Implementing the Law on National Reserves of Vietnam: Issues to consider

The Ordinance on National Reserve was promulgated in 2004. However, over the course of more than 8 years of implementation, several limitations have been identified, including:

i) The objectives of national reserves outlined in the Ordinance on National Reserve are not comprehensive and do not adequately contribute to ensuring social welfare.

ii) The Ordinance on National Reserve does not have provisions regarding policies to incentivize and create favorable conditions for businesses, organizations, and individuals to participate in national reserve activities.

iii) The regulations regarding budget allocation for national reserves are not consistent and do not align with the characteristics of national reserve activities and the budget management process. There is a lack of coordination among the stages of budget planning, execution, and settlement within the state budget system.

iv) The management and operation mechanisms for national reserves have certain shortcomings, particularly in terms of the purchasing and selling methods, which do not ensure timeliness and create difficulties in implementing the rotation of national reserve items and annual national reserve plans etc.

The Law on National Reserves was approved by the 13th National Assembly of Vietnam at its 4th session and effective from July 01, 2013, which has partially addressed the inconsistencies in regulations that existed in the previous Ordinance on National Reserve with other laws. This ensures the consistency of the legal system and meets the requirements of national reserve activities in the new conditions such as: the regulations regarding the procurement of national reserve items are not consistent with the provisions of the Procurement Law; the management regulations for national reserve items in relation to businesses are not in line with the provisions of the Enterprise Law and the Commercial Law; some regulations on quality management standards, procedures, regulations, and storage periods for national reserve items are no longer compatible with the provisions of the Law on standards and technical regulations etc. Concurrently, the Law on National Reserves will ensure the centralized, unified, effective, and efficient management and utilization of state national reserve resources, which will enhance the role of national reserves in the market-oriented socialist economic mechanism.

In order to expedite the implementation of the Law on National Reserves into practice, the Ministry of Finance (State Reserve General Department) has promptly carried out the following tasks:

Establish the Plan for the implementation of the Law on National Reserves

Immediately after the Law on National Reserves was approved by the National Assembly of Vietnam, the Minister of Finance issued a plan to implement the Law on National Reserves (Decision No. 43/QD-BTC dated January 07, 2013). The legal normative documents to be developed include 01 Decree detailing the implementation of the Law on National Reserves, 08 Circulars providing guidance on the implementation of the Decree detailing the implementation of the Law on National Reserves, and the Articles and provisions of the Law on National Reserves under the state management authority of the Ministry of Finance.

Concurrently, in order for the newly developed legal normative documents to meet the requirements of being timely, consistent, and coherent with the existing legal framework, the Ministry of Finance has directed the State Reserve General Department and relevant Departments and Bureaus of the Ministry to review the current system of legal normative documents regarding national reserves under the authority of issuance by the Government, the Prime Minister, and the Ministry of Finance. This is to modify, supplement, replace, or repeal them to align with the Law on National Reserves.

The review and systematization of legal normative documents for the implementation of the Law on National Reserves are carried out based on the existing regulations, following these steps: conducting inspections and reviews of each document, preparing a report on the results of inspections, reviews, and systematization of legal normative documents, and proposing the construction, modification, and supplementation of the List of legal normative documents. As of November 30, 2012, there were 54 documents inspected and reviewed, including 03 Decrees of the Government, 06 Decisions of the Prime Minister, 45 Circulars and decisions of the Ministry of Finance and other ministries and agencies responsible for the management of national reserves.

Fundamental contents of the Law on National Reserves

Regarding the objectives of national reserves: The Law on National Reserves fundamentally inherits the objectives stated in the Ordinance on National Reserve implemented in the past 8 years. However, in addition to the objectives of addressing the consequences of natural disasters, fires, and epidemics, the law has added the objective of "addressing emergencies". Furthermore, to ensure alignment with the nature of national reserves and avoid dispersion of resources, the Law on National Reserves has removed indirect objectives such as "participation in market stabilization, contribution to macroeconomic stability, and implementation of other urgent tasks of the state". The law has specified the objectives in a way that the resources of national reserves are used to meet urgent requirements for prevention, control, and mitigation of natural disasters, emergencies, fires, epidemics, as well as for defense and security purposes. These provisions enhance the feasibility of the Law on National Reserves and ensure alignment with the balanced capabilities of the state budget allocated for national reserves.

State policies on national reserves: In order to provide guidelines for directing national reserve policies to meet the requirements of the new situation, the law has stipulated a provision on state policies on national reserves. It specifies principles such as: he State shall adopt strategies and plans for developing national reserves that conform to the national socio-economic development and strategies and plans in each period; the State shall build solid and well-structured national reserves to ensure accomplishment of the national reserve objectives and the balancing capacity of the state budget; the State shall provide policies on investments in scientific research on national reserves, and application of preservation technology and information technology in order to modernize activities related to national reserves; the State adopts policies to mobilize resources and encourage organizations and individuals to participate in activities related to national reserves. These provisions are new compared to the previous ordinance and aim to specify the state's policies on national reserves and provide conditions for the socialization of national reserve activities.

Regarding the sources of national reserves: Compared to the Ordinance on National Reserve, which only stipulated the sources of national reserves from the state budget, the Law on National Reserves also includes other legally acquired resources for national reserves, including resources obtained from voluntary investment in the construction of infrastructure, provision of information technology for the management and preservation of national reserve items, direct preservation of national reserve items; goods and materials mobilized from organizations and individuals in emergency and urgent situations as prescribed by law.

Regarding the regime and policies for personnel working in national reserves: This is a completely new provision compared to the Ordinance on National Reserve. National reserve activities have many similarities with the fields of defense and security because (i) national reserve items are used in emergency and urgent situations, (ii) national reserve warehouses are often located in remote areas to ensure safety and confidentiality, (iii) working conditions of officials and public employees in the national reserve sector are in hazardous environments, sometimes facing dangers such as carrying out the distribution of national reserve items for disaster relief, rescue, epidemic prevention, and ensuring security and defense. Therefore, the Law on National Reserves of Vietnam stipulates that national reserve personnel being officials and public employees working at the specialized national reserve management agency; national reserve personnel being servicemen and police officers; officials and public employees doing national reserve works in Ministries and agencies are entitled to seniority benefits and occupational benefits depending on the discipline and nature of their work.

Regarding specialized inspections in national reserves: To comply with the provisions of the Inspection Law, the Law on National Reserves has stipulated specialized inspections in national reserves. The agency responsible for state management in the field of national reserves performs the function of specialized inspections in national reserves in accordance with the provisions of the law on inspections. Specialized inspections in national reserves involve inspecting compliance with the laws on national reserves as stipulated in the Law on National Reserves and other related laws.

Regarding the duties and powers of agencies and organizations in national reserves: The Law on National Reserves of Vietnam has specified the duties and powers of agencies and organizations in national reserve management, which are closely linked to the state management of national reserves. To be specific:

- The law has stipulated the duties and powers of the National Assembly, the Standing Committee of the National Assembly, the Government, the Prime Minister, the Ministry of Finance, the Ministry of Planning and Investment, the ministry in charge of national reserve management, the People's Committees of provinces and central-affiliated cities, as well as the duties and powers of specialized national reserve agencies, national reserve units, and contracted storage organizations and enterprises. These provisions aim to clarify specific responsibilities that are appropriate to the assigned and delegated levels of national reserve management, creating conditions for the implementation of the law's provisions in a smooth manner and contributing to the effectiveness of national reserves.

Responsibilities and entitlements of the National Assembly and the National Assembly Standing Committee include: (1) Decide national reserve development policies, orient national reserve resources, and approve 5-year national reserve plans; (2) Decide the rate of annual central budget allocation for the national reserves; this reflects the position and importance of national reserves in the country's development process. The National Assembly Standing Committee has the following responsibilities and entitlements: (i) Decide the annual additional central budget allocations for the national reserves (if any); (ii) Decide the budget for restocking for the released commodities in national reserve; (iii) Adjust the list of commodities in national reserve.

- The law specifies the duties and powers of the Ministry of Finance, in addition to inheriting the basic duties and powers stipulated in the Ordinance on National Reserve. The Law on National Reserves has transferred many of the previous duties, which were led by the Ministry of Planning and Investment, to the Ministry of Finance to ensure centralized and unified national reserve management and clearly define the Ministry of Finance's powers in relation to national reserves.

To be specific: (i) Preside and cooperate with the Ministry of Planning and Investment in preparing state budget estimates and central budget allocation plans for the Government to submit to the National Assembly for deciding annual plans for central budget allocation for the national reserves to the agencies in charge of commodities in national reserve; (ii) Preside and cooperate with the Ministry of Planning and Investment in sending reports on the addition to the annual central budget for national reserves to the Government; (iii) Preside and cooperate with the Ministry of Planning and Investment and the agencies in charge of commodities in national reserve in formulating the national reserve strategies, annual national reserve plans on the system of national reserve warehouses, scientific research and application of national reserve commodity preservation technologies, for submission to the Prime Minister for approval.

- Responsibilities and entitlements of the Ministry of Planning and Investment: Due to the fact that some tasks have been transferred to the Ministry of Finance, the Law on National Reserves has made changes to the responsibilities and entitlements of the Ministry of Planning and Investment as follows: (i) Preside and cooperate with the Ministry of Finance in arranging and allocating capital construction investment funds for the national reserves; (ii) Cooperate with the Ministry of Finance in formulating national reserve strategies, planning, 5-year and annual plans for submission to the Prime Minister; (iii) Cooperate with the Ministry of Finance in advising the Government on annual plans on central budget allocation for the national reserves to be submitted to the National Assembly for decision; to cooperate with the Ministry of Finance in sending reports to the Government on the level of annual central budget addition for the national reserves (if any) for submission to the National Assembly Standing Committee for decision.

- Responsibilities and entitlements of the provider of preservation services: This is a new provision compared to the previous ordinance, aimed at encouraging eligible organizations and enterprises to participate in the storage of national reserve items. According to the Law on National Reserves, organizations and enterprises contracted for storage have the following responsibilities and entitlements: (i) Directly preserves commodities in national reserve, ensuring their adequacy, quality, types, locations according to the contracts signed; (ii) Store, release, purchase and sell commodities in national reserve under decisions by competent agencies; (iii) Replace old commodities of national reserves with new ones, ensure the correct quantity and categories as prescribed by law; (iv) Report the storage, release and residual quantities of commodities in national reserve to specialized national reserves agencies and to the service buyer.

Regarding the national reserve strategy and plan: The Law on National Reserves of Vietnam has provided specific provisions on the principles, foundations, and content of the national reserve strategy and plan. The law stipulates the national reserve strategy to guide the development of the national reserve sector in line with the economic and social development strategy and plan. It has defined the principles for developing the strategy, the content of the strategy, and specific regulations for constructing a national reserve strategy for a 10-year period with a vision for 20 years, in accordance with the economic and social development strategy.

Regarding the lists of commodities in national reserve: The Law on National Reserves has specified the criteria for selecting items for the lists of commodities in national reserve. Specifically, commodities on the list of commodities in national reserve must satisfy one of the following criteria: (i) Being strategic and essential, having a high use frequency or an effect of timely response in emergencies; (ii) Being of special types, which cannot be replaced; (iii) Being supplies, equipment and commodities assuring defense and security but their domestic production has not yet met the quantity, quality and type requirements.

In addition to specifying the above-mentioned criteria, the Law on National Reserves also stipulates that the list of commodities in national reserve covers the following commodity groups: (i) Food; (ii) Rescue and salvage supplies and equipment; (iii) Supplies of common use for industrial mobilization; (iv) White salt; (v) Fuel; (vi) Industrial explosives; (vii) Plant seeds; (viii) Pesticides; (ix) Germicides used for environment cleaning, treatment of water for living and aquaculture; (x) Medicines used for preventing and treating diseases on humans; (xi) Drugs for treating diseases on cattle, poultry, plant and aquatic organisms; (xii) Supplies, equipment and commodities serving National defense and security. Moreover, the Law also stipulates that where it is necessary to adjust the list of commodities in national reserve, the Government shall report it to the National Assembly Standing Committee for consideration and decision.

State budget expenditures for the national reserve: The Law on National Reserves of Vietnam stipulates: “State budget expenditures for the national reserves comply with the Law on the State Budget and are included in annual state budget estimates. The Ministry of Finance shall manage and allocate funds for the purchase of commodities for national reserve, purchase of commodities for national reserve to make up for the released ones in the planning year after they are approved by competent authorities.”. This is a new point and a basis for amending and supplementing the State Budget Law to allocate funding for national reserves as a separate task of the state budget, aiming to address the current inconsistency in funding allocation for national reserves. This is one of the conditions to implement strong reforms in the procedures and processes of purchasing, selling, importing, exporting, and using national reserve items in urgent and critical situations.

Management and administration of the national reserve

Storage and release of commodities in national reserve: The Law specifies cases in which  commodities in national reserve are stored and released, including: storage and release of commodities in national reserve under the Prime Minister's decisions; storage and release of commodities in national reserve in emergencies; storage, release and exchange of commodities in national reserve according to given targets; storage and release of commodities in national reserve in other cases.

Regarding the storage and release of commodities in national reserve in emergencies, the authority to decide the storage or release of national commodities is exercised as follows: (i) The Prime Minister shall promptly decide the storage or release of commodities in national reserve; (ii) The Minister of Finance, the Minister of National Defense, the Minister of Public Security and the Minister of Agriculture and Rural Development shall temporarily release national reserves supplies and equipment to timely serve arising tasks; after the tasks are fulfilled, immediately recover them for maintenance, replenishment and preservation according to regulations or send reports to the Prime Minister for decision; immediately store or release for free supply commodities in national reserve with a value within the legal authority of the Minister of Finance to decide the  budget expenditure prescribed in the Law on the State Budget for promptly performing every task that may arise. This provision is to ensure compliance with the State Budget Law because currently, the State Budget Law is being amended and supplemented.

Purchase and sale of commodities for national reserve: The Law on National Reserves stipulates that the principles of purchasing and selling national reserve items must comply with the regulations on bidding and auctioning. Compared to the previous ordinance, the Law supplements specific provisions on the application of bidding and auctioning in the procurement and sale of national reserve items to suit the nature and characteristics of national reserve activities, avoiding the application of general bidding and auctioning regulations that may hinder the completion of national reserve tasks.

- Purchase of commodities for national reserve: To prevent arbitrary application of direct contracting, the Law specifies the cases in which direct contracting is allowed. The authority and procedures for direct contracting are carried out in accordance with the regulations on bidding. The appointment of contractors must comply with the bidding law and applies to the following cases: (i) Confidentiality must be assured in accordance with the law on protection of state secrets, for bidding packages to purchase commodities for national reserve for defense and security tasks; (ii) Neither public bidding nor competitive offer can apply due to the emergency, urgency, seasonal and temporal requirements with regard to bidding packages to purchase commodities for national reserve being drugs, germicides, pesticides and plant seeds.

Moreover, the Law on National Reserves also stipulates the public direct purchase from all subjects. The public direct purchase from all subjects is only made when purchasing grain for national reserve. The unit assigned to purchase commodities for national reserve shall make a plan for public direct purchase from all subjects and submit it to the head of the specialized national reserve management agency for approval; concurrently, determining the quantity, quality and types of grain to be purchased, purchase locations, purchase time and purchase prices; based on the approved plan, the unit assigned to purchase commodities for national reserve shall publish the purchase plan in 3 consecutive issues of a newspaper or on television three times in three consecutive days and post it up at the locations where grain are purchased; the purchase must be made in accordance with the plan and the posted prices.

- Selling commodities in national reserve: Commodities in national reserve may be sold by the following methods: auction; appointed sale; public direct sale to all subjects. The Law specifies the appointed sale or public direct sale to all subjects, according to which commodities in national reserve to serve defense and security can be put on appointed sale only for defense and security purposes. Commodities in national reserve put on public direct sale to all subjects include: (i) Grain, vaccines, germicides, pesticides, plant seeds and white salt; (ii) Commodities in national reserve other than commodities serving defense and security and grain, vaccines, germicides, pesticides, plant seeds and white salt, which must be auctioned but cannot be sold after two unsuccessful auctions.

Liquidation of commodities in national reserve: To provide specificity and convenience in implementation, the Law on National Reserves of Vietnam stipulates the liquidation of commodities in national reserve. According to this Law, commodities in national reserve which fail to meet the criteria for serving the national reserves objectives must be liquidated in accordance with law. Heads of the Ministries and agencies in charge of the management of commodities in national reserve shall decide the liquidation of commodities in national reserve. Money earned from the liquidation of commodities in national reserve must be remitted into the state budget after paying reasonable expenses. Unusable commodities in national reserve must be destroyed. The Prime Minister shall decide the destruction of commodities in national reserve.

Preservation of commodities in national reserve: The Law on National Reserves specifies the responsibility for preservation of commodities in national reserve of agencies in charge of commodities in national reserve, heads of the agencies in charge of commodities in national reserve, heads of units directly managing commodities in national reserve and persons directly managing and preserving commodities in national reserve, specialized national reserves agency. Organizations or enterprises hired by the Ministries and agencies in charge of the management of commodities in national reserve to preserve commodities in national reserve must satisfy the following conditions: (i) Having the legal entity status; (ii) Producing and trading in commodities similar to the commodities being preserved; (iii) Warehouses and equipment for storage, release and preservation must satisfy the technical requirements of commodities in national reserve; (iv) Technical staff possess appropriate managerial and professional experience to meet the requirements of national reserves commodity preservation; (v) Having full financial capability for the performance of national reserves commodity preservation contracts.

Moreover, the Law also stipulates the application of national technical standards and economic-technical norms of commodities in national reserve as a basis for managing and preserving national reserve items, ensuring compliance with relevant legal regulations.

Use of commodities in national reserve: The Law on National Reserves of Vietnam specifies the rules for the use of commodities in national reserve, responsibility for release for free supply, and receipt of commodities in national reserve, the management and use of commodities in national reserve. After receiving commodities in national reserve, ministries, agencies, provincial People's Committees, agencies and organizations shall: (i) Manage and use commodities in national reserve for proper purposes and subjects and according to the norms prescribed by law, ensuring neither loss nor waste; (ii) Compile dossiers for monitoring, accounting and reporting the management and use of supplied commodities in national reserve in accordance with the laws on accounting and statistics. Particularly for commodities in national reserve which can be used many times, books must be opened for detailed monitoring as prescribed by law. This is a new point compared to the previous Ordinance on National Reserve, aimed at ensuring compliance with the legal regulations on state asset management.

National reserve warehouses, scientific research and application of preservation technology to commodities in national reserve: The Law specifies the planning for the system of national reserve warehouses and the detailed planning for the network of national reserve warehouses.

Planning for the system of national reserve warehouses: The Law specifies the principles, contents and competence for developing the planning for the system of national reserve warehouses. Contents of the planning for the system of national reserve warehouses must meet the following requirements: (i) Conformity with the national reserves objectives and requirements; (ii) Connectivity of the system of national reserve warehouses according to territorial lines and regions; (iii) Development toward modernization; (iv) Suitability to investment capital capacity; (v) Clear identification of implementation solutions and roadmaps. Concurrently, the Ministry of Finance shall preside and cooperate with the Ministry of Planning and Investment as well as the agencies in charge of commodities in national reserve in formulating the planning for the system of national reserve warehouses for submission to the Prime Minister for approval.

Detailed planning for the network of national reserve warehouses: The Law specifies the principles, contents and competence for developing the detailed planning for the network of national reserve warehouses. The detailed planning for the network of national reserve warehouses must: (i) Ensure the continuity and connection between major economic centers and different regions nationwide, convenience in the storage and release of commodities in national reserve; (ii) Ensure high efficiency; (iii) Ensure the development toward modernization of preservation technologies and storage and release processes; (iv) Be suitable for investment capital capacity; (v) Identify the implementation solutions and roadmaps. Concurrently, heads of the agencies in charge of commodities in national reserve shall formulate and approve detailed plans on the network of national reserve warehouses under their respective management after reaching agreement with the Ministry of Finance and the Ministry of Planning and Investment.

Modernization of activities related to national reserves: The Law stipulates the modernization of activities related to national reserves and scientific research into and application of national reserve commodity preservation technologies. Scientific research and application of technologies to national reserve commodity preservation must: (i) Be able to prolong the storage and preservation duration, ensure quality and reduce the loss of commodities in national reserve; restrict environmental pollution; (ii) Be suitable for reality; (iii) Adopt and transfer advanced foreign preservation technologies in a selective manner. The contents of scientific research into and application of national reserve commodity preservation technologies include: (i) Research into new preservation technologies for replacing of obsolete and polluting technologies, and replacing imported technologies; (ii) Expansion of international cooperation in the transfer and application of advanced technologies to national reserve commodity preservation; (iii) Training qualified human resources. Concurrently, the Ministry of Finance shall preside and cooperate with the agencies in charge of commodities in national reserve in formulating plans for scientific research and application of technologies to national reserve commodity preservation.

Issues that arise in the implementation of the Law on National Reserves

The specific and comprehensive legal provisions have adequately addressed the unique issues in the operation of national reserves. Many regulations have been explicitly stated in the law, ensuring transparency and aligning with the activities of national reserves. When the Law on National Reserves applies, it will bring many advantages and contribute to better management, tighter control, and more effective operations in achieving the objectives of national reserves in the new phase.

However, in the implementation of the law, national reserve activities need to keep up with the ongoing realities and be in line with the socialist-oriented market economy in Vietnam. The objective is to enhance the effectiveness of national reserve operations, save financial resources for the country, while ensuring that the reserves are sufficient, readily available, and timely in meeting the objectives of national reserves. Therefore, during the implementation of the Law on National Reserves, specific issues need to be further addressed, as follows:

(1) Issues related to state policies on national reserves: Specific policies on national reserves should be timely, consistent, transparent, and feasible to incentivize and motivate the socialization of national reserve activities. These challenging issues require investment in research, both in theory and practice, coordination among relevant agencies, and reference to the experiences of other countries to establish policies that are suitable for the development of national reserves in each stage of the country's socio-economic development.

(2) Issues related to national reserve management in line with the market mechanism under state supervision: With the role of state management in national reserves, the Ministry of Finance assists the government in implementing state management of national reserves, while the General Department of State Reserves provides recommendations for the Ministry of Finance in implementing state management of national reserves. Therefore, important tasks include continuing research and development of national reserve strategies based on the provisions of the Law on National Reserves and the results of strategic assessments that have been conducted. This includes determining a detailed list of national reserve items suitable for each phase of national reserve objectives, studying and developing mechanisms for rotation and conversion of national reserve items in accordance with the regulations on contract execution for the storage of national reserve items to enhance the efficiency of national reserve management within the market mechanism with diverse ownership forms.

(3) Continuously researching, reviewing, amending, and supplementing economic and technical standards for national reserve items: Ensuring that these standards align with the reality and management requirements while enhancing the capacity for managing economic and technical standards for national reserve items, ensuring the most advanced economic and technical standards and minimizing losses during the storage of national reserve items.

(4) Issues related to scientific research, technology, and application of preservation methods for national reserve items: Meeting the requirement to extend the storage period of national reserve items while ensuring the quality of the items and minimizing environmental pollution. This requires research to determine the storage period for specific types of items, aiming to enhance responsibility in preservation and cost savings for rotation and replacement. Some items may not require rotation, replacement, or exchange between old and new items but are only released when necessary for demand, such as salt, for example. The study of national reserves should be approached as a genuine scientific discipline with theoretical and practical foundations and methods for implementation.

(5) Issues related to training and capacity building of human resources for national reserve activities: Meeting the requirement to enhance knowledge and skills in the management, operation, scientific research, and application of preservation technology for national reserve items. Human resources are a decisive factor in national reserve activities and are the foundation for implementing the Law on National Reserves in society.

Source: Portal of the Ministry of Finance

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