The Vietnamese economy experienced a tough year of 2014, while the business community still struggled to get through difficulties. But, this was considered a successful year for Vietnam as it exercised flexible fiscal policy to ensure social security and promote economic development. 2014 was the breakthrough year for the finance service in administrative procedure reform, and customs and tax modernisation. The sector reviewed and systematised 645 administrative procedures; reduced 290 hours of tax payment (54 percent), cut 10-20 percent of costs and 30 percent of customs clearance time for exports and imports, signed up electronic tax declaration service for 95 percent of companies, and piloted electronic tax payment in 18 localities. Thus, the service was praised by businesses, taxpayers and the business community. On the occasion of Lunar New Year 2015 - Year of Goat, Vietnam Business Forum Magazine has an interview with Finance Minister Dinh Tien Dung on balancing the national budget and the way ahead for the finance sector, as 2015 marks the 70th birthday of the finance service. Le Hien reports.
Could you give us the outlook for the Vietnamese financial sector in 2014?
In 2014, the socioeconomic situation developed positively but many companies still struggled with difficulties. By adopting drastic and consistent measures from the start of the year, the sector achieved relatively comprehensive results in State revenue collection. In 2014, the value collected exceeded the plan by 10.6 percent, or VND63.7 trillion, and increased 12.3 percent over 2013. This good result enabled us to keep the overspending rate within the limit approved by the National Assembly. The sector also effectively carried out solutions to support enterprises to deal with their difficulties in production and business operations and speed up business development. The financial sector held regular dialogues with businesses to listen to their problems and introduce the best measures and solutions.
In 2014, the sector enthusiastically exercised thrift and fought against wastefulness by tightening budgetary spending and strengthening professional and fiscal discipline. At the same time, the sector intensified price and market controls, contributed to curbing inflation and macroeconomic stability, managed prices of electricity, coal, oil, milk and public services under market mechanism, ensured the achievement of inflationary control target. The consumer price index (CPI) climbed nearly 2 percent in 2014, the lowest in 13 years.
In addition, the sector raised capital for the State Budget and development investment, gradually restructured public debts towards sustainability, ensured repayment capacity, and improved loan efficiency. In 2014, they paid special attention to debt restructuring and the issue of longer-term government bonds bearing lower coupon rates. Vietnam issued 10-year international bonds worth US$1 billion, bearing a coupon rate of 4.8 percent per annum to restructure older international debts which carried higher coupon rate (about 6.8 percent), thus enabling the country to cut costs and stretch resources for other years from 2016 to 2020.
However, there were still shortcomings and limitations that needed to be addressed in the future. Notably, smuggling, trade fraud, transfer pricing and revenue loss were reduced but failed to meet expectations. Outstanding tax debts remained huge. The State expenditure structure revealed shortcomings and limitations. The weight of recurrent State budget expenditure in total spending increased sharply to implement Party and State policies and resolutions on wage and social security reform. Wasteful, ineffective and wrongful use of State budget was still found in some units and localities. External fundraising mechanisms for investment and development (i.e. public private partnership - PPP, etc.) are inadequate. The restructuring of State-owned enterprises (SOEs) produced initial positive results but still went slower than expected.
.jpg)
Balancing budgetary income and expenditure is always a big concern of all countries. How has Vietnam dealt with this, especially when it is now investing a lot for development?
Balancing budgetary collection and expenditure is an extremely important issue. This is a ‘golden rule’ and the ultimate target, not only for Vietnam, but also any country in pursuit of a healthy national financial foundation. The Law on State Budget stipulates State budget balancing principles. In the event of overspending, the excessive value must smaller than the value of expenditure spent on development investment. Vietnam will significantly reduce the budget deficit by 2020.
Unfavourable economic development situation and weakening production and business activities, large inventories, coupled with tax incentives resulted in a short-term decline in budgetary collection, while the demand for spending surged to carry out the Resolution of the Party and the National Assembly on three breakthrough stages in economic development, wage policy and social security policy. The budget deficit is necessary. However, the high rate of budget deficit produced significant pressure on public debts.
In the short term, the sector will strive to gradually cut budget deficit. In the long term, the service must strive to balance State budget income and spending. To realise this goal, Vietnam needs to speed up business development, promote growth and generate substantial revenue while speeding up State budget expenditure restructuring, arrange spending tasks based on the order of importance, exercise thrift, prevent wastefulness, and enhance the effective use of State budget.
How will information transparency be affected when the draft Law on State Budget comes into effect?
Publicity and transparency in the financial - budget sector has received more attention. Publicity contents, scopes and forms have been expanded. However, financial publicity and information disclosures without explanations are found in some units.
The draft Law on State Budget (revised), already submitted to the National Assembly, is expected to address those weaknesses. The new law adds regulations on publicity content (estimates, settlement, audit results of budget payment, etc. including declaration attached with notes and explanations; publicity of budget procedures); publicity objects (budget and treasury units at all levels, etc.) while adding regulations on entities responsible for publicity. Incomplete publicity will be settled by the law.
Will the sector tighten budgetary discipline, since according to many domestic and international economic experts, Vietnam is quite loose in public expenditure management?
In the coming time, we need to implement the Law on Public Investment well. The financial sector will submit amendments to the Law on Thrift Practice and Waste Combat to the National Assembly while considering amendments and supplements to the current Law on State Budget to increase responsibilities of the heads of units using the State budget and enhance publicity, transparency and accountability of ministries, branches and localities in management and use of State budget. In 2015 and beyond, the Ministry of Finance will coordinate with ministries, branches and localities to continue to speed up the implementation of necessary measures to further improve the observance of discipline in State financial - budgetary management.
Would you mind telling us the priorities in budget balance in 2015 as Vietnam is facing growing pressures of repaying short-term debts, and public debts is climbing near to the allowed limit?
In the context of difficulty in balancing the State budget, growing pressures of short-term debt repayment, and near-limit public debt, the finance service has defined State budget targets in 2015 as follows: Mobilising, distributing, managing and effectively using national financial resources, gradual restructuring State budget, ensuring financial security, contributing to macroeconomic stability, inflation control and economic growth, solving social, defence and security issues in the new situation. To accomplish these goals, the Government has submitted State budget estimations for 2015 to the National Assembly for approval. Accordingly, State budget revenue was estimated to rise 8.8 percent over 2014. Budget deficit is 5 percent of GDP, lower than 5.3 percent in 2014.
The sector will have to enhance State expenditure management, proactively respond to new tasks like addressing consequences of natural disasters and epidemics, ensure national defence and security, and strictly control the budget deficit.
Vietnamese
