DECENTRALIZATION OF PUBLIC INVESTMENT MANAGEMENT IN VIETNAM SITUATION AND SOLUTIONS PHÂN CẤP QUẢN LÝ ĐẦU TƯ CÔNG TẠI VIỆT NAM THỰC TRẠNG VÀ GIẢI PHÁP Ngo Ngan Ha, M A Nguyen Thi Nguyet, M A Thuongmai[.]
INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 DECENTRALIZATION OF PUBLIC INVESTMENT MANAGEMENT IN VIETNAM: SITUATION AND SOLUTIONS PHÂN CẤP QUẢN LÝ ĐẦU TƯ CÔNG TẠI VIỆT NAM: THỰC TRẠNG VÀ GIẢI PHÁP Ngo Ngan Ha, M.A - Nguyen Thi Nguyet, M.A Thuongmai University hann.vcu@gmail.com Abstract Public investment plays the important role in Vietnam’s development, it not only contributes to change the socio-economic, but also to increase the technical infrastructure of the economy and labor productivity Apart from those positive contributions, public investment in Vietnam still exists many limitations, especially the investment efficiency is low Besides, the inadequacy in decentralization of public investment management between the central and local government is one of the most interested causes This paper discusses the perspectives on decentralization of public investment management, the situation and some recommendation for decentralization of public investment management in Vietnam Keywords: public investment, decentralization, Vietnam Tóm tắt Đầu tư cơng góp phần làm thay đổi cấu kinh tế - xã hội Việt Nam, gia tăng sở vật chất kỹ thuật kinh tế, tăng suất lao động Bên cạnh đóng góp tích cực vào q trình phát triển đất nước, đầu tư công Việt Nam tồn nhiều hạn chế, hiệu đầu tư thấp Trong đó, bất cập phân cấp quản lý đầu tư công cấp Trung ương địa phương ngyên nhân đặc biệt quan tâm Bài nghiên cứu luận bàn quan điểm phân cấp quản lý đầu tư công, thực trạng phân cấp quản lý đầu tư công Việt Nam đề xuất số giải pháp nhằm hoàn thiện phân cấp quản lý đầu tư công Việt Nam thời gian tới Từ khóa: đầu tư cơng, phân cấp, vietnam Introduction In the process of State management over public investment, the State emphasizes the concentration of management The concentration is an attribute of the management over public investment in general and the management of the state in particular The State management over public investment is understood as the positive impact on public investment management processes in order to achieve certain goals The concentration is talking about the unity of State management on public investment, rather than concentrating all power on a central goverment, inevitably leads to autocracy, authoritarianism, abuse of power in public investment management The history has shown that, no State can bring the country to development, increase the efficiency 93 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 of public investment when all rights to govern the country and solve all affairs are concentrated in the central government Excessive centralized management over public investment can constrain the efficiency of public investment But a lack of concentration will lead to the dispersion of resources, which makes the, possibly overlapping functions and tasks in public investment management Therefore, it is necessary to clearly define what problems the central government deals with in public investment, and which issues to hand over to local goverment Decentralization of public investment management is understood as the transfer and determination of management authorities and responsibilities between the central government and the local government based on the real characteristics and capacity of local goverment through the legal documents In which, the central government transfers to local authorities on a regular basis, one or a number of tasks and powers for public investment management by issuing legal documents In Vietnam, the decentralization of public investment management has clearly defined the functions, tasks and implementation resources of the central and local governments in public investment management This reduces the workload of the central government, thereby further facilitating the macro-level policymaking process In addition, the decentralization process of public investment management also creates more initiatively for local goverment in implementing public investment activities in accordance with their competence and requirements of duties However, the decentralization process of public investment management still lacks synchronization, does not ensure consistency between the decentralized powers and duties with the ability to exercise those rights and the responsibilities of local goverment That leads to ineffective decentralization of public investment management In the scope of this article, through secondary data, this research focus on analyzing the current situation of decentralization of public investment management relationship of two most important levels of government which are central and local governments and the conditions for decentralizing public investment management in Vietnam Overview of decentralization of public investment management 2.1 The concept of decentralization of public investment management The investment is the process of using resources in a coordinated time to achieve a defined result or set of goals in a certain socio-economic condition (Le Viet Thai, 2007) Sharpe (1999) argues that the investment means the present firm sacrifice of value in order to achieve (possibly uncertain) future value The investment can be investment of the State, investment by enterprises and investment in the form of public - private partnership The investment can be towards socioeconomic or profit-oriented goals Public investment means an investment activity chaired by the State to implement socio-economic development programs and projects on the basis of the State’s resources and other resources Initially, almost countries managed public investment according to the centralization model In this model, making the management decision and implementing the functions of mornitoring and evaluation are mainly carried out by the central government The central government regulates issues relating to planning the public investment, allocation of the capital sources and implementation of public investment projects As a result, it is really difficult for local government to promote the dynamism, creativity, autonomy and self-responsibility in public investment 94 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 management Therefore, decentralization of public investment management is considered as an alternative management model which can overcome the limitations of centralization mechanism Decentralization of public investment management can be understood as the transfer and clear delimitation of authority and responsibility between government levels in public investment management by promulgating in legal documents (Vu Thanh Tu Anh, 2012) In general, it is the process of redesigning the system of authority, responsibitlity and accountability (base on functions of state management in public investment) in the direction of shifting from the central goverment to the local government, as well as the business relationship process among stakeholders (inside and outside the system of public investment management) In essence, decentralization of public investment management aims to transfer the decision - making power to the lower levels to suit with the actual situations and to ensure the use of rescource more effectively, thereby to contribute to the local socio-economic development In federal countries – the degree of decentralization ensures the highest independence for local government, the central government only approves the national socio-economic development plan and the local governments are enable to decide some issues on public investment management including: planning the public investment; allocating the public investment capital plan; approving, evaluating, deciding, implementing and supervising the public investment projects In countries applying delegation in public investment management, the central government has the right to promulgate policies, regimes, standards, norms of public investment management decentralization while the local governments are mainly assigned responsibility and power to manage and implement public investment Decentralization of public investment management includes the following main contents: planning the public investment; allocating the public investment capital plan; approving, evaluating, deciding, implementing and supervising public investment (Tran Thi Thu Huong, 2011) However, the transfer of authorities and responsibilities in the decentralization of public investment management is not a mechanically arrangement, but according to John M Cohen & Stephen B Peterson (2002), decentralization of public investment management must be operated in close relation with administration decentralization, fiscal decentralization, market decentralization, political decentralization) In a study by Lorena Viñuela (2014) in 40 countries on the quality and trend of decentralization of public investment management, it is stated that “there is no common model, no general uniformity in the public investment management decentralization applies to all countries “ Therefore, the countries need to base on the goals of economic management in general and public investment management in particular, as well as the political, economic and social situation of each country, each region to make decisions on the content and form of decentralization of public investment management The important problems of public investment management decentralization are the consistency between contents of public investment management decentralization (planning the public investment; allocating the public investment capital plan; approving, evaluating , deciding, implementing and supervising public investment) with decentralization forms (administration decentralization, fiscal decentralization, market decentralization, political decentralization) and how to coordinate to create an expected decentralization model Besides, because of the interation between the contents and forms of public investment management decentralization, it is necessary to pay attention to the order and coordination between them to get the highest efficiency For ex95 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 ample, within the scope of fiscal decentralization, if the revenue decentralization is not preceeded, or at least parallel with expenditure decentralization, the local government will not have enough financial resource to carry out the other tasks of public investment management On the other hand, if administration and fiscal decentralization are expanded but not associated with political decentralization, the use and alloction of resource will also not be controlled exactly 2.2 The conditions of public investment management decentralization Public investment management decentralization is not the intrinsic attribute of local government, but it reflects the relationship between the central and local government in performance the duties of state management on public investment Therefore, in order to implement effectively and achieve the target of public investment management decentralization, the local government should implement in certain conditions According to Jennie Litvack (1998), the conditions to ensure effectiveness of public investment management decentralization include: Firstly, it is the condition of implementation resources The local government must have sufficient resources to implement decentralization of public investment management including human, financial and material resources The condition of human resource requires local public investment managers must ensure both in quantity and quality and have the capacity to perform the assigned tasks If the public investment managers are not satisfied the condition, the local government cannot well implement contents of decentralization, even corruption and power abuse can occur Physical resources are physical factors ensuring the process of public investment management decentralization can be carried out smoothly such as office systems, working equipment…Therefore, physical resources are the important resource to ensure the local government can have adequate equipment to implement decentralization contents Financial resource here means the budget for public investment management decentralization If budget and other resources not follow the authority and responsibility, decentralization of public investment management will be very difficult to succeed Therefore, decentralization must link the autonomy of budget with the authority and local management function of public investment Thanks to budget autonmy, local governments can ensure the budget for their decisions and implementation of state management of public investment Secondly, it is the condition of information transparency Information transparency can be understood as the full, prompt, accurate notification for local people of the public investment plan, solutions for allocating public investment capital plan and approval, evaluation and decision on public investment projects implemented by local government as well If the information is transparent, on the one hand it will help ensure the the provision of public goods and services becomes meaningful and on the other hand residents may participate in checking, supervising or even may detect some mistakes in the implementation process of public investment management decentralization which can enhance the efficiency of public investment Thirdly, it is the condition of opinion collection mechanism from residential community This mechanism means people can express their expectation to local governments about the contents of public investment management decentralization Along with the condition of information transparence and accountability, the opinion collection mechanism of residential community also encourage people to actively participate in the process of developing public investment plans and 96 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 allocating the public investment capital plan As a result, this mechanism can help overcome the situation of spreading public investment, wasting resources, low efficiency of public investment and decrease many public investment projects which are not suitable with expectation of local residents Fourth, it is the condition of accountability The local government must have two-way accountability: first is with the upper level and second is with the lower level who directly are influenced by decentralization The local government must publicize, account and take responsibility for the results of public investment management so that residents can supervise their activities to ensure efficient implementation of public investment management If accountability mechanisms are not ensured in both two ways, the decision making not only may not guarantee to serve residents better but also take it out of control of central government Fifth, it is the condition of instituational environment The conditions of resources, information transparency, opinion collection from residents, accountability are only necessary conditions for the success of public investment management decentralization In fact, these conditions are affected, even in some extended cases, they can be products of instituational environment Therefore, in order to successfully decentralize public investment management, the factors of institutional environment must be adjusted so that regulations, legal policies must operate in the same direction and support the process of public investment management decentralization However, institution is often self-sustaining, so sometimes it not only does not support but also impede decentralization of public investment management Situation of public investment and decentralization of public investment management in Vietnam 3.1 Situation of public investment in Vietnam In the social investment structure, investment of public sector plays an important role in the economy development of Vietnam In the period from 2014 – 2018 and preliminary 2019, social investment capital continuously increased, in average it increased of about 12% per year In which, public investment always accounts for an important proportion in the total social investment capital The total public investment capital which the state budget is allowed to implemented in 2020 is nearly 700 trillion VND and 2.2 times to the real capital disbursed in 2019 Table Public investment in the total social investment structure Unit: billion VND Total Public investment Non-state invest- Foreign investment ment No Year 2014 1.220.704,0 486.804,0 2015 1.366.478,0 519.878,0 Scale Percent (%) Scale 39.9 468.500,0 38.0 528.500,0 97 Percent (%) Scale 38.4 265.400,0 38.7 318.100,0 Percent (%) 21.7 23.3 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 2016 1.487.638,0 557.633,0 37.5 578.902,0 38.9 351.103,0 23.6 2018 1.857.061,0 618.661,0 33.3 803.298,0 43.3 435.102,0 23.4 2017 1.668.601,0 594.885,0 Preliminary 2.046.838,0 634.948,0 2019 35.7 677.510,0 40.6 396.206,0 31.0 942.449,0 46.0 469.441,0 23.7 23.0 Source: General statistics office of Vietnam Public investment includes major sources including state budget, credit investment capital from state and state-owned enterprises, in which investment from state budget and state-owned enterprises accounts for over 70% the public sector investment Table Structure according to public investment capital Unit: billion VND Loans Capital of state enterprises and other No Year 2014 486.804,0 207.704,0 2015 519.878,0 233.378,0 44.9 201.000,0 38.7 85.500,0 16.4 2016 557.633,0 270.883,0 48.6 202.052,0 36.2 84.698,0 15.2 2017 594.885,0 290.135,0 48.8 210.549,0 35.4 94.201,0 15.8 2018 618.661,0 324.109,0 52.4 193.831,0 31.3 100.721,0 16.3 Preliminary 634.948,0 342.948,0 2019 54.0 186.390,0 29.4 105.610,0 16.6 Total State budget capital Scale Percent (%) Scale 42.7 198.202,0 Percent (%) Scale 40.7 80.898,0 Percent (%) 16.6 Source: General statistics office of Vietnam According to General statistic office, for the first months of 2020, public investment disbursement reached 203 trillion VND, equaling 42,7% of the year plan and increased 27,2% in compared to the same period of last year (41,6% in 2019 and increased 4,7%) Specifically, the central capital reached 32,5 trillion VND, equaling 38,4% of the year plan and increased 60,1% 98 INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2020 ICYREB 2020 compared to the same period of last year; the local capital achieved 170,5 trillion VND, equaling 43,6% of the year plan and increased 22,5% in comparison with the same period of last year Notably, the capital implemented from state budget in months of 2020 of some centrals citites like: Hanoi city reached 22,063 trillion VND, equaling 48,6% of the year plan and increased 2,8% compared to the same period of last year; Ho Chi Minh city reached 17,128 trillion VND, equaling 35,8% and increased 73,2%; Quang Ninh reached 8,465 trillion VND, equaling 60,9% and increased 64,6% Disbursement of public investment capital in many Vietnamese provinces was “frozen” in the first half of the year due to the complicated Covid-19 epidemic The “social distancing” policy and other prevention measures affected site clearance in many areas Furthermore, many investors, project management boards, consultants, contractors of all construction works must stop working and implement general cleaning, cleaning up construction sites, coordinating with functional agencies to contribute to epidemic prevention and control Therefore, the disbursement of public investment capital was delayed In addition to objective causes relating to the epidemic situation, the main cause of the current slow disbursement is mostly due to subjective factors in managing, operating and implementing the project such as: slowly completing investment procedures and assigning detail plans for capital allocation; delay in site clearance; the selection of contractor and construction organization is still low… Especially, some ministries, sectors, localities and project management boards are not proactive and drastic in coordination and direction; the role and responsibility of headers have not been highly appreciated… Public investment in recent years played the important role in the difficult time of economic development, become great motivation to promote growth and economic restructuring and had large spreading effects in projects of transportation infrastructure development, energy… Besides, the positive changes in public investment structure promoted investment in infrastructure, improved the investment environment and handled unreasonable issues of regions The state budget has focused more on human development, improving the quality of workers Specifically, investment in infrastructure development accounts for a big proportion, over 90% on average of total development investment expenditure from the state budget 3.2 Situation of public investment management decentralization in Vietnam For public investment activities, the spirit of management decentralization has been demonstated since 1999 in Resolution No 52/1999/NĐ-CP on 08/07/1999 with the basic principles “define clearly the state’s management fuction and management decentralization of investment… in accordance with each type of investment capital source and investor” Accordingly, apart from important national projects approved by National Assembly, investment projects using state budget are divided into groups A, B, C depending on the field and/or total capital Depending on each project group, the competent authority may be Prime Minister, Minister, Heads of ministry-level agency or President of People’s Comittees at all levels At the local level, before 1997, all investment projects were appraised and approved by Central agencies Then, in the 2003 period, it was decentralized to locals to evaluate and approve the projects of group B and C; The Prime Minister allows investment in group A projects and Chairman of the Provincial People’s Committee decides to invest (organize to evaluate and approve) the projects of group A Since 99 ... management in Vietnam 3.1 Situation of public investment in Vietnam In the social investment structure, investment of public sector plays an important role in the economy development of Vietnam In the... and local governments and the conditions for decentralizing public investment management in Vietnam Overview of decentralization of public investment management 2.1 The concept of decentralization... public investment projects As a result, it is really difficult for local government to promote the dynamism, creativity, autonomy and self-responsibility in public investment 94 INTERNATIONAL CONFERENCE