Vietnam’s shift from a centrally planned to a market economy has transformed the country from one of the poorest in the world into a lower middle-income country. Vietnam now is one of the most dynamic emerging countries in East Asia region.
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How do we know whether State Budget expenditures are efficient and affordable? Are public debt levels at 60 percent of GDP too high for Vietnam? How can the government improve transparency of the Stat... Show More +e Budget? These are important questions raised by the public and the media just as the National Assembly is debating revisions to the 2002 State Budget Law and reviewing the draft 2015 State Budget.Recent research by the World Bank has highlighted a number of reforms that could help to further modernize the State Budget system and enable it to meet the development challenges of a Middle-Income Vietnam. The State Budget Law sets out important “rules of the game” that have enabled strong management of public finances in Vietnam over the past ten years.State Budget spending has increased from 20 percent of GDP fifteen years ago to just under 30 percent in more recent years, making major contributions to Vietnam’s development by providing critical infrastructure and enabling greater spending to benefit the poor. For example, in poorer regions, where development needs and service delivery costs are high, State Budget policies have enabled up to seven times more public spending per person than in richer regions. Meanwhile, when the economy was overheating in 2011-2012, State Budget policies reduced government spending as a share of GDP but maintained critical spending on education, health and social protection. These developments have taken place in an environment with increased information available in the public domain on government revenue, spending and debt. This allows the public to participate in and raise questions on public finance decisions. There are clear accounting and reporting rules and regular independent auditing on the quality of government accounts. Fiscal decentralization policies have brought spending decisions closer to people providing more opportunity to reflect local choices and preferences in budget allocations.Given these achievements, what would be our top five recommendations for improvements to the State Budget Law?The first recommendation is to further strengthen State Budget transparency, to promote more public participation in the budget process at all levels of government and to improve accountability. For example, the State Budget submitted to the National Assembly and Local People’ Councils should be disclosed at the same time so that citizens can provide feedback. State Budget information should be communicated clearly and concisely to facilitate citizens’ understanding of and participation in budget discussions.Secondly, there is a need for more discipline in implementing approved spending plans. Actual spending has in recent years significantly exceeded planned spending. Such big changes affect the credibility and integrity of spending plans. To address this, we recommend that major changes to budget appropriations be approved through a supplemental budget. This should help to ensure stronger accountability to the legislature and promote more efficient spending.The third recommendation is to introduce medium-term budgeting, which is subject to annual updates, aligned with Socio-Economic Development Plans (SEDP), and linked with the Medium-Term Investment Plan (MTIP). At the moment SEDPs run for five years, whereas the State Budget is annual. A medium-term budget would provide projections of total revenue, spending and borrowing over the coming three to five years. This would enable the government and the public to estimate the cost and affordability of its development plans.The fourth recommendation is to consolidate reporting on all activities of the public sector so that the government, the National Assembly and citizens have a fuller picture of fiscal policy. This could be done through consolidated government financial statements with full information on revenue, expenditure, financial and non-financial assets, and liabilities. Like in other countries, the State Budget is not the only channel through which public services are delivered. In Vietnam there are for example extra budgetary funds and state enterprises. It is important to monitor risks to the State Budget emanating from these. As previous global crises have shown the biggest risks to the State Budget often come from extra budgetary public sector activities.The fifth recommendation, is to have a comprehensive framework for local borrowing. At the moment all local debt is treated outside the State Budget because local authorities are not allowed to run budget deficits. We recommend the comprehensive framework includes integration of local borrowing onto the State Budget, strengthening of local debt management capacity, and adoption of borrowing limits that are more closely related to borrowing capacity of local authorities. This can help provide much needed resources to meet infrastructure needs in selected provinces, whilst ensuring responsible and transparent local borrowing for high return public investments.The revision of the State Budget Law is a very important milestone. The agreed reforms will have an impact on the government’s public finance policies and the economy for many years to come. Much has already been achieved in the last ten years. We hope the government and the National Assembly will seize the opportunity to build a better State Budget system to help Middle-Income Vietnam grow even stronger in the future. Show Less -
Washington, D.C., 17 November 2014 - Seven Vietnamese photographers were recognized in the 2014 CGAP Photo Contest, which aims to highlight stand-out photography depicting financial inclusion around t... Show More +he world. Through strong photography, CGAP showcases the different ways in which poor households manage their financial lives and raises awareness about the importance of formal financial services for people at the base of the economic pyramid. In Vietnam, 79% of the adult population is “unbanked” and lacks an account at a formal financial institution.Vietnam’s Tran Dinh Thuong, who submitted the photo “Traditional,” received a special mention. His photo depicts a woman transporting ceramic pots at a kiln. The judges appreciated the symmetry in the image and remarked that he captured the photo at exactly the right moment. Six additional photographers from Vietnam were designated as finalists in the competition, which received a record number of 4,820 entries from professional and amateur photographers in 95 countries.Overall, East Asia and the Pacific was very well represented in the winning set of images. Fifteen of the 30 winning images were from the East Asian region, including the first prize winner, Soh Yew Kiat of Malaysia. His photo, “Cormorant Fisherman,” depicts a man in China practicing the vanishing craft of cormorant fishing – a traditional technique thousands of years old that involves training birds to catch fish.The judges selected “Cormorant Fisherman” because of the poetic and evocative way it tells a story. Cormorant fishermen, like the one in the photo, are typically involved in the tourism industry and their businesses benefit greatly from easier access to financial services.“The photo captured a timeless image, paired with a modern story,” explained Meghan Dhaliwal, Multimedia Projects Coordinator for the Pulitzer Center on Crisis Reporting. “It’s mythical-looking, and his clothes mirror the shape created by the wings of the bird,” she added.In addition to the compelling story behind the winning image, the judges said it was technically excellent. “The focus is on the fisherman, but the viewer can still see the beautiful details of the background,” said Indira Williams Babic, Senior Manager of Visual Resources for the Newseum.The 2014 Grand Prize is a $2,000 gift certificate for photography equipment.A full gallery of the 30 winning photos can be viewed at www.cgap.org/photocontest.The judges also selected second and third place winners as well as 27 regional winners, finalists, and special mentions, which were chosen for both technical excellence and depiction of the stories and faces behind financial inclusion.The 2014 panel of judges consisted of Indira Williams Babic, Senior Manager of Visual Resources at the Newseum, Jeanette Ortiz-Osorio, Manager of Photo and Digital Assets for The Red Cross, and Meghan Dhaliwal, Multimedia Projects Coordinator for The Pulitzer Center on Crisis Reporting.About CGAPThe Consultative Group to Assist the Poor is a global partnership of 34 leading organizations that seek to advance financial inclusion. CGAP develops innovative solutions through practical research and active engagement with financial service providers, policy makers, and funders to enable approaches at scale. Housed at the World Bank, CGAP combines a pragmatic approach to responsible market development with an evidence-based advocacy platform to increase access to the financial services the poor need to improve their lives. Show Less -
Hanoi, November 12, 2014 – The State Bank of Vietnam and the World Bank today signed a US$ 500 million loan for a US$ 731.25 million operation in support of Vietnam’s energy sector. The investment wil... Show More +l fund construction of over 1,000 kilometers of transmission lines and implement Smart Grid technologies to improve reliability and quality of electricity supply. “Improving energy efficiency is critical for Vietnam’s ability to meet energy demand to power growth and maintain improvements in welfare.” said Victoria Kwakwa, Country Director for the World Bank in Vietnam. “Energy efficiency improvements are also important for reducing Vietnam’s rapidly growing greenhouse gas emissions and contributing to climate change mitigation.” The loan supports a Transmission Efficiency Project, which is expected to improve the capacity, efficiency and reliability of electricity transmission in areas that are key to the country’s economic development, including the Greater Hanoi Area, the Greater Ho Chi Minh City Area, the Mekong Delta, and the Central Region.It will finance transmission lines and substations, constituting about 15 percent of the expected need for transmission network expansion by 2020. The project targets key investment needs in major economic development areas where transmission overloads are already present or are expected in the very near term.In addition, the project will support Smart Grid technologies for monitoring, control, and protection equipment to improve reliability and reduce electricity outages, and help build the capacity of the National Power Transmission Company by supporting its operational and financial independence, as part of a plan to pilot a competitive energy wholesale market by 2015.The total financing requirement of the project is estimated at US$731.25 million, of which US$500 million will be funded by the International Bank for Reconstruction and Development, the World Bank Group’s lending arm for middle-income countries. The remaining US$231.25 million will be financed by the National Power Transmission Company, Electricity of Vietnam. For more information, please visit www.worldbank.org/vn Show Less -
The partnership recently awarded $3 million grants each to Brazil, Ukraine, and Vietnam to implement national plans to lower emissions and move toward low-carbon growth paths. Brazil will use the gran... Show More +t to carry out analytical work on a carbon tax and the Ukraine will use the funds to build a monitoring, reporting and verification (MRV) system for a future emissions trading scheme. Representatives from Vietnam presented their proposal at the meeting for a national sector-wide program that will reduce emissions and earn carbon credits, a program that might be scaled up in the future. They plan to use the funds to help develop necessary infrastructure, including setting an emissions baseline and creating an MRV system."This significantly contributes to the implementation of important climate change policies in our country, especially greenhouse gas emission reductions,” said Truong Duc Tri, deputy director general of the Department of Climate Change at the Vietnam Ministry of Natural Resources and Environment. “Through the implementation of credited mitigation actions in the steel and solid waste sectors, this project helps our government take important steps to analyze economic policies that shift carbon use and create opportunities for investors to develop sector-wise actions that support growth models to develop a low-carbon economy.” Chile takes an active lead in South AmericaDuring the PMR Partnership Assembly meeting this week, Chilean Minister of Energy Máximo Pacheco discussed the progress in PMR countries. He said it was motivating to know that a growing number of middle-income countries are exploring the use of carbon pricing instruments.Chile itself is showing the way with plans to become the first country in South America to implement a carbon tax. On September 29, Chile approved a law which goes into effect in January 2017 and that will tax CO2 emissions from boilers and turbines with an installed capacity of 50MW thermal, as well as diesel passenger vehicles and local pollutants. Chile’s energy sources have traditionally been fossil fuel-based and, as the minister pointed out, greenhouse gas emissions doubled between 1990 and 2010. Electricity generation, transportation, and mining were the main sources. However, Chile is committed to reducing emissions by 20 percent by 2020 and, as part of their national energy agenda, has pledged that 45 percent of power generation installed between now and 2025 will come from renewable energy sources.“The energy agenda is our roadmap for the next few decades and certainly will be part of a conversation on the strategic vision that we have as a country on the issue of climate change,” said Minister Pacheco. “We want to prioritize energy efficiency as a clean, safe and economical way to fulfil the demand for energy, thus breaking with the dominant paradigm for so many decades. We are convinced that it is possible to uncouple economic growth from growing energy consumption, as other countries have done.”Other countries are also moving forward.South Africa’s carbon tax on emissions is scheduled to go into effect in 2016, and by 2020 it aims to reduce its emissions below business-as-usual by 34 percent. The PMR is expected to approve a $5 million grant to South Africa at the next PMR assembly meeting in March 2015 to help implement the carbon tax, in particular focusing on how to use the tax revenue, how best to address competitiveness concerns, and how to implement the MRV system which is fundamental to verifying the emission reductions.China has launched cap-and trade pilots in seven cities and provinces, which are together already trading 13.5 million tons of CO2 at a total value of RMB 512 million Yuan (approximately US$84 million) and are being used to inform a nationwide emissions trading system to launch as early as 2016. The PMR is supporting this preparation and design phase with an $8 million grant. As explained by Shu Wang of the Climate Change Department at NDRC at the conference, China is already working on a national registry and monitoring system.Climate action is an economic issueClimate change is about much more than environmental impact. The latest Intergovernmental Panel on Climate Change report makes clear that it is affecting countries’ economic growth, development, energy security, and their trade and competitiveness today, said Vikram Widge, head of climate finance and carbon finance at the World Bank Group.“Putting a price on carbon needs both political leadership and a sound technical basis – which is what the PMR provides support for – to ensure the design of stable and predictable policies that will re-direct investment flows to low carbon resilient development,” he said. Show Less -