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THE SOCIALIST REPUBLIC OF VIETNAM

MINISTRY OF FINANCE

The decision-making process of


VU THI BICH LIEN fiscal policy in Vietnam
Official of Banking Division, 1
Banking & Financial Institutions Department Bangkok 2019
The views expressed in this presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development
Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee
the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not
necessarily be consistent with ADB official terms.
CONTENT

1. A glance of Vietnam

2. Background of decision on fiscal policy

3. Overview of the decision-making process


of fiscal policy in Vietnam

4. The conflict of interests

5. Conclusion
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

-  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.

Revenue Expenditure

State budget
Background of decision on fiscal policy

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

- State budget system:

Province/City
Central budget budget

State budget District budget


Local budget
Ward budget
Background of decision on fiscal policy

Five-year financial plan,


three-year financial and
The implementation of
state budget plan and
budget estimates in
medium-term
previous years
investment plan of the
country

Tasks of socio-economic
Current regulations of
development and
laws on taxes, fees,
security and defense
maintenance
Making charges, ...
suitable
decisions
on fiscal
policies
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
Ministry of
Planning and
Finance
Investment

Ministry-level Government’s Other Central Local People’s


Agencies Agencies Agencies Committee

Subordinate Agencies Subordinate Agencies of


of Ministries Local People’s Committee
Overview of the decision-making process
of fiscal policy in Vietnam

Making state budget estimates has two processes:

Top-down

Bottom-up
Overview of the decision-making process
of fiscal policy in Vietnam
Making state budget estimates: Top-down

National Assembly issues resolution on five-year financial National


plan, three-year financial and state budget plan. Assembly

Before 15th May every year, the Prime Minister issues


directive on the building of next year’s socio-economic Government
development plan and state budget estimates.

Before 01st June every year, MPI issues circular on building


socio-economic development plans and development Ministry of discuss together Ministry of
Planning and
investment plans for the next year; MOF issues circular on Finance
Investment
building state budget estimates for the next year.

Before 15th June every year, ministry-level agencies,


government’s agencies, other central agencies and local Ministry-level Government’s Other central Local People’s
People’s Committee build and guide their subordinate agencies agencies agencies Committee
agencies building the budget estimates for the next year.

Before 01st July every year, the subordinate agencies of Subordinate


Subordinate
Ministries and the subordinate agencies of Local agencies of
agencies of Local
People’s
People’s Committee build their state budget estimates for Ministries
Committee
the next year.
Overview of the decision-making process
of fiscal policy in Vietnam

Making state budget estimation: bottom-up

National Assembly
discusses, approves the
state budget estimates and
allocates local budget and
The Government send the central budget for the next
state budget estimates to year.
each member of the
Ministry-level agencies, National Assembly at least
government’s agencies, other 20 days before the opening
central agencies and Local of the last National
People’s Committees send Assembly session of the
their budget estimates for the year.
next year to MOF and MPI.
These two Ministries will
The subordinate agencies discuss together and MOF
of Ministries and the will synthesizes budget
subordinate agencies of estimates and report to the
Local People’s Committee Government before 20th July
report their state budget every year.
estimates to Ministries and
Local People’s Committee.
Part 4

THE CONFLICT OF
INTERESTS
The conflict of interests

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

Budget departments Other line ministries

Based on macro Based on the


issues and priority priority areas that
areas they manage
The conflict of interests

The conflict of interests between Ministry of Finance (MOF)


and Ministry of Planning & Investment (MPI):

MOF: collecting the


state budget and MPI: making the plan for
making the plan for allocating development
allocating the revenues investment expenditures
resource and regular estimates
expenditures estimates
The conflict of interests

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

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 There are not
to central much
budget, theconflicts of interest
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

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.
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