Development investment based on the local budget in ha nam province

Specific objectives a, Establish the theoretical framework of development investment from local state budget; b, Analyze the current situation of development investment from local state

Introduction

1 Rationale

Development investment from state budget plays a requisite role in the economic development of a country or a province in Vietnam However, in recent years, development investment from state budgets in Vietnam has still been inefficient This has been proved by various scientific researches on the efficiency of public sector, in which development investment from state budgets is considered as the key part In fact, every research carried out has mentioned different aspects of development investment from state budgets Development investment from local state budgets, recently, has contributed to the socio-economic development, restructuring the economics of localities pursuing industrialization and modernization, improving infrastructure and technology, promoting the construction

socio-of modern rural areas Nevertheless, development investment from local state budget

in some provinces or citiy in general and Ha Nam in particular has lately been controversial due to depending almost on state budgets; moreover, development investment from local state budget hardly prove its role in local socio-economic development strategy Until now, there has been no PhD thesis in development investment from local state budget in Ha Nam Province

Vietnam has 63 provinces and cities, of which around 20 provinces and cities

do not rely on central state budget The other 40 provinces including Ha Nam have to receive remarkable contribution from central state budget annually (revenues are insufficient to cover expenditures) Ha Nam is a poor province whereas development investment from state budgets play a vital role Every year, this province depends on central state budget funding sources, and 57 percent development investment are funded by local state budget in the period 2008 - 2013 Budgets for development investment have been inadequate to meet the demand of provinces, resulting in a wide range of investment projects being delayed or halting execution The problem that needs solving is how to reduce the dependence of development investment from local state budget of Ha Nam on the state budget, raising the activeness of budgets invested in provinces The fact is that planning and operating the development investment from local state budget has inappropriate method and content; the allocation of budgets among different industries and fields is unreasonable, for instance, focusing much on investing and developing infrastructure instead of labor

or technology Another measure is how to enhance the quality of making and operating plans, changing capital structure, improving the management, thus promoting development investment from local state budget in Ha Nam province

Under the circumstances above, the writer has chosen the topic “Development investment from local state budget in Ha Nam province” as the PhD thesis with an aim to clarify the mentioned problems

2 Research objectives

General objectives

Based on researching the development investment from local state budget of

a particular province as Ha Nam, the thesis works towards a goal of making

suggestions for improving the development investment from local state budget of Ha Nam as well as the provinces having the same status, in accordance with new

conditions, along with the trend of budget arrangement towards localities in Vietnam

Specific objectives

a, Establish the theoretical framework of development investment from local state budget; b, Analyze the current situation of development investment from local state budget in the period of 2008-2013, hence, assess the influences of development investment from local state budget in socio-economic development of Ha Nam province; c, Determine limitations and causes of development investment from local state budget of Ha Nam province; d, Illustrate opinions and orientations of development investment from local state budget of Ha Nam province until 2020; e, Make reccomandations for enhancing the development investment from local state budget of Ha Nam and other provinces with homologous status

3 Research subjects and scopes

Research subjects

a) Local state budgets: the concepts and establishment of local state budgets; b) The development investment from local state budgets: the organic relationship between the development investment from local state budget and development investment in the area in general as well as examined the relation between the development investment from local state budget and the socio-economic development of a province

Research scope

a, Place: Ha Nam province

b, Sience: The thesis focuses on researching development and investment from local state budget in provinces Local state budget includes: funds regulated from the state budget and funds accumulated by local state budget for investment The thesis studies development investment from local state budget in Ha Nam province, both theoretically and practically, focusing on: content, impacts, factors affecting, then topropose solutions to increase development investment from local state budget in Ha Nam province

c.Time: +) Research on reality: development investment from local state budget in the period 2008-2013; +) Research for future: development investment from local state budget until 2020

4 Contribution of the thesis

Academic and theoretical contributions:

- The thesis introduces a research framework including 5 steps In each step, content is mentioned in various approaches (methodology, research tools, research content, and its results)

- By analysing features of development investment based on the local state budget, the author help to clarify the content of development investment, criteria for assessing impacts of development investment on the local socio-economic development

New conclusions and findings from research results

- By applying the research framework, the thesis analyses the situation of the development investment from the local state budget in Ha Nam in the period 2008-

2013 and gives some findings as follows: There are a number of reasons that make the development investment from the local state budget fail to stimulate the socio-economic development in Ha Nam province, of which the major one is the inappropriateness in planning development investment from the local state budget There are no focal points The objectives are too general The development investment capital is spreaded and covers so many sectors and industries Therefore, the structure of development investment from local state budget in Ha Nam is irrelevant The investment focuses mainly on infrastructure and forgets in some extent to other fields such as technology science; human resource

- The author uses the method of Ordinary Least Squares regression to estimate the demand for the development investment capital in Ha Nam in general and demand for development investment capital from the local state budget in particular in the planned year Therefore, the thesis’s recommendation can help Ha Nam’s government to find out their solutions of mobilizing financial provincial budget for development investment by 2020

- Solutions in the thesis are to strengthen development investment from local state budget in Ha Nam, in which focusing on changing the structure of investment and structure of investment capital coming from the local state budget In this thesis, the author make clear that there can be two options for increasing total capital for development investment coming from the local state budget The author also proposes a solution to change the structure of development investment from the local state budget to help the province can make their investment more efficiently and effectively in the future

Structure of the thesis

Besides the introduction, conclusion and list of references and appendices, the main content of the thesis is divided into four chapters:

Chapter 1: Literature review

Chapter 2: The theoretical framework for development investment from local state budgets

Chapter 3: Current situation of development investment from local state budget in Ha Nam province in the period of 2008-2013

Chapter 4: Views and recommendations to increase development investment from local state budget in Ha Nam province

CHAPTER 1:

LITERATURE REVIEW 1.1 Literature review

International studies: Generally, international studies have mentioned almost full of both theory and practice in analyzing and evaluating public investment, solutions to manage public investment effectively in some countries and territories However, public investment in each country has its own characteristics due to

management mechanisms and certain conditions

Domestic researches

Domestic researches related to the topic are collected by the author in many aspects: overview of the research, performance, and management of development investment from state budgets; and research on economic and investment of Ha Nam province

Overall, these studies have focused on performance of investment in general and investment from state budget in particular in the scope of a province (city) or investment performance in some industries, mobilization and the use of development investment funds in a province, the management of development investment from state budgets in a province or a city On the other hand, there has not been any thesis going into development investment from local state budget in case of Ha Nam province

Moreover, some studies have only mentioned the performance of development investment from state budget, some just illustrate the management of state budgets of the whole country or in a particular province This thesis focuses on development investment from local state budget in a province Local state budget includes: funds regulated from the state budget and funds accumulated by local state budget for investment Indeed, the thesis study development investment from local state budget

in Ha Nam province, the limitation of which is that development investment from annual budgets depends on the regulation of the state budgets with the proportion of about 57% from local state budgets in the period 2008 - 2013; budgets have not met demand for development investment in the province, leading to a large number of investment projects being delayed or halted construction The author goes through: content, impacts of development investment from local state budget on socio-economic development, management as a cause of development investment from local state budget being ineffective in local socio-economic development strategy, thus find solutions to increase development investment from local state budget in Ha Nam province

1.2 Research framework and methodology

1.2.1 Research framework: It consists of 5 steps, each of which is divided into

smaller contents with different prospects (research methodology, research tools, main study contents and results to be achieved)

The research steps includes: a) Literature review of international and domestic research b) The theoretical framework of the development investment from local state budget funds in Ha Nam province c) Analysis of development investment from local state budget in case of Ha Nam province d) International and domestic context, views, orientation and some solutions to enhancing development investment from local state budget funds in Ha Nam province e) Recommendation to strengthen development investment from local state budget funds in Ha Nam province in the

future

Research questions: the 5 research questions of this thesis are:

+) What are the contents of development investment from local state budget?

+) How does development investment from local state budget affect provincial socio-

economic development?

+) Which factors affecting development investment from local state budget of Ha Nam province?

+) What are the real situations of development investment from local state budget in

Ha Nam province today?

+) How can development investment from local state budget in Ha Nam province be strengthened?

1.2.2 Research methodology: to achieve the objectives of the thesis, the author used

these main methods: statistical analysis, ordinary least squares (OLS) forecast regression, comparative method, expert interviews, methods of analysis, synthesis, diagrams, charts, graphs Methods were used synthetically to take advantages and resist any limitation in each method, hence, gain reliability in the results of research

to achieve the objectives

CHAPTER 2 THEORETICAL FRAMEWORK FOR DEVELOPMENT INVESTMENT

FROM LOCAL STATE BUDGET 2.1 Development investment

2.1.1 The concept of development investment

There are different concepts of investment, and development investment, but in short, “development investment is a fundamental component of investment, spending current funds to conduct activities aiming at increasing or creating physical assets and intellectual property, increasing production capacity, creating jobs and for development goals”

2.1.2 Characteristics of development investment

The author clarifies the characteristics of development investment as follows:

a, Require large funds and stagnated throughout the investment process; b, The results of development investment activities that are construction works usually take effect at the place of investment implementation; c, Development investment is durable due to the fact that time for investment implementation and operating time of investment results generally undergo many years; d, Development investment activity

is highly risky

2.2 Local state budget

2.2.1 The concept of local state budget

According to the State Budget Law, local state budget is part of state budgets, with revenue and expenditure being regulated by Law, decided by People’s Council and local authorities, and approved by the government if they are consistent with State budget law and other laws related to budget revenues and expenditures The state budget includes central and local state budgets Development investment funds belongs to local state budget managed by the local authority, which is the whole development investment funds of three levels of local state budget implementation,

including provincial budgets, district budgets and the budgets of communes and townships

2.2.2 Sources of local state budget:

a, Development investment funds divided by economic components include: development investment funds of the State sector, the non-state economic sector and the foreign investment sector Among which, the development investment funds of the State economic sector includes state budgets for development investment of state’s credit and of state-owned enterprises The thesis only studies development investment funds from the local state budget mobilized for provincial development investment locally called development investment from local state budgets

b, Development investment funds from local state budget includes: +) development investment funds from central budgets (both investment funds of central budget regulated directly to the local and ODA projects managed by the local) regulated to the province +) development investment funds from local state budget accumulated

to invest by the local themselves

2.3 Development investment from local state budget

2.3.1 The concepts and objectives of development investment from local state budget:

Through researching development investment from local state budget, the author has introduced the concept of development investment from local state budget, which is the activities invested by resources managed and used (as assigned) by the local authorities to maintain and enhance the capacity of the local economy through increasing the value of local physical and non-physical assets in order to achieve the objective of local socio-economic development To understand clearly the concept, the author also explained what development investment from local state budget resources are; how to raise development investment from local state budget for the purpose of creating, upgrading, and expanding asset value; and clarify development investment from local state budget is an investment activity of local authorities from local state budgets

Objectives of development investment from local state budget: is for sustainable

development, interests of nation, communities, localities and investors Development investment from local state budget is development investment activity funded by state budget to achieve the goal of the local socio-economic development: development investment for infrastructure, addressing employment problem, eradicating hunger and alleviating poverty, developing culture-health-education, security and defense, protecting the environment and improving the living standard of citizens, promoting investment from other sources on local areas (individual and foreign countries)

2.3.2 Characteristics of development investment from local state budget

The author clarified the characteristics of development investment from local state budget through the following primary traits: a) Development investment expenditures from local state budget are big, but often have the volatility, depending

on the balance of local state budgets; b, Development investment from local state budget is the use of state budget to conduct development investment activities; c) Development investment from local state budget managed by the State is mainly

invested in infrastructure and socio-economic projects, which are unable to recover capital; d) Investing in infrastructure and socioeconomic accounted for the majority

of local state budget; e) Development investment from local state budget predominantly aims to ensure the local socio-economic development

2.3.3 State management of development investment from local state budget

2.3.3.1 The objective of management of development investment from local state budget

From the consultation of professional scholars, the author found that, on a macro perspective, managing development investment from local state budget is to meet the following main objectives: a) Achieving objectives of socio-economic development strategy in each period of each region and of the country b) Mobilizing maximum and using effectively capital investment, human resources and material resources of industry, local and society c) Adhering to the provisions of law and economic - technical requirements in investment

2.3.3.2 Process of development investment from local state budget

The author agreed with other scholars on the process of development investment from local state budget in a province; however, the following steps are complemented: +) Identify investment needs +) Establish and appraise plans for development investment from local state budgets +) Layout allocation plan for development investment from local state budgets +) Invest +) Test, monitor, and evaluate

2.3.4 Contents of development investment from local state budget in a province

According to investment objects, development investment from local state budget in a province includes: a) Development investment from local state budget in infrastructure – socioeconomic (system of economic – technical infrastructure and system of social infrastructure; b) Development investment for supporting activities

of state enterprises, economic institutions in fields that are essential for the economy requiring state participation; c) Investing in purchasing public properties from local state budgets; d) Development investment of science and technology by using local state budgets; e) Development investment of human resources from local state budgets; f) Development investment from other local state budgets Each content above is divided into smaller details in order to form a basis for analyzing the structure of development investment from local state budget in Ha Nam province, following investment content in chapter 3

2.3.5 Effects of development investment from local state budget

After consulting scholars, the author has completed and proposed a set of indicators assessing the impact of development investment from local state budget on local socio-economic development through the following groups: +) the effect of development investment from local state budget on the development of local infrastructure – socio-economic namely economic–technical infrastructure (transportation, hydraulics, centre business districts, industrial zones) and social infrastructure (education and medicine); +) the effect of development investment from local state budget limits the increasing level of environmental pollution; +) development investment from local state budget promotes other investing –

developing budgets; +) development investment from local state budget has an influence on the development of local technology; +) development investment from local state budget improves the quality of life for inhabitants; +) development investment from local state budget reduce poverty; +) development investment from local state budget with the construction of modern rural area

2.4 Factors affecting provincial development investment from local state budget

2.4.1 The objective factors: a) Natural conditions; b) Economics; c) Political,

cultural, social; d) Policies; e) Opening market trends and international integration

2.4.2 The subjective factor: +) Capacity of local authority’s management and

administration; +) Capacity of investors; +) Strategy of local socio-economic development; +) Elements of projecting, plans of development investment from local state budgets; +) Organizational model of management apparatus in

development investment from local state budgets

2.5 Experience of development investment from the state budget in general and local state budget in particular:

Studying two represented Asian nations like South Korea and Taiwan, and two localities of Vietnam being Da Nang city and Phu Tho province, the author draw the lessons on state management of development investment from the state budget in

general and local state budget in particular

2.5.3 Lessons for Ha Nam province:

a) Drawing up investment plans, appraising investment projects, and monitoring tightly the development investment from state budgets play an important part in utilizing state budgets in the most effective way; b) Countries and localities pay attention to development investment from state budgets with a view to attracting other investing budgets They also take notice of training and developing human resources for the public sector, stimulating technology (innovate new technology and products), and supporting venture capital, especially supporting state budgets in this field; c) Countries such as Taiwan and South Korea also decentralize investment from state budget in the same way

as in Vietnam, but they respect the decision of the central government; at the same time, they encourage local governments to find ways for additional development investment budgets in infrastructure; d) The success or failure of state management in development investment from the state budget in general and local state budget in particular depend heavily on thought, vision, leadership and moral qualities of the central governments and local authorities; e) Nations such as Taiwan, South Korea and Da Nang focus on development investment from the state budget in key industries and key areas for the local as well as national development

CHAPTER 3: THE CURRENT SITUATION OF DEVELOPMENT

INVESTMENT FROM LOCAL STATE BUDGET IN HANAM PROVINCE

+ The favourable geographic position, and diversity in its land resources;

+ Diversified mineral resources, favourable climate, soil, and abundant human resources, the developed infrastructure and socio-economic system are positive conditions in developing modern industries, advanced agriculture which is various both in farming, forestry and aquaculture

3.1.2 Ha Nam’s economic potentials

The major industries in Ha Nam include producing cement and other construction materials, textile, and handicraft (making bamboo products,… sung): +

Ha Nam has a lot of potentials to develop agriculture, both farming and raising; + Ha Nam also has remarkable potentials in developing eco-tourism, mental tourism and heritage tourism; + The development rate of the province during the period 2008-

2013 was about 11.7%

3.2 An overview of the development investment in Ha Nam province 2008-2013

3.2.1 Development investment in Ha Nam province according to management levels and investment portfolio:

During 2008 -2013, the total investment capital in Ha Nam reached 62.237,01 billion VND, increasing 11,7% annually According to the management level, the percentage of development investment project managed by the local authorities was increasing On the average, there were 72 projects managed by the local authorities According to the portfolio, investment in basic construction accounted for the major part (72%) during this period

3.2.2 Development investment in Ha Nam according to the economic sectors during 2008-2013

The development investment capital were allocated for 20 economic sectors, and hundreds kinds of products, with a great portion flowing into production, infrastructure and socio-economic development A number of economic sectors were prioritized, including processing, manufacturing (43%), freighting (26%), agriculture, forestry, aquaculture (7.3%) Other sectors accounted for 23.7%

3.3 The current situation of development investment from the local state budget

in Ha Nam province during 2008-2013

3.3.1 The development investment from the local state budget in Ha Nam province during 2008-2013

3.3.1.1 The scope of and increases in the development investment capital from the local state budget in Ha Nam province during 2008-2013

Table 3.2: The scope and proportion of development investment capital from the

local State Budget in the period 2008-2013 of Ha Nam

Unit: Millions VND, %, current price calculations

Average stage (2008– 2013)

1

Total development investment capital

from local state budget

Million VND 757.843 849.592 1.080.844 1.305.036 1.774.914 1.348.780 1.186.168

2

The total development investment capital in

in the province

Million VND 7.476.100 7.558.600 8.975.600 11.550.500 13.010.500 13.666.200 10.372.833

3

Proportion of investment development capital

from local state budget/the total development

investment capital in the province

% 10,14 11,24 12,04 11,30 13,64 9,87 11,38

Source: [25,105] and author's calculations

The scope and proportion of development investment capital from local state budget in the period 2008-2013 were unstable The proportion of investment development capital from the local state budget accounted for 11.4% of the total development investment of the province (Table 3.2)

The increasing rate of the development investment capital from the local state budget was unstable The average increasing rate in the period was rather low (4%)

3.3.1.2 Development investment from the local state budget according to the investment capital resources in Ha Nam province during 2008-2013

Table 3.4 Development investment from the local state budget according to the investment capital resources in Ha Nam province during 2008-2013

Unit: Million VND, %, current price calculations

1

Development investment from

the local state budget

Billion VND 757.843 849.592 1.080.844 1.305.036 1.774.914 1.348.780

2

Development investment capital

from the funds allocated from

central state budget

Billion

3

capital from the

self-accumulated local state budget

capital from the

self-accumulated local state

budget/The total development

investment capital from the

local state budget

Source: [94,95,105] and author's calculations

Development investment capital from the self-accumulated local state budget accounted for 43% of the total development investment capital from the local state budget, fluctuating The proportion of the development investment capital from the funds allocated from Central State budget over the total development investment capital from the local state budget was 57% on the average

3.3.1.3 Development investment from the local state budget based on the investment portfolio in the period 2008-2013 (Table 3.5)

a) Development investment from the local state budget in infrastructure and the socio-economy accounted for the largest portion (78.74%) in the total development investment capital from the local state budget Development investment from the local state budget in the technical-economic infrastructure occupied 57.04%, in social infrastructure 21.71%; b) Development investment from the local state budget in other sectors occupied only 10.68% of the total; c) Development investment from the local state budget in science-technology occupied 5.5% of the total and fluctuated; d) Development investment from the local state budget in human resource development fluctuated, accounting for 4.61% of the total; e) Development investment from the local state budget in programs supporting enterprises and economic organizations that requires the state participation accounted for 0.47% of the total

3.3.2 The reality in management of development investment from the local state budget in Ha Nam province

3.3.2.1 The process of development investment from the local state budget is discussed in detailed as follows: a) Identifying the investment needs; b) The current

situation in making, verifying plans for development investment from local state budget; c) Planning, allocating the development investment capital from the local

state budget; d) Implementing investment; e) Examining, supervising and evaluating

3.4 Evaluating the influences of development investment from the local state budget on the socio-economic development in Ha Nam province in the period 2008-2013

in the period 2008 - 2013

Unit: Million VND, %, current price calculations

The period average

2008 -

2013 A1

Development investment from local state budget funds into the

A2

Development investment from local state budget for supporting

activities of state enterprises economic institutions in fields that

are essential for the economy state participation

A3

Development investment from local state budget in

A Total of development investment capital from local state budget 757.843 849.592 1.080.844 1.305.036 1.774.914 1.348.780 100

Source: Author collected from [95, 105] and author’s calculations