Speech at seminar on "Financial-budgetary issues of Viet Nam in 2013 and beyond"

10 May 2013

Speaker: UNDP Deputy Country Director, Mr. Bakhodir Burkhanov
Date:       Friday, 10 May 2013
Event:      Seminar on “Financial-Budgetary Issues of Vietnam in 2013 and Beyond”
Venue:     International Convention Center, Ha Noi

Dr. Dinh Van Nha, Vice-Chairman of the National Assembly Committee on Finance and Budgetary Affairs;
Distinguished National Assembly Deputies;
Representatives of development partner agencies;
Ladies and gentlemen:

I am pleased to address today’s seminar which is organized by the Committee on Finance and Budgetary Affairs bi-annually ahead of each National Assembly session.

In the next session of the National Assembly starting in ten days, the legislators will review the progress in the implementation of the Socio-Economic Development Plan and State Budget in 2012 and thus far in 2013. The Committee plays a key role in appraising this progress report produced by the Government.

In 2013, Vietnam’s economy continues to face challenges. While fiscal and monetary policy tightening led to a significantly lower inflation rate, it took a toll on growth. In 2012, growth slowed to 5.03%, the lowest in 13 years. Budget revenue was lower than estimated , a reflection of the slowing economy and the difficulties faced by many businesses. Non-performing loans are among top concerns for the financial sector and may have serious repercussions for the country’s budget.

According to the State Bank of Vietnam, the ratio of non-performing loans by mid-year 2012 was estimated at 8.8% but the actual figure may be higher. Moving forward, the Government will need to find ways to stimulate domestic consumption, accelerate reforms to improve the efficiency of public investment, re-structure SOEs and the banking sector, including tackling the issue of non-performing loans. I am pleased to acknowledge the presence with us this morning of Dr. Sanjay Kalra, the IMF Representative, who will share some reflections on the macro-economic situation and fiscal policies challenges, alongside other speakers.

Today’s discussion will focus on challenges facing the economy, particularly challenges of the current fiscal and monetary policies in Vietnam in 2013. The goal is to hear from a variety of experts and researchers to facilitate greater analysis and understanding of these challenges by the National Assembly deputies, in order to support their vital oversight and policymaking roles.

We know that addressing structural reforms and improving the quality and sustainability of growth under the current economic climate is not an easy task. With limited resources, the need for transparency and efficiency of public expenditure becomes all the more important. The Committee on Financial and Budgetary Affairs has an important role in overseeing this process, in making sure that spending on social sectors, particularly health and education, remains a priority, and that public financial management practices become more transparent.

Looking ahead, the National Assembly – particularly the CFBA – has an important oversight role with regards to the performance of Viet Nam’s public financial management (PFM) system. The Public Expenditure and Financial Accountability Assessments are efficient tools to measure performance of public financial management performance. Globally, over 300 PEFA reviews have been conducted – and most have been publicly disclosed – to guide policy-level dialogue for reform, and to address capacity gaps.

In Viet Nam a PEFA was conducted in 2012.  While Viet Nam is assessed quite positively in terms of legislative scrutiny of the annual budget law and external audit reports, its transparency indicators such as transparency of taxpayer obligations and liabilities, classification of the budget, extent of unreported government operations, and oversight of aggregate fiscal risk from other public sector entities  have scored low. There is an opportunity for the National Assembly to exercise its oversight role to lift the level of the country’s public financial management. We would like to express our appreciation to our World Bank colleagues for joining us to share their insights into the PEFA assessment later this morning.

Ladies and gentlemen:

In the coming session, the National Assembly will also review the law on cost-saving measures and prevention of wasteful expenditure together with a newly proposed regulation on disclosing the management of state budget, including income and asset declarations. These are welcome legislative initiatives. In this connection, it is worthwhile to note that according to the Ministry of Finance, civil service and personnel salaries accounted for as much as 7% of the total state budget expenditure in 2012.

However, the remuneration package of state employees includes substantial non-salary emoluments. This raises the questions of salary structures, entitlements and eligibility, including whether remuneration and benefits should be on the basis of seniority, merit or qualifications. The measures to optimize the existing practices will go beyond reducing inefficient expenditure but will also promote the right incentives for productivity that are more merit-based. In this regard, I’m happy to introduce my UNDP colleague Jairo Acuna-Alfaro who will speak in more detail on the issue of public sector salaries.

I trust that today’s discussion will equip the National Assembly deputies with useful background and insights as they prepare for the upcoming parliamentary deliberations. I join Dr. Nha in wishing you a fruitful and stimulating discussion this morning.

Xin Cam On va Chuc Suc Khoe!