summary of doctoral thesis decentraliztion of state budget management in vietnam today

In the state management activity, together with the social-economic development, with the intervention requirement of the state into the market economy in order to assure the targets of

MINISTRY OF

EDUCATION AND TRAINING

HO CHI MINH NATIONAL ACADEMY

OF POLITIC AND PUBLIC ADMINISTRATION

NATIONAL ACADEMY OF PUBLIC ADMINISTRATION

LE TOAN THANG

DECENTRALIZTION OF STATE BUDGET

MANAGEMENT IN VIETNAM TODAY

Specialism:PUBLIC ADMINISTRATION

Code: 62 34 82 01

SUMMARY OF DOCTORAL THESIS

HANOI -2013

This work has been completed at: National Academy of Public

Administration

Scientific Instructor: Associate Prof.Dr Do Van Thanh

Dr Nguyen Phu Thai

The Thesis shall be defended before the National Academic level

Thesis Assessment Council held at: Academy of Public Administration,

No 77, Nguyen Chi Thanh, Dongda, Hanoi

FOREWORD

1 THE NECESSITY OF THE THEME

Management decentralization is one of the basic issues of management In the state management activity, together with the social-economic development, with the intervention requirement of the state into the market economy in order to assure the targets of efficiency, stability and equality, the decentralization of state management is the key content to ensure the participation of authority levels into the execution of functions, duties of the State in the best effective way

State Budget is the financial resource of the State In order to manage the process of establishment and distribution effectively, the use of state budget is the important and necessary issue of any nation in the world State budget management is a forming part of state management in socio – economic fields and to be executed by the system of state management agencies from the central

to the local

Theoretically as well as in the reality, decentralization of state budget management is recognized as the important method to improve the efficiency of state budget management

Decentralization of state budget management resolves the relationship between central and local in handling issues related to the operation of State Budget Decentralization of State Budget Management helps defining the competence and responsibilities among budget management levels, ensuring the timely settlement of state management tasks

There are still gaps in the decentralization of state budget management in Vietnam For example, the initiative level of local budget is not high, the process

of state budget approval is quite complicated, takes time, and the state management effect is not met with the requirement of socio-economic development of the State This indicates the need of having an objective and comprehensive review on the actual situation of decentralization of State budget management in Vietnam recently, pointing out the shortcomings to get the right solution to perform decentralization of State budget management as the urgent need

For the theoretical and practical requirements of the decentralization of state budget management in Vietnam, I would like to choose the theme

“Decentralization of state budget management in Vietnam today” for my

PhD thesis of Public Administrative Management, with the desire of giving some scientific and practical recommendations to contribute to the process of state budget reform, financial reform and the reform of the state administration

of Vietnam in the integration period

2 PURPOSE AND TASK OF THE RESEARCH

The thesis is based on hypotheses that current provisions on Decentralization

of State budget management in Vietnam today is not relevant and insufficient, the effectiveness of State budget management is then not high Therefore, the researching purpose and task of the thesis is to gather information, prove and find solutions for more appropriated decentralization of budget management in Vietnam, bringing higher effectiveness in the management of State budget

The thesis is aimed to achieve the practical purposes as follows:

- Systematize the theory on decentralization of state budget management

- Analyze and evaluate scientifically about the reality of decentralization of state budget management in Vietnam today Analysis to clarify the advantages, weaknesses of this work to address the researching issues in the decentralization

of state budget management

- Propose a number of solutions to strengthen decentralization of the state budget management in Vietnam in the new period and conditions ensuring the implementation of such solutions effectively

Research tasks :

- Research to clarify issues related to the management of State budget, such as: the concept of state budget, state budget revenues and expenditures, principles and contents of state budget management

- Analyze the rationale of decentralization of State budget management, such as: the concept of decentralization of State budget, purpose, base and principle of decentralization of State budget management, content of decentralization of state budget management and influencing factors

- Analyze and assess the current decentralization of state budget management

in Vietnam, raising assessments on advantages as well as shortcomings in the decentralization of State budget management in Vietnam today

- Forecast orientations and recommend some solutions on decentralization of state budget management in Vietnam

3 RESEARCHING OBJECT AND SCOPE

Researching object: The thesis focuses on study about the decentralization of state management in the state budget management activity in Vietnam

Researching scope: The thesis reviews contents of decentralization of state budget management in Vietnam between the central budget and local budget The thesis focuses on four basic issues in the decentralization of state budget management between the central budget and local budget The specific contents are as follows:

- Decentralization of authority for promulgating laws, policies, standards and norms of the state budget

- Decentralization of revenue management, task of state budget spending

- Decentralization of management for the implementation of the state budget cycle

- Decentralization in supervision, inspection, auditing of State budget

Researching time: To assess the status of decentralization of state budget management in Vietnam concentratedly, the thesis deeply analyzed the situation

of decentralization of state budget management in Vietnam in the period since the Law on State Budget 2002 However, the thesis also referred to a number of legal documents related to the activities of decentralization of State budget in Vietnam in the previous stage

4 RATIONALE AND RESEARCHING METHOD OF THE THESIS

Rationale: The thesis "Decentralization of State budget management in

Vietnam today" was conducted on the basis, the foundation of Marxist – Leninist Theory about dialectical materialism and historical materialism The author interpreted problems of state management and decentralization of state budget management in the objectively dialectical logic thinking and in connection with other matters relating to the State budget management activity

About the researching methods: In the researching process, the author used

the following researching methods:

- Method of analysis, synthesis: the author compiled to get in the review, conclusion, and recommendation scientifically, consistent with the methodology

and practice of decentralization of state budget management in Vietnam

- Comparative method: the author used the comparative method to clarify the similarities and differences of the researching problem through the phases, from which to have comments, assessments and recommend solutions for

decentralization of State budget management

- Historical method: The author performed this method by approaching and developing the issue of decentralization of budget management through different

historical periods

- Forecasting method: This method was used to analyze and forecast trends

of decentralization activities of state budget management in Vietnam

- The method of collecting suggestion from experts: It is to collect suggestions from experts about the contents of the thesis to gather scientific issues for the

thesis

In addition, the thesis also uses the researched results which were published within Vietnam and in foreign countries relevant to the topic of the thesis

5 NEW CONTRIBUTIONS OF THE THESIS

There are some new points that the thesis has reached:

- Based on the theory of public administrative management and state budget management, the author studied and interpreted the decentralization of state budget management

- Researched the experiences of decentralization of state budget management from some countries in the world to draw some experienced lessons that can be applied to the specific conditions of Vietnam

- Assessed the real situation of decentralization of the state budget management in the four specific contents, including: Decentralization of authority for promulgating laws, policies, standards and norms of the state budget; Decentralization of revenues management, tasks of spending state budget; Decentralization to perform state budget cycle; decentralization in supervision, inspection, and auditing of state budget

- Proposed solutions on decentralization of state budget management in Vietnam and conditions for implementing such solutions

6 THEORETICAL AND PRACTICAL MEANINGS OF THE THESIS

- The researching results of the thesis will provide scientific arguments and information on issues related to the theory of public administrative management, public management and theory of decentralization of State budget management

- The researching results of the thesis positively impact on the more promotion of decentralization of state budget management between the central and local

- The researching results of the thesis may be a reference for researching officers, students at the NAPA and the interested public officials

7 STRUCTURE OF THE THESIS

The structure of the thesis consists of Foreword, Content and Conclusion There is also a list of references Specifically as follows:

Foreword:

Content: This part concludes 3 chapters, which are:

Chapter 1: Scientific foundation of decentralization of state budget

OVERVIEW OF THE RESEARCHING SITUATION AND ISSUES

RELATED TO THE THESIS

- Publication "Decentralization Briefing Notes" written by Jennie Litvack and

Jessica Seddon (2000), published by Institute of Research of the World Bank

- The book "Serve and maintain: Improving Public Administration in a

Competitive World" by the World Bank, the National Political Publishing, 2003

- The "Decentralization in East Asia, local authorities take effect" of the

World Bank published by the Culture and Information Publishing House in

2005, which has provided many theoretical issues about decentralization

- The book "Empowerment in fact - from analysis to the implementation" of

the World Bank, published by the Culture and Information Publishing House (in 2006) referring to the empowerment-how to understand and apply in the reality

- The theme: "Make good the decentralization between the central

government and local government" implemented by the Central Institute for Economic Management (2005)

- The book "Decentralization of state management - theory and practice" written by Ass Pro and Dr Vo Kim Son, published by the National Political Publishing House in 2004

- The book "Decentralization of budget for local government - Reality and

Solutions" by Ass Pro & Dr Le Chi Mai (2006) published by National Political Publishing House

- The book "Budget harmonization between the central and local" written by

Dr Bui Duong Nghieu (Editor 2006) published by National Political Publishing House

Many research works relating to the state budget management conducted by Budget – Financial Committee of National Assembly, Academy of Finance, and National Economics University The current researching results show that:

1 The scientific researching themes mentioned above mainly studied about the decentralization of state management in general and on many different aspects, not fully studied about the decentralization of state budget management

2 The new research works focused on the solution system for innovating budget management in general rather than focusing on solutions on decentralization of budget management or only focusing on some contents of the decentralization of budget management, if any

3 A number of studies have examined the issue of decentralization of state budget management, but mainly approached from point of view of legal regulations on decentralization that was not deeply analyzing the implementation

of the provisions in reality

Therefore, further study about the theory of decentralization of state management and state budget management while building system of solutions to strengthen decentralization of state budget management in Vietnam with specific contents is very necessary

CONTENTS CHAPTER 1: SCIENTIFIC FOUNDATION OF THE DECENTRALIZATION OF STATE BUDGET MANAGEMENT

1.1 MANAGEMENT OF STATE BUDGET

1.1.1 Concept and System of State Budget

1.1.1.1 Concept of State Budget

Budget is an economic category associated with the creation and use of monetary fund of a certain entity The entity using monetary fund may be an individual, a family, an organization, a locality or a nation

Law on State Budget 2002 of the Socialist Republic of Vietnam also

affirmed: “The State Budget is the total revenues and expenditures of the State

decided by the competent State Authority and performed in a year to fulfill the functions, duties of the State,”

State Budget usually includes: central budget and local budget In Vietnam, the State Budget includes central budget and local budget The local budget includes the budget of administrative units having organizations of People’s Councils and People’s Committees With the current organizational model of the State of Vietnam, the local budget includes the budget from provinces, cities under the jurisdiction of the central government (hereinafter referred to as the provincial budget), the budget from districts, towns, cities under the provinces (hereinafter referred to as the district budget) and the budget from communes, wards, townships (hereinafter referred to as the communal budget)

1.1.1.2 System of State Budget

The system of State Budget is understood as the overall budget having organic relationship with each other in the process of performing the tasks of revenues and expenditures of each budget level

State Budget levels are formed on the basic of state authority levels, in accordance with the current organizational model of the state governmental system The system of State Budget includes the central budget and the local budget

1.1.2 Revenues and expenditures of State Budget

1.1.2.1 State Budget Revenues

State Budget Revenue is a process in which the State uses its power to mobilize a valuable part of the social wealth to form the state budget fund in order to meet the needs of the State spending

State Budget Revenues include revenues from taxes, fees; revenues from economic activities of the State; donations from organizations and individuals, aids and other revenues stipulated by the State

1.1.2.2 State Budget Expenditures

State Budget Expenditure is the process of distribution and use of State Budget to carry out the duties of the State in each period The expenditure

contents are various and diversified, coming from the management role of the State for the socio-economic development State Budget Expenditures include expenses for socio-economic development, spending for defense and security, spending for the operation of State apparatus, spending for state debts, aids and other expenses

1.1.3 Principles of state budget management

1.1.3.1 Principle of unification, comprehension

Principle of unification: under this principle, revenues and expenditures of any governmental authority must be included in a unified budget plan

Principle of comprehension: State Budget must be inclusive This means all activities related to budget revenues and expenditures must be reflected in the budget documents

1.1.3.2 Principle of democracy, openness, transparency

Principle of democracy: With the participation in the society, each citizen is involving in all phases of the budget cycle which is shown the principle of democracy in the management of the state budget

Principle of openness, transparency: Openness means to let everyone know, without keeping confidentially Transparency is making the openness content clear, understandable, and unmistakable A good budget management requires following the principles of openness, transparency

1.1.3.3 Principle of objectiveness, independence and responsibility

Principle of objectiveness and independence: Ensuring the objectiveness and independence of State Budget is a necessary principle Activities relating to budget revenues and expenditures need to be checked, investigated and audited

by the competent state authorities

Principle of responsibility: This principle ensures the responsibility of the state agencies in using state budget The State must be responsible before its people about the process of state budget management, about the results of receiving, spending state budget

1.1.3.4 Principle of balancing state budget

Balancing state budget is one principle in the management of state budget Balancing State Budget, in addition to balancing the accounts, is the sensibility

in the structure of revenues and expenditures, among the fields of economy, between the central and locality

1.1.4 Cycle of State Budget

1.1.4.1 Concept of the state budget cycle

Budget cycle is the term used to refer to the entire operation of a budget from the start until the end switching to the new budget A budget cycle consists of three successive phases that are budgeting, budget execution and budget finalization

1.1.4.2 Phases of State budget cycle

Budget cycle consists of three phase that are budgeting, budget execution and budget finalization

Budgeting is the process of analyzing, evaluating, collecting, estimating in order to define the targets of budget revenues and budget expenditures of the State reachable in a budget year, as well as to define the key measurements on economy – finance to ensure the well execution of assigned budget targets

Execution of State Budget is the process of generating economic, financial and administrative measurements to turn the targets of revenues, expenditure noted in the year budget plan into reality

Finalization of State Budget is the final phase of a budget cycle The purpose

of balancing state budget is to generate and evaluate the whole process of revenues, expenditures in a budget year The balancing of state budget provides full information about management and operation of revenues, expenditures of state budget for the competent state authorities such as: National Assembly, People’s Council, Government, sponsors, people,… from which to learn about the advantages, disadvantages and the experiences for the next budget cycle

1.1.5 Content of state budget management

Management, in general, is interpreted as the impact of management subject affecting to the managed object through the use of appropriate tools and methods

to achieve the defined objectives

Management of State Budget is the activity of subject managing state budget through the use of appropriate management tools and methods to affect and operate activities of state budget to achieve the defined objectives

Content of state budget management is interpreted as a job that competent state authorities carry out to manage state budget effectively, to meet the requirement of social – economic development of the country The management

of state budget is relating to the activities of receiving, spending state budget Management of State Budget is reflected in the following aspects:

- Issue laws, policies, regulations, norms on state budget

- Manage receiving, spending state budget

- Manage the execution of state budget cycle

- Supervise, investigate and audit the implementation of state budget

1.1.5.1 Promulgation of laws, policies, standards and norms of state budget

The promulgation of laws, policies, standards, regulations and norms of state budget is the first activity in the management of state budget Any country has its own law on the formation and use of budget and regulations are generally enacted in various forms associated with the authority of central and local state agencies

1.1.5.2 Management of receiving, spending state budget

Management of receiving, spending state budget is an important content in the management of state budget

Management of receiving state budget is understood as the action of the agency in charge of state budget revenues to the state budget revenues by making plans, organizing the collection and coordination of testing, assessing the process of receiving state budget

Management of spending state budget includes the issuance of policies on spending budget, making plans, operating budget expenditure and checking, supervising state budget expenditures

1.1.5.3 Management of the implementation of state budget cycle

Budget cycle is understood as the entire operation of a budget from the start until the end moving to a new budget A budget cycle consists of three phases that are state budget estimation, budget execution and finalization of the state budget

There are many subjects participating in the budget cycle with specific rights and duties specified in the phases of a budget cycle

1.1.5.4 Supervision, inspection, auditing of state budget

In the management of state budget, supervising, inspecting and auditing the use of state budget are very important This job causes effects to the efficiency in managing the use of state budget to reach the national social - economic targets

1.2 DECENTRALIZATION OF STATE BUDGET MANAGEMENT

1.2.1 Concept of decentralization of state budget management

Decentralization of state budget management is the delimitation of the scope

of responsibilities and powers of state agencies at each level in the process of management and execution of state budget

The concept of decentralization of state budget management as stated above shall be construed in this thesis as follows:

First, decentralization of budget management includes the budget deciding competence and budget managing competence

Second, decentralization of budget management focuses on power, responsibility decentralization among agencies related to the budget deciding competence and budget managing competence

1.2.2 Aims of decentralization of state budget management

Decentralization of state budget management is aimed at:

First, increase the efficiency of using state budget: A reasonable

decentralization of state budget management shall increase the efficiency of budget management for the process of national social-economic development

Second, promote the local initiative: The locality shall be able to increase the

efficiency of using state budget when they are proactive on budget in providing public services as well as the economic welfare for its local people

Third, encourage providing public commodities efficiently: Aim of

decentralization of state budget management is to encourage locals spending

budget for significant and long term valuable public commodities such as education, health,

Fourth, strengthen the management capacity of the various government

levels: Better budget decentralization will contribute to the increased capacity of state management of the central and local government thereby increasing budget management results

Fifth, create conditions for monitoring the state budget: budget

decentralization explicitly, transparency will facilitate the monitoring of the use

of budget of the functional authorities more effectively

1.2.3 Bases of decentralization of budget management

First, the legal system on decentralization of budget management: To

effectively manage the budget, the government has enacted a system of statutory regulations related to the organization and management of the state budget, including the specific provisions on decentralization of budget management

Second, the specific characteristics of the state budget system: budget system

of each country is usually classified into levels corresponding to the state apparatus system Normally, the system of state budget is divided into the central budget and local budget

Third, the characteristics of the state management activity: this is represented

in the countries where state power is highly centralized, the budget revenues are mostly from central level while a small hierarchy of revenues is from the local

In the countries where the state power is more decentralized, the local has relatively independent rights to enact and enforce many decisions on local budget

Fourth, the efficiency of providing public goods: In the management of the

state, central government and local government have to both ensure the state management function and supply of public commodities The supply of public commodities directly spent by the conducting level will make the state budget spending more efficiently

1.2.4 Principles of decentralization of state budget

First, decentralization of state budget must be consistent and synchronized

with the decentralization of state management: state budget is the financial instrument of the State to serve the activities of the state apparatus If the state management is much decentralized for local in the field of administration, economics and society, the budget management must also be more decentralized

Second, ensure the leading role of the central budget and give the local

budget the relative independent position in the state budget system: The central budget keeps the leading role as the budget holding important revenues which are enough for the State to perform well its duties and regulate the state budget system The relative independent position of the local budget means that the local has certain autonomy on the local budget The central creates conditions for the local to implement such autonomy

Third, ensure the effectiveness: The effectiveness of state budget

decentralization is embodied in two aspects which are general effect resulted from regulations on decentralization of budget management (shown in the delimitation of receiving – spending task) and the effect when considering expenses in the process of decentralizing budget management

Fourth, ensure the fairness: fairness in decentralization of budget

management is in place because among locals in a country there are different natural, social characteristics and different economic development levels Regulations on decentralization of budget management simply applied to all provinces equally will likely lead to the inequities

Fifth, ensure strengthening the efficiency of state budget management and

control: To ensure strengthening the efficiency of budget management, budget control, it is needed to build a budget control institution with higher degree of independence, as well as with competence in handling violations in budget

management

Sixth, enhance the management capacity, accountability of the local: When

deciding on the level of decentralization of budget management for the local the central needs to review on the local management capacity The local budget management capacity includes: decision making capacity, implementation organizing capacity, monitoring capacity and capability to explain the budget

1.2.5 Content of decentralization of state budget management

In reality in Vietnam, decentralization of state budget management is considered on the four main contents which are as follows:

- Decentralization on the authority to issue laws, policies, standards and norms of state budget

- Decentralization of revenue management and duties of spending state budget

- Decentralization in the implementation of the state budget cycle

- Decentralization in supervision, inspection and audit of state budget

1.2.5.1 Decentralization on the authority to issue laws, policies, standards and norms of state budget

In the management of state budget, regulations on laws, policies, standards, norms of state budget play an important role Regulations on laws, policies, standards, norms of state budget are not only the key bases to set up budget estimates, fiscal control, but also one of criteria assessing the quality of state budget management and operation of the central and local levels

1.2.5.2 Decentralization of revenue management and duties of spending state budget

Decentralization of revenue management and duties of spending state budget

is an important content in the regulations on decentralization of state budget management Specifically, it is the task defining what items the central budget and local budget are collected and what specific expenses they carry out in the