Section 1
THE IMPLEMENTATION OF THE SOCIO-ECONOMIC DEVELOPMENT PLAN AND THE STATE BUDGET IN 2011
I. REVIEW OF THE IMPLEMENTATION OF THE 2011 SOCIO-ECONOMIC DEVELOPMENT PLAN
In the 8th Meeting of the National Assembly Session XII, the Resolution No. 51/2010/NQ12, dated 08 November 2010, for the approval of the 2011 socio-economic development plan was promulgated with the overall objective of “Increasing macroeconomic stability and controlling inflation in relation to reforming of the growth patterns and restructuring of the economy; with the aim to achieve the growth rate higher than that of 2010, to improve the quality, efficiency and competitiveness of the economy; to ensure social protection and social welfare, to improve people’s living standards; to maintain political stability; to continue strengthening national defense; to ensure social order, security and safety; to enhance the effectiveness of external affairs and international integration”.
In the implementation of the National Assembly Resolution, the Government issued at the beginning of the year its Resolution No. 02/NQ-CP, dated 09 January 2011 for the promulgation of the major actions for the governance and management of the implementation of the socio-economic development plan and the State budget in 2011.
However, the emerging socio-economic developments of the world and in the country triggered factors impairing macroeconomic instability in the first few months of 2011. All over the world, the world economic recovery was slowing down, and inflation was skyrocketing in a number of countries; the European public debt crisis was looming… The domestic economy had to endure the adverse external impacts on one hand, and to overcome the internal weaknesses in the other; the exchange rate, inflation and interest rates rallied, which all negatively impacted the productive and non-productive lives of people, particularly of the poor, and low income households. In such context, the Government promulgated Resolution No. 11/NQ-CP, dated 24 February 2011, delineating the general governance objectives in 2011 being to focus on reigning inflation, stabilizing macro economy, ensuring social protection, and introducing a number of measures, including the tightening of monetary and fiscal policies, promotion of productive operations, encouraging exports, controlling trade deficits, and ensuring social protection.
Under the guidance of the Party, the State, and the strong commitments of the whole political system, with the great efforts of all the sectors and governments at all levels, and the consensus of the business sector and all people, the Vietnam economy has gradually overcome the difficulties. The GDP growth is estimated to reach 5.89% (compared to 7 – 7.5% target in the plan), the export value is estimated to increase by 33.3% (compared to the 10% planning target)… the major balances are under control; industrial production and construction have been recovering; the service sector has maintained high growth rate; socio-political conditions have been stable, and the social safety net has been taken care of.
More specific review of the implementation of some socio-economic targets in 2011 is set out below:
That the macro economic instability, particularly reflected in the rising inflation, interest rates and exchange rates, in parallel with the tightening of the monetary and fiscal policies has actually impacted investments, production and commerce activities. Many enterprises and business households, while facing the difficulties, had to endure contraction or even had to terminate their production- commerce activities; the real estates market encountered stagnation, with real estates transactions slowed down since the middle of the year; the stock market plunged severely.
Facing the situation, and in the implementation of the National Assembly Resolution, the Government, while implementing its measures for macroeconomic stabilization, reigning inflation, also tried to resolve problems for production and commerce activities, and to promote exports. The Ministry of Finance made submission to the Government and the National Assembly requesting for tax exemption, reduction and tax postponement for certain enterprises, including mainly small and medium enterprises, business households and individuals…
Thanks to the effort, the economy is indicating positive signals. The consumption prices followed constant declining trend in the last half of the year; the 2011 consumption price index grew by about 18.13%. The borrowing and lending rates have become more relevant and followed a declining trend in the last months of the year. Measures for the stability of the foreign exchange market have contributed to stabilizing the exchange rates, improving the foreign exchange liquidity, strengening foreign reserves, and promoting exports. The annual export grew by 33.3%, which was 3 times higher the National Assembly’s approved target (at 10%). Higher export and controlled import (which increased by 24.7% compared to that in 2010), resulted in the trade deficit of 9.9% of the total export, which is lower than the planning target (of not higher than 18%), and is obviously decreased from that in 2010 (at 17.5%), which positively contributed to the improvement of the balance of payment and foreign exchange stability. Economic growth was also improved quarter by quarter, with GDP growth at 5.57% in the first quarter, 5.68% in the second quarter, 6.07% in the third quarter, and 6.10% in the fourth quater. It is estimated that the annual GDP growth reached 5.89%, of which agriculture, forestry and fishery output growth was 4.0%; industrial production and construction output growth was 5.53%, and service growth was 6.99%.
In the implementation of the policy of curbing State investment for inflation control, in addition to the investment slowing down in the business sector due to the difficult conditions and lower rates of return, the gross investment in the society declined solidly. The annual gross investment in the society is estimated to be 877.9 trillion dongs, equivalent to about 34.6% of GDP.
While tightening public expenditure, the State also managed to maintain all social security policies which are already allocated budget for, such as granting health insurance cards to the poor, children under 6, providing scholarship to boarding and semi-boarding ethnic minority students… ; and to provide extraordinary supports to the poor and low income groups; to provide power price subsidy for the poor; to provide guidelines for the use of 10% savings from recurrent expenditure for social protection; to use over 3,000 billion dongs from State budget contingency reserve to support provinces in the recovery from natural disasters and epidemics; to timely release nearly 65,000 tons of rice as emergency relief for people suffering from natural disasters and epidemics. Thank to these efforts, the poverty rate continued to decline by about 2%, and estimated 1.54 million jobs were created, with the urban unemployment rate being controlled at under 4%; essential health and education services were being provided to a majority of the population.
Although the economy is showing positive signs of recovery, a number of difficulties are prevailing. Inflation, while declining in the last half of the year, was still very high for the whole year; interest rates are not substantially reduced. The year-end demand for foreign currencies and foreign exchange pressure are significant; a number of enterprises still have difficulties. Jobs and livelihood for the poor, low income people are pressing issues.
II. REVIEW OF THE IMPLEMENTATION OF THE 2011 STATE BUDGET
1. Implementation of the State budget revenue mandates:
The balanced State budget revenue estimate for 2011 is 595,000 billion dongs; the estimated actual reached 674,500 billion dongs for the whole year, which is 13.4% higher than the budget, and 20.6% higher than the actual in 2010. The revenue from taxes and fees accounted for 20.3% of GDP.
Specific revenue outcomes are set out below:
a. Domestic revenues:
The originally budgeted revenue was 382,000 billion dongs, and the estimated actual reached 425.000 for the whole year, which is 11.3% higher than the budget, and increased by 19.9% from the actual in 2010. Excluding the revenues from land use right transfer (which was estimated to be 43,500 billion dongs, increased by 13,500 billion dongs from the budget), the estimated actual revenue increased by 8.4% from the budget, and 22% from the actual revenue in 2010.
All major revenues are estimated to reach and exceed the budgets. Of which, revenues from the State-owned economic entities exceeded the budget by 0.8%; revenues from non-State industrial and commercial entities was 10.6% higher than the budgeted target; revenues from foreign invested entities was 11.3% higher than the budget; and personal income tax was collected 28.6% higher than the budget… The sub-national governments basically collected their actual revenues at or higher than the assigned revenue targets.
In the condition of adverse economic development, the above achieved outcomes are attributed to the great efforts of line Ministries, agencies, sub-national governments and the business community in their implementation of the Resolutions of the National Assembly and the Government which defining major measures for inflation control, macroeconomic stability, and social protection. In addition, it is important to take into account the following impact factors: (i) the economic development momentum in the last months of 2010, which generated revenue sources to lap into the 2011 State budget cycle; (2) the inflating commodity and service consumption prices, particularly the increasing prices of agriculture, forestry and fishery products, as well as the USD/VND exchange rate movement, which all contributed to the increase of the State budget revenues; (3) the robust implementation of revenue administration activities, with the strengthening of tax declaration, inspection and tax audits, for timely collection of the State budget revenues, in accordance with the conclusions of the tax inspectors and tax auditors,...
In order to resolve difficulties in productive and commercial activities, and to create favorable conditions for enterprises to maintain their productive activities and to stabilize the livelihood of salary earners, the Government since April 2011 has extended the payments of corporate income tax for one year for small and medium enterprises, labor intensive enterprises, manufacturing and processing of agricultural, forestry, fishery products, garment, textile, shoes, electronic parts, and engaging in socio-economic infrastructure construction and other enterprises in important industries, in order to assist these enterprises with the additional finance for development; it is estimated that about 303.2 thousand enterprises fell in the coverage of tax credit extension, with the total value of tax credit extension from 2011 to 2012 of 6.900 billion dongs. Moreover, the Government also submitted to the National Assembly, requesting for 30% reduction of corporate income tax for small and medium enterprises, labor intensive enterprises in some special industries; and for 50% reduction of lump sum value added tax; reduction of corporate income tax and personal income taxes for individuals, business households and organizations being tenants of rental houses and rooms, food catering; exemption of personal income tax for securities transfers… Accordingly, it is estimated that the total exempted and reduced taxes reached 4.200 billion dongs in 2011.
b. Revenue from crude oil:
The originally budgeted revenue was 69,300 billion dongs, with the estimated crude oil sales of 14.02 million tons, and the estimated price of 77 USD/ barrel.
In view of the actual implementation in the year: Regarding oil price, though current world oil price continued to be volatile, the average annual export oil price of Vietnam could reach 102 USD/ barrel, which is 25 USD/ barrel higher than the budget target; Regarding sales, the annual sales is estimated to be 14.13 million tons, which is 0.11 tons higher than the planning target. With the estimated actual crude oil sales and price, the estimated actual revenue from crude oil in 2011 could be 100,000 billion dongs, which is 30,700 billion dongs higher than the original budget, and 44.6% higher than the actual in 2010.
c. Balanced budget revenue from imports and exports:
The balanced budgeted revenue was 138,700 billion dongs, with the total revenue from exports and imports budgeted at 180,700 billion dongs, and value added tax refund according to the regulations at 42,000 billion dongs.
Based on estimated import - export values in 2011, it is estimated that the total budget revenues from imports and exports could be 205,000 billion dong for the year, which is 13.4% higher than the budget. Deducting the value added tax refund of 61,000 billion dongs, the balanced budgeted revenue from exports and imports in 2011 reached 144.000 billion dongs, which is 3.8% higher than the original budget.
The achieved revenue from imports and imports was mainly due to the world price increases and the exchange rate adjustments, resulting in the increasing prices of the taxable imported commodities. In addition, a number of revenue policies in the area of export and import are being implemented for macro economic stability and inflation control, for example, by increasing the tax rates for preferential import duties of 6 commodities not preferred to import (i.e. pure tobacco or tobacco products, powder tobacco, metal bath tubs…), by allowing to import spirits, cosmetics, mobile phones through only 03 international seaports in Hai Phong, Da Nang, Ho Chi Minh City, in order to protect the interests and health of consumers, to prevent the import of fake products, low quality products and to fight against trade frauds; by increasing the tax rates for the exports of metal ore, refined metal ore, timber and wood products,… in order to limit the exporting of crude natural resources… The Customs Departments continued to review, amend, and conduct administrative reforms in the area of export and import revenue administration, creating favorable conditions for enterprises, and strengthening anti-smuggling, and trade fraud prevention. These are the factors that contribute to the increase in State budget revenue.
d. Revenue from aid:
With the original budget of 5,000 billion, the estimated actual is 5,500 billion for the whole year, which is 10% higher than the budget.
2. Implementation of the State budget expenditure:
2.1. In the implementation of the Party and National Assembly Resolutions, the Government focused on managing the 2011 State budget in the principle of managing to fulfill the expenditure mandates as approved by the National Assembly and Sub-national People’s Councils. The Government requested Ministries, agencies and sub-national governments to proactively reallocate within the assigned budget for the handling of emerging in-year mandates, with exception of the implementation of the newly promulgated policies and entitlements or for the recovery and rehabilitation from natural disasters and epidemics. Sub-national governments were required to increase their budget revenues, and make sufficient contingent reserve for coping with natural disasters, epidemics and to meet other urgent requirements in social protection, national defense, social order and security… in the provinces.
In their implementation of the State budget expenditure, Ministries, agencies and sub-national governments strictly complied with the mandates of strict control of public investment, savings of recurrent expenditures, strengthening of expenditure control in order to improve the efficiency of State budget use; as required, they were also reviewed and reallocated 9.452 billion dongs of capital investment from the State budget, Government bond finance and lottery finance for the acceleration of urgent and important projects to be completed in 2011. Thanks to the review and reallocation, the number of completed project in 2011 increased by 1.053 projects. In addition, Ministries, agencies and sub-national governments also made a savings of 10% of recurrent expenditure in the remaining 9 months of the 2011 budget, which amounted up to 3,857.7 billion dongs for spending in social protection.
The excess revenue of the central budget, according to the State Budget Law, Resolution of the National Assembly, and the actual implementation in 2011 as well as the 2012 State budget allocation requirements, after being used as rewards for sub-national governments collected excess revenue, as reimbursements for sub-national governments with balanced budget short-falls due to objective reasons (if any) and as re-investment for sub-national governments according to applicable policies, and as expenditure increases as decided by increasing conditioned aid, the Government propose to the National Assembly a request to use the remaining excess revenue for (i) reducing State budget deficit, (2) increasing debt services, (3) carrying forward for 2012 State budget balance.
Regarding the excess revenue of the sub-national governments, in accordance with the State Budget Law and the National Assembly Resolution, the excess revenue from land use right transfer (about 13,500 billion dongs) can be used by the sub-national governments to increase contribution to the Housing and Land Development Fund and to invest in key socio-economic infrastructure projects; of the remaining excess revenues, i.e. excess revenue excluding land use right transfer (about 12,000 billion dongs), 50% shall be set aside by the sub-national governments to support salary reform, the remaining can be used to meet urgent mandates in the prevention and mitigation of natural disasters, epidemics, social protection, national defense and local social order. In the management, the sub-national governments are required to proactively arrange to carry forward for the 2012 State budget balancing, not to use immediately in 2011 in the effort to control inflation.
2.2. Based on the 2011 State budget expenditure, in combination with the plans for the allocation of the contingency reserve and the excess revenues in 2011 mentioned above, it is estimated that the total actual State budget expenditure in 2011 to be 796,000 billion dongs, an increase of 9.7% compared to the original budget and 18.6% above the actual expenditure in 2010. The specific outcomes in some major expenditure categories are set out below:
a) Capital development expenditure: The original expenditure budget was 152,000 billion dongs.
The actual expenditure for the whole year, estimated on the basis of the original budget at the beginning of the year, plus the additional finance from the allocation of contingency reserve and excess revenue of the State budget, reached 175,000 billion dongs, which was an increase of 15.1% from the original budget, 9% higher than the actual in 2010, and was accounted for 22% of the total State budget expenditure. The excess expenditure from the original budget was used for key and urgent projects that could be completed and put into use in 2011 – 2012, other projects for the urgent upgrading and repairing of eroding dykes and river banks, natural disaster mitigation, and to replenish the national inventory reserves to ensure food security...
Compiling the investment expenditure financed from the State budget, Government bonds, and lottery revenues, the total budgetary capital development expenditure was estimated to be 233,000 billion dongs, which was equivalent to 27.3% of the total State budget expenditure, and was accounted for 9.3% of GDP. The State budget capital finance, combined with the domestic and foreign investment finance, amounted the gross capital development expenditure finance in 2011 to 34.5% of GDP, which altogether contributed to building new capacity for the economy.
However, there were a number of shortcomings in the management of the development finances in 2011, i.e. slow progress of implementation against the requirements; fund allocation for projects not following due procedures; fund allocation not complying with the funding structure and the assigned support programs; some central and sub-national agencies and units being reluctant and unwilling to cut public expenditure or starting new projects against the applicable policies...
b) Debt service and aid expenditure:
The original budget was 86,000 billion dongs, the estimated actual was 101,000 billion dongs for the whole year, which was an increase of 17.4% from the original budget, and increased by 25.9% from the actual in 2010, to ensure timely payments of the committed debt services and the implementation of the State’s external relations.
The excess expenditure (15,000 billion dongs) was used for external debt services due to the exchange rate adjustment and to increase principal payments of short-term debts in order to reduce the debt service burden in the following years.
c) Recurrent expenditure (including expenditure for salary reform):
The original budget was 469,100 billion dongs. With the allocation of the contingency reserve and of the the excess revenue in 2011 for recurrent expenditure, mainly to mitigate natural disasters, epidemics, and to improve social safety net, it is estimated that the actual recurrent expenditure in the year was 491,500 billion dongs, which was an increase of 4.8% from the original budget, and an increase of 17.5% from that in 2010.
In its management, the Government focused finance for the implementation of social protection policies as a key mandate in 2011. In addition to the original budget allocation to social protection policies at the beginning of the year and the increases of salaries, pensions and social benefits based on adjustment of salary base to 830,000 dongs per month as from 01 May 2011, the Government also initiated the implementation of a number of new policies such as providing supplementary allowances for low income civil servants, government officers and employees, the arm forces, low income pension earners, nationally merited people, poor households; and power price support for poor households; increasing the student credit limit from 900,000 dongs/head/month to 1,000,000 dongs/head/month...
3. State budget balance:
The 2011 State budget deficit determined by the National Assembly was at 120,600 billion dongs, equivalent to 5.3% of GDP. Based on the estimation of actual revenue and expenditure and the plan for the use of the excess revenues as reported above, the estimated actual of the State budget deficit in 2011 is to be reduced to 4.9% of GDP. The absolute budget deficit is 111,500 billion dongs, which is 9,100 billion dongs lower than the target set by the National Assembly.
It is estimated that by the end of 2011, the public debt stock is outstanding at 54.6% of GDP, the Government debt outstanding is 43.6% of GDP, and the national debt is at 41.5% of GDP, which are all within the thresholds of national financial security.
General review: The execution of the State budget – financial mandates in 2011 was undertaken in the context of implementing the Resolutions of the National Assembly and the Government for inflation control, macroeconomic stability and social protection, a number of public financial measures were drastically, consistently and timely implemented. The fiscal policy was strictly implemented to control inflation, stabilize the macroeconomic conditions, ensure social protection, and to resolve problems for productive and commercial activities, as well as to encourage exports. The outcomes are positive, with budget revenues collected at or exceeding the targets; budgetary expenditures strictly managed for good implementation of key political mandates and for the strengthening of the social safety net; the State budget deficit lowered than the targeted budget; which all contributed to reign inflation, stabilize macroeconomic, maintain a relevant rate of growth, ensure social order, and strengthen the confidence of the society in the leadership of the Party and the Government.
In the first 5 month, the CPI reached 12.07%, which is much higher than the planning target of 7%. However, since June, the CPI growth already slowed down (the month on month CPI growth in November and December was only 0.39% and 0.53% respectively). The CPI in December 2011 increased by 18.13% from December 2010
At the level of 250,000 dongs per head for target groups having low salary and low social insurance benefits; and entitled benefits for the nationally merited groups; at the level of 250,000 dongs per households for poor households according to the new poverty standards.
At the level of 30,000 dongs/household/month.
About 900 billion dongs in central Ministries, agencies; and 2,957.7 billions in sub-national governments
Most are the excess revenue from land use fee compared to the budget estimates of the sub-national governments according to applicable regulations.
For example: the policy of free health care for children under 6, the purchase of health insurance policies for the poor, and the near poor; provision of scholarship to boarding and semi-boarding ethnic minority students; the policy of social support for social insurance beneficiaries, and revolutionary merited people; the credit policy for exported laborers; credit schemes for households of ethnic minority groups living in extreme difficulties, poor households in the Mekong river delta; ...
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