US embassy cable - 03HANOI1258

UNCLAS SECTION 01 OF 03 HANOI 001258 
 
SIPDIS 
 
STATE FOR EAP/BCLTV, EB/IFD/OIA 
STATE ALSO FOR USAID 
 
E.O. 12958: N/A 
TAGS: AA, AMGT, EAID, ECON, EFIN, EINV, EPET, ETRD, VM, FINREF 
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 
government 
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 
requirements. 
 
3 - Detailed and comprehensive 
 
g. Assess extent to which laws and regulations on fiscal 
transparency and accountability are implemented and 
enforced. 
 
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 
facilitation. 
 
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 
effort. 
 
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. 
BURGHARDT