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2003-05-22 10:16:00
Embassy Hanoi
Cable title:  

VIETNAM: P.L. 108-7 - Consolidated Appropriations

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						UNCLAS SECTION 01 OF 03 HANOI 001258 



E.O. 12958: N/A
SUBJECT: VIETNAM: P.L. 108-7 - Consolidated Appropriations
Resolution for FY 2003, H.J. Res. 2, Section 585.
Transparency and Accountability.

REF: STATE 100283

1. This cable was originally sent May 5, 2003 but
encountered TERP transmission problems. Post apologizes for
the delay. Responses to reftel questionnaire follow:

a. Does host government publish national budget in a
timely manner?

2 - Yes, with some delay (more than one year)

b. Where subnational levels of government are significant,
are their combined fiscal positions published?

No - subnational levels are considered insignificant;
combined fiscal positions are not published.

c. In what form in national budget published?

Internet, newspaper.

d. Please rate the quality and comprehensiveness of fiscal
data published.

2 - Limited system of budget reporting and monitoring with
limited classification system. Some payments arrears and
deviations between actual expenditures and amounts budgeted.
e. List key laws/regulations governing public disclosure of
revenues and expenditures in the national budget.

1 - Law on State Budget
2 - Decision 225/1998/QD-TTg of the Prime Minister on
financial disclosure of the state budget for all levels of
3 - Circular 01/2002/TT - BTC of the Ministry of Finance
providing guidelines for the regulations on financial
disclosure of the State Budget

f. Assess adequacy of those laws and regulations
establishing fiscal transparency and accountability

3 - Detailed and comprehensive

g. Assess extent to which laws and regulations on fiscal
transparency and accountability are implemented and

2 - Unevenly enforced

h. How would distribution of tax powers and expenditure
responsibilities of central government be described?

i. Does a national audit body or equivalent organization,
independent from the executive, provide reports for the
legislature and the public on the financial integrity of
government accounts?

No. There is a "State Auditor" which is the only body
authorized by Vietnamese law to conduct government audits.
The IMF does not consider the State Auditor to be
sufficiently independent from the executive.

j. How would the link between nonfinancial public/state-
owned enterprises and general government be described?

3 - Clear control under central government budget process

k. Are privatization processes transparent and published?

1 - Limited

l. How would the reliability of budget revenue and
expenditure estimates best be described?

2 - Moderately reliable.

m. Please provide evaluation of hose government commitment
to fiscal transparency and accountability.

As part of the overall reform effort, Vietnam is attempting

to improve its public expenditure management and the
consistency and transparency of budgetary information. Up
until 1999, the budget was covered by secrecy laws and was
essentially considered a State secret. While certain
"sensitive" budget items will remain opaque, some daylight
is being inserted into the budget and budget process.
Previously, only an aggregate amount of the total state
budget revenue and only a total expenditure figure by
Ministry was available publicly. Current publications
provide details of state revenue broken down into 4 major
and 11 sub-categories. Central Ministries and local
government have begun to disclose more detailed budgetary
data in accordance with transparency regulations. For the
first time, limited budget information is freely available,
whether posted on the local Commune's community bulletin
board or via the Ministry of Finance's web page. However,
while the situation is improved, Vietnam's budgetary system
is still far from transparent and accountability remains a
serious problems.

In December 2002, the National Assembly enacted amendments
to the Law on the State Budget. Effective for the financial
year 2004, it provides for the preparation, implementation,
inspection, supervision, audit and balance of state budget.
The law clarifies the specific duties and responsibilities
of each state body in connection with the management and use
of the revenues and expenditures of the state budget,
including the National Assembly, the Government,
governmental bodies, local People's Committees and People's
Councils. Now, Ministry of Finance (MOF) is explicitly in
charge of budget formulation while the Treasury Department
(within MOF) is responsible for budget execution and
reporting. The amendments also provide for the audit of the
state budget, which must be carried out before the National
Assembly or the relevant People's Council (which approves
the state budget balance sheet). The State Auditor is by
law the only body allowed/required to carry out such audits
but it is not truly independent from the executive and its
procedures are not truly transparent. The audit report must
be reported to the National Assembly, the Government and
other such bodies specified by law but it is not required to
make such audits public.

Public Finance reform includes other projects to streamline
the budget process, revise the budget law to capture `off
budget' accounts, better track cash transfers to the
provinces, and just generally improve data management.
However, the lack of basic mechanisms for monitoring the
actual outcomes of public spending, including common
accounting standards and integrated electronic data
recording and reporting, weaknesses in transparency and
accountability continue to exist.

n. Please list USG programs and activities that promote
accurate disclosure of revenues and expenditures in the
national budgets of your host country. Please also
summarize the result of those programs and activities.

Increased transparency and accountability in Vietnam is
directly linked to the country's economic, financial and
trade-related reform efforts. USAID technical assistance in
this area focuses on trade and investment, financial sector
reform and economic governance. The major program in this
area is the Support for Trade Acceleration (STAR), which is
designed to support the Government of Vietnam's efforts to
liberalize its trade and investment regime consistent with
its commitments under the BTA. The BTA covers key issues
related to transparency, rule of law, market access for
goods, services and investment, protection of intellectual
property rights, dispute settlement and business

Through STAR, the USG provides technical assistance to
identify necessary changes in laws and regulations, develop
new laws and regulations that are compatible with
international trade and investment norms. In 2002/3, STAR
assisted Vietnam to revise several keys laws, including the
overall "Law on the promulgation of Laws" which provides the
framework for increased lawmaking transparency and
accountability. Since 1997, USAID has - through a grant to
the U.S Vietnam Trade Forum - provided commercial law and
trade policy assistance to key Vietnamese institutions in
both the public and private sectors. The program has
familiarized key Vietnamese officials with legal and
economic concepts that are at the root of their reform

USAID works in partnership with the government and the World
Bank in support of Vietnam's emerging financial sector
reform program. Over the past two years, USAID has funded
two IAS audits of a state-owned commercial bank, in support
of the GOVN/ World Bank/ IMF poverty reduction and growth
facility (PRGF). The World Bank is focusing greater
attention on this area to help Vietnam establish a single
system for planning, formulating, executing, and reporting
on the budget through technical assistance and improved
information technology. In addition, the Asian Development
Bank and the UNDP are both involved in Public Administration
Reform activities.