State budget policies over 2001-2005 and future intentions

1. State budget policies over 2001-2005 and future intentions

2. Some macro-economic indicators ( 2001-2005) • GDP growth: 7,5%. Average annual export growth 17.4%. Trade deficit to export from 19% (2001); to 14% in 2005. • Domestic savings to GDP: 29.9% in 2005 from 28.8% in 2001. Gross investments in society increased from 32.4% (1998) to 38.2% of GDP (2005). • Poor households in Vietnam (international standards) reduced from 58% in 1993 to 22% in 2005. Job creation: about 7.5 persons.

3. State budget policies over 2001-2005 • Continued reforms and improvements in fiscal – budget policies and management • Strengthened fiscal stance; actively restructured State budget composition; increased capital development for socio-economic infrastructure, and development of education, culture, health, social protection, poverty reduction services: • SB Revenue increased by 18.4% per year; accounted for 22.5% of GDP • SB expenditure increased by 21.7% of plan, accounted for 28.7 % of GDP • Tight budget policies, with deficit lower than 3% of GDP

4. State budget policies over 2001-2005 • Fiscal policies to promote, reform and improve efficiency of SOEs • Financial markets to be established and rapidly developed, to become important finance channel for capital development • Reinforced administrative reforms in fiscal-budget management area; • Achievements made in the emphasis in external finance relations, international integration • Fiscal – budget disclosure and transparency realized

5. State budget policy directions and measures over 2006-2010 • Socio-economic objectives • Average economic growth: 7.5% - 8% of GDP in 2010, doubled from 2000, average income 950- 1000USD per capita. • Gross investments in society (2000 – 2010), annual growth of 12 - 13%, accounted for over 38% - 40% of GDP. • By 2010, cut half of poor households (from 24% now to under 15% by 2010). • Job created for 1.5-1.6 workers per year • Universalized lower secondary school, trained workers to reach 40%; longervity to reach over 72 years; having 4.5 doctors and 1 pharmacist per 10.000dân, having doctor(s) in 80% communes, village health workers in 100% villages.

6. State budget policy intentions and measures over 2006-2010 • State budget intentions • SB Revenue to GDP to reach 22-23%, tax and fee revenues to reach 21-22% of GDP. • Gradual increase of domestic revenue share (excl. Oil rev.) to reach 60-63% of GDP by 2010. • SB expenditure to reach 26 - 27% of GDP, of which capex to reach 7 - 8%, recurrent 14-15%, debt services 4 - 4,5% of GDP.

7. State budget policy intentions and measures over 2006-2010 • Timely debt services shall be ensured • Recurrent expenditure: 52-54% of total State budget, with an increase of 10-11% per year (incl. Salary reform) • Education and vocational training share shall be over 20% of total SB expenditure, science and technology services 2.0%, environment 1%, increased expenditure for health, poverty reduction, salary reform. • SB deficit shall not exceed 3% (international practice). Deficit financing by domestic borrowing and concesssional foreign credit

8. State budget policy intentions and measures over 2006-2010 • State budget restructuring for socio-economic development and poverty reduction: • Revenue policies: liberate and unleash all resources in the society, focus on capital development to create productivity and new socio-economic infrastructure. • Revenue policies on the basis of reformed taxes, fees and charges relevant to a market economy, promoted international integration, equity and unity, consistency in 3 aspects: tax policies, tax administration, tax consulting services.

9. State budget policy intentions and measures over 2006-2010 • Link State budget re-distribution to socio-economic stratefic objectives in each phase, in medium and long term frameworks, in each sector. • State budget capital expenditure to growth higher than GDP growth over 2006-2010, together with Government bond issuance for transport & irrigation infrastructure development; SB capital expenditure to be 30% of total SB expenditure; accounted for 8.5-9% of GDP, 20-21% of gross investments in society. • Allocate sufficiently for State administration, national defence... Administrative reform... On the basis of the separation between Government administration, ownership, business administration of public services

10. State budget policy intentions and measures over 2006-2010 • State Budget used for social service development on the basis of clearly defined State’s role, prioritization... With determination to transfer non-State roles to other economic sectors. • Budget priority given to national program on poverty reduction, to have no hungry households, less than 15% poor households by 2010

11. State budget policy intentions and measures over 2006-2010 • State budget management reform to ensure State budget unity, dominant role of Central budget (60-65% of total SB revenues, increased decentralization and delegation linked with fiscal accountability. • By 2010, deficit fiscal policies to be maintained, to increase resources for capital development without negative impacts to the economy at present and in strategic term. • Restructuring of borrowings for deficit financing. Domestically, focusing on benchmarked long term and medium term bonds under relevant market rates, less on short term borrowings for long term investments. No commercial borrowings to finance deficits.