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MINISTRY OF EDUCATION AND TRAINING VIETNAM UNIVERSITY OF COMMERCE TA VAN QUAN THE DECENTRALIZATION OF GOVERNMENT BUDGET MANAGEMENT IN HANOI Major: Economic Management Program code: 62340410 Summary of the Doctoral Thesis Hanoi, 2019 22 INTRODUCTION 1.The urgency of the topic: The decentralization of Government Budget is an imperative component of government budget management, formulated based on the foundation of government apparatus, socioeconomic issues and periodical targets of government budget management Therefore, each country will come up with different decentralization budgeting methods taking the current national situation into account In Vietnam, the decentralization of government budget management has been implemented long ago and the level of decentralization of government budget varied periodically Since the 1996 Act of Government Budgeting amended and came into force in 2002 and 2015, the decentralization of budget management has been complying with the fundamental rules and remains relatively consistent, clear, transparent which ensures the proactiveness of different levels of local authorities as well as the central government The decentralization of government budget management is a key section among the decentralization of Authority Only with adequate resources and decision-making power on expenditures, each level of authority decentralized would be able to fulfil their missions independently and effectively Theoretically, the decentralization of government budget management was affirmed as an important modality in improving the effectiveness of government budget management and ensuring that the managerial duties of all authority levels, from primary to central, can be timely tackled One of the most noticeable challenges of the decentralization of government budget management is how to execute it in an urban context Over the last few years, after the delegation from the Central Authority, the locally decentralized budget management (distributed to the Provincial, Town and Village Authority) in Hanoi city had stuck to not only the government budget law but also the local features resulting in remarkable outcomes The rules about income sources and spending task of different local authority levels were set out precisely and specifically The local Authority has proactively formulated and distribute the local budget as well as proactively explore the urban advantages and potentials It was evidenced that budget distribution had improved the effectiveness of spending task and avoided intensive intervention from higher Authority to the lower However, beside the success in the decentralized budget management of Hanoi, there are some existing limitations such as: It has not been aligned with the requirements of the decentralization of Local socio-economic management within the area; The revenue distributed to District Authority is low still; The regulations of decentralized budgeting in spending task have not been appropriate towards socio-economic management decentralization; The role of socio-economic management decentralization in several missions and areas has not been assigned with enough details and specifications On the other hand, increasing globalisation together with international and regional economic integration have been adjusting the economic situation of the whole country generally and of Hanoi city particularly With the expansion of border of administration and the strengthening of urban administrative innovation, the decentralization of government budget management should undoubtedly be renovated to encourage the capital’s economy In order to promote the current positivity and to tackle the existing issues of the decentralized budget management of Hanoi, especially under the condition of the city council's policy to expand the border of administration and to accelerate the decentralization of the administrative and socio-economic management, PhD student is going to discuss “the possible improvement to the decentralized budget management of Hanoi city" in this thesis • • • Purpose and significance of the study a Purposes The thesis of the decentralization of the Government Budget management in Hanoi aims to establish a theoretical framework and practical grounds so as to propose a system of pragmatic solutions, hence, to complete decentralization of the Government Budget management of the capital city within the period of 2018-2025 onwards to 2030 Therefore, the thesis will answer these following key research questions: (1) What are the principles for dividing expenditure responsibility and revenues among levels of authorities? (2) How is the practical situation of the decentralization of Government Budget management of Hanoi at the moment? Are there any limitations and why? (3) What are those improving solutions to the performance of the decentralization of Government Budget management in Hanoi, which could promote efficient allocation of resources, equality assurance and improvement in the government management quality at local authority? b Significance Systemization clarifies the theory of decentralization of Government Budget management, including the decentralization of Budget management among local authorities; The thesis analyses and evaluates the current situation of the decentralization of Budget management among local authorities in Hanoi; clarify results, possible limitations, and reasons for those Provide a result-oriented and systematical perspective on feasible solutions to complete the decentralization of Government Budget management in Hanoi from 2025 to 2030 Subjects and scope of the study a Subjects of the study The thesis studies theoretical issues on the decentralization of Government Budget management, especially the content of the decentralization of Budget management among local authorities; a practical situation of the decentralization of Government Budget management in a local context (e.g city) and among different levels of local authorities within that city b Scope of the study Research overview: The thesis studies the decentralization of Government Budget management with main contributions, which are: (1) Decentralize the authority and power of enacting laws, policies, standards, and norms of State Budget (2) Decentralize revenues and spending tasks of the city budget (3) Decentralize management of Government Budget on debts (4) Decentralize the implementation of the budget management process (5) Decentralize the supervision, inspection, and audit of the Government Budget Research environment: The thesis studies the case of Hanoi and examines the experience of some countries on the decentralization of their Government Budget management Research timeline: The thesis studies the content of the decentralization of State Budget management in the city in the period of 2013-2025 and onwards to 2030 Research questions (1) What are the principles for dividing spending responsibilities and revenues between levels of government? (2) What is the current situation of state management decentralization in Hanoi city? What are the limitations and causes? (3) What are the solutions to improve decentralization of state budget management in Hanoi City in order to promote the efficient allocation of public resources and ensure equity and improve the quality of state management of local authorities? Research methodology Based on the basis of the methodology of Dialectical and Historical materialism, during the research process, the author has used various research methods as such: Analysis and Synthesis Methods: These methods are used to determine and explore different aspects of the theory Evaluations, conclusions, scientific proposals, which are consistent with the theory and practice of the decentralization of Government Budget management in Hanoi, are then drawn Historical method: This method is implemented so as to consider historical background and context, explore sources related to the decentralization of Government Budget management Case study method: The case study method is an empirical investigation of some examples in different districts in order to increase the pragmatic level of knowledge Quantitative research method: The author has created a research model with various variables, which are: the qualification of Government Budget management officer; positive impacts on local economic growth and social development; support from Government Budget management superior authorities and financial autonomy of local authorities The analysis is performed to accredit the relationship between the decentralization of Government Budget management and influencing factors Comparative method: This method clarifies the differences and similarities, strengths, limitations of research issues, hence, suitable proposals are provided to achieve research purposes Scientific method: The author uses related research paper results which were published in national and international journals to improve the theoretical framework and propose various solutions New contributions to the thesis Theoretically, the thesis has established a theoretical framework of the content of the decentralization of Government Budget management at a local level followed economical management approaches The thesis has specified evaluation criteria and elements that have impacts on the decentralization of Government Budget management at the city level Practically, from quantitative and qualitative research results, the thesis has come up with several conclusions on the success, limitations, and the reasons behind them in the decentralization of Government Budget management in Hanoi The thesis also evaluates the level of influence of elements to research subjects, including, the element of “financial autonomy of local authorities” and the element of “positive impacts on locality” have the strongest impact on the level of hierarchy in Government Budget management in Hanoi In terms of proposal solutions, the thesis has stated a few perspectives and solutions so as to complete the decentralization of Government Budget management in Hanoi in the corresponding time Research design Apart from the introduction, conclusion, the list of the author’s published research paper related to the thesis, reference list, and appendices, the structure of the thesis includes chapters: Chapter 1: The theoretical framework of Government Budget and the decentralization of Government Budget management Chapter 2: The practical situation of the decentralization of Government Budget management in Hanoi Chapter 3: Perspectives and solutions to complete the decentralization of Government Budget management in Hanoi CHAPTER 1: THE THEORETICAL FRAMEWORK OF GOVERNMENT BUDGET AND THE DECENTRALIZATION OF GOVERNMENT BUDGET MANAGEMENT 1.1 GENERAL THEORIES ABOUT GOVERNMENT BUDGET 1.1.1 Definitions and characteristics of a government budget 1.1.1.1 Definitions of a government budget The first definition of the government budget is that it is a document, in which the government presents revenues and expenses drafted for the following year and require legislative approval prior to implementation The second concept is that a government budget is a tool for the government to operate policies; the scope of the government budget depends on the scope of government activities, including revenues and expenses Upon the above analysis, some notions of the government budget could be understood as such: A government budget is a document of estimated revenues and expenses of the government, which was approved by the legislature, reflecting the economical relations incurred during the establishment process, distribution of the centralized monetary fund and is performed during a defined period to ensure government functions are operated according to a statutory basis 1.1.1.2 Characteristics of a government budget First, the establishment and usage of the government budget always go with the economical and the government based on certain rules executes political power of the government Second, a government budget always closely linked to government ownership and always contains common interests, public interests Third, a government budget is an estimated revenues and expenses document Agencies and units are responsible for making the government budget and setting important parameters related to the policies that the government must implement in the next fiscal year Fourth, a government budget is a crucial part of the national budget system The national budget system consists of: government finance, business finance, financial intermediaries, and personal or household finances Fifth, the characteristic of a government budget always linked to hierarchical aspect During the feudal period, the budget model was primitive and arbitrary, confusing the King’s treasury with the feudal government budget 1.1.2 Government budget system The budget level is formed on the basis of the government authority level, consistent with the current organizational structure of our government system, the government budget system includes central and local authority budgets, in which the local authority budget consists of: The budget of provinces and cities operating directly under the central authority (generally referred to as provincial budgets) The budget of districts, towns, provincial cities (generally referred to as district budgets) The budget of communes, wards, and townships (generally referred to as commune budgets) The central budget reflects the collecting and spending tasks by branch and plays a prominent role in the government budget system, it originates from the position and role of the central authority, which is the lifeline of the country The provincial budget reflects the collecting and spending tasks by territory, ensuring the implementation of the tasks of comprehensive organizing socio-economic management of the provincial authorities and centrally-run cities The budgets of communes, wards, and towns are special administrative units with special importance and specific characteristics: the revenue stream is directly exploited in the area and the spending task is also allocated to serve the immediate purpose of the community in the commune without any intermediaries 1.1.3 Revenue stream and spending tasks of government budget 1.1.3.1 Collect government budget Government budget collection is a financial activity of the government established by a system of policies and laws promulgated by the government based on the political power of the government over other entities in society to mobilize a part of the social wealth value to form a government budget to meet the government's spending needs Government budget collection includes taxes, charges, and fees paid by organizations and individuals according to the provisions of law; revenues from economic activities of the government; donations from organizations and individuals; grants (non-refundable) and other revenues as prescribed by law 1.1.3.2 Spending on the government budget Government budget expenditure is the process of allocating and using the government budget to perform the government's tasks in each period With international practices, classified by economic content, government budget spending includes: (1) Recurrent expenditures are those with a short-term impact, usually less than one year (2) Development and investment expenditures are those with a long-term impact, usually over a year, forming material assets capable of generating revenue, directly contributing to the increase in the infrastructure and facilities of a country (3) Other expenditures include the remaining government budget expenditures, such as: Payment of principals and interests of monetary funds borrowed by the government, aid, loans, additional financial reserved funds, etc 1.1.4 Government budget management process According to international practices, the process of government budget management is all activities of three stages: (1) Preparing and deciding the government budget; (2) Execute the government budget; (3) Auditing and evaluating the government budget Regarding the content, the process of State budget management includes: a Prepare and decide annual budget estimates (making government budget estimates) In the preparation of estimates, law enforcement agencies forecast government budget revenues and expenditures from the central to local levels; to promulgate documents guiding the estimation, implementation of estimation, and submission of budget estimates to superior authorities for consideration and decision b Execute the government budget estimates Compliance with the budget estimate is the process of implementing general economic, financial and administrative measures to turn the revenue and expenditure targets into reality Compliance with the estimates must comply with the overall fiscal discipline; Ensure allocation efficiency and operational efficiency The content of compliance with the budget estimation includes: Observing the budget revenue estimates, executing the budget expenditure estimates and the budget fund management activities c Auditing and evaluating budget (government budget finalization) Based on the settlement reports and evaluation reports, the government authority will discuss to approve the settlement of the State Budget Regarding the relation with political power, the procedure of State budget management is the process of concretizing the government power in the financial and budgetary sector of the state authorities (National Assembly, Citizen's Council) and executive authorities (Government, People's Committee) 1.2 DECENTRALIZATION OF GOVRNMENT BUDGET MANAGEMENT 1.2.1 Concepts and forms of decentralization of state budget management 1.2.1.1 Concepts Decentralization of State budget management is considered as one of the crucial parts in the decentralization of government management, which indicates the transfer of power and responsibilities from central government to subordinate government The purpose of the decentralization of government budget management at provincial level is to divide the management rights between provincial and district authorities, so as to promote the dynamics, creativity, autonomy and self-responsibilities of local authorities based on defined allocation of tasks, powers and responsibilities of each authority in government administrative apparatus In a local budget with an urban budget, the decentralization of urban budget management is actually the delimitation of the scope, responsibilities, and powers at each level in the process of management and operation of urban budgets On the basis of perspectives and analysis on the decentralization of government budget management as above, the thesis is determined to study the content of the decentralization of government budget management as follows: “ The decentralization of government budget management is to delimitate scope, responsibilities, decision-making power and management right of the government budget among different levels of authorities 1.2.1.2 Forms of decentralization of government budget management Based on the authority of all levels of government, decentralized state budget management can exist in the following forms: Decentralization: is a form of decentralization of state budget management in which superior authorities will transfer the right to perform budget tasks to its representative offices located locally Authorization: is the task of subordinate government transferring the decision-making power and responsibility to manage activities related to the State budget from the superior government When decentralizing the state budget management in the form of authorization, the subordinate authorities will make decisions on behalf of the superior authorities but the responsibility for those decisions remains with the superior authorities Empowerment: this is a form of decentralization of state budget management with the highest independence for subordinate governments In this form, subordinate governments are allowed to decide on budget-related issues without being subject to the control or administration of superior authorities 1.2.2 Requirements and principles of decentralization of government budget management 1.2.2.1 Requirements of decentralization of government budget management Compliance requirements: Compliance requirement is the respect and execution of spending and collecting tasks accordingly in budget of executive agencies and units The compliance expressed by complying with the budget law in collecting and spending activities for the budget Requirements for economic efficiency: Requirements for economic efficiency are economic results as shown by growth index, average income, productivity of government economic sector and other impacts from state infrastructure investment activities Social efficiency requirements: Socially effective requirements are understood as the results achieved by the budget in ensuring social welfare, public service systems such as health, education, etc Requirement on political efficiency: The political efficiency requirement of the management of budget usage can be understood as the result of the coordination among state management agencies in budget activities, in the construction of flexible and timely b c d e f (1) information processing system to execute budget is of great significance in evaluating budget efficiency 1.2.2.2 Principles of the decentralization of state budget management a The decentralized management of budget must be consistent with the decentralization of organizational structure in state administrative apparatus The process of decentralization of state budget management in general and local budget management in particular have to consider the relations between sector management and territorial management Combining those two is one of the most essential principles in state management of socio-economy in countries Each level of local authorities is allocated with specific revenue sources and spending tasks The spending tasks of any levels of budget are guaranteed by that level of authority; the issue and implement of policies, new regimes that increase budget’s expenses have to possess solutions The solutions should ensure financial resources are suitable to the balance ability of each budget Ensuring the leading role of the provincial budget of the city and the activeness of subordinate level budget To promote local authorities’ activeness, budgetary powers should not be intensively focused on provincial level of authority It is necessary to decentralize revenue sources to ensure subordinates to actively perform their assigned spending tasks The decentralized management of budget must be consistent with the decentralization of socio-economic management and management capacity of state authorities at all levels Any level of authorities, which perform well at any government public goods and services provision, should be assigned to perform that Hence, decentralization of budget management should be consistent with the management capacity of all levels of government, including management capacity, revenue sources development, and spending tasks execution It will promote the benefits of decentralized budget management, improve allocative and budget use efficiency Ensuring efficiency The efficiency in the decentralization of state budget management is indicated in aspects, which are general efficiency created from legal provisions on decentralization of state budget management and efficiency when considering expenses in the process of decentralizing state budget management The first aspect is closely related to the scope of allocating revenue sources management and spending tasks of government budget Decentralized management of state budget collection must achieve the goal of accuration, complete and timely collection of revenues as prescribed with the lowest cost Regarding the second aspect, for every additional level of government budget, additional operation and management costs incurs, which include the costs of that additional level of government budget and other related authority For instance, state budget inspection, supervision and approval activities Therefore, it is necessary to build a government budget system with minimum amount of intermediaries The effectiveness in decentralizing the state budget management shows the transparency in allocation of spending responsibilities, associating resources with responsibilities and associating responsibilities with powers of each level Ensuring fairness There is a need for ensuring fairness in the decentralization of state budget management due to the following reasons: Different locality holds different natural and social characteristics, different level of economic growth When applying the same basic principles of the decentralization of state budget (2) management to every locality, it could create unfairness and gradually cause bigger gap in development conditions among locality The decentralization of revenues and the task of state budget spending between the central and local governments is the main tool to implement the harmonization in the entire state budget system The state plays a role of coordinator through the central government budget by supplementing budget Supplementing budget is to balance a budget or to serve a certain purpose This provision allows the efficient allocation of resources between localities to facilitate mutual development g Ensuring to increase the effectiveness of state budget management and control An important issue for any state budget system is to minimize possible losses after implementing the state budget management decentralization To ensure the increased efficiency in the management and control of decentralization of government budget management, it is essential to build State budget control institutions, which have a higher level of independence, as well as the authority to handle violations in budget management Additionally, local authorities need to increase management capacity and accountability When deciding the level of decentralization of government budget management, tax collecting responsibility and spending tasks for locality, we need to evaluate local management capacity, including: decision making capacity related to budget, capacity to organize collecting and spending tasks and budget monitoring capacity 1.2.3 Grounds of the decentralization of government budget management a Based on the capability of local government to provide government public goods and services Any level of authority that has the optimal capacity to provide government public goods receives the decentralized revenue sources and budgetary spending tasks b Based on natural, economical, social characteristics of locality When allocating revenue sources, spending responsibility, it is crucial to consider both advantages and difficulties to every locality to ensure balanced development among regions as well as fairness in receiving government public goods and services for citizens c Based on the form of government structure Each level of government in the state apparatus performing the assigned functions and tasks in an administrative-territory area must have a contingent of officials, public employees, facilities and financial means Therefore, the structure of the state government apparatus, the legal status as well as the functions and duties of state management of all levels of government are the basic basis for building a state budget system in a country 1.2.4 Contents of decentralization of state budget management From the perspective of local state budget in the provinces and cities, decentralization of state budget management has many contents, but mainly has the following basic contents: 1.2.4.1 Decentralization of authority to issue policies, standards, and budget norms Decentralization of authority to issue policies, standards, budget norms is understood as the empowerment of local governments in issuing policy mechanisms under their authority, especially specific mechanisms, ensuring consistency with local socio-economic development objectives and practical situation In all levels of government, the provincial People's Council is allowed to decide the decentralization of revenue sources and spending tasks among the local government budgets at all levels; provincial Citizens’ Councils are allowed to decide on a number of fees and charges in the list decentralized by the National Assembly Standing Committee; provincial Citizens’ Committee are allowed to promulgate a number of regimes, budget spending norms, budget allocation norms to suit the conditions in the local government The specific provisions on revenue sources, spending tasks and the authority to 10 promulgate revenue policies and regimes have contributed to eliminate the situation where the localities stipulate receivables that violates law provisions 1.2.4.2 Decentralize the management of revenue sources and State budget spending tasks The decentralization of revenue sources needs to ensure a number of principles of economic efficiency and management efficiency: corresponding to the decentralized spending task, we need to ensure the balance of benefits - costs of taxpayers Also, minimize the tax risk impacts and administrative costs related to tax administration and collection The decentralization of spending tasks should be developed in accordance with the local government's responsibility to provide government public goods, clearly and transparently without overlapping spending tasks among levels, ensuring economic efficiency, fiscal justice, accountability and administrative management effectiveness 1.2.4.3 Decentralize the operational management to implement the state budget cycle Decentralized management of the state budget shows the relationship between different levels of state government in a state budget cycle including all stages: budgeting, approval, execution, settlement, inspection and budget examination The requirement of this content is to deal with the relationship of the level of participation, administration and control of the authorities, state management agencies and specialized agencies in each stage of the budget management cycle Citizens' Councils at all levels have powers and responsibilities in deciding local budget estimates; local budget allocation; allocate estimated expenditure to departments, agencies and sectors according to specific fields, decide the additional amount from their budgets to subordinate's budgets, and approve budget settlement 1.2.4.4 Decentralize borrowing to local governments Decentralizing loans to local authorities, including decentralizing to local governments to decide on loans, establishing debt limit frameworks and controlling loan decisions, and methods of loans allowed to be used Decentralization of decision-making authority: Local budgets are balanced based on the principle that total expenditures not exceed total revenue 1.2.4.5 Decentralize in supervision and inspection of state budget The purpose of decentralization in the supervision and inspection of the State Budget is to control the management and use of the budget, money and state assets; contribute to saving practice, fight against corruption, prevent loss and waste, detect and prevent law violations; improve the efficiency of using state budget, money and assets 1.2.5 Indicators of decentralization of state budget management 1.2.5.1 Quantitative indicators a The group of indicators reflects the decentralization of state budget revenues and expenditures Revenue Decentralization Indicator (RDI): Is determined by the ratio between total local budget revenues and total state budget revenues Total local budget revenues RDI = Total state budget revenues Expenditure Decentralization Indicator (EDI): Is determined by the ratio between total local budget expenditure and total state budget expenditure The formula to determine the income ratio of local authorities is as follows: EDI = Total local budget expenditure Total state budget expenditure 13 practice when and only when the local authority has sufficient financial resources, autonomy and self-determination in such revenue and expenditure activities 1.3.2.4 Fairness among levels of authority When a task transferred from the Central Government, the upper level authority to the lower level authorities in a hierarchical manner, the task may not be well performed Although tasks and responsibilities are transferred, it is not transferred in accordance with powers and resources 1.4 EXPERIENCES OF SOME COUNTRIES AND LOCALITIES ON THE DECENTRALIZATION OF GOVERNMENT BUDGET MANAGEMENT AND LESSONS FOR HANOI 1.4.1 Experiences of some countries on the decentralization of government budget management 1.4.1.1 Thailand’s experiences on decentralization of their budget management A highlight from the success of decentralization in Thailand is the encouragement of increasing autonomy of local authorities, especially in the revenue and expenditure activities of local budget However, the percentage of spending increases of local authorities is due to an increase in funding that is transferred at the same time as the tasks from the Central authority The main task is related to the expenditures for small-scale public services such as rehabilitation of infrastructure (eg roads, bridges, irrigation canals, water supply and drainage) 1.4.1.2 Indonesia’s experiences on decentralization of their budget management With stronger decentralization, local authorities receive greater autonomy and in particular the expansion in the powers of local councils The Central authority has no longer interfered with human resources allocation in local authorities The fact that the local authorities are allowed to set up taxes and fees could increase their immediate revenue, but if these taxes and fees are not carefully calculated and reasonably considered, local business activities will be impaired In the long run, it will lead to negative consequences 1.4.2 Experiences of some localities on the decentralization of government budget management 1.4.2.1 Experiences from Ho Chi Minh City a Revenue sources of state budget In addition to revenues arranged by the city, they are supplemented with additional capital construction investment The City People's Council allows the City People's Committee to mobilize other capital sources such as calling for investment in the form of BT (BuildTransfer), BOT (Build- Operate- Transfer), BTO (Build- Transfer- Operate) projects to key infrastructure projects and public services, making the best use of ODA capital and funding from the World Bank (WB), contributing to promote socio-economic development of Ho Chi Minh City b About spending tasks Management of recurrent expenditures of the State budget: The city has implemented the mechanism of autonomy on payroll and administrative management costs for administrative agencies, assigning financial autonomy to public service delivery units Management of budget capital-funded construction expenditure: With the principle of prioritizing capital for key and urgent projects capable of being completed and put into use; during the process of administration, the authorities regularly review and monitor the implementation progress of the project 14 1.4.2.2 Experiences from Da Nang a Revenue sources of state budget Da Nang builds a mechanism to support businesses to expand production and business to create sustainable revenue The support mechanism is reflected in the reform of administrative procedures; supporting production and business premises; supporting technological and equipment innovation; information support, market expansion promotion, tourism promotion, human resource training for businesses b About spending tasks In the work of planning budget spending, the city always prioritizes concentrated budget for development investment spending The average annual growth rate of total investment in capital construction in the past 15 years (from 2003 to 2017) in Da Nang is 14% Especially, the revenue collected from land use fees for capital construction in the past 15 years is nearly 35,260 billion dong, accounting for nearly 50% of total capital construction investment of the city and becomes the main resource for investing in infrastructure development 1.4.3 Lessons learned for Vietnamese government and Hanoi a To government First, decentralization of state budget management should be specified in the constitution and legal documents to increase the autonomy of grassroots governments and improve the rights of local people Secondly, the public services and goods provided by the local authority or the central authority should be clearly distinguished Thirdly, in order to coordinate the interests and development plans of grassroots state budget management units; the government should have solutions to promote cooperation between local authorities, between the government and the people Fourthly, central authority needs to shift their roles from direct public service providers to state budget supervisors and distributors for the effective provision of local authorities Fifthly, local authorities must improve accountability to the people Solutions to increase local revenue should be applied, for example, local governments may collect some taxes related to property Sixth, when decentralizing state budget management, there should be a strict and specific plan with the goal of reducing the gap between rich and poor between regions and regions Seventhly, decentralization of state budget management will bring financial autonomy to localities but it may lead to a loose state budget management, embezzlement and waste Therefore, central authority must strengthen inspection, inspection and supervision activities of budget management at all levels Eighthly, emphasizing the co-operation of local authorities with non-governmental organizations (NGOs) as these organizations are also likely to be a useful source of funding for local governments The legal framework for this cooperative activity needs to be expanded b To Hanoi Firstly, avoiding the deep intervention of the City level, reducing the activeness, flexibility and increasing dependence of the district and commune authorities Secondly, it is necessary to ensure transparency in decentralized management of local state budget in the province Thirdly, ensuring clarity and transparency in the decentralization between the City, District, Town and commune, ward and town levels Fourthly, in accordance with the decentralization of economic, social, defense, security management and management capacity of each level of City, District, commune, ward and town 15 • • • CHAPTER 1: CONCLUSION Chapter deals with decentralization of state budget management in general, decentralization of urban budget management in particular is always associated with specific context and responsibilities of the government apparatus in that particular context Therefore, before going into the theory of decentralization of state budget management, chapter studies the characteristics of the state budget and the state budget system Based on those two foundations, Chapter has studied in depth the theoretical issues of decentralization of state budget management In which, contents of decentralization of state budget management are also studied and clarified in the theoretical chapter, namely: decentralization of authority to promulgate laws, policies, standards and norms of state budget; decentralizing the management of revenue sources and the task of regulating and supplementing the State budget source; decentralized state budget management on debt financing; Decentralize the implementation of budget management process; decentralize the supervision, inspection and audit of the state budget In addition, there are grounds for conducting decentralization of state budget management and the principles of decentralization of state budget management, which are the research content of this chapter Quantitative and qualitative indicators, which evaluate the decentralization of state budget management, have been clarified to serve as a basis for the model study in chapter with factors affecting the level of decentralization of state budget management In addition, chapter of the thesis has studied the experiences of some countries and big cities in Vietnam in terms of decentralization of expenditure management, revenue management and borrowing authority of the city government Hence, drawing some basic issues that Vietnam in general and Hanoi in particular need to research and deploy CHAPTER 2: CURRENT SITUATION OF THE DECENTRALIZATION OF GOVERNMENT BUDGET MANAGEMENT IN HANOI 1.5 THE GOVERNMENT BUDGET SYSTEM IN HANOI 1.5.1 The government budget system of Vietnam Budget unit is formed based on the authority level and should be appropriate with the current framework of the government apparatus, the government budget system includes the central budget and local budget, in which, and central budget consists of: Budget for provinces and cities under central government (generalized as Provincial Budget) Budget for townships, districts and city under provincial government (generalized as town budget) Budget for commune, precinct and town (generalized as commune budget) 1.5.2 The government budget system in Hanoi The budget unit of Hanoi has authority to decide, distribute, control, supervise and examine the budget of estimated units which are under Hanoi authority’s control as the revenue and spending task are decentralized to local budget The district and town councils, under Hanoi authority, need to tender the budget estimation and budget distribution proposal to the corresponding people's committee following the rules while aligning spending estimation distributed to authorised councils with the rules as well 1.5.3 The government budget management system of Hanoi: People’s Committees at all levels estimate government budget generation in the corresponding scope; estimate income and spending of local budget; propose distribution lay out for estimated budget of the local authorities presented to the corresponding people’s committee to decide; set up local budget adjustment estimation in case of necessity; balance the local budget and present to people’s committee for consideration in accordance with the 16 law; direct and inspect the tax agency and assigned agency for generating local budget following the regulations; propose fee, charge and people’s contribution collecting project and propose capital mobilization level presented to the corresponding people’s committee for deciding; project the investment spending decentralization of local socio-economic infrastructure construction in accordance with the regulation and present to people’s committee for deciding 1.6 CURRENT SITUATION OF THE DECENTRALIZATION OF GOVERNMENT BUDGET MANAGEMENT OF HANOI FROM 2013 TO 2017 1.6.1 Current Situation of the decentralization of spending norms, standards, regulation and policy enforcement As stated in government budget law 2015, the generated revenue which is distributed among central budget and local budget includes: Value added tax (VAT) deducted by VAT on imported goods; company income tax deducted company income tax from the exploration and exploitation of petroleum; personal income tax; special consumption tax deducted special consumption tax on imported goods; environment tax deducted environment tax on imported goods Revenue of local budget is endowed with 100% the amount of environment tax deducted environment tax from petroleum exploiting and exploring activities; license tax; agricultural land use tax; non-agricultural land use tax; land use fee deducted land use fee of those whose assets on the ground are under central departments’ control; land and water surface rent; government-owned accommodation rent and sales; registration fee; lottery revenue; capital withdrawal from economic organisation investment of local budget … Those revenue sources are usually minor 1.6.2 Current situation of the decentralization of income sources and spending task 1.6.2.1 The decentralization of income sources: a Division rate of revenue between budget units: Division rate of revenue sources between budget units of Hanoi was implemented as follow: From 2013 to 2016, Hanoi had self-guaranteed districts for their budget balancing includings: Hoan Kiem, Ba Dinh, Dong Da, Hai Ba Trung, Thanh Xuan, Cau Giay, Nam Tu Liem From 2017 till 2020, according to the ruling of Prime Minister, Hanoi enjoys the 35% regulatory rate of the income distribution which is 7% lower than that of the 2011-2016 period, Hanoi has adjusted the regulatory rate of the income distribution from districts to town aiming at increasing the number of districts that has the ability of budget self-balancing during 20172020 period to 10 districts: Hoan Kiem, Ba Dinh, Dong Da, Hai Ba Trung, Thanh Xuan, Cau Giay, Nam Tu Liem, Tay Ho, Hoang Mai and Long Bien Several districts suffer a reduction of regulatory rate such as: Hoan Kiem’s 6% decrease from 17% to 11%, Nam Tu Liem’s 5% decrease from 16% to 11%, Long Bien’s 21% decrease from 42% to 21%, Tay Ho’s 10% decrease from 42% to 32% and Hoang Mai’s 14% decrease from 42% to 28%, b The government budget revenue generation in the area of Hanoi From 2013 - 2017, the total income of the government budget in the area of Hanoi has suffered from the fluctuation The total income of the government budget has been increasing continuously: 8,25% increase comparing the figures in 2014 and 2013, 36.35% increase from 2014’s data to 2015’s data However, the amount in 2016 had then plummeted and decreased by 46,473,591 millions VND which is equivalent to 20.61% decline since 2015 From 2017, the total income of government budget seemed to start climbing and recovering quickly reaching 18.71% growth since 2016 Surprisingly, the total income of government budget generated within Hanoi city area has always been exceeding the estimation c The decentralization of local budget revenue of Hanoi 17 The additional income coming from the central budget of Hanoi only covered a small proportion of total income of the city’s local budget, only less than 10% of total local budget revenue on average The additional income extracted from the central budget of Hanoi mainly came with other specific purposes rather than balancing which had proved the financial independence and budget self-balancing ability of Hanoi d The decentralization of district’s and town’s local budget revenue of Hanoi The total budget revenue of districts and towns in Hanoi had increased consistently during 2013-2017 The total budget revenue of districts and towns after the 2014 regulation in terms of decentralization had surged by 888,391 millions VND (equivalent to 6.67%) since 2013; it continued to increase by 4,573,135 millions VND (equivalent to 32.37%) from 2014 to 2015, 8,721,826 millions VND ( equivalent to 46.53%) from 2015 to 2016 and 883,976 millions VND (equivalent to 3.22%) in 2016-2017 period Annually, the city budget still need to supplement the district and town budget since they have not been able of self-balancing This reality illustrates that the decentralization of budget revenue among all levels was having an inclination towards the city level City budget usually enjoys an enormous and more stable income than district’s and town's Considering the socioeconomic responsibility of a city, the current distribution is reasonable, however, favouring city would fail to encourage the proactiveness of district and town 1.6.2.2 The decentralization of local budget spending task a Local budget spending task in Hanoi From 2013 to 2017, total spending of local budget had increased by 16.10% in which the development and investment spending had risen by 5.53%, regular spending had surged by 23.32% The reason why regular spending rose much faster than the development and investment spending was due to a high proportion of salary payment in regular spending Besides, Hanoi’s budget even spared a spending for the central budget in 2016 and 2017 which emphasized that the income and spending management of the city budget has been implemented more and more effectively b Local budget spending task at all levels in Hanoi (1) Local budget spending task at City level: Decentralize the spending task between local budget at all levels of Hanoi according to the 16/2016/NQ-HDND Resolution of the city's people committee in terms of income generation and spending task decentralization and the percentage of income distribution between the budget at all authority level within the city area; the 55/2010/QĐ-UBND Decision of the city's people council and 13/2016/NQ-HĐND Resolution The regular spending and development and investment spending of Hanoi were inconsistent throughout the years The spending on development and investment tended to shrink gradually during 2013-2017 period (2) Current situation of budget spending at District level; The level of decentralization of district budget with the target of balancing the spending task was at 40 - 85% This ratio showed that the total income of district budget generated was inadequate for the spending task assigned, resulting in the heavy dependence of district budget in city budget The source-converting spending of district budget was fairly great, even exceeded the spending on development and investment at some point The excess of source-converting spending compared to development and investment spending were 22.96% and 14.72% in 2016 and 2017 respectively The spending task implementation with such a high sourceconverting cost prevented the local budget from taking all the advantages of financial resources Basically, this source-converting spending is a waste while the spending on fundamental construction investment has not been timely responded 18 1.6.3 Current situation of the decentralization of local authority’s borrowing: The borrowing had surged continuously from 2013 till 2015 and experienced a significant drop in 2016 before mounting back in 2017 Among all the borrowing funds, the amount coming from issuing government bonds has always seemed to be the most valuable and account for the major proportion: in 2013, it was worth 4,400 billions VND which was equivalent to 86.41% of total debt; in 2014, the amount surged to 7,400 billions VND and was equivalent to 91.02% of total debt; in 2015, this kept increasing to 11,400 billions VND and was equivalent to 93.95%; the number reached a peak at 2016 and 2017 at 8,000 billion and was equivalent to 95.84% and 81.5% of the total debt respectively 1.6.4 Current situation of the decentralization of the government budget management procedure Vietnam’s government budget has been carrying the nested feature since it included both central budget and budget at all authority levels The whole budget units were nested to become the government budget system The subordinate budget units together formed the budget unit at higher authority level With the nested feature, a lot of income and spending targets were assigned to subordinate budget units by higher authority This was not encouraging the lower authorities to practice budget self-balancing or project positive income estimation, instead, they would project negative estimated income and heavy spending task to enjoy more subsidy 1.6.5 Current situation of the decentralization of government budget supervisions and inspections Supervising and inspecting the government budget was carried out and managed by the Budget and Economic Department of the People’s Council in Hanoi All districts and township were aware of the matter, the main points and the subject under supervision and inspection as well as organized fundamental and transparent supervision and inspection The government budget law in 2015 had added a section allowing the public to supervise and inspect the government budget and assigning the Vietnamese Fatherland Front at all levels to coordinate with their members and organize the government budget supervision and inspection 1.6.6 Evaluate the decentralization of the government budget management in Hanoi on several quantitative indexes: Figure Applying quantitative indexes to evaluate the decentralization of the government budget management in Hanoi Unit: % Index 2013 2014 2015 2016 2017 RDI 7.66 7.06 7.32 8.51 10.71 EDI 7.08 6.56 6.71 7.32 8.28 RAI 98.88 95.24 95.37 96.80 98.47 RAII 106.96 102.45 104.13 112.55 127.38 Source: Self-calculation The higher the RDI is, the higher level of income is distributed to Hanoi from the central authority The higher the EDI is, the more spending tasks are assigned to Hanoi by the central authority The other two indexes to evaluate the financial independence of Hanoi are RA I and RAII The higher these indexes are, the more effective the decentralization of government budget management at local is The RAII of Hanoi was highest in 2017 which evidenced that the 2015 government budget law coming to force since 2017 and all papers related to the decentralization of government budget management issued since 2016 started to produce desired effect and creating a leap on making the decentralization of government budget management effective 19 1.7 THE RESEARCH MODEL AND THE RESULTS OF ASSESSMENT ON FACTORS IMPACTING ON THE DECENTRALIZATION OF THE GOVERNMENT BUDGET MANAGEMENT IN HANOI 1.7.1 The research model The thesis assesses the influence of key factors on the perfection level of decentralization of the government budget management which are: the specialization of the managerial officials; positive effects in the local economy; subsidy from the higher authority's government budget and financial independence level of local authorities a Specialization of the managerial officials H1: the specialization of the managerial officials of government budget has a positive impact on the perfection level of decentralization of the government budget management b Positive effects towards the local economy H2; Positively affecting the local economy brings positive impact on the perfection level of decentralization of the government budget management c Subsidy from the government budget at higher authority H3; Subsidy from the government budget of higher authority has a positive impact on the perfection level of decentralization of the government budget management d The financial Independence of all local authorities H44: The financial independence of all local authorities have a positive impact on the perfection level of decentralization of the government budget management The study’s findings show that the factor of being financially independent holds the greatest impact following by the factor illustrating the benefits of decentralization of the government budget management on its perfection level This result has clearly proved that the decentralization of the government budget positively affect the economic growth and implying that policy encouraging financial independence of local authorities should be carried out 1.8 EVALUATION ON CURRENT SITUATION OF DECENTRALIZATION OF THE GOVERNMENT BUDGET MANAGEMENT IN HANOI 1.8.1 Verifiable results Firstly, the trend of decentralization of the government budget management at different units in Hanoi is getting stronger, which is shown clearly when decentralizing more revenue streams and spending tasks to create the independence for lower authority's budget Secondly, the decentralization structure of budget management of the city was actively, independently responsible for managing and governing the budget of all authority levels People's committee of the city was authorized a great power on managing local budget For example, deciding the revenue streams, spending task for different budget unit, deciding some budget-distributive norms, deciding several fees and charges and deciding the subsidy level from city budget to lower authority Thirdly, Rising the decentralization of regular spending tasks and authorizing greater autonomy on the management of investment spending XDCB?? for all authority levels which will encourage the effectiveness of public resources distribution and meet all the demands from the city's residents Fourth, the decentralization of revenue streams to all authority levels of the city need to consider carefully the characteristics and features of the revenue stream to increase effectiveness and ensure justice Fifth, the amount added to budget units of all levels has been spurting dramatically which improves the imbalanced budget of local authority both horizontally and vertically This practice also enhances the transparency and fiscal discipline of the budget of city authority Sixth, the current borrowing practice and the borrowing management following the decentralization of government budget of Hanoi are significantly favourable 20 Seventh, the greater authorization given to local government to make decisions on budget related issues also requires a higher level of transparency and outcome accountability on budgeting 1.8.2 Limitations First, the decentralization of the city budget management are still being overlapped, have not been synthesized with the decentralization of economic management in the area of Hanoi Second, the decentralization of revenue streams and spending task are still insufficient: revenue decentralized to district and town authority is still low; the decentralization of socioeconomic management with several goals and areas has not been clearly identified Third, the nested feature of decentralization of local budget management was not tackled Fourth, the decentralization of the government budget management in Hanoi is still suffering from a low rate of investment spending distributed from the government budget to the city budget Fifth, the decentralization of the government budget management has been suffering from the incomplete implementation of assigning the authorisation and administrative management cost 1.8.3 The causes of disadvantages 1.8.3.1 Subjective causes First, the revenue collecting organization has not been appropriate with the revenue decentralization Second, the specialization of the financial managerial officials of Hanoi was not adequate to meet the requirements placed when expanding the decentralization of the government budget management Third, technology has not been utilized and applied effectively on projecting the decentralization of the government budget management of Hanoi 1.8.3.2 Objective causes First, the regulation, policy, standard and norm of the government have not been fully and timely issued leading to the late amendment to better suit the current situation Second, it was indistinguishable between the criteria of socio-economic development of urban and suburban areas in Hanoi in order to decentralize appropriately to each unit's characteristics and features ensuring justice in the decentralization of the government budget management Third, since the specialized financial structures and policies mostly related to tax, fees and charges are either under the authority of the Congress, Permanent Committee of Congress and Government or restricted by the budget spending norm provided by the Central Government which is supposed to make it clear on the spending norm or the maximum norm, there are usually struggles while they are being implemented Fourth, there was not any database to manage the borrowing fully and timely at all local in general and in Hanoi particularly CHAPTER 2: CONCLUSION In this chapter, the author has analyzed all the advantages and disadvantages related to physical and socio-economic conditions of Hanoi After that, the writer focused on analyzing the current situation of the decentralization of the state budget management in Hanoi during 2013-2017 period (the stage of budget stability from 2011-2016 enforcing the 2002 State Budget Law and later, the 2015 State Budget Law applied since 2017) The analysis of current situation concentrated on main issues: (1) The decentralization of Government Budget; (2) the decentralization of the government budget spending task; (3) the 21 decentralization of the city authority's borrowing; (4) The implementation of the management process of the government budget; (5) The government budget supervision and inspection Among them, the decentralization of income and spending task of government budget was broken down into city unit and other lower budget units Based on all the theories established in chapter and all findings of the predecessors, the thesis evaluate the impact of the different elements on improving government budget decentralization; The specialization of executive board members, positive impacts on local economy, government budget subsidy from higher level and financial independence of lower authority levels The outcome suggested that the level of financial independence had the greatest impact, followed by the positive impacts and improving progression of the decentralization of government budget management On this foundation, the author has evaluated the results and limitations of the decentralization of government budgeting in Hanoi from 2013-2017, also determine the roots of the problems The different evaluations of the current situation, especially about the causes of such limitations on the decentralization of government budget management in Hanoi are truly all descriptive practical evidence for the writer to propose the renovation of the decentralization of government budget management in the next period CHAPTER 3: OUTLOOK AND RECOMMENDATION TO IMPROVE THE DECENTRALIZATION OF GOVERNMENT BUDGET MANAGEMENT IN HANOI 3.1 VISUALIZING THE DECENTRALIZATION OF THE GOVERNMENT BUDGET MANAGEMENT IN HANOI DURING 2019-2025 PERIOD TILL 2030 3.1.1 Advantages and disadvantages of Hanoi city in the next few years a Advantages: First, Hanoi is considered as the cultural, economic and political centre of Vietnam, also the capital and the heart of the country The city receives great attention from the Government, the Parliament and the Party Central Committee Second, Hanoi is experiencing a remarkable annual economic growth with a noticeably continuous increase in GDP per year Third, the total budget income generated per year of Hanoi always exceed the estimated level with a positive difference in absolute value of income between two consecutive years Fourth, the city reaches the most advanced level of socio-economic development b Disadvantages: First, environmental pollution: urbanization and industrialization is breaking down the quality of water, air and soil in Hanoi Second, the infrastructure provided is insufficient since there is an overpopulation The population of Hanoi keeps rising rapidly, most of them are from the other city moving in for living, studying or working which results in a great pressure for the city and lower the living standard Third, though the city’s total budget income stays high, the total tax and fee debt from the government is covering a great proportion Fourth, The real estate and financial markets are unstable and unsustainable; the business’s challenges, issues related to labor, employment, wage; severe weather, the disadvantaged modification and unjustification of such a flash urbanization 3.1.2 Recommendation on improving the decentralization of the government budget management in Hanoi First, considering the decentralization of security, national defence, socio-economic management of the city and the management capacity at all authority levels as fundamental criteria to further amend and perfect the decentralization scheme of the government budget 22 (1) (2) (3) management till 2025 and looking forwards to 2030 Second, ensuring the leading role of the city and the independence of local budget at districts and townships among the united city budget system Third, ensuring the justice for the decentralization of the city budget management 3.2 RESOLUTION TO IMPROVE THE DECENTRALIZATION OF THE GOVERNMENT BUDGET MANAGEMENT OF HANOI 3.2.1 Renovate the income decentralization 3.2.1.1 Follow the rules of income distribution among different authority levels a In order to decentralize appropriately the government budget income at all levels considering socio-economic conditions of different districts and towns, the city should be divided into smaller specific administrative groups of unit: Group 1: Including 12 districts (Ba Dinh, Hai Ba Trung, Hoan Kiem, Dong Da, Hoang Mai, Cau Giay, Long Bien, Thanh Xuan, Tay Ho, Ha Dong, Bac Tu Liem, Nam Tu Liem) Fundamentally, these district’s budget income are sufficient to balance their spending task, therefore, the current decentralization of budget income at this level should be maintained Group 2: Including 18 other townships (Son Tay, Ba Vi, Phuc Tho, Thach That, Quoc Oai, Hoai Duc, Dan Phuong, Phu Xuyen, Thuong Tin, Chuong My, Ung Hoa, My Duc, Thanh Oai, Thanh Tri, Soc Son, Dong Anh, Gia Lam, Me Linh) These are suffering from lower socio-economic development, limited government budget income generated within the local area and are in need of a great amount of subsidy It’s necessary to have a subsidy scheme for these units from the city budget b Subsidy with purposes b Preventing the tax competition among districts b Managing the fully-beneficial income of local budget Allowing towns to enjoy 100% the value of revenue generated from land use fee; license tax (contributed by state-owned enterprises, foreign-invested firms, economic assets that belong to administrative departments; career, Party Committee, community and the city’s armed force); water and land rent from foreign-invested firms as well e Authoritatively deciding or being tax independent should follow the framework of the independence in revenue collection The authority identifies all available revenue sources of the government budget In case of single authority, the decision-making power related to the income of the government budget remains with the central government, all local authorities should follow the direction Then, there will be a list of “closed revenue sources” established and issued by the central government which allows local authorities to choose the taxing measures suggested, simple understood as implementing the ruling in this case Another approach allowing the local authorities to generate their own revenue from a list of “open revenue sources” with restricted constraints The authority determines the sources and generating level of revenue Having independence in revenue generation, the local authorities usually prefer the privilege of deciding the revenue generating level over the power to decide on revenue streams due to the complication when identifying revenue streams, especially in some exemption cases The privilege of deciding the revenue generating level is favoured since it lifts up the administrative accountability of local authorities putting in a relationship between taxpayer and tax collector The authority would organize the revenue collecting procedure Concentrated organizing, from the central to local authority in a large-scale, would bring about better effectiveness However, the management-centric measure might reduce the motivation and responsibility of the department that manages the revenue collected from local authority-owned revenue stream, whereas, decentralizing the revenue collecting tasks to their own local authorities would successfully boost 23 their responsibility towards these revenue streams f Transparency and Publicity Taxation of the city and districts should be clear and transparent so that the resident could be aware of the tax burden, which will intrigue them to join and supervise the authority’s responsibility for implementing assigned tasks 3.2.1.2 Renovate the measure of identifying the revenue division rate among different budget units a Regarding to the 100% beneficial revenue generated by districts, townships and precincts Two possible resolutions for implementation are: (i) Taking the unique characteristics of each district and town into account when implementing the revenue distribution in percentage among city, district and town level; (ii) Getting direct subsidy from the city budget b Regarding to the revenue allocated to the budget of the city and other lower authority level The division rate among budget revenue at city and district/ town/ precinct levels should be determined while strictly following these basic rules: • The division rate among budget revenue at city, district, town and precinct levels should be determined considering the unique characteristics of each district and town during their economic development process, simultaneously, paying attention to the district authority's goals and functions as the district authority is a part of the urban authority Therefore, the division rate of budget revenue between city and district/ town should be separated from the precinct c Regarding to the additional revenue of the city budget distributed to the budget of districts and towns (1) Balancing supplement The formula of determining the balancing supplement amount for district budget during the first stabilizing stage is: Balancing supplement amount = A - (B+C) in which A is the total spending of district budget determined while taking into account all the fundamental principles, criteria and distribution rate that are decided for the first year of stabilizing stage by the district’s people's committee (including development and investment spending and regular spending); B is the total fully-beneficial revenue of district budget determined based on the collecting capacity while ignoring the lottery revenue, land use fee, subsidy from the higher authority, budget surplus fee, voluntary contribution, other subsidies, source-converting fee from annual budget; C is the total revenue distributed to city budget and district budget based on the collecting capacity (2) Purposeful supplement The amount of purposeful supplement of the city budget for the district budget is determined based on the principles, criteria, budget division rate and other schemes, standards and budget's spending level following the current regulation as well as the self-balancing capacity of city budget and district budget allowing the district budget to receive subsidy in specific cases d The budget's source-converting revenue between two consecutive years To process the source-converting procedure, the district's financial department need to research on the documents mentioned above to implement while complying with the regulation Several common notices when processing the budget at then end of each year are: • Close the accounting book and resolve end-year expenditures • With the projects, plans and programs that have the permission of authorized department to implement in 12 months, the balance would be carried out following section 24 article 44 of the 163/2016/NĐ-CP Resolution of the Government and section article 25 of 342/2016/TT-BTC Circular of Financial Department, suggesting that: the annual balanced expenditures that are recorded and accumulated year over year are the fundamental of balancing the projects, plans and programs when they are completed following the regulation 3.2.2 Renovate the decentralization of spending task 3.2.2.1 Renovate the decentralization of spending task based on rules: be effective; be macro-stable and be clear between every single authority level Assigning spending responsibility to the authority at all levels following these rules: First, effectiveness Assigning spending functions on public services that are beneficial at the local scale to the local authority while assigning spending functions on public services that are beneficial at a national scale to central department The effectiveness of providing public services would be improved if the benefit from utilizing the services were reflected by the services charges such as subscription fee or tax paid to local authority In other words, it is necessary to spend the revenue of local authority on local expenditures Second, re-distribution and macro stability Choosing the most reasonable spending responsibility should be adjusted as cost and technology as well as people's preferences keep changing over time However, in any case, at a specific timing, the authority at all levels should be responsible for the prioritized task among their optimal missions Otherwise, the government internal relationships might be unstable and the public services provision might be ineffective Third, spending task needs to be clear and stable by applying these steps; Firstly, checking all the spending tasks assigned to the authority at city, district and precinct while applying effectiveness rule and notice the budget's self-balancing capacity of the city authority Secondly, considering assigning to the city budget such spending tasks as ensuring the justice of commune, precinct and community, then, the city will authorize local authority to implement it Thirdly, rising the independence of the city authority in terms of deciding the spending task, force distribution and force utilization considering each city level's priorities Gradually cutting down on the government department’s intervention in the city's units, giving the city authority more power in actively come up with reasonable spending level Fourthly, bringing accountability of budget distribution to the chairman of the authority at all levels and creates a system to supervise, evaluate the public spending of the city authority Fifthly, decentralizing the government budget management in Hanoi while sticking to the projection and development plan of the corresponding authority, ensuring the bond between government budget revenue and government budget spending which both share responsibility on public services provision assigned 3.2.2.2 Amending the decentralization structure of spending task based on the decentralization of socio-economic management of the city Reviewing the whole regulation of the current decentralization of socio-economic management to identify the spending tasks of every single budget unit clearly Basing on that, the decentralization structure of spending task under the government budget should be amended appropriately depending on different spending sector such as; education career; social insurance; environment protection; medical career and economic career 3.2.3 Setting the decentralization model for the authorized urban budget management 25 One of the key objectives is to restrict third-party's involvement and reduce the intermediaries while improving the autonomy of district authority to be self-deciding and be self-responsible - a part of the urban authority, Another objective is to form a more domestic urban budget under district authority, unlike the current district budget which not only is responsible for urban tasks but also ensures all the functional tasks of the agriculture and countryside areas In other words, as the district authority is a part of the urban authority, its functional task shall be different from the current situation (1) Spending task of the urban authority The urban authority should be given a greater autonomy when implementing the spending tasks under the government budget as well as other special spending tasks apart from the local authority’s (2) Decentralization of different authority levels (2-tier authority) Local authorities within the same urban area should have a certain level of autonomy when spending on public services as well as deciding on the revenue generated from fees, charges and subsidy for debt Higher authority would only tackle the tasks that could not be fulfilled by the local authority or related to connecting locals together and advancing urbanization The urban authority is involved in and responsible for the implementation of connecting tasks such as inter-regional traffic, infrastructure, local economic development, large-scale public order, urban administration and medical services; lower authority level is responsible for implementing the fundamental local services such as maintaining roads, parks, markets, butcheries, public utility, preschool, primary school and secondary school (3) Targeting the outcome of budget management With this methodology, the structure and distribution of budget proposal should represent a strong relationship between the distributed amount from budget proposal and target achievement so that objective could be met and the budget planning management together with administrative culture would be intentionally more responsible for outcome accountability 3.2.4 Enhancing the transparency and publicity; Strengthening the decentralization of budget managing inspection in Hanoi Transparency and publicity are close but not the same Publicity is meant to ensure the information provision Transparency is meant to ensure the precision of the information which not only fulfill the provision of information but also the accessibility of the information Approaches ensuring and enhancing the transparency and publicity of the decentralization of budget management in Hanoi city are: First, encourage the involvement of residents in the budget management of the city authority: (1) Encouraging residents to participate in the decision-making process of budget at all authority levels; (2) Ennoble residents’ role in evaluating the action of the authority at all levels; (3) Enhancing and diversifying the inspection into different forms, feedback of organizations and residents towards the action of administrative departments and the public services provided by the authority at all levels Second, actively promoting and effectively implementing the Law on access to information, which was issued by the parliament (came into force since 01/07/2018) Third, applying technology for the management of the city authority 3.2.5 Innovate the borrowing management system of the local authority First, borrowing should help the decentralization of government budget management to distribute investment spending evenly The city authority’s borrowing ensures the justice between different generations and the benefit of the authority’s spending activities Second, the decentralization of government budget management encourages the city economic growth The borrowing of city authority assist on the local economic development 26 • • • Third, set up an adequate regulatory framework to manage the total debt of local authorities: Adding other forms of mobilization like direct mobilization from the funds of commercial banks; Implementing the special regulation in accordance with the city Law; Strictly inspecting and managing the risks of city authority’s debt 3.3 CONDITIONAL RESOLUTIONS 3.3.1 With the department managing the Budget of Central Government (Congress, Government, Departments) Innovate the fundamental budgeting method Authoritatively determining revenue streams and deciding revenue collection frameworks and levels so that the city authority is awarded the tax autonomy Improving the inspection system and the evaluation of public spending 3.3.2 With the People’s committee of Hanoi 3.3.2.1 Enhancing the official’s expertise and ability, especially financial officials at all authority levels a Recruiting financial officials b Compensation Policy for financial officials c Paying attention to the enhancement of the official’s quality at all authority levels, especially the financial officials d Strengthening quality and responsibility of all officials under the current situation of public administration revolution 3.3.2.2 Reviewing to improve the decentralization of function and task and avoid incompatibility between the decentralization of spending task and revenue sources because of the unclear assigned functions among all authority levels in the city 3.3.2.3 Strengthening financial independence at local authority level while tending to amend the decentralization structure to give the district authority a greater autonomy on distributing and deciding revenue, inspecting process and reporting outcomes CONCLUSION All findings about the decentralization of government budget management in Vietnam was recognized by many experts to actively promote the proactiveness and creativity of all authority levels to enhance the exploitation of local revenue streams to fulfil the spending tasks, upgrade the capacity and efficiency of government management and improve the socioeconomic development of the city As a result, the residents' benefit and demand for development will surely be met However, in order to strengthen the decentralization of government budget management, the government is in need of a clearer vision and mightier changes How to decentralize effectively the government budget management from the Central Government to city authority and other local authority levels in the city has always been a challenging task for Hanoi as well as many other locals in Vietnam The thesis focused on the purpose, significance, target and the scope of study while combining all the methodologies to produce the following contributions: Specifying the fundamental arguments on government budget and the decentralization of government budget management through systematic study Several experiences of other resembled countries and locals are provided Based on the study and analysis of regulation framework and available documents of Hanoi or other sources, this thesis paid attention to the current situation of the decentralization of government budget management in Hanoi during 2013-2017 period including: decentralizing the authorization for the government budget's norm, standard, policy and regulation promulgation; decentralizing the revenue stream, subsidy; borrowing and spending task of government budget; decentralizing the process of government budget management; 27 decentralizing the inspection, supervision and auditing on government budget; decentralizing the revenue stream, subsidy and spending task of the government budget to all local authority levels in Hanoi With the available documents, the thesis had paid attention to analyze the factors that affect the decentralization of government budget management through model checking On that basis, the writer has evaluated the results and disadvantages of decentralization of government budget management in Hanoi from 2013 to 2017, simultaneously, addressing the causes of the problems Evaluating current situation and addressing the cause of the problem of decentralization of government budget management in Hanoi would function as a solid evidence for the writer to propose all potential resolution for the decentralization of government budget management in Hanoi in the near future Recommendations provided to improve the decentralization of government budget management in Hanoi in the upcoming years One of the key resolutions is to strengthen the targeted budget management; Distributing budget based on reported outcomes is necessary to determine the priority, productivity and effectiveness of budget's spending With this application, the setup and distribution of budget proposal should represent a close relationship between proposed budget subsidy and target achievement, which will create a higher certainty of outcome This management method not only requires several changes in the processing, systematic and regulatory framework but also need to switch the focus of the budget planning management and management culture on the outcome accountability Although the PhD student has made great efforts and serious research, due to limited knowledge in general and econometric knowledge in particular, the handling of model defects may not be thorough These are also suggestions for more in-depth studies in the future In addition, because the scope of the research is decentralized state budget management of Hanoi, which means these research issues deeply specialized in specific characteristics of the Capital city, and the rapid changing socio-economic situation, the results of the thesis are unavoidably limited The author wishes to receive the guidance from scientists and readers who are interested in the topic Sincerely thanks LIST OF PUBLISHED WORKS RELATED TO THE STUDY'S THESIS Ta Van Quan (2015) "Decentralizing state budget management in order to well implement the state budget management process", Journal of Financial and Accounting Research, No 02 (139), p 29-36 Ta Van Quan (2016) "Continuing to renovate the decentralization of state financial management and state budget", Journal of Financial and Accounting Research, No 04 (153), p 7-9 Ta Van Quan (2018), "Decentralization of state budget management for urban authorities in some countries and problems drawn for Vietnam", Journal of Financial and Accounting Research, No 08 ( 181), p 84-88 Ta Van Quan (2018), "Decentralized management of local budgets for research in Hanoi", Financial Magazine, period 1- September, p 104-106 Ta Van Quan (2019), "Scientific research project Decentralized management of revenue and expenditure of Hanoi City", University of Commerce, March 2019 ... Oai, Hoai Duc, Dan Phuong, Phu Xuyen, Thuong Tin, Chuong My, Ung Hoa, My Duc, Thanh Oai, Thanh Tri, Soc Son, Dong Anh, Gia Lam, Me Linh) These are suffering from lower socio-economic development,... fees and charges in the list decentralized by the National Assembly Standing Committee; provincial Citizens’ Committee are allowed to promulgate a number of regimes, budget spending norms, budget... committee following the rules while aligning spending estimation distributed to authorised councils with the rules as well 1.5.3 The government budget management system of Hanoi: People’s Committees
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