the decision-making process of fiscal policy in …bich lien...3. all of levels are involved in the...

1

THE SOCIALIST REPUBLIC OF VIETNAM MINISTRY OF FINANCE

VU THI BICH LIEN Official of Banking Division, Banking & Financial Institutions Department

The decision-making process of fiscal policy in Vietnam

Bangkok 2019

4. The conflict of interests

3. Overview of the decision-making process of fiscal policy in Vietnam

2. Background of decision on fiscal policy

1. A glance of Vietnam

5. Conclusion

CONTENT

Part 1

A GLANCE OF VIETNAM

A glance of Vietnam

- Population (April 2019): 97,208,495 people

- Population density: 314 people/km2

- HDI value (2017): 0.694

A glance of Vietnam

- GDP (2018): US$238 billion

- GDP per capita (2018): US$2.587

- Key products export: rice, cashew nuts, black pepper, coffee, tea, fishery products and rubber

Vietnam is the one of the largest oil producers in the region

Part 2

BACKGROUND OF DECISION ON

FISCAL POLICY

Background of decision on fiscal policy

State budget

Revenue Expenditure

-  Based on the balance of revenue - expenditure policies, fiscal policy is divided into three main categories: neutral fiscal policy, expanded fiscal policy and narrow fiscal policy.

-  Depending on each stage of development, the Government considers the application of different fiscal policies.


Principles for managing the state budget

- The principles for managing the state budget of Vietnam: unified, focused democratic, effective, economical, public, transparent and fair; decentralized management; attaching powers to the responsibilities of state management agencies at all levels.

State budget

Local budget

Province/City budget

District budget

Ward budget

Central budget

- State budget system:


Making suitable

decisions on fiscal policies

Tasks of socio-economic development and

security and defense maintenance

Five-year financial plan, three-year financial and

state budget plan and medium-term

investment plan of the country

The implementation of budget estimates in

previous years

Current regulations of laws on taxes, fees,

charges, ...

Part 3

OVERVIEW OF THE DECISION-MAKING

PROCESS OF FISCAL POLICY IN VIETNAM

Overview of the decision-making process of fiscal policy in Vietnam

National Assembly

Government

Ministry of Finance

Ministry of Planning and Investment

Ministry-level Agencies

Other Central Agencies

Government’s Agencies

Local People’s Committee

Subordinate Agencies of Local People’s Committee

Subordinate Agencies of Ministries


Top-down

Bottom-up

Making state budget estimates has two processes:


Making state budget estimates: Top-down

National Assembly

Government

Ministry of Finance

Ministry-level agencies

Subordinate agencies of Ministries

Government’s agencies

Ministry of Planning and Investment

Other central agencies

Local People’s Committee

Subordinate agencies of Local

People’s Committee

Before 15th May every year, the Prime Minister issues directive on the building of next year’s socio-economic development plan and state budget estimates.

National Assembly issues resolution on five-year financial plan, three-year financial and state budget plan.

Before 01st June every year, MPI issues circular on building socio-economic development plans and development investment plans for the next year; MOF issues circular on building state budget estimates for the next year.

Before 15th June every year, ministry-level agencies, government’s agencies, other central agencies and local People’s Committee build and guide their subordinate agencies building the budget estimates for the next year.

Before 01st July every year, the subordinate agencies of Ministries and the subordinate agencies of Local People’s Committee build their state budget estimates for the next year.

discuss together


Making state budget estimation: bottom-up

The subordinate agencies of Ministries and the

subordinate agencies of Local People’s Committee

report their state budget estimates to Ministries and Local People’s Committee.

Ministry-level agencies, government’s agencies, other

central agencies and Local People’s Committees send

their budget estimates for the next year to MOF and MPI. These two Ministries will discuss together and MOF

will synthesizes budget estimates and report to the

Government before 20th July every year.

The Government send the state budget estimates to

each member of the National Assembly at least 20 days before the opening

of the last National Assembly session of the

year.

National Assembly discusses, approves the

state budget estimates and allocates local budget and central budget for the next

year.

Part 4

THE CONFLICT OF INTERESTS

The conflict of interests

The conflict of interests between the budget departments and other line ministries:

Based on macro issues and priority areas

Based on the priority areas that

they manage

Budget departments Other line ministries


The conflict of interests between Ministry of Finance (MOF) and Ministry of Planning & Investment (MPI):

MPI: making the plan for allocating development investment expenditures estimates

MOF: collecting the s t a t e b u d g e t a n d making the plan for allocating the revenues resource and regular expenditures estimates


The conflict of interests between the central government and local authorities:

There are not much conflicts of interest

The unequal economic development of localities lead to in the period of 2017-2020, among 63 cities and provinces of Vietnam, there are only 16 cities and provinces regulate the revenues to central budget, the remaining localities still receive support from the central budget.

The conflict between central government and local authorities from determining the proportion of supplementary balances for localities from the central budget is increasingly tense.


The conflict of interests between the Government and the National Assembly:

There are not much conflicts of interest

Conclusion

1. Fiscal management mechanism of Vietnam is based on the main principle of decentralization and centralization.

2. There are 2 types of state budget: local budget and central budget.

3. All of levels are involved in the decision-making process of fiscal policy.

4. There are two processes to making state budget estimates: top-down and bottom-up.

5. National Assembly of Vietnam is the competent agency in approving fiscal policy.

6. Vietnam does not have any independent fiscal institutions involved in the decision-making process of fiscal policy.

7. There is a conflict between budget departments and the other line ministries, as well as MOF and MPI, the central government and local authorities regarding to the revenue and expenditure budget estimates.

THANK YOU!

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