Implementation of the Public Expenditure Review recommendations helps public financial reforms make strides

Implementation of the Public Expenditure Review recommendations helps public financial reforms make strides 18/11/2021 10:11:00 510

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Mr.Vo Thanh Hung, Vice Minister of Finance and Ms. Steffi Stallmeister, the World Bank’s Operations Manager for Vietnam, East Asia and Pacific co-chaired the conference on the review of the implementation of Vietnam Public Expenditure Review recommendations. The conference was hybrid, with 32 virtual groups of participants.

The conference was well-attended by the World Bank, the Swiss State Secretariat for Economic Affairs (SECO) and Global Affairs Canada (GAC), representatives of a range of central ministries and agencies, subnational governments and departments of the Ministry of Finance.

In-person participants at the conference

The conference was organized by the Ministry of Finance under the the Vietnam Public Financial Management (PFM) Analytical and Advisory Assistance (AAA) Program which is co-financed by the Swiss Government via SECO and the Canadian Government and entrusted through the World Bank. It aimed to review outcomes of the five-year implementation of the 2014 Vietnam Public Expenditure Review recommendations, limitations and bottlenecks which need to be further explored and addressed in order to effectively mobilize, allocate and use resources for the sake of socio-economic development, economic stability, growth and social security.

In his opening remarks, Vice Minister of Finance Vo Thanh Hung stated that public expenditure review is an important part of public financial management. Besides achievements, the review identifies gaps, weaknesses, challenges and latest changes in overall expenditure structure as well as in certain areas, and then makes necessary recommendations for policy-making in allocation, management and use of the budget in a more proactive and effective manner for the sake of socio-economic development.

 

Vice Minister Vo Thanh Hung delivered his opening remarks

The 2014 edition is the fourth release of the periodic Public Expenditure Review that Vietnam’s Ministry of Finance worked with the Ministries of Planning and Investment, Education and Training, Health, Transport, Agriculture and Rural Development, Science and Technology, Labor – Invalids and Social Affairs, Home Affairs, the State Audit, the National Assembly’s Office and five subnational governments (Lao Cai, Hai Phong, Quang Nam, Ho Chi Minh city and Can Tho) and the World Bank to develop.

The Public Expenditure Review is divided into three parts covering the overview of public expenditure, five heavy-spending sectors of transport, agriculture, health, education and training, science and technology, five reprensentive provinces and cities.

On the basis of scientific analysis and assessment conducted by national and international experts, the review pointed out Vietnam’s achievements in the ten-year period 2004 - 2014. Despite a challenging world and national economy, most notably the global financial crisis during 2009 - 2011, Vietnam maintained reasonable revenue growth rates thanks to revenue restructuring, adjustment of tax administration policies for simplification, more transparency and smaller tax revenue losses. Budget expenditure was restructured towards growth support, savings of recurrent expenditure, social security assurance. Public finance management reform was carried out gradually towards enhanced financial autonomy, effectiveness and efficiency of expenditure.

Nonetheless, in addition to achievements, Vietnam faced a lot of difficulties and challenges. Therefore, the Public Expenditure Review made 68 recommendations to assist the central government, ministries and subnational governments to consider and select their priorities in public finance management reform for improved effectiveness. After the review was completed and disclosed in 2017, the Prime Minister assigned the Ministry of Finance to lead, provide guidance and work with relevant central ministries and agencies as well as subnational governments to study and implement these recommendations. These ministries, agencies and subnational governments were also requested to periodically report implementation progress and results to the Ministry of Finance for consolication and submission to the Prime Minister. Since then, many recommendations have been institutionalized, realized and shown their effectiveness.

Ms. Steffi Stallmeister, the World Bank’s Operations Manager for Vietnam, East Asia and Pacific spoke at the conference

Mr. Nguyen Minh Tan, Vice Director of the State Budget Department informed participants about the results of implementation of recommendations at the conference. He said that 96 percent of recommendations have been implemented after five years. 62 percent have been fully realized and shown their effectiveness. A very few recommendations (four percent) are under study for application and adjustment to the Vietnamese political economic context.

It is noteworthy that on the basis of practical needs as well as recommendations of the review, the Ministry of Finance provided input to the revision, supplementation or issuance of a range of important laws, including the 2016 Law on export and import duties; Law on amendments to some articles of the Law on value-added tax, the Law on special excise duty, and the Law on tax administration; 2017 Law on management and use of public assets; 2017 Law on public debt management; 2019 Law on tax administration; 2019 Law on securities; 2019 revised Law on public investment; 2019 revised Law on State audit, etc. These have contributed to improving the socialist-oriented market economy, investment and business environment, mobilization, allocation and use of resources, social security assurance, anti-corruption and waste, etc.

Furthermore, international good practices in public expenditure management such as the national five-year financial plan, medium-term investment plan, the rolling three-year finance - budget plan have been applied. The coverage of the State budget has been more adequately and comprehensively identified. Budget deficits move closer to international practices. Transparency and accountability in sync with enhanced autonomy of subnational governments and spending units have been improved. Finance and budget management and public investment management systems have been strengthened to guarantee accuracy and timeliness in order to meet management needs, boost transparency and ensure that databases are interlinked and integrated and data-sharing exists among ministries and subnational government.

Mr. Nguyen Minh Tan, Vice Director of the State Budget Department delivered
a presentation on the implementation of recommendations

It is noteworthy that a lot of recommendations are still highly practical and suited to the current context. Public Expenditure Review recommendations have basically been fully implemented, achieved positive results and met the demands of finance - budget management in both recent and coming years. For example, when COVID-19 hit the Vietnamese economy and people badly in 2021, the Ministry of Finance proactively proposed discretionary fiscal policy to boost economic recovery and effective measures to add necessary resources for the COVID-19 prevention and control and for social security, etc. They are also part of the efforts to implement Public Expenditure Review recommendations.

In her opening remarks, Ms. Steffi Stallmeister, the World Bank’s Operations Manager for Vietnam, East Asia and Pacific advised that in the context of the pandemic, the Government may want to consider a more expansionary fiscal policy. Before spending more, one must improve the quality and efficiency of public investment so that fiscal policies have a more positive impact on economic recovery. She said that a crisis such as COVID-19 is an opportunity to accelerate reforms. Such transformation is not only necessary to recover both socially and economically, but also to achieve the Government’s goal to become a high-income economy by 2045. However, this cannot be done without institutional reform and effective implementation of policies. The World Bank will be pleased to work with the Ministry of Finance and relevant government agencies to help Vietnam through technical and financial support.

 

A number of participants provided their input via Zoom

At the conference, representatives from the Ministries of Finance, Health, Planning and Investment, Transport, Agriculture and Rural Development as well as experts from the World Bank also discussed outcomes of the management of public debt and contingent liability risks in the period 2016 - 2020 and priorities for 2021 - 2025; aggregate impact of COVID-19 on the Vietnamese economy, fiscal operations, health, education and migitation measures; decentralization of public investment management to improve efficiency and effectiveness and support economic growth; public investment management in transport, rural and development and sectoral medium-term public investment plans of the period 2021 - 2025.

News and photos: Tue Anh

 

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