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69428

REPORT ON

ASSESSING FISCAL IMPLICATION OF THE RECENT CHANGES IN POVERTY LINES AND REVISION OF ALLOCATION NORMS OF CAPITAL EXPENDITURES AND RESOURCES FOR TARGETED PROGRAMS
Submitted to
The Poverty Reduction and Economic Management Group

THE WORLD BANK

Hanoi, June 2011

ABBREVIATIONS

GSO General Statistics Office

MOF Ministry of Finance

MOLISA Ministry of Labor, Invalid, and Social Affairs

MPI Ministry of Planning and Investment

MTEF Medium-Term expenditure Frameworks

NTP National Targeted Program

ACKNOWLEDGEMENT

This study was carried out by an independent consultant Ms. Hoang Thi Thuy Nguyet. The consultant would like to thank the National Assembly officials from National assembly Standing Committee, the Finance and Budget Committee of National Assembly, government officials from Ministry of finance, Ministry of Planning and Investment and others who provided their time and views and shared important documents to consultant, as well as the staff of the World Bank in Hanoi, particularly Mr. Doan Hong Quang for valuable comments on earlier drafts.

The views presented in the study are the author alone and should not be attributed to the World Bank or any other organizations.

TABLE OF CONTENTS





ABBREVIATIONS ii

ii


ACKNOWLEDGEMENT iii

TABLE OF CONTENTS iv

LIST OF TABLES v

LIST OF FIGURES vi

LIST OF ANNEXES vii

EXECUTIVE SUMMARY 1

1. INTRODUCTION 3

1.1. Background of the research 3

1.2. Objectives of the research 4

1.3. Research approach 5

1.4. Literature reviews 7

2. BUDGETING PROCESS 10

2.1. Budgeting process before the introduction of State Budget Law 2002 10

2.1.1. General budgeting procedure regulated by state budget law 1996 11

2.1.2. Activities and timeline of budgeting process in State Budget Law 1996 12

2.2. The current budgeting process 15

2.2.1. General budgeting procedure regulated in the state budget law 2002 15

2.2.2. Budgeting procedure regulated in State Budget Law 2006 16

2.3. New changes in current system 18

2.3.1. Changes in budgeting procedure 18

2.3.2. Changes in allocation norms 20

2.4. Shortcomings of the State budget law 2002 22

3. ASSESSMENTS ON ALLOCATION OF CAPITAL EXPENDITURES 24

3.1. Assessment on changes in capital expenditures allocation norms 24

3.2. Assessment on change in poverty identification 32

3.3. Assessment on changes in poverty line 40

4. ASSESSMENTS ON RESOURCES FOR THE NATIONAL TARGETED PROGRAMS 44

4.1. National targeted program snapshot 44

4.2. Resources for the National Targeted Programs 50

5. CONCLUSIONS 56

PREFERENCES 58

ANNEXES 59


LIST OF TABLES





Table 1: Main activities and timeline of budgeting process stipulated in the state budget law 1996 12

Table 2: Main activities and timeline of budgeting process stipulated in the state budget law 2002 16

Table 3: Structure of budget expenditures in 2006 and 2007 25

Table 4: Change in capital expenditures from central to provincial budgets if changing in the allocation norms between 2006 and 2007 by regions 26

Table 5: Provincial growth rates and shares of capital expenditures using new allocation norms between 2006 and 2007 27

Table 6: Change in capital expenditures distributed from central to provincial budgets if changing in the allocation norms between 2010 and 2011 by regions 29

Table 7: Provincial capital expenditures growth rates and share changes due to new allocation norms applied for 2011-2015 30

Table 8: Regression results of difference in per capita capital expenditures on provincial poverty rates, 2006-2007 35

Table 9: Regression results of differences in per capita capital expenditures allocated to province on provincial poverty rates, 2010-2011 36

Table 10: Regression results of provincial shares of capital expenditures on poverty rates for 2006-2007 39

Table 11: Regression results of capital expenditure share allocated to province on provincial poverty rates for 2010-2011 39

Table 12: Scores of poverty for capital expenditure allocation of central to provincial state budgets during 2011-2015 due to a change in poverty line 41

Table 13: Regression results between differences in per capita capital expenditures allocated to province on provincial poverty rates, 2010-2011 41

Table 14: Regression results between provincial shares of capital expenditures and poverty rates when poverty line changed 42

Table 15: Capital allocation to the national targeted programs during 2007-2010 51

Table 16: Change in capital allocation to NTPs due to change in the allocation norms and criteria between 2006 and 2007 by regions 52

Table 17: Regression results between capital allocation to the NTPs and provincial poverty rate, 2006-2007 55

LIST OF FIGURES





Figure 1: The approach of the research assignment 7

Figure 2: Planning and budgeting system in the State Budget Laws 11

Figure 3: GSO provincial poverty rates and difference in per capita capital expenditure between 2006 and 2007 33

Figure 4: MOLISA provincial poverty rates and difference in per capita capital expenditure between 2006 and 2007 34

Figure 5: MOLISA provincial poverty rates and changes in shares of capital expenditures during the budgetary stability period 2011-2015 37

Figure 6: GSO provincial poverty rates and changes in share of capital expenditures during the budgetary stability period 2007-2010 38

Figure 7: MOLISA provincial poverty rate and capital allocation to the NTPs in 2007 53

Figure 8: GSO provincial poverty rate and capital allocation to the NTPs in 2007 54





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