The Ministry of Finance proposed regulations allowing the mobilization of local resources for inter-regional projects to promote socio-economic development. Photo: VNA

Mobilizing local resources for inter-regional projects

While acknowledging the positive outcomes of implementing the Law on State Budget, the Ministry of Finance has pointed out certain limitations encountered during the implementation process. For instance, objective factors have led to changes in revenue structure, with the central budget playing a dominant but decreasing role, while there is a growing demand for greater proactivity in local budgets. The formulation, consolidation, and allocation of the state budget, as well as budget execution and settlement, have also revealed some shortcomings and inadequacies that require further study to address.

Regarding the policy that allows localities to use their local budgets to support the central budget, assist other localities, and provide aid to foreign localities, the Ministry of Finance proposes a regulation permitting local budgets to be invested in the construction of central government infrastructure projects within their localities and to support other localities in implementing or participating in the construction of regional and inter-regional infrastructure projects.

According to the Ministry of Finance, there is a significant demand for investment in regional and inter-provincial infrastructure projects. Meanwhile, some localities in the region face socioeconomic difficulties and are unable to secure sufficient funding for infrastructure construction, while some projects using the central budget cannot be fully allocated or allocated sufficient capital for dynamic and regionally connected projects. On the other hand, localities with better conditions are not allowed to support the central budget's expenditure tasks within their own localities or in more disadvantaged areas.

Therefore, allowing local budgets to be invested in central government infrastructure projects within their localities and to support other localities in implementing or participating in the construction of regional and inter-regional infrastructure projects would help mobilize resources from the budgets of financially capable localities for regional projects, leading to their early completion. Moreover, this would enhance the competitiveness of the economy and facilitate socio-economic development in localities within the region.

Overcoming the situation of “capital waiting for projects”

In addition, the Ministry of Finance proposes a clear definition of development investment expenditures as stipulated in the Law on Public Investment and other development investment expenditures.

Accordingly, the draft regulation clearly specifies the use of central budget development investment for state investment tasks and capital support (including interest rate support) for economic organizations. It also supplements the provision on the use of local budget development investment to compensate for interest rate differences, management fees, and delegated lending through policy banks; and to support enterprises, organizations, and individuals. The draft Law also proposes adding a provision regarding investment decisions and investment expenditures for programs and projects using state budget capital. In addition to complying with the Public Investment Law, tasks and projects arranged outside the medium-term public investment plan must be implemented in accordance with the Law on the State Budget as well as relevant legal regulations and will be summarized and reported to the competent authority at the end of the medium-term period. At the same time, it supplements regulations to provide a basis for using other development investment sources to implement investment projects outside the medium-term public investment plan, clearly distinguishing between public investment expenditures under the Law on Public Investment and other development investment expenditures.

According to the Ministry of Finance's explanation, the demand for investment in projects outside the medium-term public investment plan (projects not included in the medium-term public investment plan at the beginning of the term, or with insufficiently allocated capital) arises annually, especially for projects related to disaster prevention, climate change adaptation, security, and defense. Meanwhile, according to the Law on Public Investment, public investment projects use public investment capital and must be included in the medium-term plan assigned by the competent authority, and the public investment plan is formulated for a five-year medium-term period.

Therefore, in the case of new projects, ministries, central agencies, and localities must go through a process of reporting to the competent authority to adjust and supplement the investment list at multiple levels, with multiple stages of appraisal, which takes a long time (1-2 years) and cannot be immediately implemented but must wait for the supplementation of the medium-term public investment plan and the implementation of procedures for formulating, appraising, and approving new projects to be assigned an annual plan for implementation, bidding, contractor selection, and disbursement. As a result, the situation of "capital waiting for projects" is very common and has not been addressed. In the draft amendment to the Law on State Budget, the Ministry of Finance proposes a clear provision on this issue to remove obstacles in the implementation of public investment projects.