After more than 10 years of implementation, the Law on State Budget has achieved many important results, contributing to building a strong national financial foundation, creating a driving force to promote socio-economic growth, contributing to political stability, and improving the living standards of the people. However, alongside these achievements, the operation of the state budget as well as the management and administration mechanisms still reveal some limitations that need to be amended and supplemented to align with practical realities.
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Current Status of the Implementation of the Law on State Budget
The draft amendments and supplements to the Law on State Budget (NSNN) have been developed by the Ministry of Finance, widely soliciting opinions, and finalized with a spirit of openness to present it to the Government of Vietnam and the National Assembly. Currently, the draft law is being discussed by the National Assembly and the Standing Committee of the National Assembly to reach consensus before presenting it to the National Assembly for approval. Most opinions highly appreciate the role of the 2002 NSNN Law in macroeconomic regulation; notably, in recent years, NSNN expenditure has decreased compared to previous years. Previously, the budget expenditure growth rate reached 20%, but in recent years it has only been around 8-10%. Implementing the NSNN Law, the state budget balance has positively transformed; government debt, national debt, and public debt are at reasonable levels; debt service obligations are generally fulfilled completely and on time as committed. The annual state budget revenue growth rate is quite good (during the period 2004-2013, it averaged over 18% per year and by 2013, state budget revenue had increased nearly 5.4 times compared to 2003). Generally, state budget revenue not only ensures recurrent expenditure and debt payment but also accumulates increasingly more for development investment (in 2003, 29.700 billion VND was allocated for development investment, and in 2012 it was 95.000 billion VND).
The structure of state budget expenditure has prioritized investment in development with an average growth rate of over 13.5% per year, accounting for over 20% of the total social investment expenditure, reaching nearly 8% of GDP; expenditure on education and training, vocational training reached 20%, expenditure on science and technology reached 2%, expenditure on culture reached over 1.5%, and expenditure on environmental protection reached over 1% of the total state budget expenditure. From 2003-2013, the state budget allocated 723.000 billion VND to implement salary reform policies for government-salaried individuals, implement state official policies for commune, ward, and township officials, thereby increasing the actual income levels of those receiving salaries, allowances, and subsidies from the budget; implemented many social security, poverty alleviation policies, especially for ethnic minorities and people in particularly difficult mountainous, remote and isolated areas... The state budget ensures reasonable expenditure on national defense, security, foreign affairs, and administrative management; increases proactive reserves to prevent and overcome natural disaster consequences, epidemics, and address urgent arising tasks.
Furthermore, the state budget balance has improved positively; borrowing to offset the state budget deficit generally complies with the principle of being used only for development investment, not for consumption. By December 31, 2013, public debt was 54.2% of GDP, government debt was 42.3% of GDP, and national debt was 37.3% of GDP. The debt service obligations of the Government of Vietnam were generally fulfilled completely and on time as committed. With such debt levels, Vietnam's borrowing is within the safe limit of national financial security (the ceiling according to the Debt Strategy: Public debt by 2015 is not more than 65% of GDP, government debt not more than 55% of GDP, and national debt not more than 50% of GDP), not adversely affecting the macroeconomy or socio-economic development...
Alongside the enormous results from implementing the 2002 NSNN Law, combined with the operation of the economy under market mechanisms and the need for innovation for integration and development, this law has also revealed some shortcomings compared to practical requirements. Implementing the NSNN Law shows that the state budget system is integrated, leading to overlapping authorities among different levels; the budget process is complicated; the scope of state budget revenue and expenditure is unclear; the division of revenue sources and expenditure tasks among different budget levels is inappropriate, the basis for constructing the state budget estimates is incomplete, not linked to output performance; accountability provisions before elected bodies are not specific; transparency and publicity in state budget management do not match international practices... To be specific:
Firstly, the decision on budget estimates and allocations is still overlapping and formalistic. The overlapping and formalistic nature is clear when the National Assembly decides on the NSNN estimates, which include both the central and local budgets. Meanwhile, under the current Law on the Organization of People's Councils and People's Committees, the People's Council decides on local budget estimates. However, the People's Council only votes on sources of revenue and tasks decided by higher authorities. The People's Council does not autonomously decide on its budgetary revenue and expenditure but must follow the allocations and estimates assigned by higher authorities, decide on local budget estimates at the time prescribed by the Government of Vietnam, and adjust according to the requests of the Prime Minister of the Government of Vietnam or the Chairperson of a higher-level People's Committee...
Secondly, the construction of estimates starts from the grassroots level, with unclear procedures and responsibilities for each level. Moreover, the budget preparation and decision-making period is very short, which does not adequately ensure democratic rights and the quality of budget estimates, creating difficulties for proactive budget estimation. The basis for calculating budget revenues and expenditures lacks solid scientific grounding. The spending standards and norms system is outdated, inadequate, and inconsistent.
Thirdly, the local budget process is complex and lengthy, involving many administrative procedures, which not only consume the time of budget-benefiting agencies and units but also affect the operational efficiency of state agencies. Although the People's Councils at various levels are authorized by the law to decide on local budgets, they have not effectively supervised to promote effective budget compliance. The People's Committees at various levels are often very passive in local budget compliance because most provinces rely on central subsidies due to insufficient local revenue. Additionally, a lack of consistent budget spending norms leads to a situation where localities with higher revenue spend more, and those with lower revenue spend less. The same governmental activities have different funding sources, causing inequality: Some places have high spending, while others have no spending on the same purpose or task. Public service and welfare spending for the population vary greatly.
Fourthly, the process of reviewing and approving budget finalization remains quite complex and cumbersome due to numerous agencies involved, many relationships, leading to significant delays. The Treasury controls expenditure; the financial agency approves finalization, overlapping the Treasury; meanwhile, the inspection and auditing systems are weak. The audit agency lacks personnel and expertise, mainly performing compliance audits and not efficiency audits of budget expenditure; moreover, the number of budget expenditures not audited remains large, so there is insufficient basis for trusted approval of finalization by the National Assembly and the People's Councils. The responsibility regime for wrong and right budget expenditure is unclear, with few cases requiring repayment to the budget for illegal, policy-violating, or incorrectly implemented expenditures... Furthermore, the current budget management apparatus is fragmented and poorly coordinated. The local budget management apparatus currently has three focal points: the Department of Finance, Tax, and Treasury, but only the Department of Finance is directly under the provincial People's Committee, while the Tax and Treasury agencies are under central management (vertical management)...
Solutions for Improving the Law on State Budget
The draft Law on State Budget (NSNN) amendments has been widely solicited in society, repeatedly discussed by the National Assembly and the Standing Committee of the National Assembly to reach a high consensus on the revised and supplemented provisions. However, given the aforementioned issues, the article offers some recommendations for research and revision:
First, improve regulations on the position and role of provincial-level People's Councils in the budget process, ensuring their proactive role in deciding economic and social issues at the local level, deciding and constructing local budgets based on adherence to the unified principles of national finance. Allow provincial-level People's Councils to issue certain standards appropriate to local budget capabilities and socio-economic conditions; specifically and publicly stipulate the rate of adjustments from shared revenue sources, additional amounts between local budget levels; issue documents regulating borrowing mechanisms among local budget levels. Give the People's Councils authority to request local budget audit finalization before approving the finalization. The state audit agency conducting audits in any locality must report the audit results to the respective People's Council. The People's Council can hire independent audit firms to audit projects using budget funds and audit local budget revenue.
Secondly, reform the state budget process in general and the local budget process specifically towards segregation and clarity. Currently, the budget process in our country is still integrated. To ensure the relative independence of local governments in estimating, deciding estimates, allocating, and approving local budget finalization, besides requiring the National Assembly to only decide on the NSNN estimates and allocate central budget estimates, the Government of Vietnam should abolish the mechanism of assigning revenue and expenditure targets to localities, replacing it with a revenue-expenditure mechanism under the law - localities must comply. Abolish the mechanism of rewarding localities for exceeding revenue estimates, considering compliance with budget revenue and expenditure laws as the responsibility of various government levels.
Thirdly, stipulate that higher-level budgets should include lower-level budgets only in terms of total revenue, total expenditure, and some important revenue categories and expenditure areas; not include specific revenue categories, specific expenditure fields, and the structure between recurrent expenditure, development investment, and debt repayment as currently. Based on their unique conditions, each locality should have the authority to decide on the structure of remaining revenue categories and specific expenditure areas.
Fourthly, ensure the authority of the People's Councils at various levels in deciding their budgets, clarifying and ensuring the decision-making authority of the People's Councils at all levels concerning their budget, and when the central government issues new policies, resources must be identified to avoid disrupting the annual estimates approved by the People's Councils.
Fifthly, specify and increase the time for budget estimation and allocation, supplement the basis for estimation to ensure the quality of budget estimates at all levels. Before submitting to the National Assembly or People's Council, the state budget estimate must involve the audit's opinion to ensure the accuracy, objectivity, and feasibility of the state budget estimates.
Sixthly, in budget compliance, publicize the state budget; emphasize the role, specify the responsibilities, and powers in complying with the state budget of the People's Committees at various levels. Address improper use of central budget support for local purposes that do not align with national goals and programs, redistribute funds without proper authority for other local needs.
Seventhly, in local budget finalization, clearly define the responsibilities of entities in local budget finalization in the direction that the head of the estimating unit is the one approving the unit's finalization; the financial agency conducts finalization checks before approval, and the State Treasury controls expenditure. Incorporate audit work into finalization report checks to improve the quality of budget finalization and prevent waste and loss.
Eighthly, raise the borrowing limit for infrastructure investment. Investing in local infrastructure is considered an effective fundraising channel to promote the development of infrastructure, meeting socio-economic development needs. Current regulations allow local budgets to mobilize investment in infrastructure within a limit of no more than 30% of annual domestic capital construction investment. Practical experience shows the need to raise the borrowing limit for provincial-level tasks and repayment from provincial budgets to 100% for provinces and cities with a revenue-sharing ratio with central budgets; supplement regulations allowing mobilization for investment-attracting projects with repayment from project-generated resources; regulate the repayment period of temporary budget loans from the State Treasury for investment-attracting projects to 3-5 years to ensure project repayment capacity.
