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City needs funding that matches its contributions to State budget

Update: August, 04/2015 - 09:57

Do Thien Anh Tuan, lecturer for the Fulbright Economics Teaching Programme, spoke to Tuoi Tre (Youth) newspaper about HCM City's desire for more investment from the central government.

Do you think Viet Nam's current national budget allocation incentivises localities to develop?

In the 2012 State budget, HCM City collected VND235 trillion (US$10.8 billion) in state revenue but was allowed to spend only VND53.6 trillion ($2.46 billion). Ha Noi collected VND176 trillion ($8 billion) in state revenue, but was allowed to spend VND77.5 trillion ($3.55 billion).

If we look at the ratio of collected revenues to spending budgets from all 63 cities and provinces nation-wide, we see that HCM City ranked 62nd.

In my opinion, HCM City's spending budget should be tallied according to the per cent of GDP that it contributes to the national budget.

A big problem in our country is that the State budget "cake" is shared between all 63 provinces and cities, of which 13 provinces and cities contribute revenues much bigger than their allowed spending budgets. In other words, they send a large portion of their collected revenues to the national coffer while the remaining 50 provinces and cities basically ask for supplementary allocation from the central government.

This feels paradoxical! For example, Dien Bien Province is expected to collect VND729 billion ($33.4 million) in revenue this year, and it plans to spend VND4.6 trillion ($211 million). That means their spending proposal is six times bigger than their collected revenue.

HCM City's yearly spending budget is equal to just 16 per cent of its collected revenue. I don't think the current budget allocation is appropriate. The operating principle must motivate all provinces and cities to develop!

Some people have argued that the State budget should focus more on HCM City and other southern economic regions, not only HCM City. Do you agree?

The current principle behind the current national budget allocation serves two objectives, fairness and effectiveness.

But, for me, I'm interested in how to make the country's "budget cake" bigger rather than how to cut it into more portions. It means that HCM City should be given a bigger budget than the sum it has been allocated in the past. This would help the city increase its growth rate at a much faster. In return, the budget "portion" that HCM will send back to the national budget will be bigger.

Do you think HCM City should continue to borrow money to invest in projects, even when their proposed annual budget is met by the central government?

HCM City has more advantages than most other cities in attracting investment from the private sector in infrastructure development like building roads or seaports.

In my opinion, HCM City's decision to borrow money will help ease the burden on the State budget. It will also make the city authorities, or project owners, more responsible and careful to use the money efficiently and effectively.

Of course, when the city borrows money to invest in infrastructure development, it needs the government to play the role of guarantor. I'm confident that HCM City knows how to use borrowed money wisely and effectively.

If HCM City receives more money from the State, what kinds of projects will the money go to?

The money would be invested in infrastructure development, both "hard" and "soft" infrastructure.

"Hard" is the obvious- roads, bridges, etc. "Soft" infrastructure is human capital and institutions that cultivate it, such as community colleges and universities. Apparently, the city has deficits in both areas.

But, in my opinion, the city will focus more on hard infrastructure. Of course, investment in science, technology and education will help the city become on par with other cities in the region. — VNS

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