Thách thức trong quản lý ngân sách nhà nước đối với chính quyền địa phương trong điều kiện hội nhập quốc tế

Nội dung text: Thách thức trong quản lý ngân sách nhà nước đối với chính quyền địa phương trong điều kiện hội nhập quốc tế

1. CHALLENGES IN STATE BUDGET MANAGEMENT FOR LOCAL GOVERNMENT IN INTERNATIONAL INTEGRATION THÁCH THỨC TRONG QUẢN LÝ NGÂN SÁCH NHÀ NƯỚC ĐỐI VỚI CHÍNH QUYỀN ĐỊA PHƯƠNG TRONG ĐIỀU KIỆN HỘI NHẬP QUỐC TẾ Nguyen Thi Thanh Nhan Haiphong University Abstract: This paper focuses on analysing local budget expenditure of Vietnam in terms of: total revenue, total expenditure, the rate of adjustment of central budget for provinces and cities. Then, the paper draws out the challenges that the Government and local authorities are facing in implementing their management functions in the context of international integration. Thereby, some policies are recommended to improve the effectiveness of state budget management. Key words: State budget, decentralization, regulation, local budget. Tóm tắt: Bài viết này tập trung phân tích chi tiêu ngân sách địa phương ở các tỉnh - thành phố Việt Nam trên các khía cạnh: tổng thu trên địa bàn, tổng chi trong cân đối, tỷ lệ điều tiết của ngân sách trung ương cho các tỉnh, thành phố. Từ đó chỉ ra những thách thức trong quản lý ngân sách nhà nước (NSNN) mà Chính phủ và chính quyền địa phương phải đối mặt khi thực thi chức năng quản lý trong điều kiện hội nhập quốc tế như hiện nay. Qua đó, khuyến nghị một số chính sách nhằm nâng cao hiệu quả quản lý NSNN phù hợp. Từ khóa: ngân sách nhà nước, phân cấp, điều tiết, ngân sách địa phương. 1. Rationale Over the past years, state budget of Vietnamese Government has played an important role in promoting economic growth. Three decades after reform, Vietnam has achieved considerable achievements, changing from a backward, underdeveloped economy to a developing and a middle income country. Partially, it was by virtue of state budget management, which is an important driving force in promoting growth and economic structural changing process. The management of state budget in Vietnam is being implemented in accordance with the Law on the State Budget of 1996, which was then amended in 2002 and now the State Budget Law 2015 effective from 01 January 2017. During implementation, state budget management has experienced certain limitations such as imbalances and inequities in local budget revenues and expenditures over many years, leading to the dependence of some localities. On the other hand, some localities which are main contributors to the state budget are not adequately allocated, leading to limited infrastructure investment, threatening to slow down economic growth and budget revenue. 858
2. Upon the demand of regional and international integration, the state budget sector needs to be more transparent, especially in the field of local budget revenue and expenditure, in order to reduce the number of projects that are not yet urgent and minimize ineffective projects, thus reducing the overall pressure. In the long term, there should be mechanisms to encourage creativity and new methods in disadvantaged localities to reach budget autonomy. 2. Literature review Research on state budget of government and local government has been carried out quite popular by both domestic and foreign authors. Research on building an urban administration model needs to address the relationship between central government - urban government and between urban government - other components of the metropolis. First of all is the relationship between the central and the local. The key to this relationship lies in decentralization. The government should act as the "coordinator" creating basic legal and management frameworks. The government should increase the rate of decentralization, such as the model of decentralization (Oates, 1972) and fiscal decentralization to create conditions for local governments to make use of their financial and social potentials. For example, to motivate, attract high-quality human resources into the state apparatus, enterprises, public non-business units in education, healthcare, etc. or have breakthrough mechanisms such as bidding the right to collect fees of the roads invested by the State; or the authority to make investment decisions to facilitate administrative procedures for investors. Second is the relationship between the municipal government and the provincial government, which is the expansion of the central government. To meet today's requirements, it is necessary to change the philosophy of leadership to the direction that the development of a city should be the responsibility of every component in the city. Economic, cultural and social goals shoud follow "bottom-up" instead of "top down" model (Stigler's Model, 1957). As such, the task of local governments in the future is to create a new mechanism to stimulate the participation of all stakeholders in the development of the city (New Public Management Model or NIE). City authorities need to institutionalize the involvement of all stakeholders in budget-related decisions of the city. In Vietnam, some studies on state budget management in Vietnam (Le Chi Mai, 2014) by Su Dinh Thanh, Vu Thanh Tu Anh and Vu Si Cuong, etc. demonstrate some challenges in managing state budget in Vietnam. For example, the scale of state budget increases rapidly; the budget expenditure structure contains some issues such as the repayment in total budget expenditure is increasing due to the large scale of borrowing and loan maturity; the efficiency of public sector investment is worse than that of other countries in the region; high rate of budget overspending leads to increased public debt; the rise in state budget has negative effects on the economy. The study (Su Dinh Thanh, 2013) on Budget decentralization in conjunction with urban government reform clarifies that Urbanization and changes in urban government 859
3. budget management, the relationship between urban governance and urban budget management; Important changes in urban budget management in Vietnam: overviews; clarify the budget allocating tasks of urban government; Provincial/ municipal budget revenues: maximize local revenues (100% revenue) with the revenue allocated to central revenue, and budgetary support mechanism. The research in Decentralization of Economic Management in Vietnam from the institutional perspective of Vu Thanh Tu Anh (2010) analyzes the decentralization of economic governance in Vietnam from an institutional perspective which covers decentralization in terms of politics, administration, budget and market sectors comprehensively. Within the scope of this study, theoretical issues related to state budget management are inherited and developed as follows: Firstly, in the process of globalization, globalized cities are located with clear boundaries but are integrated into the global flow. For example, foreign direct investment comes from decisions of companies based in particular cities, as well as the flow of people coming to work for these companies or coming to the city to do business and the flow of goods and services that the companies produce when they made the decision to locate in a particular city. A city in global context will benefit from its indigenous characteristics. Secondly, in terms of budget management, the characteristics of the city are reflected in the size and complexity of budget expenditures. Urban government must have greater financial capacity than rural government, therefore, have greater financial autonomy to fulfill the responsibility of providing public goods and services to the city. Thirdly, in localities gathering many enterprises, the local government should focus on investing in infrastructure, developing human resources and transportation and telecommunications system. Cities also have to provide public services related to improved quality of life, which attract human resources from other localities to serve the economic and commercial development of the city. As a result, expenditures for development of culture, transportation, electricity, water and environment should be paid more attention. In general, the availability of local government revenue should reflect the amount of expenditures required to ensure that finances are commensurate with the responsibilities as regulated by the law. In the state budget, equivalent to the provincial budget, the city has the right to collect certain amounts and retain 100%, some of the revenues are regulated with the central budget and lower-level budget and complemented from the central budget. Measures to expand budget revenues include: Maximizing local revenue (100% revenue) Local revenue sources are sources of revenue that local governments are entitled to use fully. The principles for local revenue design are associated with the delimitation of local service delivery: (a) to ensure the provision of public goods by local governments regardless of the policy changes in fund transfer in higher level government; (b) best responsibilities for the quantity and quality of public goods provided; (c) highest efficiency in the provision of goods and services on the basis of comparing benefits and costs; (d) to improve financial decision-making responsibility of metropolitan government to be 860
4. compatible with the benefit model of local finance. Anyone who pays tax or fees to local governments is entitled to the benefits of local government spending. It means that those revenues are locally entitled without regulation or distribution. For revenue shared with the central Local budget revenues shared with central revenues are regulated in details in the State Budget Law. Revenue sharing is directly related to the financial capacity of each budget level, affecting local dynamics, activenes and proactiveness in activities encouraging revenue in particular and budget balancing in general. If the locality is assigned with revenue sources associated with economic growth of the area, the revenue- sharing mechanism will stimulate locality to actively nurture and develop revenue sources. Mechanism to support state budget balance From the need for large expenditures and the ability to increase resources, local governments are more likely to be self-reliant, thus, less dependent on central government support. However, there is still some cases that local governments need the support from central government to provide services when the benefits of these services result in spill- over effect to other areas. In other words, central budget should only subsidize the balance of urban budget in some cases, but not provide the entire deficit. 3. The result of state budget expenditures and challenges in state budget management -The challenges in high regular expenditure structure According to the audit report on state budget execution, state budget revenue for the phase of 2011 - 2015 was double that of the phase of 2006 - 2010 and fivefold that of the phase 2001-2005. The domestic revenue structure increased from 58.9% in the phase 2006 - 2010 to 68% in the phase 2011-2015, accounting for 74% of total state budget revenue in 2015, which is higher than the target set at 70%. In terms of expenditure structure, from 2006 up to now, the rate of regular expenditure has reached around 70% of total expenditure. This is high and unsustainable rate. The reason for that is the expenditure on bulky, overlapped mechanism. On the other hand, due to loose budgetary expenditure discipline from central to local levels, the state budget becomes over expenditure, resulting in loans for recurrent expenditure. Therefore, it is necessary to restructure the budget in line with reforming and streamlining the apparatus and saving expenses from guest reception, foreign study visit, etc. It is also important to publicize and be transparent and detailed in each expense according to the principle of "people's expenditures must be publicized and supervised", and the accountability must be pursuant to international standards. By that way, regular expenditure ratio can be balanced to actural revenue step by step, between 55% and 60% of total spending. (Le Dang Doanh, 2016) Since 2006, Vietnam's budget deficit has grown rapidly both in absolute quantity and in GDP. The budget deficit reached 6.11% of GDP in 2015 and about 5% of GDP in 2016, with a daily deficit of over 520 billion VND. Budget deficit for the whole year 2016 was about 200.000 billion VND, debt payment was about 150.000 billion, accounting for 861
5. 13% while spending on development investment was only 190.000 billion VND, making up of 16.7% of the total expenditure of the budget. - The challenge of imbalances and inequities in local government revenues and expenditures Local governments' revenues and expenditures are clearly stated in State Budget Law in 1996, and then amended in 2002, and now is the State Budget Law 2015 effective on 01 January 2017. The State Budget Law clearly regulates the decentralization of central and local budget revenue and expenditure. State budget revenue consists of three parts: 100% of the entitled central budget, another part is divided between the central budget and the local budget, and the rest is 100% of the entitled local budget. Budget expenditures are also clearly defined in central budget expenditures and local budget expenditures. In the past time, among 63 provinces across the country, there are only 13 localities that can self-balanced and contribute to central budgets, which are Hanoi, Haiphong, Quang Ninh, Vinh Phuc, Bac Ninh, Quang Ngai, Khanh Hoa, Ho Chi Minh City, Dong Nai, Binh Duong, Ba Ria - Vung Tau, Can Tho. Revenues of the remaining 50 provinces can not compensate for expenditure. These localities retain 100% of local budget revenues, some provinces collect the rate of only about 1/3 compared to spending needs, the rest will be supplemented from central budget through two sources: the difference in revenue and expenditure through the inclusion of estimates and through national target program. Within 13 provinces and cities that have the ability to balance between revenue and expenditure and even contribute to the central budget, Ho Chi Minh City is a typical example. Ho Chi Minh City accounts for 1/4 to 1/3 of Vietnam's total revenue but only retains about 10% -14% of its total budget revenue. The other provinces will benefit from the transfer of this city’s budget to central budget (Vu Dinh Anh, 2014). Due to deficit in expenditure and revenue in nearly 50 provinces, most local budgets have to rely on central government budget. This dependence is enormous in terms of both quantity and scale. Although local budgets receive additional allocations from central government, there is still a great gap for local spending need. Despite being subsidized partially from central budget, local authorities still have to mobilize other resources to offset the deficit between revenues and expenditures. This mobilization may be public or non-public and will inadvertently create debt obligations to local governments. The most worrying thing is latent debt due to non-public information; therefore, it is not included in official local government debt. 862
6. Table 1: Analysis of contribution rate, spending rate and supplemented rate for balancing local budget according to state budget estimate in 2016 Total Balacing % Total state spending state Contribution Spending supplement in No Area budget in the on balance budget to to state on balance balance of locality of local local budget local budget budget budget TOTAL 1,109,500,000 550,139,780 96,591,908 Northern 1 mountainous 40,112,000 76,937,682 34,049,246 3.62% 13.99% 44.26% area Red River 2 334,860,000 159,940,879 9,138,607 30.18% 29.07% 5.71% Delta area Northern- Middle area 3 120,746,000 111,338,415 26,072,227 10.88% 20.24% 23.42% and Middle Coast Central 4 15,285,000 28,436,409 9,321,352 1.38% 5.17% 32.78% Highlands South East 5 467,507,000 107,114,332 1,250,772 42.14% 19.47% 1.17% area Mekong Delta 6 50,331,000 66,372,063 16,759,703 4.54% 12.06% 25.25% area Source: The author calculated based on public figures of state budget estimates of Ministry of Finance Figure 1: Contribution rate to state budget of 6 regions in the country according to state budget estimates in 2016 863
7. Of the total 1,109 million billion VND estimated revenue of the state budget in 2016, 14 mountainous provinces in the Northern region contributed only about 3.62%; 13 provinces in the Mekong River Delta contributed only 4.54%, 14 provinces in the Northern Central Coast and the Middle Coast contributed nearly 10.88%. 5 provinces in the Central Highlands had the lowest contribution to state budget revenue, which is of 1.38% (Figure 1). Thus, there has been an imbalance and inequity in local budget revenues and expenditures over the decades. The direct reason is due to too much economic concentration in some centers and the big gap between the development of different provinces and regions. The burden of collecting state budget revenues was put into six provinces in the southeastern region, which accounted for over 42% of the total state budget revenue (11 provinces in the Red River Delta covered over 30%). Ho Chi Minh City's state budget revenue is much higher than the total revenue of 46 provinces outside the Red River Delta and the South East area. The difference between Ho Chi Minh City (which collects the highest revenue) and Bac Can (which collects the lowest state budget revenue, only 501 billion) is nearly 600 times. This shows that the burden of state budget revenue is being born to some provinces while the rest seem to make no improvement in underdevelopment argriculture or exploitation of raw materials without finding out their potential. Figure 2: Contribution rate to the state budget and the allocation of areas under the 2016 budget estimates Source: The author's calculation based on public figures - Challenges in decentralization of state budget between central and local levels are still inadequate without encouraging the activeness of the majority of provinces to take charge of the revenues and expenditures to reduce over-reliance on the central budget. 864
8. Due to different socio-economic characteristics, many provinces and cities have received a large proportion of central budget support for many years such as Bac Can (57.6% of its total budget expenditure), Cao Bang (56, 9%), Lai Chau (54.6%), Soc Trang (51.1%). Notably, there are provinces with favorable geographical conditions but they still receive support from the central level such as Lang Son (49.2%), Bac Giang (44%), Nam Dinh (46.2%). Among nearly 50 provinces getting central government support each year, 41 provinces have been distributed thousands of billions. Thanh Hoa is a typical example with the highest support of over 6.500 billion dong, and Tay Ninh, though received the lowest rate of support, this amount reached nearly 386 billion dong. As such, the current budget allocation structure not only reduces the motivation and preferable conditions of some localities to enhance their revenue, but also limits revenue sources of some provinces with the ability to self-balance their budget. Many localities still want to be supported as much as possible. Table 2: Cities and provinces receiving supplemental state budget of over 40% according to state budget estimates in 2016 Balaned Total balanced Cities/ Total state supplement of expenditure of No. Provinces budget revenue central state Balanced state budget in in the area budget to local supplement the area budget 1 Bac Can 501,000 2,590,086 1,492,057 57.61% 2 Cao Bang 964,000 4,386,288 2,496,683 56.92% 3 Đien Bien 924,500 4,729,586 2,612,446 55.24% 4 Ha Giang 1,538,000 6,408,828 3,538,100 55.21% 5 Lai Chau 1,414,000 4,360,267 2,380,376 54.59% 6 Soc Trang 1,218,000 4,608,093 2,356,357 51.14% 7 Lang Son 7,590,000 5,171,469 2,541,842 49.15% 8 Tra Vinh 1,780,000 4,256,087 2,078,319 48.83% 9 Yen Bai 1,710,000 4,800,796 2,235,307 46.56% 10 Nam Dinh 3,070,000 7,033,439 3,249,502 46.20% 11 Tuyen Quang 1,312,000 4,106,188 1,888,791 46.00% 12 Bac Giang 3,470,000 7,255,977 3,193,015 44.01% 13 Hau Giang 1,266,000 2,866,089 1,254,727 43.78% 14 Son La 3,765,500 7,721,166 3,256,698 42.18% 15 Quang Tri 2,570,000 3,854,048 1,598,430 41.47% 16 Dac Nong 1,461,000 3,180,471 1,298,429 40.83% Source: The author calculated based on public figures of state budget estimates of Ministry of Finance In regulating central state budget to each locality, it should be ensured that these regulations are mainly aimed at maintaining expenditures on healthcare, education, 865
9. supplemented investment in technical infrastructure at a reasonable level. The revenue of each locality must self-balance with expenditures on the apparatus. The poorer or low- income provinces have to be more economical and have a streamlined apparatus. In fact, there are still some poor provinces investing too much, which leads to huge debts. Therefore, it is necessary to become more and more publicized about local budget revenue and expenditure, to reduce investment in non-urgent projects, to minimize ineffective projects, thereby reducing general pressure. In the long term, there should have mechanisms to encourage creativity and new ways of doing things in difficult localities to gradually reach budget autonomy. "The decentralization of state budget revenues and expenditures should be supplemented and improved in line with the process of restructuring local budget revenues and expenditures towards equity and efficiency". It is necessary to restructure budget revenues and expenditures. - Challenges in the budget allocation rate limiting revenues of local budget In the year 2016, 13 out of 63 provinces did not receive support from the central budget; on the contrary, their revenues were large enough to contribute to central revenue. However, over-regulation from these large provinces had some drawbacks. These provinces do not have enough capital to build infrastructure, which threatens to slow down their economic growth and budget revenues. Table 3: Total balanced revenues and expenditures of state budget of 13 provinces/ cities with large source of revenue according to state budget estimate in 2016 Total balanced Total state % of allowed expenditure of No. Cities/ Provinces budget revenue expenditure/t local state in the area otal revenue budget 1 Hanoi 169,420,000 69,977,640 41.30% 2 Haiphong 55,985,000 11,279,044 20.15% 3 Quang Ninh 33,900,000 15,969,737 47.11% 4 Vinh Phuc 25,750,000 14,090,040 54.72% 5 Bac Ninh 16,080,000 10,826,919 67.33% 6 Da Nang 14,100,000 10,275,750 72.88% 7 Quang Ngai 22,251,000 7,161,754 32.19% 8 Khanh Hoa 13,403,000 8,535,420 63.68% 9 Ho Chi Minh City 298,300,000 58,956,200 19.76% 10 Dong Nai 40,950,000 14,777,979 36.09% 11 Binh Duong 37,730,000 12,489,214 33.10% 12 Ba Ria - Vung Tau 82,250,000 11,818,742 14.37% 13 Can Tho 9,237,000 6,825,696 73.90% Total 819,356,000 252,984,135 30.88% Total revenue 1,109,500,000 550,139,780 % 73.85% 45.99% Source: The author's calculation based on data from Ministry of Finance, 2015 866
10. Ho Chi Minh City contributed nearly 27% to total estimated budget revenue in 2016 but only received 10.7% of total budget expenditure. Competitiveness of central cities can not be sustained without investment and advanced infrastructure. Hanoi belongs to the second group having highest rate of regulation, along with Binh Duong and Ba Ria - Vung Tau, with local budget retention of 40-44% of total state budget revenue. Though ranked the second in total state budget revenue, Hanoi only accounted for more than 15% of total estimated state budget revenue in 2016. Although five central cities are self- balancing group, which means that they do not receive support from central state budget, the rate of local budget retention of each locality is different. For example, Hanoi retained 42%, Ho Chi Minh City retained 23%, Hai Phong retained 88%, Da Nang retained 85% and Can Tho retained up to 91%. Figure 3: Total balanced expenditure, total state budget revenues of 13 provinces with large revenue sources according to state budget estimates in 2016 Pursuant to State Budget Law in 2015, the estimated state budget for 2017 has some changes, specifically in increasing contribution rate to central budget of 16 provinces that are capable of generating large sources of revenue, reducing retention rates of those shared with central budget, including Ho Chi Minh City, Hanoi, Binh Duong, Dong Nai, Khanh Hoa, and Haiphong. Furthermore, the number of localities which do not receive support from central budget and contribute to the balance of the state budget is increased 867
11. from 13 to 16/63 in the state budget estimate in 2017. Budget revenue sources that share between central budget and local budgets are mainly sustainable sources, including value added tax, corporate income tax, and personal income tax. Table 4: The rate of retention of local budget of 16 provinces/cities which largely contribute to state budget in 4 phases 2007- Phase 2004-2006 2011-2016 2017-2020 No 2010 Cities/ Provinces contributing to central budget revenue 1 Ho Chi Minh City 29% 26% 23% 18% 2 Binh Duong 44% 40% 40% 34% 3 Hanoi 32% 31% 42% 32% 4 Ba Ria - Vung Tau 42% 46% 44% 64% 5 Dong Nai 49% 45% 51% 41% 6 Vinh Phuc 86% 67% 60% n.a. 7 Quang Ngai 100% 100% 61% 88% 8 Quang Ninh 98% 76% 70% n.a. 9 Khanh Hoa 52% 53% 77% n.a. 10 Da Nang 95% 90% 85% 68% 11 Haiphong 95% 90% 88% 67% 12 Can Tho 95% 96% 91% 91% 13 Bac Ninh 100% 100% 93% n.a. Three new provinces contributing to central budget revenue for the phase 2017-2020 1 Quang Nam 100% 100% 100% 90% 2 Hung Yen 100% 100% 100% 93% 3 Hai Duong 100% 100% 100% 98% Note: n.a.: not available. Source: annual budget estimates data of MOF; Information from Session II, National Assembly XIV; and estimates of BVSC. [8] It can be seen from the table that among localities that contribute a great proportion to the state budget, Ho Chi Minh City reduced the retention rate from 23% to 18% - this ratio will be remained unchanged during the period of budget stabilization from 2017- 2020, Hanoi reduced from 42% to 32%, Dong Nai from 51% 41%, Da Nang from 85% to 68%, and Haiphong from 88% to 67%. 868
12. Reducing retention rate in localities is to ensure the key role of central budget, providing resources for prominent national spending programs. However, over-regulation from large income provinces will cause unreasonable and counterproductive effects. These provinces and cities do not have enough capital needed to build infrastructure, threatening to slow down economic growth rate and budget revenue of localities and the whole country. In order to set a reasonable level of regulation, it is necessary to have a democratic discussion of stakeholders involved. In the long run, the current budget decentralization principle needs to be changed to promote local autonomy. 4. Policy implications in state budget management of Vietnam in the phase 2017-2020 The Resolution No. 07-NQ / TW dated 18 November 2016 of the Politburo on policies and measures to restructure the state budget, public debt management to ensure a secure and sustainable national finance states: " State budget restructuring and public debt management must be put under the overall economy restructuring, coupled with the renovation of the growth model, ensuring efficiency, equity, sustainability and rational mobilization of resources. Saving is the top priority; only spend within economy's capacity and only borrow within the ability to repay. To tighten the discipline and principle of state budget, to increase the publicity, transparency and accountability of each level on State budget collection and spending, the use of loans and the handling of public debts, to restrict and gradually eliminate "ask - give" mechanism". - To harmonize the settlement of important and urgent problems with fundamental and long-term issues towards sustainable development goal. To ensure the key role of central budget, to promote initiative and creativeness of ministries, departments and localities. To maximize societal resources. To regulate the relationship between accumulation and consumption, between regular and and development spending; To save recurrent expenditure to increase the proportion of spending on development investment and debt repayment in total state budget expenditure and result in reduction of state budget deficit. To mobilize, allocate and use state budget resources in line with strategic priorities of the economy. - To renovate financial management in state budget compatible with international practices and standards, to effectively support the process of international economic integration; to ensure independence and sovereignty of the country. From analyzed challenges of state budget management and to implement policy of the Politburo on restructuring state budget in the coming period and to improve budget expenditure, following are some suggestions: Firstly, to promote initiative, activeness towards collection - spending competitiveness in budget management: Switching to state budget autonomy, allowing localities to self-control their budget revenues and expenditures, which will make them more innovative, dynamic, and reduce the dependence on central budget regulation. In regulating central budget to local budget, it should be ensured that these regulations are 869
13. mainly aimed at maintaining expenditures on healthcare and education, supplementing investment in technical infrastructure at a reasonable level while spending for the apparatus must be balanced from their local revenue. The State Budget Law 2015 allowed local budget deficit. This will enable the provincial governments to plan their spending, contributing to socio-economic development in the area. Previously, all budget deficits in the localities were transferred to central budget, so the responsibility for repayment was not specified. Implementing the State Budget Law 2015, the localitites with deficit will enhance their creativity and increase the responsibility of local authorities in budget expenditure associated with socio- economic development plan of the area. Localities which are active and have good socio- economic development plans can actively borrow to spend on development investment, hence, self-balancing their budgets and contributing to the central budget. Secondly, to increase regulation rate to central budget while raising expenditure on budget balance, spending in accordance with target program, which will enhance regulatory role of central budget in socio - economic development of the country, leading to spill-out effect and region development linkage. The city of Haiphong is a typical example of this new mechanism. According to the state budget estimate in 2017, this city is retained only 78% of revenues sharing with central budget (compared with 88% in 2016). It is applied to the period of budget stabilization 2017-2020 as well. However, Haiphong will receive 1,446 billion dong from the central budget to carry out important projects in the area. Thirdly, the increase in spending on development investment will build the stepping stone for mid-term economic expenditure growth of 2016-2020. In the past few years, due to limitation in the budget, the proportion of spending on development investment kept decreasing, affecting growth motivation of the economy. The mid-term public investment plan sets the target that spending on development investment will account for 25% -26% of total state budget expenditure for the phase 2016-2020. This will be an important resource demonstrating the leading role of the state apart from private and foreign resources in developing essential infrastructure for the economy such as highway, seaport, energy, etc. Fourthly, the localities whose retained local budget in central budget sharing was cut-off will have to restructure their income and promote the involvement of non-state sector in developing local infrastructure development. Shared revenues between local budget and central budget include personal income tax, corporate income tax, value added tax, which are significant and sustainable revenue sources. Therefore, the reduction in retention rate from these revenues will have direct impacts on local budget revenue, including Ho Chi Minh City, Hanoi, Binh Duong, Dong Nai, Da Nang, Haiphong. These provinces may take into account revenue collection from 100% retained sources such as locally managed fees and charges, housing and land tax, auction of land use rights, excise tax, resources tax (except for oil and gas exploration and production), lotteries, etc. In addition, the promotion of private and foreign participation in infrastructure development, 870
14. people and environmental projects in the area is also a solution for the phase of budget stabilization for the phase 2017-2020. Fifthly, to motivate localities to actively generate income and reduce their dependence on central budget. For the phase 2017 - 2020, there are still 47 out of 63 provinces and cities receiving subsidies from central budget. It is necessary to develop their autonomy so that some localities with potential and favorable conditions give up their dependence on central budget and contribute to central budget in the upcoming time. Sixthly, state budget management in the context of deepening regional and international integration should be based on the following important premises: - Information transparency: Local communities should have timely and accurate access to information about public decisions. For example, when local government provides a public goods or services, people must be informed about possible policy options along with their costs and benefits. If the information is transparent, it will on one hand help ensure the meaningfulness of the provision of public goods and services, on the other hand, help its citizen effectively monitor the performance of local government. - The right to speak: There should be effective mechanisms for local communities to express their wishes and priorities to the government. This, together with the requirement of transparency and accountability, will encourage people to actively participate in the whole process of policy making and implementation to protect their interests and community. - Accountability: The decentralized entity must be accountable with both the higher authorities from which responsibility and power are decentralized downward and with those directly affected by it. Take decentralization from central government to local government as an example. Local governments are then accountable for their compliance with the guidelines and policies of central government and accountable to local people for the quality of their service. Without these mechanisms, the decision making authority on one hand is not guaranteered to provide better services to its citizen, on the other hand, is put out of control of the central government. - Resources: Despite all the above conditions, without enough resources, citizen’s desire will not be satisfied. In other words, if capital and other resources do not follow the increase of authority and responsibility, decentralization will be very difficult to succeed. - Scale: The decentralized unit should be large enough to take advantage of economies of scale and cover the benefits and costs of decentralized activities or functions (to be able to "internalize" the external factors, both negative and positive ones). The large size of a decentralized unit or the detailed number of decentralized unit also facilitates central policy coordination as well as effectively coordinate intergovernmental policy. On the contrary, if the scale of decentralization is too small and the number of decentralized units is too large, it will easily lead to unfair competition instead of cooperation between localities. This will increase the cost and reduce the effect of decentralization, and may lead to many negative impacts on the national economy. 871
15. These assumptions are important conditions for the success of effective state budget management. Therefore, to manage the state budget successfully, the environmental factors must be adjusted so that they operate in the same direction and support the management process. However, the principles and environment are often self-sustaining, so in some cases, instead of supporting, they may impede state budget management. 5. Conclusion The economy is recovering strongly, which is a positive signal to ease the pressure on the state budget for the phase 2017-2020, however, budget constraints remain unresolved comprehensively. In the short run, governments and local authorities are still facing many difficulties and challenges. The author's study has focused on clarifying drawbacks in the state budget expenditure structure - the budget structure that tends to be more of "consumption" than "investment", holding unreasonable disciplines in budget regulation, lacking motivation to nurture revenue, resulting in dependent concept and over- reliance on central budget. All of these have become major challenges to state budget management. Finally, some recommendations to improve effeciency of state budget management in Vietnam have been drawn out. REFERENCES A. Vietnamese materials 1. Vu Dinh Anh (2016), This is the reasons why these 13 provinces, especially Ho Chi Minh City must bear the budget burden for the rest. ngan-sach-cho-cac-dia-phuong-con-lai-20161014154220872.chn 2. Vu Thanh Tu Anh, Economic decentralization in Vietnam from an institutional perspective, Fulbright Economics Teaching Program. Available at : Phan%20cap%20kinh%20te%20o%20VN%20nhin%20tu%20goc%20do%20the%20c he Vu%20Thanh%20Tu%20Anh%202012-2015-04-13-15403053.pdf 3. Vu Sy Cuong (2013), Public finance management reform through the application of mid-term expenditure: Challenges for Vietnam, Journal of Finance and Accounting Research, pp. 8-11, issue 3 (116) - 2013. 4. Le Dang Doanh (2016), Budget autonomy, why not? The Workers online, 20161025233347585.htm 5. Le Dang Doanh, More budget autonomy, less reliance of the local, it-y-lai/1102932 872
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