Speech at the Executive Symposium on ‘The Comparative study of Municipal Finance in Ho Chi Minh City, Shanghai and Jakarta’

Oct 9, 2006

Speaker: Mr. Jonathan Pincus, UN Development Programme Senior Country Economist
Date:       October 9, 2006
Event:      Executive Symposium on ‘The Comparative study of Municipal Finance in Ho Chi Minh City, Shanghai and Jakarta’
Venue:    Ho Chi Minh City
Mr Nguyen Huu Tin, Vice Chairman of the Ho Chi Minh City People’s Committee;
Dr. Tran Du Lich, President of HCMC’s Institute for Economics Research;
Distinguished international and national scholars and leaders;
Colleagues and friends:
 It is a great pleasure to join with you today at this important symposium on comparative international experiences in municipal finance.  
Recent years have seen a pronounced trend in the East Asia region towards the decentralization of government authority, service delivery and financing mechanisms to regional, provincial and local structures.  
Decentralization is motivated by the desire to bring government closer to the people, and to create the space for flexibility in government programmes, budgeting and financing. Since every locality has its own constellation of economic, social and political characteristics, it seems only logical that too much centralization will result in programmes and practices that are unsuited to local conditions. As Viet Nam’s largest metropolitan area, and a city with aspirations to achieve greater regional and global importance, Ho Chi Minh City’s infrastructural and institutional requirements are much different from those of smaller Vietnamese cities. Decentralization can also encourage greater public participation, since people can take a more active role in local decision-making than they can at the national level.
Yet the obvious advantages of decentralization need to be balanced against the need to maintain national standards of fairness and equity in the coverage and quality of health and education services, in basic infrastructure like water supply, sanitation and roads, and in other public investment decisions. For example, productive investment in schools, health centres and irrigation systems in poor rural areas should not be held back by limits on local revenue raising capacity. Successful system must find ways to combine flexibility with fairness.
Viet Nam is currently grappling with these crucial issues. Twenty years of economic reform have revitalized the nation’s economy, and in doing so have lifted millions of Vietnamese people out of poverty. It is not an exaggeration to say that no country in the world has made more rapid progress towards achieving the Millennium Development Goals.
But now that Viet Nam is poised to achieve middle income status, the need for policy innovation is even greater than in the past. Viet Nam is now engaged in the difficult process of creating and sustaining the institutions of a modern market economy. Developing decentralized structures that meet these criteria for flexibility and fairness is a major challenge.  
of UN Development Programme Senior Country Economist, Mr. Jonathan Pincus

There are no blueprints or easy answers. Every country must build institutions, establish practices and promote values that accord with its own history, culture and social conditions. Yet there are tremendous opportunities for the countries of East Asia to share experiences and lessons across a wide range of public policy issues, not least decentralization of government finance, authority and service delivery. Many countries in the region share some common characteristics. For example, they tend to be densely populated with relatively young age structures, they have experienced sustained periods of rapid economic growth and they are leaders in international economic integration. These demographic and economic factors translate into huge demand for investment in infrastructure and massive pressure on government to increase the supply and quality of basic services.
Today’s symposium provides policy makers from three countries with an opportunity to exchange ideas and information relating to the specific topic of municipal finance. The idea for this event originally emerged in discussions last year between the Ho Chi Minh City People’s Committee and UNDP in the context or our collaboration on public administration reform. This work pointed to the need to explore new public finance ideas for Viet Nam’s largest and most rapidly growing metropolitan area.   
Fortunately, this is a topic in which Harvard’s Kennedy School of Government has considerable international experience, not least in East Asia. The Kennedy School’s network of scholars and experts in China, Indonesia and Viet Nam provide a natural starting point for international comparative research on this emerging and vitally important public policy issue. The Fulbright Economics Teaching Programme (FETP), a partnership between the Kennedy School and the University of Economics, Ho Chi Minh City, was uniquely positioned to lead this research in Viet Nam and capitalize on the Kennedy School’s international and domestic links. Today’s symposium is another product of the strong and growing partnership between UNDP and FETP in producing practical and impartial policy research for Vietnamese policymakers and the wider public.
We are especially grateful to the Institute for Economics Research of HCM, and Dr Tran Du Lich, for hosting today’s event and for putting together a programme that is certain to generate constructive and innovative ideas for new ways to finance local investment and service provision. We at UNDP look forward to building our relationship with the Institute and working together on issues relating to municipal finance, decentralization and the development of democratic citizenship in Ho Chi Minh City.
Special thanks are also due to our international participants, who have taken the time from their busy schedules to travel from Shanghai and Jakarta to share their own experiences of relevance to Ho Chi Minh City’s financing needs. I hope that you find today’s discussions useful, and that we can continue to explore ways to share information and ideas among cities in China, Indonesia and Viet Nam as well as other countries in the region.
The United Kingdom’s Department for International Development (DFID) provided financial support to this comparative research and for today’s symposium under the DFID-UNDP Strategic Partnership Initiative. It is a great pleasure to welcome representatives from DFID Viet Nam here today, and we hope that you will feel free to share your considerable international experience with us.
In closing, I would like to thank all of the presenters and participants for your contributions to today’s event, for your continued support for innovative policy research and for collaboration between the United Nations and the Government of Viet Nam.
Thank you.