Public investment disbursement pressure huge: finance minister

The pressure on public investment disbursement in 2023 will be huge as a record state budget of over VND726,684 billion ($30.77 billion) has been allocated by the National Assembly, the country's legislative body, says Finance Minister Ho Duc Phoc.

State budget revenue in the year to December 15 reached VND1,692 trillion ($71.63 billion), surpassing the estimate by 19.8%. What were the major factors that made up such a success?

As of December 15, state budget revenue had reached VND1,692 trillion, VND77.8 trillion ($3.3 billion) higher than the estimated figure for the whole year. Of this, domestic revenue exceeded 13.4% of the estimate while respective figures from import-export activities and crude oil were 39.8% and 159.6%.

Firstly, the achievement was attributed to the synchronous, drastic and effective implementation of anti-pandemic solutions as well as fiscal and monetary policies to support the socio-economic development and recovery program, control inflation and remove difficulties for businesses and people. Production and business activities have gradually regained their growth momentum in the new normal.

Implementing the socio-economic development and recovery program, by December 15, land rent, fees and charges worth VND193.4 trillion ($8.15 billion) had been exempted, decreased, or seen payment timelines extended. Despite revenue reduction, the implementation of these policies had helped to maintain and expand production and business, and boost the demand for goods and services, thus increasing budget revenue.

In the first months of the year, a number of areas saw good revenue growth. For example, by the end of April, personal income tax revenue had increased by 19.8% year-on-year, mainly from the 2021 transfers of real estate and securities; and land use fee collection rose by 21.2% thanks to strong growth in the real estate market.

Secondly, Vietnam’s total import and export turnover of $700 billion and the increase in prices of petroleum products (crude oil up 57% and finished oil products 116%) helped increase budget revenue.

Thirdly, as of December 15, the tax authorities had proposed financial settlements of VND63.36 trillion ($2.68 billion), with VND14.87 trillion to be paid to the state budget. At the same time, they hastened the recovery and handling of 11-month tax arrears estimated at VND29.4 trillion.

Customs agencies proposed financial settlements of VND6.4 trillion ($270.78 million), with VND6.28 trillion going to the state budget, as well as administrative fines of VND137.3 billion ($5.8 million).

Notably, in 2022, the cross-border e-portal was put into operation, enabling 42 foreign suppliers to declare and pay taxes, with a total amount of VND3.44 trillion ($145.6 million). Revenue from real estate transfers is estimated to reach more than VND41 trillion ($1.73 billion) in 2022, an increase of about 97% year-on-year.

State budget revenue exceeded the estimate, but investment and development spending was very slow, hitting VND338.3 trillion ($14.31 billion) in the first 11 months of 2022, equivalent to 64.3% of the plan and down 0.6% year-on-year. What are the reasons for this situation?

In 2022, Vietnam was still strongly affected by the Covid-19 pandemic, along with external fluctuations, prompting hikes in the prices of raw materials, fuel, materials, and international freight rates. The mobilization of foreign experts, managers and contractors, as well as imported machinery and equipment to serve public investment projects, especially those using official development assistance (ODA) and foreign concessional loans, faced huge difficulties.

Subjectively, some legal provisions were not synchronized, uniform or feasible, failing to meet practical requirements and leading to confusion. Coordination between ministries and central agencies as well as between central and local governments in handling public investment problems remained ineffective. Many problems have existed for a long time but have yet to be resolved such as site clearance work.

Some ministries, central agencies and localities have not followed the principles and criteria specified in the Law on Public Investment, the National Assembly's resolutions, and the Prime Minister's decisions, leading to adjustments of allocation plans.

The state budget investment plan for 2023 was approved by the National Assembly with a record VND726.68 trillion ($30.83 billion). The Prime Minister also issued a decision on adopting the state budget investment plan for 2023. Therefore, the disbursement pressure next year is very high.

What needs to be done to accelerate public investment?

Ministries and central agencies need to urgently implement the government's resolutions and the Prime Minister's directives on this matter.

The Ministry of Finance, in order to simplify procedures, has shortened the spending control time at payment makers to only 1-3 working days. At the same time, it has also directed the State Treasury to promote the delivery and receipt of documents via online public services in order to save time and travel costs for investors, as well as publicize the processing of applications at payment control agencies.

After the success of 2022, what is your prediction on state budget collection in 2023?

Since the third quarter of 2022, the economy has faced difficulties due to unpredictable changes in the global situation and complicated developments of the Russia-Ukraine geopolitical conflict. The energy crisis has been getting worse, leading to crises among other commodity markets. Major countries have applied tight monetary policies with interest rate hikes, posing risks to the financial and monetary markets.

Domestically, inflationary pressure is on the rise while there are still many bottlenecks in the capital market, real estate, securities markets, and in disbursement of public investment capital. Pressures on interest rates, exchange rates and inflation have pushed input costs up and slowed down consumption due to a lack of new orders. Export markets have declined due to shrinking consumer demand in many countries. These problems will put great pressure on the implementation of state budget collection in 2023.

To solve the above difficulties, the financial sector has put forth a number of solutions.

Firstly, continue to promote effective implementation of fiscal and monetary solutions stated in the National Assembly and government resolutions.

Secondly, amend and supplement tax-related laws according to the Strategy on Tax System Reform to 2030; and continue to implement measures to support businesses and people so they have more resources to cope with difficulties and challenges in the coming time.

Thirdly, proactively review spending needs and restructure state budget expenditures; arrange expenditures in order of priority and apply tight, thrifty and efficient management of state budget expenditures.

Fourthly, continue to improve the legal system on price management; apply flexible management of prices on the basis of market supply and demand forecasts, and strengthen inspection and supervision of market prices, especially for energy, building materials, and steel.

Fifthly, take necessary measures to stabilize and develop an open, transparent, safe and sustainable capital market in order to unleash medium- and long-term capital sources for investment and development, focusing on perfecting legal and institutional frameworks, and strengthening communications to build investor confidence.