Fiscal implication of the recent changes in poverty lines and revision of norms for the allocation of capital expenditures and resources for targeted programs REPORT ON ASSESSING FISCAL IMPLICATION OF[.]
INTRODUCTION
Background of the research
The enactment of the State Budget Law in 2002 has transformed Vietnam's state budgeting process by enhancing transparency, accountability, and predictability This law has led to significant changes, including improved decentralization between central and local budgets, with over 50 percent of state budget expenditures now directly managed by local governments As a result, local authorities have been empowered to exercise initiative and creativity in budget management to effectively address the expenditure demands for economic development.
Since 2006, Vietnam has undergone significant changes in its budgeting process, initiated by Government Decisions 210/2006/QĐ-TTg and 60/2010/QĐ-TTg, which established quantitative norms for state budget allocation for investment expenditures during the periods of 2007-2010 and 2011-2015 These reforms represent a transformative approach to state budget management and allocation The norms introduced for 2007-2010 took into account ethnic minority populations and poverty rates, making the allocation process more equitable The implementation of the newly revised allocation norms is expected to further enhance investment expenditure distribution from the central state budget to local budgets, benefiting targeted transfers and national programs.
The Decision 60/2010/QĐ-TTg establishes new quantitative norms for state budget allocation for investment expenditures from 2011 to 2015, reflecting a progressive approach despite significant changes in allocation criteria The introduction of a new poverty line, now double that of the previous period (2006-2010), will notably alter provincial poverty rates Furthermore, the government has opted to utilize the provincial poverty rate from the General Statistic Office (GSO) instead of that from the Ministry of Labor, Invalid, and Social Affairs (MOLISA) These adjustments are expected to have a considerable fiscal impact on the allocation of capital expenditures and resources for national targeted programs.
The recent changes are expected to introduce flexibility in budget allocation criteria, weights, and norms, which will significantly affect the redistribution of state budgets for capital expenditures and enhance resource availability for national targeted programs.
Understanding the transfer of the central state budget to lower levels is essential for evaluating poverty reduction efforts Changes in budget allocation criteria, weights, and norms significantly impact these efforts, making it crucial to analyze their effects This knowledge is vital for designing future poverty reduction programs and effectively allocating resources to national targeted initiatives.
Objectives of the research
This research is follow-up assistance, which was provided to the Ministry of Planning and Investment to develop the Social Economic Development Plan for the period 2011-
In 2015, the government implemented Decision 60/2010/QĐ-TTg to review the evolution of budgeting mechanisms concerning resource transfers between central and provincial state budgets This assignment aims to assess the impact of recent changes in allocation norms, poverty lines, and the identification of provincial poverty rates on the redistribution of budget resources Ultimately, the research seeks to achieve specific goals related to these financial dynamics.
In recent years, the budgeting mechanism has evolved significantly, particularly regarding the transfer of capital expenditure from central to provincial state budgets This shift has led to notable changes in the budgeting process and the allocation norms, enhancing the efficiency and effectiveness of resource distribution at the provincial level.
This report assesses the impact of recent changes in allocation norms, the poverty line, and provincial poverty rates on the redistribution of capital expenditures from the state budget to provincial budgets, aiming to determine if these changes are pro-poor Additionally, it examines how these adjustments influence the availability of resources for national targeted programs.
Research approach
With given objectives and our understanding, our approach for this assignment follows three steps, which are described in the figure 1.
This article outlines the budgeting process in Vietnam, highlighting its historical development and significance in understanding capital expenditure allocation It examines the criteria used for allocation and how these may shift with changes in policy Additionally, it provides insights into 15 national targeted programs (NTPs), which are essential for comprehending the broader budgeting framework This foundational information serves as critical input for subsequent analysis.
The second step examines the impact of allocation norms, provincial poverty identification, and the new poverty line on capital expenditure distribution from the central to provincial state budgets This research will gather provincial poverty rate data for the years 2006, 2008, and 2010, as calculated by MOLISA and GSO, along with provincial capital expenditure data for the years 2006, 2007, and 2010 Utilizing the collected data, the study will perform calculations to analyze these relationships.
The provincial growth rate of capital expenditures is assessed by comparing the year when new allocation norms were implemented to the previous year when these norms were not in effect A negative growth rate indicates that the introduction of new allocation norms has led to a reduction in capital expenditures allocated to the provinces.
The analysis of capital expenditure shares across provinces reveals significant shifts, with negative changes indicating a decrease in funding compared to the previous year under the old allocation norms Conversely, positive share changes in disadvantaged provinces suggest that the new allocation norms favor pro-poor initiatives In contrast, negative share changes in highly developed provinces imply that these new norms may be detrimental to wealthier regions.
The relationship between per capita capital expenditures and provincial poverty rates is significant, as evidenced by the analysis of GSO and MOLISA provincial poverty rates in conjunction with per capita capital expenditures and their respective shares Variations in the calculation of provincial poverty rates and adjustments to the poverty line reveal crucial insights into how these financial investments impact poverty levels across provinces.
The relationship between provincial per capita capital expenditure and poverty rates indicates that provinces with higher poverty levels tend to receive increased capital expenditures This suggests a positive correlation, where a higher poverty rate in a province is associated with greater financial allocation for development projects.
In this case, it would be said that allocation norms is pro-poor.
This step is time-consuming because of data collection for the analysis, and quality of this calculation would determine the quality of the research
Step 3 is essential for this research assignment, as it examines the impact of allocation norms, provincial poverty identification, and the new poverty line on capital expenditure distribution from the central to provincial state budgets Additionally, the study explores how these factors relate to the resources available for national target programs (NTPs) To analyze the effects of changes in allocation norms on NTP resources, the research employs methods similar to those used in Step 2, substituting capital expenditures with resources allocated to NTPs Key indicators include provincial growth rates, changes in resource shares for NTPs, the correlation between NTP resources and provincial poverty rates, and the regression analysis of NTP resources and their shares in relation to provincial poverty rates.
Figure 1: The approach of the research assignment
Literature reviews
This literature review summarizes research on Vietnam's budgeting process since the introduction of the State Budget Law in 2002 It highlights the effects of changes in allocation norms, provincial poverty identification, and the new poverty line on the redistribution of capital expenditure from the central to provincial state budgets, emphasizing the resources available for national targeted programs.
Step 1: Describe the budgeting process
The team will review and provide a real budgeting process shown exactly how budgeting has been done in Vietnam since introduction of Budget Laws.
Budget Law, Decision 210/2006/QĐ-TTg and Decision 60/2010/QĐ-TTg
Other related policies and regulations on budget plan and allocation
Budgeting assessment reports and policy analysis from governmental stakeholders, researchers
Step 2: Assessment of the allocation norms, new poverty line, and poverty identification on allocation of capital expenditures
Using the assessment criteria, the team conducts an assessment of these factors on capital expenditure allocation from central to provincial budget levels
GSO and MOLISA provincial poverty rates
MOLISA new poverty line, and its provincial poverty rates
Provincial data on allocation norms
Reports of National Assembly on Budget
Analysis and assessment from researchers
Step 3: Assessment of the allocation norms, new poverty line, and poverty identification on resources for the NTPs
Using the assessment criteria, the team conducts an assessment of the above factors on resources for the national targeted programs
Other secondary data and information sources
60 other specific goal-oriented programs
The State Budget Law, implemented in Vietnam from January 1, 2004, has significantly enhanced the budgeting process, making it more transparent, accountable, and decentralized Various studies, including a comprehensive overview by the World Bank in 2004, confirm these improvements and highlight the critical coordination between the Ministry of Planning and Investment (MPI) and the Ministry of Finance (MOF) for successful budgeting Additionally, the introduction of Medium-Term Expenditure Frameworks (MTEF) has been pivotal in integrating planning and budgeting The studies also underscore the importance of budget allocation norms, particularly from the central to provincial levels, which have contributed to increased transparency and decentralization in public finance management.
Studies have identified several limitations following the introduction of the new Law, particularly regarding the use of poverty reduction rates as an allocation norm, which discourages provinces from making efforts to decrease poverty levels (World Bank, 2004) Additionally, a lack of coordination between the Ministry of Planning and the Ministry of Finance during the budgeting process can hinder effective resource allocation, as the Ministry of Finance oversees budgeting (Cheng, 2004; World Bank, 2004) Furthermore, the long-standing allocation norms fail to account for regional inflation differences, resulting in a significant disparity between the established norms and actual conditions (Office of National Assembly, 2011).
The implementation of the State Budget Law 2002 has significantly enhanced transparency, accountability, and decentralization in governance Furthermore, the subsequent introduction of Decision 210/2006/QĐ-TTg and Decision 60/2010/QĐ-TTg has taken additional strides towards fostering a more transparent and accountable governance framework, as confirmed by various studies and research (Vasavakul et al., 2009; Office of National Assembly, 2010).
Research on the impact of allocation norms, provincial poverty identification, and the new poverty line on capital expenditures for the national targeted program is limited, with only one comprehensive study conducted by the Office of National Assembly in 2011 This study examined the socio-economic effects of allocation norms on capital expenditure distribution at the provincial level, revealing that state budget capital mobilization increased, facilitating the completion of several significant national projects between 2006 and 2010 However, the study also highlighted various limitations that must be addressed in the design of new allocation norms, which are detailed in the Office of National Assembly report.
In short, this research assignment will fulfill empty holes in literature relating to the issue.
The article examines the budgeting process, highlighting its strengths and weaknesses, along with recent changes in allocation norms It also explores how these changes affect the distribution of capital expenditures and the availability of resources for national targeted programs.
BUDGETING PROCESS
Budgeting process before the introduction of State Budget Law 2002
Prior to the State Budget Law 2002, Vietnam's fiscal management was highly centralized, with the central government controlling and allocating both recurrent and capital expenditures to lower budget levels based on discrete allocation norms (Hanai and Bach, 2008) This lack of transparency and local government incentives led to the introduction of the State Budget Law 1996, Vietnam's first budget law, which established crucial regulations for budgetary and fiscal management Its enactment marked a significant turning point in state budget management, providing a legal framework for the budgeting process and contributing to socio-economic development (Hanai and Bach, 2008) The State Budget Law 1996 also represented the initial move from an input-control system towards a nascent result-oriented budgeting process in Vietnam (World Bank, 2004).
The State Budget Law of 1996 established a tiered budget system across four governmental levels: central, provincial, district, and commune This structure was reaffirmed in the State Budget Law of 2002 An overview of Vietnam's planning and budgeting system, governed by these laws, is illustrated in Figure 2.
Figure 2: Planning and budgeting system in the State Budget Laws
Source: Consolidation from existing legal documents
2.1.1 General budgeting procedure regulated by state budget law 1996
The State Budget Law of 1996 outlines an annual budgeting process initiated by a directive from the Prime Minister, focusing on socio-economic development and the preparation of the state budget.
Ministry of Planning and Investment, Ministry of Finance,
Department of Planning and Investment, Department of Finance, and planning and financial units of each sectoral department
District Office of Planning and Finance
There is no full-time official in charge of planning Commune accountant is also in charge of budgetary management.
The Prime Minister's directive has prompted the Ministry of Finance to release a Circular that outlines the procedures for drafting the state budget This guidance emphasizes two key components: first, revenue estimation should be aligned with existing tax laws and relevant documents, incorporating any additional tax collections if applicable; second, cost estimation must adhere to the policies and spending norms established by central government regulations.
The Ministry of Finance (MOF) has developed a budgetary plan to allocate revenues and expenditures to various ministries, central agencies, and local authorities Following the Prime Minister's directive and the MOF's circular, ministries and central agencies are responsible for designating revenue sources and budgetary tasks to their subordinate units Meanwhile, People's Committees at all levels are tasked with assigning revenue sources and budgetary responsibilities to the units they oversee.
The state budget estimation process follows a "bottom-up" approach, starting from the budget beneficiaries at the base unit and consolidating at each level The Ministry of Finance (MOF) then calculates the total revenues and expenditures for the entire country Ultimately, all sub-national budgets are integrated into the state budget, which is submitted to the Government and National Assembly for approval.
2.1.2 Activities and timeline of budgeting process in State Budget Law 1996
According to the State Budget Law of 1996, the National Assembly is responsible for approving the drafted state budget plan and allocating funds before November 30 The key activities and timeline related to this process are summarized in the accompanying table.
Table 1: Main activities and timeline of budgeting process stipulated in the state budget law
Main activities By the State budget
Prime Minister issues instruction on building state budget plan by June 15 th
MOF, MPI issue instructional guidelines; then ministries, central bodies and people committee instruct lower levels to build their
From Jun 15 to the end of July budget Plan budget plans
Provincial authorities submit budget plans to
MOF and MPI By August 15 th
MOF works with the central and local agencies, consolidating and building national budget plan.
From August to the end of October
Review, approval and allocation of the state budget
Government submits national budget plan to National Assembly via the Committee of Economic and Budget Affairs for verification
National Assembly Congress is held where discussion, hearings and decision on the state budget plan and central budget allocation scheme are made
Conducting distribution of the national state budget; National Assembly Standing Committee decides to allocate the central budget
Within one month from December 1 st to December 31 st
Source: Consolidation from existing legal documents
Based on the legal framework of the State budget Law 1996, the budgeting process can be divided into several steps as follows:
- Step 1: Before June 15 th , Prime Minister issues a Directive on the plane of social- economic development and state budget plan for the coming year.
Following the Directive, the Ministry of Finance (MOF) will issue a circular by June 10th to guide central agencies and lower budget levels on the requirements, content, and deadlines for budget estimation Additionally, MOF will make decisions regarding the review of state budget estimations for various sectors, including total revenue and expenditure for ministries and central agencies, as well as key areas like education and science and technology for provinces and centrally managed cities Concurrently, the Ministry of Planning and Investment (MPI) will release a circular to guide the planning of socio-economic development and investment plans.
In addition, coordinated with MOF, MPI announces amount of estimated capital investment from the state budget and capital investment from credit.
In accordance with the Prime Minister's directive and the Circular issued by the Ministry of Finance (MOF) and the Ministry of Planning and Investment (MPI), local agencies, ministries, central agencies, and Provincial People's Committees are tasked with communicating budget estimations to their subordinate units This process typically occurs in mid-June.
In Step 4 of the budget preparation process, budget beneficiaries must draft their budget estimations according to upper-level instructions and submit them to direct management Upper management reviews these estimations, consolidates them, and forwards the consolidated budget to the budget level-I units These units then review and consolidate all budget plans from their direct management levels before sending the final consolidated budget to the finance and planning agencies at the same level It is essential for central agencies to submit their budget plans by July 20th, accompanied by a written explanation detailing the calculations for each revenue source and expenditure responsibility.
By August 15th, ministries, governmental bodies, and localities must submit their budget plans to the Ministry of Finance (MOF) and the Ministry of Planning and Investment (MPI) Upon receiving these plans, the MOF will collaborate with the respective entities to refine their budgets before consolidating them into the national budget plan.
- Step 6: During October, the MOF have to consolidate national budget plan, and then submit to the government.
- Step 7: Government has to submit national budget plan to the National Assembly via the Committee of Economic and Budget Affairs for verification.
In Step 8, the Ministry of Finance (MOF) and the Ministry of Planning and Investment (MPI) collaborate with National Assembly agencies to review and clarify the budget plan, addressing issues related to budget estimation and allocation They also engage with various ministries and provincial people's committees to refine the budget and allocation plans, ensuring that these proposals comply with constitutional regulations and the State Budget requirements before submitting them to the National Assembly for approval.
Law The budget plan and budget allocation scheme have to be sent to all members of National Assembly at least ten days before the session begins.
- Step 9: Congress decides the state budget plan, budget allocations for the coming year before November 30th.
The current budgeting process
The budgeting process in Vietnam operates under the State Budget Law of 2002, which establishes a legal framework for both central and local budget levels, including provincial, district, and communal budgets This hierarchical system emphasizes accountability and reporting, with local budgets required to report to higher government authorities and the relevant People’s Council The structure of this budgeting system is illustrated in Figure AA, and a detailed description of the budgeting process follows.
2.2.1 General budgeting procedure regulated in the state budget law 2002
Vietnam's budgeting process adheres to the State Budget Law of 2002, enacted by Congress on December 16, 2002 The fundamental steps and procedures remain consistent with the previous legislation, with only minor adjustments to the decision-making authority of budget authorities, including Congress and People's Councils, as well as updates to the milestones in the budgetary planning process.
The State Budget Law 2002 has enhanced the autonomy and discretionary powers of provincial governments in managing local budgets, including planning, allocation, and execution This legislation promotes greater transparency and accountability in the budgeting process Additionally, it clarifies revenue sources and expenditure responsibilities at lower levels of budget management, with detailed revenue resources outlined in Annex 1.
2.2.2 Budgeting procedure regulated in State Budget Law 2006
According to the State Budget Law 2002, budget allocation and budgetary plan assignment is carried out as follows:
The National Assembly is responsible for determining total revenues, total expenditures, and the budget deficit for each sector Additionally, it allocates the central budget and any supplementary budget funds to provinces and central cities.
The allocation of the central budget plan, as approved by the National Assembly, outlines the distribution of funds from the central government to ministries, provinces, and cities under direct central management.
According to the budget plan set by the central government, ministries and agencies are responsible for distributing budget estimates to their directly managed units Concurrently, local People's Councils allocate the local budget Following the approval of the draft budget by these councils, People's Committees at all levels distribute the budget to their respective managed units.
The main activities and timeline can be summarized in the following table
Table 2: Main activities and timeline of budgeting process stipulated in the state budget law
Main activities By the State budget
The National Assembly’s Standing Committee has provided feedback on the budget allocation norms, which serve as the foundation for estimating the budget plan during the initial year of the stabilization period, lasting from three to five years This assessment is expected to be completed by May 1st.
Prime Minister (MPI) issues instruction on building state budget plan by May 31 st
MOF, MPI issue instructional guidelines; then ministries, central bodies and people committee instruct lower levels to build their by June 10 th budget Plan budget plans
Provincial authorities submit budget plans to
MOF works with the central and local agencies, consolidating and building national budget plan. by the end of July
Review, approval and allocation of the state budget at
Government submits national budget plan to National Assembly via the Committee of Finance and Budget Affairs for verification (MPI has explanations if needed) before October 1 st
The National Assembly's congress convenes to discuss and make decisions on the state budget plan and the central budget allocation scheme During this congress, two key documents are set to be approved: the drafted budget plan and the budget allocation plan, all before the deadline of November 15th.
Conducting distribution of the national state budget; National Assembly Standing Committee decides to allocate the central budget to lower budget levels. before November 20 th
Review, approval and allocation of the state budget at the localities, by the People councils
Provincial People Council decides provincial budget allocation before December 10 th
District and communal People Councils are responsible for determining budget allocations for their respective areas within ten days of the upper People Committee's budget plan decision Additionally, the state budget must be transferred to the communal budget level by December 31st, as outlined in existing legal documents.
Upon submission of the drafted budget plan to the National Assembly, the Committee of Finance and Budget Affairs is responsible for reviewing and providing comments All relevant documents, including the current year's budget implementation report, the drafted budget plan for the upcoming year, and the budget allocation plan, must be distributed to National Assembly members at least ten days prior to the congress The National Assembly is required to finalize decisions on both the drafted budget plan and the budget allocation plan by November 15th.
Under the current State Budget Law, the Ministry of Planning and Investment (MPI) provides annual guidelines for local socio-economic development plans and the associated capital requirements for their successful implementation MPI collaborates with the Ministry of Finance (MOF) to develop central state budget estimates and allocate approved budgets primarily for development capital expenditures Additionally, MPI plays a key role in designing National Target Programs (NTPs) and drafting budget plans, as well as allocating budgets for these programs.
New changes in current system
The State Budget Law of 2002 initiates a significant shift from input-control to a results-oriented budgeting process in Vietnam This legislation enhances transparency, accountability, and the overall quality of budgeting, while also facilitating financial decentralization and reforming public finance management This section will delve into the recent changes in the budgeting process, focusing on budgeting procedures and budget allocation norms.
There are significant changes in budgeting procedure regulated in the State Budget Law
The National Assembly Congress, as outlined in the 1996 State Budget Law, uniquely holds the authority to determine central budget allocations, a power not granted to the National Assembly Standing Committee The timeframe for finalizing the drafted budget plan has been reduced to 45 days, streamlining the process and ensuring timely distribution of funds to end-beneficiaries This revised budgeting process mandates close collaboration among all governmental agencies to fulfill the requirements effectively Notably, the 2002 law introduces significant changes to the budgeting process compared to its predecessor.
The State Budget Law of 2002 established a comprehensive legal framework for the budget process, clearly outlining the responsibilities of legislative bodies, such as the National Assembly and People's Councils, alongside executive agencies, including the Government and various ministries.
The law establishes legal procedures for monitoring state budget allocations by the legislature and outlines the State Auditor's responsibilities in auditing these reports Furthermore, it defines the roles, powers, and interests of governmental agencies at various levels, ensuring accountability and transparency in budget management.
- The law stipulates revenue resources and state budget expenditure tasks of the budget s and sharing revenues between the central and local budgets.
Local budgets typically have assigned revenues and expenditures that remain stable for three to five years, enabling local governments to effectively plan and mobilize resources for active spending from local state budgets.
The new law unifies state budget revenues and expenditures across all government levels, allowing for consistent use from central to local budgets It mandates the inclusion of all revenues, expenditures, and voluntary contributions for the current fiscal year, clearly defining the resources and objects of state budget revenues This approach enhances transparency and accountability across all budget levels and sectors.
The new law includes provisions to address the effects of unforeseen circumstances and policy changes on income and expenses, such as bonuses for exceeding revenue targets and adjustments to the annual state budget plan It also permits modifications to budget allocations and state budget expenditure responsibilities in response to unexpected fluctuations in revenues and expenditures.
The State Budget Law of 2002 empowers local governments to enhance their budget revenues through various means, including charges, fees, surcharges, and borrowing In most provinces, local government debt is capped at 30 percent of total annual domestic investment; however, in Hanoi and Ho Chi Minh City, this limit can extend to 100 percent This framework enables localities to actively seek funding and encourages voluntary contributions from individuals and organizations, ultimately boosting capital for development projects.
The capital expenditure allocation from the central to the provincial budget is guided by decision 210/2006/QD-TTg, which outlines a framework based on five key criteria: (i) population size and the number of ethnic minorities; (ii) provincial development level, including poverty rates, domestic revenue, and central budget transfers; (iii) the geographical area of the province; (iv) the number of administrative units, such as districts and disadvantaged regions; and (v) additional criteria for special and central cities, as well as provincial cities level I and dynamic economic regions.
The allocation norms, first implemented in the 2007-2010 state budget stability, have significantly improved the distribution of capital expenditures from central to provincial budgets Over four years, these norms have fostered equality and transparency in state budget allocations, gaining strong support from ministries, authorities, and local communities They have effectively reduced rent-seeking behaviors in capital expenditure allocation, enabling local governments to establish long-term investment plans Furthermore, these norms prioritize development objectives for disadvantaged areas, including mountainous, border, and ethnic minority regions, thereby helping to bridge the economic and living standards gap across the country.
The decision 210/2006/QD-TTg has been applied for four years and reveals some limitations
Capital expenditure allocations from ministry and sector budgets lack specificity, leading to ambiguity regarding which sectors, areas, and projects receive state funding This lack of clarity is particularly evident in the investment in national economic groups, state-owned enterprises, and social organizations, resulting in less transparency compared to the allocation of capital expenditure from central to provincial budgets.
Several provinces have experienced an increase in their internal revenue compared to previous years; however, the distribution of budget transfers remains inconsistent, with some provinces receiving no changes This disparity results in lower investment capital for certain provinces, particularly those with higher revenue sources.
During the state budget stability period from 2011 to 2015, the allocation of capital expenditure from the central to provincial budgets largely followed the same processes and norms established in previous years However, some modifications were introduced Key changes in the allocation norms for capital expenditure, as outlined in Decision 60/2010/QD-TTg, differ from those specified in Decision 210/2006/QD-TTg.
The decision 60/2010/QD-TTg outlines the principles of budget allocation in accordance with the resolutions of the Politburo and the Central Executive Committee of the Communist Party It mandates that all ministries, industries, and sectors receiving state budget allocations must direct funds to specified beneficiaries Additionally, the decision clarifies the economic groups, state-owned corporations, social and professional associations, and specific programs or projects eligible for capital expenditure from the state budget.
In terms of allocation norms used for distribution of state budget from the central to provincial budget level, some minor changes are made.
The decision 60/2010/QD-TTg clarifies and specifies five groups of criteria, including basic criteria such as population, development level, area, and district administrative units, along with additional criteria Notably, a new criterion regarding rice-planted area has been introduced to enhance investment in key rice-producing provinces, thereby ensuring food security Furthermore, urban types 1, 2, and 3 have been defined to align with current practices.
- Regarding to the additional allocation from the central budget to local budget to NTPs, the number of NTPs has been reduced by program integration (from 60 to
Shortcomings of the State budget law 2002
The State Budget Law played a crucial role in the budget process during its implementation; however, after seven years of service, the 2002 law revealed significant shortcomings that necessitated revisions The primary limitations of this law can be summarized as follows:
The budget system is characterized by complexity and overlap, as the provincial budget encompasses both district and commune levels, while the central budget includes local government finances Additionally, the authority to determine agency budgets remains ambiguous, contributing to a convoluted budget process.
The lack of clarity in regulations regarding revenue sources and expenditures has led to imbalances in various charges, fees, lottery revenues, and land use fees Additionally, the methods used for calculating budget deficits do not align with international standards.
The current decentralization of revenue sources and expenditure responsibilities between central and local budgets, as well as among various levels of local budgets, does not align with practical realities Additionally, the regulations governing supplementary budget allocations from higher to lower budget levels are deemed unsuitable.
- Annual budget plan is not appropriately built: inappropriate basis, unlinked to the medium-term budget plan, and disconnected with outcomes.
The current lack of regulations governing the operation of state budgets during emergencies leads to uncertainty, as there is no defined timeline for adjusting budget estimates Additionally, the existing rules regarding the advance use of next year's budget for urgent tasks are deemed inadequate.
- Some provisions on settlement, auditing, and publicizing state budgets are incomplete; spending tasks performed by changing budget sources are not be specified appropriately;
- The responsibility and authority in management as well as allocation of development capital are not clearly and appropriately defined.
ASSESSMENTS ON ALLOCATION OF CAPITAL EXPENDITURES
Assessment on changes in capital expenditures allocation norms
The budgetary stability period from 2004 to 2006 was guided by decision 139/2003/QD-TTg, issued on July 11, 2003 This decision established specific budget allocation norms based on various characteristics of ministries, industries, and provinces, including the number of civil servants, pupils, and hospital beds It mandated that provinces allocate 27 to 28 percent of their total budget expenditures to investment capital, resulting in a continuous annual increase in capital expenditure.
The budget allocation at local levels, including provinces and districts, has decreased by 7 percent compared to the previous plan, leading to a mismatch between available resources and local needs Consequently, the budget process often lacks transparency and equality.
The introduction of Decision 210/2006/QD-TTg marks a pivotal shift towards enhanced transparency and equity in the allocation of state budget capital expenditures This decision establishes a new set of criteria and allocation norms, completely eliminating previous inappropriate practices The allocation norms outlined in Decision 210/2006/QD-TTg are categorized into five distinct groups.
- Population criteria include provincial population size and its number of ethnic minority;
- Provincial development level consists of provincial poverty rate, internal revenue, and portion transferred to the central budget;
- Number of administrative units within provincial boundary include number of districts, mountainous district, remote, island, and disadvantage districts and cities;
- Additional allocation criteria include special cities, central cities, provincial cities level 1, and the central of dynamic economic regions.
Recent changes in state budget allocation norms have led to alterations in the volumes and proportions of capital expenditure within the overall state budget The details of total expenditures and capital expenditures are illustrated in Table 3.
Table 3: Structure of budget expenditures in 2006 and 2007
Source: The Finance and Budget Committee of National Assembly
In 2007, the share of capital expenditures in total budget expenditures declined to 25.8 percent from 27.6 percent in 2006, attributed to reduced allocations from both central and local budgets This decrease reflects a slower growth in capital expenditures, which rose by only 18 percent compared to a 19.7 percent increase in total expenditures The trend is consistent across both central and local budget expenditures.
The new allocation norms for capital expenditures ensure that funds are directed to regions with the greatest need, resulting in a notable increase for disadvantaged areas from both central and local budgets For instance, the North Mountainous region saw a 58.1 percent rise in capital expenditures in 2007 compared to 2006, enabling it to effectively implement its annual development plan and pursue its socio-economic goals Conversely, the South East region experienced only a 3.8 percent increase in capital expenditures, which accounted for 29.6 percent of total expenditures in 2007, reflecting a significant decrease from the previous year.
Table 4: Change in capital expenditures from central to provincial budgets if changing in the allocation norms between 2006 and 2007 by regions
North Central and Central Coast 6319.3 7448.9 17.9 19.0 19.0
Source: Consolidation from data provided by the Finance and Budget Committee of National Assembly
In 2007, the Red River Delta and South East regions accounted for nearly 60% of total capital expenditure, reflecting a decrease of 2.8 percentage points from 2006 Conversely, the North Mountainous and Mekong River Delta regions experienced a notable increase in their capital expenditure shares.
The analysis indicates that capital expenditures are now disproportionately allocated to more developed regions compared to the previous year, following the implementation of new allocation norms While less advantaged regions are receiving a larger share than before, more developed areas continue to dominate the total capital expenditure distribution within a single year.
By using new allocation norms, capital expenditures seem to be favorably distributed to disadvantage provinces This can bee seen in the table follows.
Table 5: Provincial growth rates and shares of capital expenditures using new allocation norms between 2006 and 2007
TP Hồ Chí Minh 7057.2 7323.7 3.8 21.195 18.645 -2.550 Đồng Nai 1077.6 1128.1 4.7 3.236 2.872 -0.364 Đà Nẵng 1923.7 2016.5 4.8 5.777 5.134 -0.644
Thừa Thiên - Huế 343.0 385.9 12.5 1.030 0.982 -0.048 Đồng Tháp 392.2 446.0 13.7 1.178 1.135 -0.043
Phú Yên 139.0 180.3 29.7 0.417 0.459 0.042 Đăk Lăk 259.1 341.1 31.6 0.778 0.868 0.090 Đăk Nông 102.2 134.7 31.8 0.307 0.343 0.036
Source: Consolidation from data provided by the Finance and Budget Committee ofNational Assembly
Table 5 reveals that in 2007, more developed provinces received a smaller share of capital expenditure compared to 2006, while disadvantaged provinces experienced an increase in their share during the same period This trend indicates a pro-poor allocation of resources during the budgetary stability period from 2007 to 2010.
During the budgetary stability period of 2011-2015, significant changes were made to state budget allocation norms, as outlined in section 2 These revised norms resulted in disadvantaged regions receiving a larger share of capital expenditures from the central to provincial state budgets compared to the previous year, when the new allocation norms were not in effect Conversely, more developed regions, such as the South East and Red River Delta, experienced a decline in their share of allocations.
Table 6: Change in capital expenditures distributed from central to provincial budgets if changing in the allocation norms between 2010 and 2011 by regions
North Central and Central Coast 5109.8 3824 33.6 1.91
Note that “share change” is the difference between the shares of 2011 and that of 2010.
Source: Consolidation from data provided by the Finance and Budget Committee of National Assembly
The recent allocation norms at the provincial level fail to benefit highly developed provinces and do not significantly aid the most disadvantaged ones Notably, provinces like Ho Chi Minh, Vinh Phuc, Da Nang, Ha Noi, Can Tho, Ba Ria-Vung Tau, and Hai Phong have experienced negative changes in their shares of capital expenditures These declines indicate a reduction in the capital funds allocated to these more developed regions.
Table 7: Provincial capital expenditures growth rates and share changes due to new allocation norms applied for 2011-2015
Source: Consolidation from data provided by the Finance and Budget Committee of National Assembly
Table 7 indicates that provinces experiencing the highest changes in capital expenditure shares are not necessarily the most disadvantaged The allocation norms implemented for 2011-2015 appear to disadvantage wealthier provinces while failing to provide substantial support to the poorest regions.
This section evaluates the shifts in allocation norms during periods of budgetary stability The research indicates that, based on the growth rate of capital expenditures and their distribution at regional and provincial levels, significant trends have emerged.
Between 2007 and 2010, the changes in allocation norms favored disadvantaged regions and poorer provinces, resulting in a higher share of capital expenditures for these areas compared to previous years However, despite this increased support, more developed provinces continued to receive larger portions of total capital expenditures annually.
During the budgetary stability period from 2011 to 2015, modifications to allocation norms aimed to assist disadvantaged regions while negatively impacting more developed areas At the provincial level, the newly introduced allocation norms do not favor the most developed provinces nor adequately support the most disadvantaged ones.
Assessment on change in poverty identification
According to decision 210/2006/QD-TTg, the MOLISA provincial poverty rates were utilized for calculating poverty scores, where a 10 percent poverty rate equates to 1 point Data from the Finance and Budget Committee of the National Assembly revealed that the total poverty scores for capital expenditure allocation during the budgetary stability period of 2007-2010 was 117.8 points, based on 2006 figures However, if GSO provincial poverty rates were applied, the total would rise to 147.2 points, reflecting an increase of 31.4 points or approximately 26.6 percent.
This section evaluates the impact of provincial poverty identification changes on capital expenditures by examining two key metrics: (i) per capita capital expenditures allocated to provinces and (ii) the share of capital expenditures distributed among provinces The analysis determines whether provincial poverty rate identification is pro-poor, with greater positive changes in these metrics indicating a more pro-poor approach However, the relationship between MOILSA/GSO provincial poverty rates and per capita capital expenditures is not distinctly defined, as illustrated in Figures 3 and 4.
1 See more detail in the annexes from 4 to 8 for more information about allocation scores.
Per capita capital expenditures are assessed by calculating the difference between the amounts allocated to provinces before and after a change This method is akin to evaluating the variations in the share of capital expenditures distributed among the provinces.
Figure 3: GSO provincial poverty rates and difference in per capita capital expenditure between 2006 and 2007
Ba Ria - Vung Tau Quang Ninh
Ben Tre Binh Dinh Thai Nguyen
Yen Bai Dak Lak Nghe An
Thanh Hoa Quang Tri Kon Tum Ha Tinh
Son La Bac Kan Ha Giang
D iif er en ce in p er c ap it a ca p it al e xp en d it u re s
Source: Consolidation from data provided by the Finance and Budget Committee of National Assembly
Figure 4: MOLISA provincial poverty rates and difference in per capita capital expenditure between 2006 and 2007
Dong Nai Tay Ninh Hai Phong
Khanh Hoa Kien Giang Hung Yen
Binh Dinh Phu Tho Lam Dong
Quang Nam Tuyen Quang Dak Lak Yen Bai
Hoa Binh Lao Cai Cao Bang
D if fe re n ce in p er c ap it a ca p it al e xp en d it u re s
Source: Consolidation from data provided by the Finance and Budget Committee of National Assembly
The analysis indicates that the provincial poverty rate identifications do not clearly illustrate the connection between poverty rates and per capita expenditures across provinces However, incorporating trend data reveals these relationships more effectively The quadratic trends suggest that both MOLISA and GSO provincial poverty rates impact both affluent and impoverished provinces Notably, the slope of the quadratic trend indicates that GSO provincial poverty rates are more pro-poor compared to MOLISA, particularly regarding the disparities in per capita capital expenditures allocated to the provinces.
Regression analysis indicates a negative relationship between the two variables, as detailed in Table 8 The total effect of the MOLISA provincial poverty rate is lower than that of the GSO provincial poverty rate for regions with poverty rates below 26.8% This suggests that the GSO poverty rate has a more significant impact on per capita capital expenditures in provinces with poverty rates under 26.7% Conversely, when provincial poverty rates exceed 26.8%, the total effects of the MOLISA poverty rate surpass those of the GSO This shift from MOLISA to GSO provincial poverty rates appears to benefit both affluent and impoverished provinces, although it is particularly advantageous for regions with poverty rates below 26.8%.
Table 8: Regression results of difference in per capita capital expenditures on provincial poverty rates, 2006-2007
Poverty identification Intercept Provincial poverty rate Coef.
Square of provincial poverty rate Coef.
Note: *** means that the coefficients are statistically significant at 1 percent level, ** at 5 percent level, and * at 1% level.
3 Total effect of GSO provincial poverty rate (PPR) should be 0.033 – 0.001*PPR, while the total effects of
During the budgetary stability period from 2011 to 2015, regression analysis indicates that the coefficients for provincial poverty rates from the General Statistics Office (GSO) are higher than those from the Ministry of Labor, Invalids and Social Affairs (MOLISA), with both coefficients being statistically significant at the 10 percent level This suggests that GSO's provincial poverty rates are more aligned with pro-poor initiatives compared to the MOLISA's identification, particularly regarding per capita capital expenditures allocated to provinces.
Table 9: Regression results of differences in per capita capital expenditures allocated to province on provincial poverty rates, 2010-2011
Provincial Poverty Rate Coefficients R-Squared
Note: *** means that the coefficients are statistically significant at 1 percent level, ** for
5 percent level, and * for 10% level.
A positive relationship exists between provincial poverty rates and changes in capital expenditure shares allocated to provinces, as illustrated by the MOLISA and GSO data Scatter diagrams reveal that wealthier provinces, particularly among the top ten, typically receive lower capital shares, indicating that funding tends to favor poorer provinces Additionally, the GSO analysis shows that while developed provinces cluster away from the zero line, poorer provinces remain just above it, reinforcing the trend that capital allocation norms prioritize middle-class and impoverished regions over affluent ones.
Figure 5: MOLISA provincial poverty rates and changes in shares of capital expenditures during the budgetary stability period 2011-2015
Tay Ninh Dak Lak Dak Nong Kon Tum
Hoa Binh Lai Chau Dien Bien
Ch an ge in s ha re s be tw ee n 20 10 a nd 2 01 1
The share of Ho Chi Minh City experienced a significant decline of -4.3, which was too substantial to be represented in the scatter plot; therefore, it was excluded from the graph.
Source: Consolidation from data provided by the Finance and Budget Committee of National Assembly
Figure 6: GSO provincial poverty rates and changes in share of capital expenditures during the budgetary stability period 2007-2010
Thua Thien - Hue Quang Tri
Quang Binh Ha Tinh Thai Binh
Bac Ninh Hoa Binh Lai Chau
Dien Bien Son La Bac Kan
The share of Ho Chi Minh City experienced a significant decline of -4.3, which was too substantial to be represented in the scatter plot; therefore, it was excluded from the graph.
Source: Consolidation from data provided by the Finance and Budget Committee of National Assembly
Regression analysis indicates a positive correlation between provincial poverty rates, as identified by MOLISA and GSO, and the allocation of capital expenditures to provinces during the budget stability periods of 2007-2010 and 2011-2015 The findings suggest that MOLISA's provincial poverty rates are less effective in targeting poverty compared to those of GSO Consequently, utilizing GSO provincial poverty rates is deemed more pro-poor for capital expenditure allocation during these periods, as evidenced by the data presented in Tables 10 and 11.
Table 10: Regression results of provincial shares of capital expenditures on poverty rates for 2006-2007
Provincial Poverty Rate Coefficients Adjusted R Square
Note: *** means that the coefficients are statistically significant at 1 percent level, ** for
5 percent level, and * for 10% level.
Table 11: Regression results of capital expenditure share allocated to province on provincial poverty rates for 2010-2011
Provincial Poverty Rate Coefficients R-Squared
Note: *** means that the coefficients are statistically significant at 1 percent level, ** for
5 percent level, and * for 10% level.
During periods of budgetary stability, the provincial poverty rates established by MOLISA served as a key criterion for allocating capital expenditures to the provinces This approach has led to several significant findings.
Using MOLISA provincial poverty rates as an allocation norm results in lower total poverty scores compared to those derived from GSO Consequently, GSO poverty measurements demonstrate a more pro-poor approach than those of MOLISA.
The allocation of per capita capital expenditure in provinces does not effectively support the wealthiest regions nor significantly benefit the poorest ones as anticipated The General Statistics Office (GSO) identifies provincial poverty rates as being more favorable for areas with poverty rates below 26.8% In contrast, for provinces with poverty rates exceeding 26.8%, the Ministry of Labor, Invalids, and Social Affairs (MOLISA) provides a more pro-poor assessment than GSO, highlighting the need for a reevaluation of poverty alleviation strategies.
The analysis of capital expenditure distribution to provinces reveals that the GSO provincial poverty rates from 2007 to 2015 are more effectively aligned with pro-poor outcomes compared to the MOLISA rates This indicates a stronger correlation between budgetary allocations and poverty alleviation efforts during these periods.
Assessment on changes in poverty line
In 2008, GSO provincial poverty rates served as the basis for distributing capital expenditures from the central to provincial state budgets, as outlined in decision 60/2010/QD-TTg, which assigned one point for every 5 percent of provincial poverty However, with the introduction of a new poverty line in 2010, it is crucial to examine how this change impacts the allocation of capital expenditures Data from the Finance and Budget Committee of the National Assembly indicates that the total poverty scores for budgetary stability from 2010 to 2015 were 210.7 points, which would rise to 231.9 points—a significant increase of 21.2 points—when applying the new poverty line to the 2010 poverty rate.
Table 12: Scores of poverty for capital expenditure allocation of central to provincial state budgets during 2011-2015 due to a change in poverty line
Scores of provincial poverty-GSO 2008
Scores of provincial poverty- MOLISA 2010
North Central and Central Coast 49.22 50.89 1.67
Source: Consolidation from data provided by the Finance and Budget Committee of National Assembly
Implementing the new poverty line would benefit poorer provinces with higher poverty rates, such as the North Mountainous and North Central regions, which show improved poverty scores under this measure Conversely, more affluent areas like the Red River Delta and South East regions experience a reduction in their poverty scores Overall, the new poverty line appears to provide essential support to economically disadvantaged provinces.
Research indicates a negative correlation between provincial capital expenditures and poverty rates, applicable to both GSO provincial poverty rates and the "new poverty line." This suggests that poorer provinces receive less capital expenditure, indicating that allocation norms are not supportive of the impoverished However, regression analysis reveals that the new poverty line is more beneficial for the poor compared to the GSO poverty rates.
Table 13: Regression results between differences in per capita capital expenditures allocated to province on provincial poverty rates, 2010-2011
Provincial Poverty Rate Coefficients R-Squared
Note: *** means that the coefficients are statistically significant at 1 percent level, ** for
5 percent level, and * for 10% level
The analysis of the relationship between changes in provincial capital expenditure and poverty rates reveals mixed outcomes, as illustrated in Figures 5 and 6 While wealthier provinces experience a negative impact, middle-class provinces show a positive correlation, and poorer provinces also benefit modestly To further investigate this relationship, regression analyses were conducted, examining the changes in provincial capital expenditures against both the GSO provincial poverty rate and the "new poverty line" poverty rates, with findings summarized in Table 14.
Table 14: Regression results between provincial shares of capital expenditures and poverty rates when poverty line changed
Poverty identification Intercept Provincial Poverty
Note: *** means that the coefficients are statistically significant at 1 percent level, and ** for 5 percent level, and * is for 1 percent level.
The regression results show that both coefficients of GSO provincial poverty rate and the
“new poverty line” rate are positive but not statistically significant at the conventional significance levels Thus, no clear relationship between those two variables has been found.
From 2011 to 2015, the GSO provincial poverty rate served as a key criterion for distributing capital expenditures among provinces, highlighting its significance in budgetary stability This approach led to several notable findings regarding the allocation of resources based on poverty levels.
Implementing the new poverty line would benefit impoverished provinces, as it appears to provide greater support in terms of poverty scores for these regions.
The allocation of per capita capital expenditure in the province reveals a concerning trend, as poorer provinces are receiving less incremental funding While the allocation norm continues to support these disadvantaged areas, it is not as effectively pro-poor when compared to the GSO poverty rates Consequently, the new poverty line appears to be less favorable for the impoverished population than the previous GSO metrics.
Changes in the allocation of capital expenditures to provinces show that variations in the poverty line do not significantly impact provincial capital expenditure shares Nevertheless, the General Statistics Office (GSO) provincial poverty rate remains more favorable for the poor compared to the "new poverty line" established by the Ministry of Labor, Invalids and Social Affairs (MOLISA).
ASSESSMENTS ON RESOURCES FOR THE NATIONAL TARGETED PROGRAMS
National targeted program snapshot
From 2006 to 2010, Vietnam successfully implemented twelve National Target Programs (NTPs), all of which remain active In 2011, the National Assembly approved the implementation of an additional fifteen NTPs, following the Government's request outlined in Decision No 2331/QĐ-TTg dated December 20.
2010 The 15 NTPs decided in 2011 include:
The National Target Program on Employment aims to enhance the quality and effectiveness of vocational training to generate jobs and increase incomes for rural labor It supports labor and economic restructuring, focusing on agricultural and rural industrialization and modernization Additionally, the program fosters job creation and labor market development, particularly in rural and informal sectors, and comprises six distinct component projects.
The National Target Program (NTP) on poverty reduction aims to provide development opportunities for impoverished households, helping them stabilize and diversify their livelihoods while increasing their incomes The program focuses on enhancing essential infrastructure for socioeconomic development, ultimately improving the quality of life for those in poverty-stricken areas Additionally, it seeks to minimize the income and living standards gap between different regions and population groups, comprising three key component projects to achieve these goals.
The Rural Clean Water and Environmental Sanitation National Target Program aims to implement the national strategy for rural water supply and sanitation by 2020 Its primary objective is to enhance the quality of life for rural residents by improving access to clean water and sanitation facilities, increasing awareness of hygiene practices, and reducing environmental pollution To achieve these goals, the program is structured into four key component projects.
The National Health Target Program aims to proactively prevent and combat social diseases and dangerous epidemics, ultimately reducing morbidity and mortality rates associated with these health issues By focusing on these goals, the program contributes to social equity in healthcare and enhances overall quality of life It is structured into seven distinct component projects to effectively address these challenges.
The National Target Program (NTP) for population and family planning aims to maintain a sustainable birth rate to stabilize the population at approximately 115-120 million by the mid-21st century It focuses on enhancing the overall quality of the population—physically, intellectually, and mentally—to support national industrialization and modernization efforts, while also addressing the issue of gender imbalance at birth The program comprises four component projects and one scheme to achieve its objectives.
The National Target Program for Food Hygiene and Safety aims to enhance the capacity of food safety management organizations at both central and local levels This initiative focuses on ensuring effective management and administration of food hygiene and safety activities, aligning with international and regional economic integration standards The program comprises six component projects overseen by the Ministry of Health and the Ministry of Agriculture and Rural Development.
The National Target Program (NTP) on culture aims to enhance public awareness and mobilize societal participation in cultural development, positioning culture as a vital foundation for national industrialization and modernization Its objectives include preserving cultural heritage while supporting key political tasks, combating the degradation of historical relics, and addressing the decline of intangible culture Additionally, the program seeks to eliminate uncultured areas and promote vibrant cultural environments across various aspects of spiritual life The NTP consists of six component projects overseen by the Ministry of Culture, Sports, and Tourism.
The national target program on education and training aims to universalize preschool education for five-year-olds, maintain primary education for eligible children, and expand lower secondary education access It focuses on providing educational opportunities for ethnic minority students and those in challenging areas, while enhancing educational quality across all levels through teacher training and curriculum improvements Additionally, the program emphasizes the importance of foreign language instruction and aims to strengthen the physical infrastructure of schools Implemented by the Ministry of Education and Training, this initiative is structured into five component projects.
The National Target Program (NTP) on drug prevention and combat aims to significantly reduce drug-related crimes and the availability of illicit substances, while also controlling and decreasing the number of drug addicts This comprehensive program encompasses eight distinct schemes and is overseen by the Ministry of Public Security.
The National Target Program on Crime Prevention and Combat aims to uphold the rule of law and enhance community awareness and respect for legal norms across society, including schools and families It focuses on fostering a law-abiding culture, promoting healthy living environments, and improving both social and professional crime prevention efforts The program emphasizes proactive measures to suppress crime in critical areas, with the ultimate goal of controlling and reducing overall crime rates, particularly serious offenses This initiative comprises seven schemes overseen by the Ministry of Public Security.
The National Target Program on Energy Efficiency and Conservation aims to achieve a 5% to 3% reduction in total energy consumption compared to current forecasts This initiative focuses on establishing effective energy management models, promoting the use of high-efficiency equipment, and phasing out low-efficiency technologies Additionally, it seeks to optimize the capacity of existing equipment, reduce fuel consumption in transportation, explore alternative fuels, and minimize emissions to protect the environment The program comprises five component projects overseen by the Ministry of Industry and Trade.
The national target program on climate change response aims to evaluate the impacts of climate change across various sectors and regions, developing actionable short-term and long-term plans to promote sustainable national development The initiative focuses on leveraging opportunities for a low-carbon economy while collaborating with the international community to mitigate climate change and protect the global climate system This comprehensive program consists of five component projects overseen by the Ministry of Natural Resources and Environment.
The National Target Program (NTP) for building a new countryside aims to enhance rural areas by developing modern socio-economic infrastructure and rational economic structures It seeks to integrate agriculture with the rapid growth of industries and services while promoting rural development in harmony with urban planning This initiative focuses on fostering a democratic society enriched with national cultural identity, ensuring ecological protection, and maintaining security and order Ultimately, the program aspires to improve the material and spiritual well-being of the people in alignment with socialist principles, and it is overseen by the Ministry of Agriculture and Rural Development.
The National Target Program (NTP) on HIV/AIDS prevention and control aims to achieve the goals outlined in the national strategy for combating HIV/AIDS Its primary objectives include reducing the HIV/AIDS infection rate among the population to below 0.3% and mitigating the socio-economic impacts of the disease The program is structured into four component projects and is implemented by the Ministry of Health.
Resources for the National Targeted Programs
National targeted programs (NTPs) have significantly enhanced state budget capital expenditures at the local level, particularly benefiting poorer regions The central government's additional capital allocation has been instrumental in the success of these programs, as noted by the Finance and Budget Committee of the National Assembly in 2010 For localities experiencing modest increases in capital expenditure from 2007 to 2010, the funding from NTPs has provided a vital source of investment, helping to maintain a balanced budget during this period of financial stability.
From 2007 to 2010, capital expenditure allocated from central to provincial state budgets experienced a decline Statistics from the Finance and Budget Committee of the National Assembly indicate that the proportion of capital expenditure fell from 30.9 percent during this period.
From 2007 to 2010, the allocation of capital to National Target Programs (NTPs) and specific goal-oriented programs rose from 17.1% to 20.6% of total capital expenditure This upward trend in investment capital has enabled localities to secure adequate funding for their social and economic development initiatives, successfully achieving the objectives set by the NTPs and specific programs.
Between 2007 and 2010, a total of twelve National Target Programs (NTPs) and sixty goal-oriented initiatives were implemented across the country, with a total capital allocation of 61,637.3 billion VND The distribution of these capital sources is detailed in the accompanying table.
Table 15: Capital allocation to the national targeted programs during 2007-2010
Source: The Finance and Budget Committee of National Assembly
Capital allocation for National Target Programs (NTPs) is guided by the principles and criteria outlined in Decision 210/2006/QD-TTg, which emphasizes objectives, project locations, and specific characteristics of the programs This allocation framework is designed to be straightforward, transparent, and traceable, ensuring that resources are prioritized for disadvantaged areas, such as mountainous, border, island, and ethnic minority regions, thereby addressing economic disparities and improving living standards The mechanism enhances transparency, accountability, and equity among provinces and beneficiaries of the state budget It has garnered support from various ministries, government agencies, and local authorities, contributing to the reduction of rent-seeking behaviors in the budgeting process With a four-year budget stability, provinces and beneficiaries can effectively plan and utilize their allocated funds to achieve program objectives.
Table 16: Change in capital allocation to NTPs due to change in the allocation norms and criteria between 2006 and 2007 by regions
North Central and Central Coast 3540.6 4182.7 18.1
Source: The Finance and Budget Committee of National Assembly
Table 13 illustrates the shifts in capital allocation to the NTPs resulting from revised allocation norms and criteria In 2007, total capital allocated to the NTPs rose by 28.3 percent compared to 2006 Notably, highly developed regions demonstrated a greater growth rate in capital allocation to the NTPs However, this data alone is inadequate to determine if the changes in allocation norms favor wealthier regions.
A significant shift in allocation norms has occurred with the transition from MOLISA to GSO for calculating provincial poverty rates, impacting capital distribution to National Target Programs (NTPs) This transition reveals a positive correlation between provincial poverty rates and capital allocation, as illustrated in Figures 7 and 8 When using the MOLISA provincial poverty rate, data points are widely dispersed across the North-east region, whereas the GSO provincial poverty rates demonstrate a more concentrated relationship with capital allocation to the NTPs, suggesting a stronger positive correlation graphically.
Figure 7: MOLISA provincial poverty rate and capital allocation to the NTPs in 2007
Thừa Thiên - Huế Đà N ẵ ng
Tây Ninh Bình Ph ướ c
Bình D ươ ng Đ ồ ng Nai
Bà R ị a - Vũng Tàu Đ ồ ng Tháp
C ap it al a llo ca ti o n t o N T P s (b ill io n )
Source: Producing from the Finance and Budget committee of national Assembly
Figure 8: GSO provincial poverty rate and capital allocation to the NTPs in 2007
Bà R ị a - Vũng Tàu Đ ồ ng Nai Bình D ươ ng
Lâm Đ ồ ng Kon Tum Đ ắ k Nông Đăk L ắ k Gia lai
Qu ả ng Nam Đà N ẵ ng
Sơn La Bắc Kạn Phú Th ọ
C ap it al a llo ca ti o n t o N T P s (b ill io n )
Source: Producing from the Finance and Budget committee of national Assembly
Table 17: Regression results between capital allocation to the NTPs and provincial poverty rate, 2006-2007
Note: *** means that the coefficients are statistically significant at 1 percent level, ** is for 5% level, and * is for 1% level.
A positive correlation exists between provincial poverty rates and capital allocation to National Target Programs (NTPs), indicating that provinces with higher poverty levels receive more funding for these programs Analysis reveals that the slope coefficient derived from the GSO provincial poverty rate is greater than that from the MOLISA provincial poverty rate, suggesting that GSO's approach is more favorable to poverty alleviation in capital distribution to NTPs.
The allocation of additional capital to National Target Programs (NTPs) and goal-oriented initiatives significantly enhances capital expenditures from central to provincial budgets, aiding in the achievement of program objectives and supporting disadvantaged areas in economic development and improving living standards Recent changes in allocation norms promote greater transparency, accountability, and equity among provinces, although they appear to favor wealthier regions with higher growth in capital allocation However, conclusions about these trends remain inconclusive, as allocation criteria for NTPs are specific and varied Additionally, the method used to calculate provincial poverty rates plays a crucial role in capital distribution, with evidence indicating that the General Statistics Office (GSO) poverty rates are more aligned with pro-poor outcomes compared to those from the Ministry of Labor, Invalids and Social Affairs (MOLISA).