MINISTRY OF HO CHI MINH NATIONAL ACADEMY EDUCATION AND TRAINING OF POLITIC AND PUBLIC ADMINISTRATION NATIONAL ACADEMY OF PUBLIC ADMINISTRATION LE TOAN THANG DECENTRALIZTION OF STATE BUDGET MANAGEMENT IN VIETNAM TODAY Specialism:PUBLIC ADMINISTRATION Code: 62 34 82 01 SUMMARY OF DOCTORAL THESIS HANOI -2013 This work has been completed at: National Academy of Public Administration Scientific Instructor: Associate Prof.Dr Do Van Thanh Dr Nguyen Phu Thai Judge 1: Judge 2: Judge 3: The Thesis shall be defended before the National Academic level Thesis Assessment Council held at: Academy of Public Administration, No 77, Nguyen Chi Thanh, Dongda, Hanoi at……… hours, The Thesis can be further referred to at: Academy of Public Administration FOREWORD THE NECESSITY OF THE THEME Management decentralization is one of the basic issues of management In the state management activity, together with the social-economic development, with the intervention requirement of the state into the market economy in order to assure the targets of efficiency, stability and equality, the decentralization of state management is the key content to ensure the participation of authority levels into the execution of functions, duties of the State in the best effective way State Budget is the financial resource of the State In order to manage the process of establishment and distribution effectively, the use of state budget is the important and necessary issue of any nation in the world State budget management is a forming part of state management in socio – economic fields and to be executed by the system of state management agencies from the central to the local Theoretically as well as in the reality, decentralization of state budget management is recognized as the important method to improve the efficiency of state budget management Decentralization of state budget management resolves the relationship between central and local in handling issues related to the operation of State Budget Decentralization of State Budget Management helps defining the competence and responsibilities among budget management levels, ensuring the timely settlement of state management tasks There are still gaps in the decentralization of state budget management in Vietnam For example, the initiative level of local budget is not high, the process of state budget approval is quite complicated, takes time, and the state management effect is not met with the requirement of socio-economic development of the State This indicates the need of having an objective and comprehensive review on the actual situation of decentralization of State budget management in Vietnam recently, pointing out the shortcomings to get the right solution to perform decentralization of State budget management as the urgent need For the theoretical and practical requirements of the decentralization of state budget management in Vietnam, I would like to choose the theme “Decentralization of state budget management in Vietnam today” for my PhD thesis of Public Administrative Management, with the desire of giving some scientific and practical recommendations to contribute to the process of state budget reform, financial reform and the reform of the state administration of Vietnam in the integration period PURPOSE AND TASK OF THE RESEARCH The thesis is based on hypotheses that current provisions on Decentralization of State budget management in Vietnam today is not relevant and insufficient, the effectiveness of State budget management is then not high Therefore, the researching purpose and task of the thesis is to gather information, prove and find solutions for more appropriated decentralization of budget management in Vietnam, bringing higher effectiveness in the management of State budget The thesis is aimed to achieve the practical purposes as follows: - Systematize the theory on decentralization of state budget management - Analyze and evaluate scientifically about the reality of decentralization of state budget management in Vietnam today Analysis to clarify the advantages, weaknesses of this work to address the researching issues in the decentralization of state budget management - Propose a number of solutions to strengthen decentralization of the state budget management in Vietnam in the new period and conditions ensuring the implementation of such solutions effectively Research tasks : - Research to clarify issues related to the management of State budget, such as: the concept of state budget, state budget revenues and expenditures, principles and contents of state budget management - Analyze the rationale of decentralization of State budget management, such as: the concept of decentralization of State budget, purpose, base and principle of decentralization of State budget management, content of decentralization of state budget management and influencing factors - Analyze and assess the current decentralization of state budget management in Vietnam, raising assessments on advantages as well as shortcomings in the decentralization of State budget management in Vietnam today - Forecast orientations and recommend some solutions on decentralization of state budget management in Vietnam RESEARCHING OBJECT AND SCOPE Researching object: The thesis focuses on study about the decentralization of state management in the state budget management activity in Vietnam Researching scope: The thesis reviews contents of decentralization of state budget management in Vietnam between the central budget and local budget The thesis focuses on four basic issues in the decentralization of state budget management between the central budget and local budget The specific contents are as follows: - Decentralization of authority for promulgating laws, policies, standards and norms of the state budget - Decentralization of revenue management, task of state budget spending - Decentralization of management for the implementation of the state budget cycle - Decentralization in supervision, inspection, auditing of State budget Researching time: To assess the status of decentralization of state budget management in Vietnam concentratedly, the thesis deeply analyzed the situation of decentralization of state budget management in Vietnam in the period since the Law on State Budget 2002 However, the thesis also referred to a number of legal documents related to the activities of decentralization of State budget in Vietnam in the previous stage RATIONALE AND RESEARCHING METHOD OF THE THESIS Rationale: The thesis "Decentralization of State budget management in Vietnam today" was conducted on the basis, the foundation of Marxist – Leninist Theory about dialectical materialism and historical materialism The author interpreted problems of state management and decentralization of state budget management in the objectively dialectical logic thinking and in connection with other matters relating to the State budget management activity About the researching methods: In the researching process, the author used the following researching methods: - Method of analysis, synthesis: the author compiled to get in the review, conclusion, and recommendation scientifically, consistent with the methodology and practice of decentralization of state budget management in Vietnam - Comparative method: the author used the comparative method to clarify the similarities and differences of the researching problem through the phases, from which to have comments, assessments and recommend solutions for decentralization of State budget management - Historical method: The author performed this method by approaching and developing the issue of decentralization of budget management through different historical periods - Forecasting method: This method was used to analyze and forecast trends of decentralization activities of state budget management in Vietnam - The method of collecting suggestion from experts: It is to collect suggestions from experts about the contents of the thesis to gather scientific issues for the thesis In addition, the thesis also uses the researched results which were published within Vietnam and in foreign countries relevant to the topic of the thesis NEW CONTRIBUTIONS OF THE THESIS There are some new points that the thesis has reached: - Based on the theory of public administrative management and state budget management, the author studied and interpreted the decentralization of state budget management - Researched the experiences of decentralization of state budget management from some countries in the world to draw some experienced lessons that can be applied to the specific conditions of Vietnam - Assessed the real situation of decentralization of the state budget management in the four specific contents, including: Decentralization of authority for promulgating laws, policies, standards and norms of the state budget; Decentralization of revenues management, tasks of spending state budget; Decentralization to perform state budget cycle; decentralization in supervision, inspection, and auditing of state budget - Proposed solutions on decentralization of state budget management in Vietnam and conditions for implementing such solutions THEORETICAL AND PRACTICAL MEANINGS OF THE THESIS - The researching results of the thesis will provide scientific arguments and information on issues related to the theory of public administrative management, public management and theory of decentralization of State budget management - The researching results of the thesis positively impact on the more promotion of decentralization of state budget management between the central and local - The researching results of the thesis may be a reference for researching officers, students at the NAPA and the interested public officials STRUCTURE OF THE THESIS The structure of the thesis consists of Foreword, Content and Conclusion There is also a list of references Specifically as follows: Foreword: Content: This part concludes chapters, which are: Chapter 1: Scientific foundation of decentralization of state budget management Chapter 2: Real situation of decentralization of state budget management in Vietnam today Chapter 3: Orientation and solution of the decentralization of state budget management in Vietnam Conclusion: OVERVIEW OF THE RESEARCHING SITUATION AND ISSUES RELATED TO THE THESIS - Publication "Decentralization Briefing Notes" written by Jennie Litvack and Jessica Seddon (2000), published by Institute of Research of the World Bank - The book "Serve and maintain: Improving Public Administration in a Competitive World" by the World Bank, the National Political Publishing, 2003 - The "Decentralization in East Asia, local authorities take effect" of the World Bank published by the Culture and Information Publishing House in 2005, which has provided many theoretical issues about decentralization - The book "Empowerment in fact - from analysis to the implementation" of the World Bank, published by the Culture and Information Publishing House (in 2006) referring to the empowerment-how to understand and apply in the reality - The theme: "Make good the decentralization between the central government and local government" implemented by the Central Institute for Economic Management (2005) - The book "Decentralization of state management - theory and practice" written by Ass Pro and Dr Vo Kim Son, published by the National Political Publishing House in 2004 - The book "Decentralization of budget for local government - Reality and Solutions" by Ass Pro & Dr Le Chi Mai (2006) published by National Political Publishing House - The book "Budget harmonization between the central and local" written by Dr Bui Duong Nghieu (Editor 2006) published by National Political Publishing House Many research works relating to the state budget management conducted by Budget – Financial Committee of National Assembly, Academy of Finance, and National Economics University The current researching results show that: The scientific researching themes mentioned above mainly studied about the decentralization of state management in general and on many different aspects, not fully studied about the decentralization of state budget management The new research works focused on the solution system for innovating budget management in general rather than focusing on solutions on decentralization of budget management or only focusing on some contents of the decentralization of budget management, if any A number of studies have examined the issue of decentralization of state budget management, but mainly approached from point of view of legal regulations on decentralization that was not deeply analyzing the implementation of the provisions in reality Therefore, further study about the theory of decentralization of state management and state budget management while building system of solutions to strengthen decentralization of state budget management in Vietnam with specific contents is very necessary CONTENTS CHAPTER 1: SCIENTIFIC FOUNDATION OF THE DECENTRALIZATION OF STATE BUDGET MANAGEMENT 1.1 MANAGEMENT OF STATE BUDGET 1.1.1 Concept and System of State Budget 1.1.1.1 Concept of State Budget Budget is an economic category associated with the creation and use of monetary fund of a certain entity The entity using monetary fund may be an individual, a family, an organization, a locality or a nation Law on State Budget 2002 of the Socialist Republic of Vietnam also affirmed: “The State Budget is the total revenues and expenditures of the State decided by the competent State Authority and performed in a year to fulfill the functions, duties of the State,” State Budget usually includes: central budget and local budget In Vietnam, the State Budget includes central budget and local budget The local budget includes the budget of administrative units having organizations of People’s Councils and People’s Committees With the current organizational model of the State of Vietnam, the local budget includes the budget from provinces, cities under the jurisdiction of the central government (hereinafter referred to as the provincial budget), the budget from districts, towns, cities under the provinces (hereinafter referred to as the district budget) and the budget from communes, wards, townships (hereinafter referred to as the communal budget) 1.1.1.2 System of State Budget The system of State Budget is understood as the overall budget having organic relationship with each other in the process of performing the tasks of revenues and expenditures of each budget level State Budget levels are formed on the basic of state authority levels, in accordance with the current organizational model of the state governmental system The system of State Budget includes the central budget and the local budget 1.1.2 Revenues and expenditures of State Budget 1.1.2.1 State Budget Revenues State Budget Revenue is a process in which the State uses its power to mobilize a valuable part of the social wealth to form the state budget fund in order to meet the needs of the State spending State Budget Revenues include revenues from taxes, fees; revenues from economic activities of the State; donations from organizations and individuals, aids and other revenues stipulated by the State 1.1.2.2 State Budget Expenditures State Budget Expenditure is the process of distribution and use of State Budget to carry out the duties of the State in each period The expenditure contents are various and diversified, coming from the management role of the State for the socio-economic development State Budget Expenditures include expenses for socio-economic development, spending for defense and security, spending for the operation of State apparatus, spending for state debts, aids and other expenses 1.1.3 Principles of state budget management 1.1.3.1 Principle of unification, comprehension Principle of unification: under this principle, revenues and expenditures of any governmental authority must be included in a unified budget plan Principle of comprehension: State Budget must be inclusive This means all activities related to budget revenues and expenditures must be reflected in the budget documents 1.1.3.2 Principle of democracy, openness, transparency Principle of democracy: With the participation in the society, each citizen is involving in all phases of the budget cycle which is shown the principle of democracy in the management of the state budget Principle of openness, transparency: Openness means to let everyone know, without keeping confidentially Transparency is making the openness content clear, understandable, and unmistakable A good budget management requires following the principles of openness, transparency 1.1.3.3 Principle of objectiveness, independence and responsibility Principle of objectiveness and independence: Ensuring the objectiveness and independence of State Budget is a necessary principle Activities relating to budget revenues and expenditures need to be checked, investigated and audited by the competent state authorities Principle of responsibility: This principle ensures the responsibility of the state agencies in using state budget The State must be responsible before its people about the process of state budget management, about the results of receiving, spending state budget 1.1.3.4 Principle of balancing state budget Balancing state budget is one principle in the management of state budget Balancing State Budget, in addition to balancing the accounts, is the sensibility in the structure of revenues and expenditures, among the fields of economy, between the central and locality 1.1.4 Cycle of State Budget 1.1.4.1 Concept of the state budget cycle Budget cycle is the term used to refer to the entire operation of a budget from the start until the end switching to the new budget A budget cycle consists of three successive phases that are budgeting, budget execution and budget finalization 1.1.4.2 Phases of State budget cycle Budget cycle consists of three phase that are budgeting, budget execution and budget finalization Budgeting is the process of analyzing, evaluating, collecting, estimating in order to define the targets of budget revenues and budget expenditures of the State reachable in a budget year, as well as to define the key measurements on economy – finance to ensure the well execution of assigned budget targets Execution of State Budget is the process of generating economic, financial and administrative measurements to turn the targets of revenues, expenditure noted in the year budget plan into reality Finalization of State Budget is the final phase of a budget cycle The purpose of balancing state budget is to generate and evaluate the whole process of revenues, expenditures in a budget year The balancing of state budget provides full information about management and operation of revenues, expenditures of state budget for the competent state authorities such as: National Assembly, People’s Council, Government, sponsors, people,… from which to learn about the advantages, disadvantages and the experiences for the next budget cycle 1.1.5 Content of state budget management Management, in general, is interpreted as the impact of management subject affecting to the managed object through the use of appropriate tools and methods to achieve the defined objectives Management of State Budget is the activity of subject managing state budget through the use of appropriate management tools and methods to affect and operate activities of state budget to achieve the defined objectives Content of state budget management is interpreted as a job that competent state authorities carry out to manage state budget effectively, to meet the requirement of social – economic development of the country The management of state budget is relating to the activities of receiving, spending state budget Management of State Budget is reflected in the following aspects: - Issue laws, policies, regulations, norms on state budget - Manage receiving, spending state budget - Manage the execution of state budget cycle - Supervise, investigate and audit the implementation of state budget 1.1.5.1 Promulgation of laws, policies, standards and norms of state budget The promulgation of laws, policies, standards, regulations and norms of state budget is the first activity in the management of state budget Any country has its own law on the formation and use of budget and regulations are generally enacted in various forms associated with the authority of central and local state agencies 1.1.5.2 Management of receiving, spending state budget Management of receiving, spending state budget is an important content in the management of state budget Third, ensure the effectiveness: The effectiveness of state budget decentralization is embodied in two aspects which are general effect resulted from regulations on decentralization of budget management (shown in the delimitation of receiving – spending task) and the effect when considering expenses in the process of decentralizing budget management Fourth, ensure the fairness: fairness in decentralization of budget management is in place because among locals in a country there are different natural, social characteristics and different economic development levels Regulations on decentralization of budget management simply applied to all provinces equally will likely lead to the inequities Fifth, ensure strengthening the efficiency of state budget management and control: To ensure strengthening the efficiency of budget management, budget control, it is needed to build a budget control institution with higher degree of independence, as well as with competence in handling violations in budget management Sixth, enhance the management capacity, accountability of the local: When deciding on the level of decentralization of budget management for the local the central needs to review on the local management capacity The local budget management capacity includes: decision making capacity, implementation organizing capacity, monitoring capacity and capability to explain the budget 1.2.5 Content of decentralization of state budget management In reality in Vietnam, decentralization of state budget management is considered on the four main contents which are as follows: - Decentralization on the authority to issue laws, policies, standards and norms of state budget - Decentralization of revenue management and duties of spending state budget - Decentralization in the implementation of the state budget cycle - Decentralization in supervision, inspection and audit of state budget 1.2.5.1 Decentralization on the authority to issue laws, policies, standards and norms of state budget In the management of state budget, regulations on laws, policies, standards, norms of state budget play an important role Regulations on laws, policies, standards, norms of state budget are not only the key bases to set up budget estimates, fiscal control, but also one of criteria assessing the quality of state budget management and operation of the central and local levels 1.2.5.2 Decentralization of revenue management and duties of spending state budget Decentralization of revenue management and duties of spending state budget is an important content in the regulations on decentralization of state budget management Specifically, it is the task defining what items the central budget and local budget are collected and what specific expenses they carry out in the 11 process of state budget management Decentralization of revenue management and duties of spending state budget is a complicated and difficult issue when conducting decentralization of budget management The difficulty is originated in the uneven development, the difference in natural, economic and social conditions among localities 1.2.5.3 Decentralization in the implementation of state budget cycle Decentralization of state budget management shows the relationship among the budget levels in a budget cycle including periods of budgeting, budget execution and budget finalization In these phases, specific competence of the state management agencies in central, local and professional authorities represents the nature of the decentralization of state budget management in the entire budget system 1.2.5.4 Decentralization in supervision, inspection and audit of state budget Decentralization in supervision, inspection, audit of state budget means the determination of tasks and powers of each state agency in the implementation of the rights on monitoring, inspecting and auditing the state budget in order to manage the state budget to achieve its proposed objectives 1.2.6 Factors affecting the decentralization of state budget management 1.2.6.1 The organizational structure of the state apparatus: Form and structure of the state decides the organizational structure of the state apparatus into governmental levels Each governmental level is mounted with a specific geographical territory and jurisdiction and often requires financial means to enforce its functions and duties, which impact on the process of organization and implementation of decentralization of budget management 1.2.6.2 The degree of decentralization of state management between central and local levels: Method for determination of competence of budget management between the central and local levels cannot happen arbitrarily but it depends on the degree of decentralization of the state management on economy - society between the central and local levels The degree of decentralization of state management is reflected in the specific regulations between central and local in the state management activities 1.2.6.3 Natural, economic and social features of the local: In the decentralization of budget management, local peculiarity such as natural, economic and social features should be taken into account which led to the distinctive characteristics in the content of decentralization of state budget management 1.3 EXPERIENCES ABOUT DECENTRALIZATION OF STATE BUDGET MANAGEMENT FROM SOME COUNTRIES The thesis has considered the experiences about decentralization of budget management from Philippines, China, the Republic of France and Sweden By 12 studying the experiences from these countries, there are some experiences that can be applied to the specific conditions in Vietnam Firstly, Sweden and the Republic of France are highly developed countries with comprehensive and complete legal system, applying macroeconomic framework in the medium term for the economy and budget management, applying appreciate budget spending and forecast of budget revenues and expenditures from one to three years is the good experience for Vietnam Secondly, about the power of National Assembly in the field of budget: National Assembly has the sole discretion on budget and may change the budget revenues, expenditures, deficit or surplus presented by the government Thirdly, the countries are conducting administrative reform and budget reform The governmental system consists of three levels: (I) the central level (National Assembly, Government, and central agencies); (ii) the regional level; (iii) the urban level Therefore, there are budgets for the regional level and the urban level Fourthly, the central budget supports the local budget in the state budget system Fifthly, the autonomy of the local government is heightened Summary of Chapter Chapter has explained the scientific foundation of decentralization of state budget management through the analysis of theoretical issues on decentralization of state budget management and the practical foundation through experiences of some countries in the world Specifically, the author has focused on clarifying the following contents: Firstly: Analyzing and systemizing issues of state budget management Secondly: Analyzing the concept of decentralization of state budget management and review the decentralization of state budget management in the relation with decentralization of state management and contents of state budget management Thirdly: Drawing some experienced lessons through the study of decentralization of state budget management in several countries around the world By studying the theoretical issues and practical experiences from some countries, Chapter set up a scientific foundation for analysis and assessment of the real situation of decentralization of state budget management in Vietnam (in Chapter 2) and the proposal of solutions to strengthen the decentralization of state budget management in Vietnam (in Chapter 3) 13 CHAPTER 2: THE REAL SITUATION OF DECENTRALIZATION OF STATE BUDGET MANAGEMENT IN VIETNAM TODAY 2.1 THE PROCESS OF DECENTRALIZATION OF STATE BUDGET MANAGEMENT IN VIETNAM 2.1.1 Decentralization of State Budget Management in Vietnam before the issuance of Law on State Budget 2002 During this period, the state budget system was organized under the unified model with two levels: central budget and local budget, in which the local budget concluded the provincial budget, the district budget and the communal budget The specific feature of budget was highly centralized The central decided all budget revenues and perform the majority in budget expenditures 2.1.2 Decentralization of state budget management in Vietnam from 2002 up to now State budget concludes central budget and local budget The local budget concludes the budget of administrative units at all levels having People’s Council and People’s Committee in accordance with the provisions of the Law on organization of People's Councils and People's Committees Decentralization of revenue sources, expenditure tasks and relationship between the central budget and local budget is executed under the following principles: - The central budget and local budget are decentralized from specific revenue sources and expenditure tasks - The central budget is to ensure the implementation of the strategic, important tasks of the nation and support the local with unbalance budget - The local budget is decentralized from revenues to ensure proactive in implementing the assigned tasks - Duties of spending budget under any budget level shall be paid by such level - Make division by percentage (%) for the revenues divided among budgets at all levels and additional grant to the local budget from the central budget to ensure fairness, balanced development among regions and localities 2.2 REAL SITUATION OF DECENTRALIZATION OF STATE BUDGET MANAGEMENT IN VIETNAM 2.2.1 Real situation of decentralization of authority to promulgate laws, policies, norms of state budget 2.2.1.1 Real situation of decentralization of authority to promulgate laws, policies, norms of state budget Central jurisdiction includes the jurisdiction of the National Assembly, the Government and the Central Ministries Local jurisdiction includes the state agencies such as provincial People’s Councils and People’s Committees 14 In fact, the decentralization of state budget management shows that the promulgated Law on State Budget 2002 has had a great progress in clearly defining the jurisdiction of state agencies (National Assembly and Government at the central level, People’s Council and People’s Committee at the local level) in promulgating policies, management mechanism, decision on estimation and allocation of state budget, supervision of state budget, thereby neutrality in the management, decisions on estimations have been reduced dramatically and highly focused on the overall decision on state budget carried by the National Assembly 2.2.1.2 Real situation of decentralization of authority to promulgate norms of state budget Norm of state budget includes the norm of decentralization of state budget and norm of spending state budget Norm of decentralization of state budget is a foundation to set up and allocate budget to ministries, ministerial-level agencies, governmental agencies, other agencies in the central and localities Spending budget is the mode, the standard as a basis to implement budget spending and control of budget spending - The Prime Minister decides budget allocation The provincial People’s Council decides to allocate its budget in the locality - The Government decides the allocation of state budget spending which is important and in large sphere of influence, relating to the implementation of socio-economic tasks of the nation such as: wage regime, social welfare, regime for people with meritorious services to the revolution, the proportion of budget spending for education and training, science and technology in total state budget expenditures - Prime Minister decides the regimes, standards, norm of state budget spending in accordance with the particular traits of the locality Prime Minister regulates the norm frame of budget spending and assigns the provincial People’s Council to decide the specific method - Minister of Finance decides the regimes, standards, norm of budget spending for industries, fields after discussing with the managing ministries - The provincial People’s Council decides the regime of budget spending in accordance with the real situation in the locality 2.2.2 Real situation of decentralization of revenue source, budget spending management 2.2.2.1 Real situation of decentralization of state budget revenues The allocation of revenue sources among levels is divided into sources; and each level enjoys 100% and the revenues are divided in proportion In other words, the state budget revenues are divided into three groups: revenues of 100% central budget, revenues of 100% local budget and general revenues (divided at the rate of central budget and local budget) 15 Revenues of central budget: the revenues of central budget include revenues that central budget enjoys 100% and revenues divided by the percentage % between the central budget and local budget - Revenues 100% enjoyed by the central budget include items - Revenues divided by the percentage between the central budget and local budget include items Revenues of local budget include 100% revenues of local budget, revenues divided by the percentage between the central budget and local budget, additional revenue from the central budget, revenue from mobilization of investment capital for infrastructure projects In the specific regulations of Law on State Budget 2002, there were some points we need to pay attention to which are as follow: - Regulations on increasing or decreasing some specific revenues for each budget level, including central budget and local budget - Law on State Budget 2002 only regulated revenues of central budget, local budget and handed only the authority to the provincial People’s Council to allocate the specific revenue sources to budget levels in the locality This gave much more autonomy to the local, particularly the provincial People’s Council Mechanism defining the distribution rate of general revenues Add State budget When the total revenues are not sufficient to cover the assigned expenditure tasks, the localities are additionally allocated the budget by the upper level Adding budget by upper level to lower level including two kinds that are balancing supplement and targeting supplement This supplement is the revenue of local budget 2.2.2.2 Real situation of decentralization of state budget spending Allocation of budget spending is defined and specified in the legal documents, the spending tasks of each budget level In the relation between the central budget and local budget, allocation of the budget spending is to identify and specify tasks for central budget and local budget Tasks of spending central budget: the tasks of spending central budget include basic expenditures as follow: (1) spending for investment and development; (2) regular expenses: (3) payment for principal and interest of loan by Government; (4) expenses for aids; (5) Loans; (6) expenses for additional financial reserves of the central; (7) expenses for supplement local budget Tasks of spending local budget: including tasks as follow: (1) expenses for local development; (2) regular expenditure of the local budget; (3) payment for debts mobilized for local investment; (4) expenses for additional provincial financial reserves; (5) additional expenses for lower level budgets In general, the decentralization of state budget expenditure under the Law on State Budget is assessed as “consistent with the theoretical principles in budget 16 expenditure task The assignments at the governmental levels commensurate with the geographic area and the beneficiaries” according to the report of expenditure review of the World Bank in Vietnam 2.2.3 Real situation of decentralization of management for implementing state budget cycle The state budget cycle usually commences before the fiscal year and ends after the fiscal year All three phases of a budget cycle are taken place in a fiscal year, including budget execution of the current budget cycle, budget finalization of the previous cycle and budgeting for the next cycle Decentralization of management in the implementation of budget cycle in Vietnam is considered through the budget cycle, central budget cycle and local budget cycle 2.2.3.1 Cycle of State budget and central budget The cycle of state budget and central budget includes three phases: the estimation of state budget and central budget, execution of state budget and central budget, finalization of state budget and central budget First phase: Estimation of state budget and central budget The preparation, establishment, verification and approval of estimation of state budget in Vietnam nowadays to be done in eight steps Second phase: Execution of state budget and central budget Budget execution is the main job of the state agencies The supervising role of National Assembly in this phase is mainly done through the provisions on sequences and procedures of budget execution prescribed by National Assembly in the State Budget Law In addition, to serve the needs of budget supervision, National Assembly also uses periodic reports as well as the monitoring results Third phase: Finalization of state budget and central budget Nowadays, in Vietnam, finalization of state budget is made from the bottom up Ministry of Finance evaluates the finalization of budget revenues, expenditures of ministries, ministerial-level agencies… using central budget and finalizing local budget; generalizes and estimates state budget to submit to the Government to present to the National Assembly for approval 2.2.3.2 Local budget cycle Local budget cycle is built and implemented according to a cycle consistent with the general state budget cycle The stages includes: (i) estimation of local budget; (ii) execution of local budget and (iii) finalization of local budget First phase: estimation of local budget Second phase: execution of local budget Third phase: finalization of local budget 2.2.4 Real situation of decentralization in supervision, inspection, auditing of state budget 2.2.4.1 Real situation of decentralization in supervision of state budget About the content of supervision: 17 National Assembly as the highest powerful state organ, performs its functions in supervising state budget on the followings: (i) supervising the annual budget estimation; (ii) supervising the allocation of central budget and the supplement from the central budget to local budget; supervising the allocation of budget revenues, expenditures for ministries, central agencies, provinces and cities directly under the central government; (iii) supervising the execution process of state budget; (iv) supervising the approval of budget estimations People’s Council shall supervise the execution of local budget estimation, allocation of local budget, additional allocation from the upper level to the lower level (in locality) and approval of local budget estimation; supervising the implementation of Resolutions of the People’s Council in the field of finance – budget and legal documents of upper level in the area About the supervising object The supervising object of National Assembly is the law enforcement agencies, including Government, Ministries, Central agencies and provincial governments, the units using state budget (in which, Ministry of Finance is the agency collecting and classifying reports on state budget to present Government to submit to National Assembly for consideration and decision) The supervising object of the People’s Council is the People’s Committee and other state agencies in the locality in management and operation of local budget (in which, Financial Department is the agency collecting and classifying reports on local budget to present People’s Committee and submit to People’s Council for consideration and decision) About the form of supervision According to the Law on supervision of National Assembly, applying in the field of state budget, the forms of supervision in the field of state budget conclude: listening to the report, organizing general supervision and specialized supervision, assigning team member to organ, organization to review and define the issues on finance – budget, organizing research, making report and considering proposal for the budget – financial management Tools to carry out supervision of state budget One of the important tools to carry out the supervision of state budget effectively is the operation of State Auditing Agency, Government Inspector, Financial Inspector, People’s Procuracy, People’s Supreme Court (for National Assembly), provincial People’s Procuracy, provincial People’s Court (for provincial People’s Council) to serve the supervision of state budget 2.2.4.2 Real situation of decentralization in inspection, auditing of state budget Annually, Government Inspector conducts inspection activities relating to the management and use of state budget 18 The State Auditing Agency undertakes the audit of financial statements, audit of compliance and performance of budget beneficiaries; inspection and supervision of state budget 2.3 ASSESSMENT ON DECENTRALIZATION OF STATE BUDGET MANAGEMENT IN VIETNAM 2.3.1 Advantages Firstly, Decentralization of state budget management is an obvious trend in Vietnam Particularly, there is much decentralization for the local on the revenue source and budget spending in the decentralization of state budget management Secondly, The provincial People’s Council serves the right to decide the decentralization of revenue sources and specific spending tasks for the lower levels, decide some regimes, standards, norms of spending local budget according to the allocation of the central level Thirdly, In the area of budget spending for investment and development, the local is more and more decentralized in deciding the capital construction projects from the state budget funds Fourthly, decentralization of state budget management is more and more based on the scientific foundation Fifthly, decentralization process of budget management in Vietnam has given the local larger initiative in managing their respective budgets, enhancing the budget management capacity of the local 2.3.2 Shortcomings Firstly, decentralization of budget management in Vietnam still follows the management method depending on the inputs; the effective use of state budget, therefore, is not high, which is shown through the use of norms system of state budget Secondly, regulations on decentralization of state budget management are not embraced the scale of state budget Thirdly, budget-managing competence of the local is increased, but the budget deciding competence is still belonging to the central government Fourthly, the allocation of revenue sources and budget spending tasks between the central budget and local budget is not in accordance with the reality Fifthly, correlation between revenues and expenditures of the local is not commensurate with each other Sixth, inadequacies in provisions on decentralization of implementing state budget cycle Seventh, supervision of state budget is not met with the real requirements 2.3.3 Reasons: Firstly, System of state budget in Vietnam is integrated Secondly, the local authorities have only been increasing organizational implementation and management of the budget, while the deciding competence is still under the jurisdiction of the central government 19 Thirdly, decentralization of state budget in Vietnam is still under the traditional method of budget management, also known as budget management under the inputs list Fourthly, some other reasons: Fiscal year is a principle in traditional budget management Lack of close linkages between the medium socio-economic development plans and resources in the state budget estimation There are regulations on public budget, but no regulations on assessment of public data, which leads to the lack of transparency At present, State Auditors only participate in auditing finalization reports;, the auditing efficiency is not high Conclusion of Chapter This Chapter deeply analyzes the real situation of decentralization of state budget on the four basic contents as follow: - Decentralization of authority of promulgating laws, policies, standards and norm of state budget - Decentralization of revenue sources, budget spending tasks - Decentralization for management of budget cycle - Decentralization in supervision, inspection, auditing of state budget When analyzing the real situation of decentralization on each content, the author has considered based on the legal documents on decentralization and evaluated the implementation of decentralization in practice Since then the author has evaluated the advantages and limitations in the decentralization of budget management in Vietnam today and pointed out the reasons of limitations The evaluation on the actual situation, especially the reasons of limitations in the decentralization of State budget management is the real basis for the author to propose solutions to promote decentralization of state budget management in Vietnam in the coming period 20 CHAPTER 3: ORIENTATION AND SOLUTION OF THE DECENTRALIZATION OF STATE BUDGET MANAGEMENT IN VIETNAM 3.1 ORIENTATION OF DECENTRALIZATION OF STATE BUDGET MANAGEMENT IN VIETNAM Based on the specific elements and principles of decentralization of state budget management, forecasts related to decentralization of budget management in the coming period in Vietnam may be: Firstly, the scale of state budget increases along with the economic growth Secondly, the trend of administrative reform in the direction of decentralization becomes clearer Some orientations of decentralization of state budget management in Vietnam in the coming period: Firstly, there is a separation between the central budget and local budget Secondly, the local authorities are given more autonomy in decision and management of revenue sources Thirdly, decentralization of budget management is not in accordance with the outputs in the medium-term budget plan Fourthly, strengthening the transparency and accountability in the state budget 3.2 SOLUTION OF THE DECENTRALIZATION OF STATE BUDGET MANAGEMENT IN VIETNAM 3.2.1 General solution of the decentralization of state budget management in Vietnam 3.2.1.1 Amendment of legal regulations relating to the decentralization of state budget management "National Assembly decides the financial policy, the national currency, the estimation of central budget, central budget allocation, approval of central budget finalization; regulations, amendment or repeal of taxes " Amend the competence of National Assembly for the budget allocation: amend regulations on the competence of National Assembly in defining the priority targets in allocating estimation of budget spending accordingly 3.2.1.2 Decentralization of state budget management in the direction of outputs in the medium term budget plan Decentralization of Budget management in the direction of outputs is to determine the final results of the supply of goods and services from state agencies from central to local levels The connection of these results with costs on budget and organization activities reflects the effects and effectiveness of the supply of public services 21 3.2.2 Specific solution of the decentralization of state budget management in Vietnam 3.2.2.1 Solution for decentralization of competence in issuing norm of state budget Decentralization of competence in issuing norm of state budget spending: it’s divided into norm groups of state budget spending under the authority of the central and to be implemented through out the country The norm group of state budget spending is specifically decided by the local within the norm framework specified by the central; the local decides the norm group of state budget Innovation of methodology for allocating the state budget: Using more criteria to calculate for more reasonable budget allocation 3.2.2.2 Solution for decentralization of budget revenues, spending tasks management Increasing the deciding competence of spending budget for the local - Clearly defining that the local serves the right to spend budget on whatever decentralized works - Decentralization of budget spending tasks for the local is subjected to the allocated revenues - Promulgating specific regulations on competence of spending for investment and development for the local Innovation of mode allocating budget revenues between central and local - Allocate the revenue sources more properly between central budget and local budget - Improve the definition of allocating rate in the general revenue sources Innovation of methodology defining the supplement to the budget 3.2.2.3 Solution for decentralization of implementation of state budget cycle The decentralization of the implementation of the budget cycle should be directed to the separation between the central budget and local budget Performing budget cycle must be based on the principle that National Assembly decides the estimation of central budget, allocation of central budget, finalization of central budget detailing for each ministry and central agency; decisions to supplement the local budget from the central budget The local should be given more autonomy in deciding and operating local budget, finalizing local budget 3.2.2.4 Enhancing competences of National Assembly and People’s Council Enhancing the competence of members of National Assembly and People’s Council: to be presented in the competence of reviewing estimation, deciding state budget, supervising the execution of state budget and finalization of state budget in the decentralization of state budget Strengthening the supervision of National Assembly: through out the establishment of specific regulations on the scale, object, supervision of using state budget; innovating the mode and form of supervision of National Assembly and People’s Council 22 3.2.2.5 Innovation of organization, enhancing the quality of state auditing Auditing plays an important role in state budget management State auditing focuses on the fields: auditing budget of provinces and cities directly under the central, auditing the national programs, auditing budgets of estimation units at various levels, auditing capital and assets of the state in the state-owned enterprises, capital construction works 3.2.2.6 Increasing public transparency and accountability in decentralization of state budget management Strengthening the decentralization of budget management can only reach the higher effect when strengthening the public, transparency and accountability in state budget management activities 3.3 RECOMMENDATIONS 3.3.1 Clearly assign duties, authorities of the central and the local budget 3.3.2 Re-organize the time of preparation, construction of budget estimations 3.3.3 Enhance the legality of Resolutions of National Assembly on state budget Conclusion of Chapter Based on the theoretical foundation on decentralization of the state budget management, experienced lessons about decentralization of budget management in some countries and the assessment on the current decentralization of state budget management since 2002, the author has proposed solutions to strengthen decentralization of the state budget management in Vietnam in the coming period The author has proposed solutions from overall to specific one in order to strengthen the decentralization of the state budget management The overall solutions are from the completion of the legal system of the State budget management in order to create a strong legal framework in defining the authority of the central and local government in state budget management The specific solutions are to strengthen the decentralization of the state budget management, which is proposed by the author to associate with the clarification of the contents in budget management They are: decentralization of authority for promulgating laws, policies, standards and norms of state budget; decentralization of revenue sources, tasks of budget spending; Decentralization in implementing the state budget cycle and decentralization in supervision, inspection, auditing of state budget In addition, the thesis also proposes some recommendations to implement solutions for strengthening decentralization of State budget management effectively in reality 23 CONCLUSION AND RECOMMENDATION To improve the effectiveness and efficiency of state management in general and state budget management in particular, it is needed to strengthen the decentralization of state budget management between the central and local Based on the theory of state budget management, theory of decentralization of state management and theory of decentralization of state budget management, the Thesis approaches the decentralization of state budget management as an important way to improve the efficiency of state budget management The author has systematized the theoretical foundation on decentralization of state budget management in Vietnam on the general theory about budget management and decentralization of state management To enrich the assessment on decentralization of state budget management, the thesis did some researches on decentralization of budget management in a number of countries around the world, from which to draw lessons for the process of state budget management in Vietnam The thesis focuses on analyzing the real situation of decentralization of state budget management in the phrase from 2002 up to now on the four basic contents: - Decentralization of authority for promulgating laws, policies, standards and norm of state budget - Decentralization of management of revenues, state budget spending - Decentralization in supervision, inspection, auditing of state budget The author has assessed the real situation of decentralization in both states “standing” and “moving” When analyzing the situation of decentralization on each content of state budget management, the author has pointed out the assessments of the strengths, shortcomings and causes of such shortcomings in the decentralization of state budget management in Vietnam Based on the theoretical foundation on decentralization of the state budget management, experienced lessons about decentralization of budget management in some countries and the assessment on the current decentralization of state budget management since 2002, the author has proposed solutions to strengthen decentralization of the state budget management in Vietnam in the coming period The author has proposed general solutions and specific solutions on decentralization of state budget management in Vietnam associated with the clarification of four contents in state budget management and proposed recommendations to implement such solutions effectively in reality 24 LIST OF PUBLISHED REASERCHES BY THE AUTHOR Le Toan Thang (2013), “ Six restrains of State Budget Law and Solution to overcome ” Economy and Forescat Review, No 8, April 2013, pg 13-15 Le Toan Thang (2012), “Decentralization of management authority in the norm of state budget” National Fund Management Review, No 125, October 2012, pg 5-8 Le Toan Thang (2011), “Decentralization of state budget management of some country and experiences to Vietnam”, National Fund Management Review, No 131, October 2011, pg 50-51 Le Toan Thang (2011), " Management decentralization in state budget process of Vietnam", Public Administration Review, No 181, Ferbuary 2011, pg 16-20 Le Toan Thang (2007), “ Solutions to perfect State budget mechanism” Public Administration Review, No 135, April 2007, pg 15-19 ... Principle of balancing state budget Balancing state budget is one principle in the management of state budget Balancing State Budget, in addition to balancing the accounts, is the sensibility in. .. local state agencies 1.1.5.2 Management of receiving, spending state budget Management of receiving, spending state budget is an important content in the management of state budget Management of. .. specified in the phases of a budget cycle 1.1.5.4 Supervision, inspection, auditing of state budget In the management of state budget, supervising, inspecting and auditing the use of state budget