Fundamental changes have been taking place in the way government manages its public finance. The introduction of the State budget Laws in 1996 and 2002 further elaborated the changes in this field. These laws empowered members of National Assembly to be responsible for approval of the budget, including allocation to the lower government levels. The Laws also stipulated the budgeting process, in which they gave more time for making budget plans and completely distributing expenditures before the budget year starts, towards more transparency, accountability, and equality.
In this reform of budgeting process, allocation norms for distributing state budget capital expenditures from the central to lower budget levels were developed. All allocation norms are divided into five groups, which cover many aspects such as population, levels of development, natural geographic areas, the number of district administrative units, and additional indicators (Decision 210/2006/QD-TTg, 2006). These allocations were used for allocating capital expenditure from the central to provincial budgets during the budgetary stability period of 2007-2010.
For the budgetary stability period of 2011-2015, allocation norms are basically similar to those stipulated in the Decision 210/2006/QD-TTg with some minor changes. For example, arable land area of rice is added into natural geographic areas; indicators for city type 1, 2, and 3 and provinces and cities belonged to dynamic economic development or center of regions and sub-regions were also added to the allocation norms. These changes in allocation norms are believed to have significant impacts on allocation of capital expenditures from the central to provincial budgets.
They have improved transparency, equality, and predictability of the budgeting process as well as in allocation of capital expenditures from the central to provincial budgets. The analysis results of the budgetary stability period of 2007-2010 suggest that the capital expenditures are unfavorably distributed to more advanced provinces, and seem to be supportive to more disadvantage provinces and regions. At the provincial level, evidence also shows that new allocation norms used to distribute capital expenditures from the central to provincial budgets are pro-poor. In the budgetary stability period of 2011-2015, newly added allocation norms do not support advanced developed provinces and regions, and they are not strongly favorable to the most disadvantage provinces.
Besides, there are changes in insights of allocation norms such as change in the way of identifying provincial poverty rate (shifting from MOLISA to GSO provincial poverty rates) and change in the poverty line (starting in late 2010). The analysis results suggest that, for the budgetary stability period of 2007-2010, the GSO provincial poverty rate would be more pro-poor than MOLISA counterpart. For the budgetary stability period of 20011-2015, in the other case, analysis results show that the new poverty line seems to be unsupportive to the disadvantage provinces and regions. They also imply that, however, the “new poverty line” poverty is unfavorable to the poor provinces than using GSO poverty rates. Using GSO provincial poverty rate as a budget allocation norm, therefore, is more pro-poor.
Resources available to the NTPs and specific goals-oriented programs are an important supplement to capital expenditure allocated from the central to provincial state budgets. This amount of capital has contributed to sustain objectives of the specific programs, support disadvantage areas over the country on catching up, promote economic development, and improve living standard of population. Changes in allocation norms and in insight poverty identification as well as new poverty rates have certain impacts on resources available to the NTPs and other specific goals-oriented programs. Evidence shows that both GSO and MOLISA provincial poverty rates are positively associated with amount of capital allocated to the programs, but GSO provincial poverty rate seems to be more pro-poor than using MOLISA one.
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