March 4, 2019

Allocation of state budget in Vietnam

March 4, 2019

In the seminar on “Political Economy of Budget Transfers and Allocations in Vietnam”, Dr. Huynh The Du, Lecturer of Fulbright School of Public Policy and Management, presented his findings on how state budget is allocated and how allocation mechanisms affect local growth. 

Dr. Du stated that equity and efficieny are two most important considerations in budget allocation. Equity can be grouped into vertical equity (areas at similar levels of growth should receive similar treatment in budget allocation) and horizontal equity (disadvantaged areas and areas with great potential for robust growth should be allocated with more budget). 

Under this principle, the priorities should be Mekong Delta (area of lowest growth) and Southeast Vietnam (area of strongest growth). In reality, areas receiving favorable ratio of budget allocation are not in these groups. 

From emprirical evidence, Dr. Du concluded that though criteria in state budget allocation displayed efficiency and equity, political and economic factors did play a role in budget decisions. He recommended that allocation criteria should be clearly specified and areas with significantly lower ratio of allocation are prioritized. 

On the other hand, it must be understood that urbanization is closely related to industrialization and the key to greater growth; as such, adequate resources should be designated for central municipalities. 

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