Tuesday, 21/11/2017
Outstanding results of Vietnam’s financial sector in 2016 and solutions for 2017 to contribute to macroeconomic stability
5/5/2017 10:11' Send Print
Finance Minister Dinh Tien Dung. Photo: VNA

Key achievements of the financial sector in 2016

In 2016, the Ministry of Finance set up and well implemented the sectoral development plans to achieve objectives and orientations set forth in resolutions of the Party and the National Assembly such as the Five-year Socio-economic Development Plan for 2016-2020 and major lines and policies to further renew the growth model, raise the quality of growth, labor productivity and competitiveness of the economy; lines and measures to restructure the state budget and public debt management to ensure a secure and sustainable national finance; the Plan on Economic Restructuring for 2016-2020; The Five-Year National Financial Plan for 2016-2020; the Socio-economic Development Plan and State Budget Estimates in 2016 and the Government's resolutions on promulgation of action programs to implement the Party and National Assembly’s resolutions. As a result, there were positive changes in the realization of objectives and tasks of the financial sector in the past year as follows:

First, the institutional and legal system on finance and state budget was increasingly improved, facilitating business environment, business development, enhancing national competitiveness and efficiency in social resource mobilization, allocation and use in general and the state budget in particular.

In 2016, the Ministry of Finance led the drafting of three laws, five resolutions of the National Assembly and the Standing Committee of the National Assembly, including the Law on Amendments and Supplements to a Number of Articles of the Law on Value Added Tax, the Law on Special Consumption Tax; the Law on Tax Management; the Law on Export and Import Taxes; the Resolution on Amendments and Supplements to a number of articles of the Resolution No. 55/2010/QH12 of 24 November 2010 of the 12th National Assembly "On agricultural land use tax exemption and reduction,” contributing to removing obstacles for people and businesses, while helping reform tax and customs procedures. In addition, the Ministry of Finance also led and coordinated with relevant ministries and agencies to develop more than 50 decrees, and decisions of the Government and the Prime Minister, and issued more than 300 other circulars under its authority.

In particular, the Ministry of Finance submitted to the Government’s Party Caucus for submission to the Party Politburo for issuance of Resolution No. 07-NQ/TW of 18 November 2016, "On lines and solutions to restructure the state budget and manage public debt to ensure a safe and sustainable national finance." This resolution is extremely important as in recent years the state budget balance faced with many difficulties, requiring radical and comprehensive restructuring and management of public debt.

Second, fiscal policy was actively, stringently and economically implemented; financial discipline strengthened; and public investment successfully restructured.

Based on the early identification and assessment of difficulties and challenges caused by the sharp fall of crude oil prices and unfavorable factors of joining FTAs at the beginning of the year, the Ministry of Finance took initiative to develop scenarios for managing the state budget, submitted to the Prime Minister for promulgation Decree No. 22/CT-TTg of 3 June 2016 "On strengthening the direction and administration of the financial and state budget tasks in 2016," which required overfulfilling of State budget revenues, strict management of expenditure, thrift and efficiency, balance of state budgets at all levels and State budget deficit within the National Assembly's draft estimates.

In its execution, the Ministry reviewed and submitted to competent authorities to amend, supplement and promulgate new policies on finance, taxation, and fees in line with reality and international integration commitments. It drastically directed the tax and fee collection to avoid tax and fee losses according to the spirit of proper collection, full collection and timely collection. Accordingly, the tax office inspected nearly 82,000 enterprises and collected more than VNĐ14.5 trillion to the state budget and more than VNĐ42 trillion as tax debt. Customs offices conducted 9,300 clearance inspections, and collected VNĐ3.3 trillion to the state budget, captured and handled nearly 15,400 smuggling cases, and seized VNĐ166 trillion. As a result, as of 31 December 2016, State budget revenue reached VNĐ1.094 trillion, VNĐ79,600 trillion or 7.8% more than estimates. The central budget balance was guaranteed.

The Ministry of Finance tightened control over State budget expenditure. Ministries, branches and localities strictly implemented solutions on expenditure within estimates, in accordance with prescribed regimes, standards and cost norms to prevent loss, waste and corruption. Financial agencies strengthened the inspection and examination of the use of budget allocation in some ministries and localities, a number of investment projects with state capital and strengthen the control of expenditure by the State Treasury. Thus, financial discipline was strengthened and state budget was effectively used. Important and urgent tasks were implemented in time and adequately and balance of the central budget and local budgets at all levels were ensured. State budget overspending was within the estimates approved by the National Assembly. In particular, implementing Decision No. 32/2015/QD-TTg on 4 August 2015 of the Prime Minister "On Regulations on norms and regimes of management and use of cars in State-owned entities, public service units, one-member limited liability companies with 100% charter capital owned by the State," the Ministry of Finance took lead in issuing Decision 1997/QD-BTC of 16 September 2016 "On Regulation on financing car use" of vice ministers and General Directors of Departments of the ministry from their houses to offices from 1 October, 2016. This regulation is aimed at realizing modern administration, reducing administrative costs (gasoline, drivers, maintenance and replacement of new cars) while reducing the number of transport means. On that basis, in 2017, it will expand the regime of financing car use for others who are entitled to use offices’ cars for office business.

Regarding the restructuring of public investment, the Ministry of Finance was proactively engaged with ministries and branches on medium-term public investment plans in line with the finance-State budget plan for 2016-2020, submitted to the Prime Minister solutions to remove difficulties and obstacles in the implementation of the Law on Public Investment and the Law on Construction, coordinated with ministries, branches and localities in implementing tasks and solutions set forth in the Government's Resolution No. 60/NQ-CP of 8 July 2016 “On main tasks and solutions to accelerate the implementation and disbursement of public investment plan for 2015." At the same time, the Ministry intensified inspection and control of expenditures, ensuring the efficient use of State budget, government bonds, official development assistance (ODA) and State investment credit.

Regarding the autonomy mechanism of public service agencies, the Ministry of Finance submitted to the Government for promulgation the Decree No. 141/2016/ND-CP of 10 October 2016, “On Regulation on autonomy mechanism of public service units in economy and other services," urged ministries, branches and localities to carry out their assigned tasks according to Government Decree No. 16/2015/ND-CP of 14 February 2015 “On Regulations on mechanism of autonomy of public service agencies,” and the Prime Minister Decision No. 695/2015/QD-TTg of 21 May 2015, “On Promulgating the plan for the implementation of Government Decree No. 16/2015/ND-CP of 14 February 2015." At the same time, the Ministry continued coordinating with ministries, branches and localities in building and managing economic and technical norms for public service delivery, piloted full autonomy of some universities, piloted equitization of some public agencies, promoted socialization, created maximum conditions for units to bring into play their autonomy in finance, personnel and operation, and at the same time, the State has created better conditions for structuring the state budget and reserving resources for priority areas.

Third, capital mobilization was stepped up, public debt management was strengthened, and efficiency of loan use was improved.

Regarding mobilization of capital, based on the plan of borrowing and debt payment in 2016 approved by the Prime Minister, the Ministry of Finance proactively and actively implemented capital mobilization solutions. Almost VNĐ 300 trillion as government bonds were issued to the market, mobilizing VNĐ55 trillion from Vietnam Social Insurance, disbursing ODA loans and preferential loans of US$1.9 billion, timely supplying resources for budget expenditure according to estimates and investment in programs and projects.

Regarding the management of public debts and national debts, The Ministry ensured full and timely payment of debts within estimates, regularly monitored and assessed the safety of public debts, and government debts, strengthened the management and supervision of government debts as well as debts of local administrations, and ensured that by the end of 2016, public debts, government debts were kept within limits.

In particular, the restructuring of domestic debts was accelerated, focusing on the issuance of government bonds. Accordingly, 91% of the total issuance volume had maturities of 5 years or more, exceeding the set requirements (according to a Resolution of the National Assembly the minimum percentage was 70%); the average maturity of bonds was 8.71 years (1.82 years higher than 2015), raising the average maturity of the government bond portfolio by the end of 2016 to 5.71 years, 3 times higher than 2011 and two times higher compared with 2013; average interest rate of bonds in 2016 was 6.49% per year, down sharply compared to previous years. At the same time, the Ministry successfully carried out the swap of government bonds with less than 5 years of their term to restructure the debt portfolio.

Fourth, the financial market and financial services developed steadily; the process of restructuring the securities market, insurance and arrangement, renewal and equitization of State-owned enterprises continued synchronously.

On the stock market, the Ministry of Finance concentrated on implementing measures to improve the liquidity of the market, actively researched new products, especially the improvement of the legal framework and technological infrastructure to issue derivative security and covered warrants in 2017. By the end of 2016, the stock market increased by 54% compared to the end of 2015 and reached 43.3% of GDP; bond market outstanding reached 35.2% of GDP; liquidity was improved.

In the insurance market, the legal system was also improved to gradually create a favorable legal corridor for healthy and sustainable development of the market, meeting international integration commitments, strengthened the management capacity and operation of enterprises, and expanded insurance products and services. The supervision and improvement of the insurance companies’ financial capacity was strengthened. The total premium revenue was estimated to increase to 22.7% higher than 2015 with VNĐ186.57 trillion investment back into the economy, up by 16.5% and insurance payment VNĐ25.87 trillion.

Regarding restructuring of State-owned enterprises, continue to develop and finalize schemes and policies on arrangement, and renewal of management and improvement of State-owned enterprises. At the same time, economic groups and state-owned corporations were actively coordinated and urged to urgently implement these schemes and policies. In 2016, 56 enterprises received approvals of competent authorities of their equitization plans with a total actual value of VNĐ34 trillion (the state capital accounted for VNĐ24.39 trillion). Groups, corporations, and the State Capital Investment Corporation (SCIC) withdrew over VNĐ5.1 trillion, earning VNĐ18.83 trillion.

Fifth, reform of administrative procedures was accelerated, business environment was improved thus contributing to enhance national competitiveness, at the same time strengthen market management, price, and inflation control.

The Ministry of Finance issued a program of action to implement Government Resolution No. 19-2016/NQ-CP of 28 April 2016 "On major tasks and solutions to improve business environment, and enhance national competitiveness for 2016-2017, towards 2020" with 73 specific solutions detailing 118 outputs (focusing on taxation, and customs). As a result, in 2016, 75 out of 118 tasks were completed (accounting for 100% of the plan). The Ministry submitted to the Government for issuance of a resolution on the simplification of administrative procedures and citizen documents under its management. It also issued 16 decisions to standardize 908 administrative procedures and updated them to the national database on administrative procedures, conducted impact assessment of 128 administrative procedures in 31 draft legal documents. Exerting great efforts and high determination in implementing administrative reform, by the end of 2016, the Ministry reduced 22.1% of the total procedures, exceeding the set requirements (minimum reduction of 10%). At the same time, the Ministry maintained its second position among 19 ministries and branches in administrative reform ranking.

The online tax declaration system was expanded (nearly 564,500 enterprises made tax declaration online, accounting for 99.6% of the operating enterprises). More than 547,000 enterprises registered to use the service with tax authorities; Automatic issuance of tax identification number was completed; Electronic tax refund in 5 local tax department was piloted.

E-customs procedures were basically implemented at all customs offices with automatic customs procedures throughout the country, providing 181 online public services (of which 119 services are of 3 and 4 levels) relating to customs administrative procedures, linking 36 administrative procedures through the "national one-stop-shop" mechanism with 10 out of 14 ministries, contributing to cost cutting and time for business.

Regarding price management, the Ministry of Finance took initiative in coordination with relevant ministries and branches to manage and regulate important and essential commodities such as petrol and oil, adjust the prices of public services (petrol, oil, milk, education services, medical services, transport cost) according to the market mechanism under the management of the State in accordance with objectives of inflation control in 2016. It stepped up the control and inspection of the observance of the law on prices, strictly monitored registration activities, price declaration of enterprises, thereby contributed to reducing pressure on inflation in 2016.

Sixth, international cooperation and external finance continued to be strengthened.

The Ministry of Finance proactively and actively participated in international and regional financial cooperation activities, such as ASEAN, ASEM, and APEC. It proactively coordinated with related ministries and agencies to complete the signing of the Trans-Pacific Partnership (TPP) Agreement, concluded negotiations on Vietnam-European Union (EU) FTA, and participated in negotiations on tariffs and financial services in FTAs (RCEP, ASEAN-Hong Kong, Vietnam-Israel and Vietnam-Cuba FTAs). In 2016, the Ministry of Finance submitted to the Government 10 decrees on special preferential tariffs for the period of 2016-2018/2019 to implement Vietnam's tariff reduction commitments. It participated in negotiations on the signing of 34 ODA and preferential agreements with total value of US$5.2 billion, 1.5 times higher than that of 2015. It can be said that 2016 was considered as “milestone" for Vietnam, when commitments to key FTAs were fulfilled, and negotiations for new generation FTA completed.

In addition, within its scope and functions, the Ministry of Finance Directive No. 02/CT-BTC of 24 December 2015, on integration in the financial sector, including assessment on impact of FTAs on State budget revenues to actively control State budget.

Solutions to stabilize the macro economy in 2017

In 2017, the situation is forecasted to have positive changes; the macroeconomy is stable with the growth rate of about 6.7%; total export turnover will increase to about 6%-7%; the average consumption price will increase to 4%; and the total investment capital for social development will be about 31.5%. However, there are still many factors that adversely affect economic development in general and the financial activities - the state budget in 2017 in particular, such as the unfavorable impact of international integration, slow response of enterprises, difficulties in restructuring the economy, high expenditure, complicated and unexpected climate change, natural disasters, epidemics, unpredictable world financial, monetary and trade markets. In order to contribute to macroeconomic stability, ensure rapid and sustainable economic growth, the Finance sector will give priority to implementing the following solutions:

First, accelerate perfecting financial institutions and mechanisms, which are synchronous, transparent and stable, meeting practical requirements in the course of socio-economic development and international integration. Implement well the 2015 Law on State budget, tax laws, Resolution No. 07-NQ/TW of 18 November 2016 of the Politburo, "On policy and solutions to restructure State budget, public debt management to ensure a secure, and sustainable national finance" and the National Assembly's Resolutions on Economic Restructuring Plan for 2016-2020, The Five-year National Financial Plan for 2016-2020, the Medium-term Public Investment Plan for 2016-2020 to effectively mobilize, allocate and use resources, including resources from the state budget.

Second, continue to implement policies to remove difficulties for production, business, attract investment, and focus on improving the quality of management, ensure sufficient, correct and timely collection of newly arising amount. Minimize the issuance of new policies when no resources are available. Avoid revenue loss, tax evasion, smuggling, price transfer and trade frauds. Monitor and evaluate the impact of FTAs on State budget revenues for proactive administration.

Third, continue to exercise financial and State budget discipline, strictly, economically and efficiently implement state budget expenditures according to assigned estimates. Strengthen the management, inspection and supervision of investment. Improve the efficiency of public investment, prevent losses, waste and corruption. Avoid new overdue debts in capital construction. Submit to the Prime Minister the amendment to Decision No. 32/2015/QD-TTg of 4 August 2015 on further reduction of public cars, strive to reduce from 30% to 50% by 2020 the number of cars provided to ministries, branches and localities, identify beneficiaries (vice ministers and equivalent officers), and roadmap for financing the use of cars for public work in order to reduce expenses for State budget. At the same time, coordinate with ministries, sectors and localities to finalize the Law on Management and Use of Public Assets to submit to the National Assembly for approval to improve the efficiency of the management and use of State property.

Fourth, strictly control public debts and budget deficit. Proactively and actively regulate local budgets, control central and local budget deficit within the National Assembly's decision. Strive to increase revenue, practice thrift to reduce State budget overspending. Comprehensively implement solutions to restructure public debts. Strengthen debt management and focus on risk management. Minimize Government guarantee for new loans. Step up inspection and control in order to enhance discipline and order in the use of loan capital, ensure investment efficiency and guarantee public debts, government debts and foreign debts are within the permitted limits.

Fifth, push forward the autonomy and self-responsible mechanism of State agencies, public service agencies and socialization of public service delivery to fully account for costs and adjustment of public service prices in accordance with the market mechanism while ensuring macroeconomic stability and mechanisms to support policy beneficiaries. Equitize eligible public service units, thereby contributing to improving the performance of public service agencies, enhancing competitiveness and encouraging participation of the private sector in public service delivery. At the same time, continue to develop synchronously modern financial and financial service markets. Speed up restructuring and raising the efficiency of State-owned enterprises, and ensuring the substantive restructure of the state-owned enterprises.

Sixth, accelerate administrative reform, thereby further improve investment and business environment, and create favorable conditions for development of enterprises of all economic sectors. Accordingly, continue to review, revise and finalize the financial legal system and implement incentive policies to support business development. Focus on removing barriers and obstacles in tax policies, customs, accounting, auditing and administrative procedures in the financial field, especially policies on small and medium enterprises, and policies for supporting industry development and for agriculture and rural areas.

Seven, strengthen the price management and market. Consistently implement the principle of price management in accordance with the market mechanism, in line with the objective of controlling inflation; speed up the implementation of market price roadmap with the State’s regulation for important and essential commodities, such as oil, petroleum, electricity, gas, public services, land and important resources. At the same time, take measures to support entitled groups (the poor, ethnic minorities).

Eighth, effectively coordinate fiscal and monetary policies to control inflation, stabilize macroeconomy, strive to at least achieve planned GDP growth rate, promote and enhance the transparency of information relating to State budget and finance according to regulations. Strengthen the dissemination of new documents, policies and regimes relating to the financial sector, enhance dialogues, support and legal consultancy for enterprises and people in order to create consensus for effective realization of financial-State budget tasks. At the same time, continue consolidating the financial apparatus, improve the quality of cadres, civil servants and public employees in the financial sector, and ensure streamlining of apparatus in accordance with the lines of the Party and the State. Build a clean and strong financial sector with integrity, efficiency that matches its words with deeds and says no to corruption, negativity, and waste.

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This article was published on Communist Review No. 893 (March 2017)

Dinh Tien DungMember of the Party Central Committee, Minister of Finance