Unlocking Impact: How Vietnam Can Transform Public Investment into Real Development

A World Bank report reveals Vietnam’s public investment system is hampered by legal overlaps, weak project preparation, and bureaucratic delays. It urges sweeping reforms to streamline laws, strengthen oversight, and improve project efficiency to meet the country’s development goals.

Vietnam’s vision to become a high-income nation by 2045 demands more than just increased public spending; it demands smarter investment. A new technical report by the World Bank, in collaboration with the Vietnam Ministry of Planning and Investment, the Central Institute for Economic Management, and the World Bank’s Governance Global Practice, reveals serious inefficiencies plaguing Vietnam’s Public Investment Management (PIM) system. The report argues that without urgent reforms to streamline legal frameworks, strengthen project preparation, and modernize provincial management systems, Vietnam risks wasting both time and capital on projects that fail to deliver transformative impact.

Tangled Laws, Fragmented Accountability

At the center of the problem lies an overly complex legal framework. Vietnam’s Public Investment Law (PIL), which should guide investment planning, operates in parallel with the State Budget Law, Construction Law, and others, all of which overlap but do not align. This legal fragmentation creates confusion, delays, and duplicate oversight. For instance, construction-heavy projects fall under the Construction Law, not the PIL, and therefore follow an entirely different set of rules. Similarly, Official Development Assistance (ODA) projects are governed by separate regulations involving extra approvals to satisfy international agreements. This fragmented structure slows down decision-making and often leads to inconsistent policy enforcement.

One key issue is the dual budgeting system, where capital expenditures (such as construction) are planned separately from recurrent ones (like operations and maintenance). This leads to situations where new schools, roads, and hospitals are built, but lack ongoing funding to function properly. The lack of a unified, lifecycle-focused budgeting approach undermines the sustainability of many investments.

Projects That Never End

The report takes a close look at how provinces manage investments and finds troubling evidence of delay and inertia. In Da Nang, one of Vietnam’s better-performing provinces, three-quarters of projects in the 2021–2025 Medium-Term Investment Plan (MTIP) were carried over from earlier cycles. Some dates as far back as 2016. Many are already forecasted to roll into the next planning period, revealing systemic delays in project execution. Worse, many of these projects were approved using outdated or incomplete data. Once a project gets its initial green light through what’s known as the Investment Policy Decision (IPD), any changes in cost, scope, or design require re-approval through a slow, bureaucratic process. As a result, planners are incentivized to stick with flawed original estimates just to avoid delays.

Compounding the problem, provincial Departments of Planning and Investment (DPIs) often lack the tools or authority to monitor these portfolios effectively. The data needed for decision-making is scattered, incomplete, or missing altogether. There is no centralized system to track project timelines, budgets, and outcomes. Without robust oversight or performance metrics, weak projects slip through, and course corrections are difficult to make.

Weak Foundations in Project Design

In-depth reviews of pre-implementation documentation for sample projects in transport, wastewater, and solid waste show a lack of standardized procedures and critical analysis. While most projects cite alignment with national plans, many fail to include essential elements like demand forecasts, risk assessments, or cost-benefit analyses. Lifecycle costing is often absent or overly simplistic, and only two out of eight reviewed projects applied any kind of social cost-benefit analysis (SCBA). Even those lacked transparency in methodology and data.

Climate change considerations were notably absent across most documents. Monitoring and evaluation mechanisms were poorly defined or nonexistent, making it difficult to assess whether project outcomes matched development goals. The overall conclusion is that project preparation in Vietnam is inconsistent, lacking quality control, and vulnerable to political pressure or institutional inertia.

ODA Projects Face Even More Roadblocks

Projects financed by international aid are supposed to follow stricter standards, but in Vietnam, they often suffer more. ODA projects have additional steps in the approval process, including a separate Project Proposal stage, which can take months or even years to complete. In many cases, these projects are slowed by conflicts between Vietnamese regulations and donor policies, particularly regarding procurement and land acquisition.

Land compensation is a persistent issue. Vietnamese authorities often underestimate these costs to keep initial budgets low, especially since land expenses must be covered by domestic funds. This underestimation leads to significant delays when actual compensation is calculated. Some projects have been delayed for years due to such gaps. Though legal reforms now aim to introduce market-based land valuation, implementation remains slow and fragmented. A legacy of centrally-managed “umbrella” projects under ministries like MARD has also contributed to inefficiencies. While some of these have shifted to decentralized “cluster” models that empower provinces, these too require strong central technical support, which is currently lacking.

The Road Ahead: Streamlining and Strengthening

To address these systemic challenges, the World Bank recommends a sweeping reform agenda. First, Vietnam should consolidate overlapping legislation and empower a single agency, most likely the Ministry of Planning and Investment, with clear authority to oversee all stages of public investment. This includes issuing methodological guidelines for project appraisal, mandating standardized formats, and embedding climate risk and adaptation planning into project design.

Second, flexibility must be introduced into the approval process. Project adjustments should not require full re-approval unless they significantly alter the scope or cost. To prevent projects from languishing indefinitely, IPDs should have expiration dates. Only projects that meet quality benchmarks and show relevance to evolving needs should be carried forward into future MTIPs.

Third, a national Public Investment Management Information System (PIMIS) should be developed and deployed across provinces. This digital system would track projects from conception through implementation to post-completion review, allowing policymakers to identify bottlenecks, underperformers, and opportunities for improvement.

For ODA projects, the report recommends harmonizing donor and government standards early in the process, allowing for more flexible use of funds, especially in sectors like digital transformation or education, and streamlining the hierarchy of approvals. Provinces should be entrusted with greater authority, provided they meet accountability standards.

Ultimately, Vietnam’s developmental aspirations depend not just on spending more, but on spending better. With streamlined laws, robust data systems, and strong institutional oversight, the country can unlock the full potential of its public investment, transforming not only its infrastructure but also the lives of its citizens.