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Vietnam Budget Reform over 2001-2005 and Intentions over 2006-2010

This article explores the fiscal and budget reforms undertaken by Vietnam between 2001 and 2010. It highlights the initiatives taken, the achievements made from 2001 to 2005, and the intentions for further reform from 2006 to 2010. The reforms include implementing the State Budget Law, revenue policy reforms, innovating budget allocation and use, tight fiscal deficit policy, international integration, and SOE sector restructuring.

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Vietnam Budget Reform over 2001-2005 and Intentions over 2006-2010

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  1. Vietnam Budget Reform over 2001-2005and Intentions over 2006-2010 Content (3 parts): • Fiscal – budget reforms initiatives making important contribution to economic development of the nation over 2001 - 2005 • Achievements of fiscal – budget reform over 2001 – 2005 • Fiscal – budget reform intentions over 2006-2010

  2. Initiatiation of fiscal – budget reforms (2001-2005) • Implementing the State Budget Law with fundamental objectives. • Implementing revenue policy reforms • Innovating budget allocation and use • Implementing a tight fiscal deficit policy • Taking lead in international integration • Establishing and implementing policies & mechanisms to speed up the restructuring, reforms and efficiency improvements in SOE sector, promoting development of other economic participants.

  3. Initiatiation of fiscal – budget reforms (2001-2005) 1. Implementing the State Budget Law with fundamental objectives: • Managing an integrated State budget; taking the leading role of the central budget, while providing discretion and improving accountability of local governments: certain levels of reserve and provision are set for the central and local budgets. • Restructuring revenues and expenditure mandates between central budget and local budget in the direction of providing more revenue resources for the local governments, thus encouraging them to work for balanced budget. • Reforming budget management and use; conducting administrative reforms in budget preparation, execution and final account reporting.

  4. Initiatiation of fiscal – budget reforms (2001-2005) 2. Implementing revenue policy reforms with the objectives of: • Establishing the tax policy system to ensure equality among all economic players, in line with the process of international integration. • Developing tax policies for broad ranged tax bases. • Reforming of specific tax policies with amendments and additions of the VAT law, special consumption tax law, corporate income tax law, and the ordinance on high income earner taxation,... 3. Innovating budget allocation and use: • Focusing on investments for infrastructure • Prioritizing budget allocation for education – training, science and technology, health, environment, with increasing budget for poverty reduction • Encouraging economic restructuring, especially in agricultural production.

  5. Initiatiation of fiscal – budget reforms (2001-2005) 4. Implementing a tight fiscal deficit policy: • No money issuance or external commercial credit to finance deficit • State budget deficit only justified for development investment • Tight control of State budget deficit (under 3% of GDP as in international best practices), with Government debt and national debt at secured level. 5. Taking lead in international integration: • Implementing international integration commitments in reduction of import duties • Amending and reforming the financial – fiscal mechanisms in ODA, FDI management, financial market development policies.

  6. Initiatiation of fiscal – budget reforms (2001-2005) 6. Speeding up SOE restructuring, reform and efficiency improvement • Implementing the equitization process in a transparent and public manner by competitive IPO • Integrating the equitization process with the development of capital market, securities markets; while promoting financial management reforms in the enterprises. • Setting up the equitization fund, redundant worker’s fund to address the obligations and reward policies for employees,...

  7. Outcomes of the fiscal – budget reofmrs over 2001-2005 • National financial position and State budget size improved, with the domestic saving of 29.4% of GDP • Over 2001 – 2005, State budget revenues increased by 24.1% from the targets, accounted for 33.5% of GDP (compared to targets of 20-21%). State budget revenue base became more stable, with domestic revenues (excluding crude oil) growing stably. State budget revenues was not only sufficient for recurrent expenditure, but also provided for development investments and debt services • Over 2001 – 2005, State buget expenditure increased by 21/7% from the targets, accounted for 25-25% of GDP; • Expenditures were positively restructured, with capital expenditure accounted for 30.6% of total expenditure (compared to the target of 25-26%). Expenditure was focusing on education – training with the expenditure share increased from 15% in 2000 to 18% in 2005; science and technology expenditure reached 2%; expenditure for health and social services in 2005 increased 2.2 – 2.5 times from 2000. Resoures were spared for salary reform.

  8. Outcomes of the fiscal – budget reofmrs over 2001-2005 • Budget provision and financial reserves were made to cope with macro economic adjustments as well as disasters and epidemics • New financial managent reforms were implemented at administrative and service delivery units, with increasing “socialization: in health, education and cultural services... • Fiscal – budget transparency was promoted in accordance to the State budget law and the 2 new laws: corruption control law, saving and economic practice law

  9. Fiscal – budget reform intentions over 2006-2010 • Budget management policy - Total State budget revenues account for 21-22% of GDP, of which taxes and fees account for 20 - 21% of GDP; • State budget expenditure accounts for 26 - 27% of GDP (compared to best practice of 24- 25%), with a proper balance between recurrent, capital expenditure and debt services and a robust, positive budget balance. • The tax and fee system will be reformed to ensure equity, unity and comprehensiveness in the 3 aspects: tax policies, tax administration and consulting, with expansion of the tax bases, and tax adjustments in line with the international integration commitment. • Distribution policies will be reformed with increasing State budget for human development, socio-cultural development with reforms in public service delivery, priority for infrastructure investments in poor areas (irrigation, transport…), providing health insurance for the poor, textbook and scholarship supports for poor students and the implementation of the nationa targets for poverty reduction (program No 135). • State budget management will be reformed, with increasing decentralization and delegation in close link with increasing accountability in fiscal – budget management;

  10. Fiscal – budget reform intentions over 2006-2010 2.Mobilizing resources for development investments; developing financial market and financial services market: • Set targets for gross social investment over 2006 – 2010 to be 40% of GDP • Creating favorable and equal environment to encourage all economic players, removing all discriminations in tax policies, price policies, fees and land use policies… • Diversifying resource mobilization for development investments • Improving policies and mechanism to strengthen the insurance market. • Researching and issuing policies to mobilize resources in the international financial market.

  11. Fiscal – budget reform intentions over 2006-2010 • Reforming corporate finance management: Completing SOE restructuring and reforms • Keeping progress of SOE restructuring, reform and efficiency improvement • Promoting infrastructure investment, expanding foreign investment attraction; • Supporting SME development; 4. Managing public assets: • Ensuring tight management, economic and efficient use of public assets, land and other national resources. • Issuing the State asset management law, reforming public procurement and promoting public asset management responsibility.

  12. Fiscal – budget reform intentions over 2006-2010 5. Accelerating international integration in financial sector: • Taking lead in expanding external finance and integration activities • Attracting external resources effectively for development investments; • Implementing international commitments in taxation and finance • Developing policies and implementing the roadmap of international market entry • Improving the legal framework in the financial sector to promote integration; • Increasing national foreign currency reserve; improving external debt mobilization and management policies. • Financial – budget supervision, surveillance, inspection, auditing for publicity and transparency: Improving policies in the areas of accounting, auditing, financial supervision, reporting, and disclosure of financial – budget information; 7. Conducting reforms in the administration State apparatus and modernization of fiscal – budget management technology.

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