Vietnam forfeits billions of dollars in foreign aid amid anti-graft freeze, document says

HANOI — Vietnam forfeited at least US$2.5 billion (S$3.36 billion) in foreign aid over the last three years and may lose another US$1 billion because of administrative paralysis, the United Nations, the World Bank and Western donors told the government in a letter seen by Reuters.

The previously unreported figures from the unpublished document, dated March 6, highlight frustration among foreign investors over regulatory hurdles and lengthy approval procedures that have caused prolonged deadlock as the Communist-ruled country is gripped by an escalating anti-corruption campaign and political turbulence.

"Approximately US$1 billion in development funding is awaiting approval, with an additional US$2.5 billion returned due to funding expirations," said the letter, sent to Prime Minister Pham Minh Chinh — effectively signalling potential losses worth nearly one per cent of the country's gross domestic product.

The expired funding could delay much-needed projects, such as infrastructure upgrades, and donors stressed in the letter that much more may have been lost in additional funds that have been "deterred by the protracted approval processes".

Two senior foreign officials interviewed by Reuters directly linked the administrative hurdles to the "blazing furnace" anti-graft drive, echoing similar comments from other diplomats and officials in recent months.

The anti-graft drive has created a sort of paralysis, in which bureaucrats are slow to approve or advance initiatives because they fear accidentally violating complex regulations.

Amid those constraints, the country is struggling to spend even its own public funds, having failed to invest about US$19 billion from 2021 to 2023, one-quarter less than it had planned,