DIRECTIVE

ON THE BUILDING OF THE PLAN FOR SOCIO-ECONOMIC DEVELOPMENT AND THE DRAFT STATE BUDGET FOR THE YEAR 2000

In the first six months of 1999, in spite of many difficulties, the socio-economic situation continues to stabilize, agricultural production records good results in the conditions of unfavorable weather, exports tend to rise gradually, the exchange rates and prices remain stable, political security and public order and safety continue to be firmly maintained. However, there have also been unfavorable developments in the socio-economic situation, most conspicuous of which are: the GDP growth rate continues to drop, industrial production and services grow slowly, the market and purchasing power are narrowed, the production of many products have had to go at half steps, capital construction is slow to deploy, budget revenue is low, under- employment and a number of social vices continue acutely.

The remaining tasks for the last six months of the year are extremely heavy. The Prime Minister requests that the ministries, branches and localities concentrate their efforts on carrying out well the Resolution of the Government session in early July 1999 on measures to administer the successful fulfillment of the tasks of the 1999 plan and at the same time to urgently build the plan for the year 2000 according to the following contents and tempo:

I. MAIN TASKS OF THE PLAN FOR SOCIO-ECONOMIC DEVELOPMENT IN THE YEAR 2000

2000 is the last year of the five-year plan 1996-2000, the year to achieve the targets of the strategy of socio-economic stabilization and development in the period 1991-2000 laid down by the 7th National Party Congress and at the same time to prepare for the implementation of the five- year plan 2001-2005 and the socio-economic development strategy in the ten years from 2001 to 2010.

Though the economic situation in the region and in the world still harbors many factors of instability, many countries have overcome crisis and depression, and are showing signs of recovery. The negotiations for the participation in the World Trade Organization and for the signing of the Vietnam-United States Trade Agreement are progressing. Our country has had new opportunities to expand international trade and investment but at the same time comes under heavier and more acute pressures of competition. Meanwhile, agricultural production of our country requires that we broaden the export of farm produce in order to achieve a new step of development; many products of our industry and services are facing very strong competition from foreign goods in both the domestic market and the regional and world market.

In that context, continuing the program of action for 1999, the socio-economic plan for the year 2000 must be directed toward striving to achieve the overall goal of: checking the decline of the economic growth rate, step by step creating the momentum for higher development in a sustainable way; creating a strong upswing in raising the competitiveness and the effective competition of the economy, raising the efficiency of investment; firmly maintaining the major balances and the macro economic stability, rendering the financial and monetary domain sound; settling urgent social problems, promoting the socialization of education, healthcare, culture and sport, step by step renovating the wage system; combining well socio-economic development with consolidation of national defense and security, firmly maintaining public order and safety.

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Proceeding from these guidelines, the socio-economic plan of the year 2000 must attach importance to solving a number of key questions in the following domains:

1. To continue focussing effort on developing agriculture and rural economy. To give priority of investment to water conservancy works and works to prevent and combat natural disasters; to broadly apply scientific and technical advances to agricultural production, first of all by using new strains of plants and breeds of animals with high productivity and quality. To take the initiative in coping with unfavorable developments of the weather in order to reduce to the minimum damages from natural disasters. To effectively remove the hindrances in policies and mechanisms that are stalling productivity and the consumption of farm produce; to achieve the unification of the managerial function and support functions of the State toward the whole process of production, processing, consumption and exportation of farm produce, aquatic and forestry products, to overcome the divide between production organization and the market.

2. To remove in time the difficulties and hindrances in industrial production and services; to encourage in-depth investment and renewal of equipment and technology, renewal and reorganization of management aimed at reducing expenditures, improving the quality of products, raising the competitiveness and effectiveness of production, increasing the capacity of consumption and exportation of products. The State management agencies must together with the association of enterprises and the major general corporations work out policies and concrete measures for each branch and each kind of product, especially for those branches of production and services which are meeting with great difficulties, such as coal, cement, steel, engineering, sugar cane, airlines and hotels... To promote the speed of equitisation of part of the State enterprises; to enforce the policy of selling, allocation, hire and assignment of a number of small State enterprises to laboring collectives. To speed up the transformation of the 100% State enterprises into companies with limited liabilities, at the same time to renovate the managerial mechanism in order to heighten the initiative of the enterprises in developing the efficiency and guiding role of the State economy.

3. To develop the inland market with importance paid to the rural market, the deep-lying and remote regions. To raise the capacity of goods consumption of the farmers. To carry out measures of stimulation in production, construction and consumption in order to increase the power of consumption in the country, lower the selling price in order to consume the products in stock.

To continue to amend and supplement mechanisms and policies and issue new ones in order to encourage the economic sectors to take part in export and broaden the export market; to bring the operations of the Export Support Fund into regularity and develop their active effect. To carry out the regime of rational protection along with the policies and measures to really promote production in the country to raise it to the level of competitiveness in the advance to participation in AFTA (ASEAN Free Trade Area), the World Trade Organization and other international commitments. To step up trade promotion, to find and broaden the export market especially for the goods with large capabilities of development of production such as food, rubber, tea, coffee, fruits and vegetables, meat, aquatic products, textiles and garments, footwear, handicrafts and fine arts articles, electronic goods and small engineering products...

4. To stimulate development investment of the entire society along with raising the efficiency of investments, especially investments with State capital.

To work out and synchronously issue regulatory documents guiding the implementation of the Law on Enterprises, the Commercial Law, the Law on the State Bank of Vietnam and the Law on Credit Institutions, to complete the drafting of the Law on State Enterprises (amended) aimed at ensuring a stable legal framework for investment and business activities of the enterprises and of the population. This work must be basically completed within 1999 and further improved in the year 2000.

State budget investments will continue to focus on building the economic and social infrastructure, aiding the difficult regions, effectively overcoming the state of scattered and prolonged investment and loss of State capital. To carry out the newly issued regulation on management of investment and construction in the economy, on State credit investment with importance paid to broadening the various forms of credit guaranty and post-investment preferential treatment along with renewing the credit mechanism and broadening the operations of the commercial banks, building step by step the stock market in order to really boost the movement of the capital market and create favorable conditions for all efforts of investment to develop production and business in society, especially among the small and medium enterprises.

To enhance the responsibility of the State agencies in removing hindrances in order to speed up the tempo of disbursement and raise the effectiveness of the use of the Official Development Assistance of foreign countries; to continue improving the environment to draw direct foreign investment, to support the projects already licensed so that they may carry out their plans as scheduled and support the enterprises in operation so that they may raise their efficiency and strictly observe Vietnamese law.

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To actively settle the state of unpaid debts, create a fundamental turn-around in making the finance of the system of banks and credit funds sound along with measures to renovate and streamline the sector of State enterprises.

6. To promote scientific and technological activities by linking research with application aimed at quickly applying the results of research to production and technological renewal, including managerial technology, in various branches and production and service establishments; to overcome the administrative-type and subsidies-type method in the mechanism of operation and management of scientific research and technological research organizations, combining the assurance of the budget for activities with the results of scientific and technological research. To increase the protection of the environment.

7. To effectively settle urgent social problems. To speed up the review and evaluation of the results in the implementation of the national programs and the target programs up to the year 2000 in order to work out the plan for raising the efficiency of implementation in the following years. To adopt a synchronous mechanism and policies to step up the socialization of the activities in education, healthcare, culture and sport aimed at further developing and raising the quality of the activities in these domains, at the same time to better support the poor in benefiting the public services.

8. To consolidate national defense and security, to strengthen public order and security. To take a further step in perfecting the administrative apparatus in the spirit of the Resolution of the 7th Plenum of the Party Central Committee, to heighten the efficiency of law enforcement, to preserve discipline and order in all economic and social activities.

II. MAJOR REQUIREMENTS IN STATE BUDGET DRAFTING IN THE YEAR 2000

1. Budget revenue estimates of the State must be built on the basis of correct and adequate calculations of the revenues as prescribed in the current laws on taxation and the regime of collection including the handling of hindrances in the implementation of new tax laws.

The budget revenue estimates must at the same time overcome the decrease in the rate of mobilization of the total produce in the country into the State budget which has continuously happened in the past few years, while remaining feasible and compatible with the capacity of growth and profitability in each domain and really encouraging production and business development along with the realization of measures against shortfalls in revenues as well as against trade fraud and tax evasion in business. The estimate of export and import taxes must take into account the continued realization of the process of participation in AFTA and in the international economic and financial organizations as well as the impact of the financial and monetary crisis in the region.

2. With regard to State budget expenditures in the year 2000, besides meeting the need of regular expenditures in the spirit of stricter economization, there must be appropriate handling of the relations between expenditures in building the infrastructure and the need of initial steps in solving the wage question. The general guideline is to focus priorities in capital for the key projects of the State and the reciprocal capital in order to continue drawing foreign capital at the tempo already signed, first of all for on-going constructions and those projects which have been completed and will be put into use in the year; to limit to the minimum the allocation of budget fund to start new constructions. On this basis, to set aside a part of the budget to settle one step the wage system in the spirit of the Resolution of the 7th Party Central Committee Plenum. To assure the rate of budget expenditures for education and training, science and technology according to the resolution of the 2nd Party Central Committee Plenum. At the same time to determine clearly the target and task of socialization in the domain of education, health care, culture and sport aimed at mobilizing more social resources and step by step changing the mechanism of State budget expenditures. To assure expenditures for the realization of the national defense and security tasks.

3. The regular expenditures draft shall be built at the necessary, rational and thrifty level. To carry out expenditure package allocation for the administrative and non-business sector in a number of affordable agencies and units at the center and in the localities. The choice of these agencies and units must be decided in 1999 in order to have a basis to work out, assign and administer the draft budgets of the agencies and units right in early the year 2000. To abolish State budget subsidies for the enterprises as well as support expenditures from State budget for the professional activities in science and healthcare and training of the general corporations (except in special cases specified by the Prime Minister). To allocate budget reserve and supplementary expenditures for the Financial Reserve Fund according to Decree No. 87/CP of December 19, 1996 of the Government detailing the assignment of responsibilities in management, drawing up, executing and making final account settlement of the State budget and Decree No. 51/1998 ND-CP of July 28, 1998 of the Government amending and supplementing a number of Articles of Decree No. 87/CP of December 19, 1996.

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The collection of taxes and charges must meet the need of regular expenditures at a rational and thrifty level and ensure the repayment of due debts, readjustment by one step of the wage system and continue to set an appropriate rate of accumulation for development investment.

State budget deficit must correspond with the capacity of sure borrowings in the country and preferential loans from foreign countries at the rate of less than 5% of GDP. We must refrain from making commercial borrowings from foreign countries, issuing banknotes or making short-term high-interest borrowings in the country to make up for State budget deficit.

5. Local draft budgets

- In establishing the local draft budgets, the following principles must be ensured: The total expenditures must not exceed the total revenues that the local budget is entitled to; to give priority to the tasks of spending for development investment, for education, training, science, technology and the environment; to allocate the draft budget reserve for the localities according to the level stipulated in Decree No. 87/CP and Decree No. 51/1998/ND-CP (mentioned above) of the Government.

- To continue carrying out the mechanism of allocating expenditures for a number of targets corresponding with the whole or part of the tax revenues in the agricultural land use tax, the land rent and the land use levy, as in the mechanism of allocation of the budget in 1999.

- On the basis of the draft State budget in the year 2000 assigned by the Government, to stabilize the source of revenue and the rate of allocation of the sources of revenues between the central budget and the budgets of the provinces and centrally-run cities. In order to encourage the localities to increase their guidance and management over the collection of revenues, for the revenues already assigned to the central budget and the budget for the different levels of local administration, if in a year the provinces and cities that remit to the central budget a revenue higher than in the previous year, half of this excess shall be reallocated by the central budget to the local budget. With regard to the excess in the collection of export and import taxes, the special consumption tax imposed on domestic goods and import goods (excluding the Value Added Tax on import goods), the policy of concrete annual reward to the local budget according to the State Budget Law shall apply. These rewards for excess collection shall be used in the investment in the building of the local infrastructure.

III. TEMPO OF BUILDING PLAN AND ASSIGNMENT OF WORK IN IMPLEMENTATION

1. On tempo

a/ In July 1999, the Ministry of Planning and Investment and the Ministry of Finance shall provide guidance on the plan framework and the direction for budget allocation in the year 2000 as basis for the ministries, branches and localities to build their plans.

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c/ Also in this period (August 1999), the Ministry of Planning and Investment and the Ministry of Finance shall work with the ministries, branches and localities so that the plans can be integrated and submitted in time to the leading agencies of the Party and the State, and at the same time make the draft project of allocating the plan and budget targets and submit it to the Standing Committee of the National Assembly for decision.

d/ After the Government has made known its guiding remarks to complete the draft State budget for the year 2000 to be submitted to the National Assembly, the Ministry of Finance, the Ministry of Planning and Investment, the agencies in charge of the target programs shall coordinate with the related ministries to draft the projects of allocation of the budget to each ministry and central agency and the level of supplement from the Central Budget to each province and centrally-run city, the estimated expenditures for the realization of the target programs of each ministry, central agency and locality so that after the National Assembly has decided on the State budget for the year 2000, they can be completed in time at the request of the Government before submitting them to the Standing Committee of the National Assembly for decision on concrete allocations.

2. Assignment of tasks in implementation

a/ The Ministry of Planning and Investment:

- To assume the prime responsibility and coordinate with the Ministry of Finance in building the projects and major balances as basis to guide the ministries, branches, localities and Corporations 91 in building their plans for the year 2000 along the common socio-economic development orientation of the country.

- To guide the building and integrating of the socio-economic development plans for the year 2000 and to work with the ministries, branches and localities on this plan; to assume the prime responsibility and coordinate with the Ministry of Finance in drafting the plan of investment and development and in allocating capital for capital construction in the year 2000.

b/ The Ministry of Finance:

- To guide the ministries, central agencies and localities in assessing the implementation of the draft State budget for 1999; to build the draft budget and announce the control figures on projected revenues and expenditures of the State budget in the year 2000 to the ministries, central agencies and localities; to determine the rate of allocation of the revenue sources and the supplements for the budgets of the provinces and centrally-run cities and submit them to the competent level for decision.

- To assume the prime responsibility and coordinate with the Ministry of Planning and Investment and the related agencies in building and integrating the draft State budget for the year 2000; to assume the prime responsibility and work with the ministries, central agencies and localities in drafting the budget.

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c/ The other ministries and branches shall coordinate with the Ministry of Planning and Investment and the Ministry of Finance in laying down the tasks of socio-economic development and the draft budget in the domains under their charge. The ministries and agencies in charge of the national programs shall coordinate with the Ministry of Planning and Investment, and the Ministry of Finance shall work with the related ministries, central agencies and localities on the tasks and draft expenditures for the year 2000 for the execution of the programs in the domains under their charge.

The ministries and State agencies shall, depending on their functions and on the basis of the calculations of the exploitable resources, work out the socio-economic targets, solutions, policies, mechanisms and new regimes or make suggestions for amendment and supplementation to the regimes and policies in force as basis to calculate the plan and draft the budget and inform the Ministry of Planning and Investment, the Ministry of Finance, the related ministries and agencies before the time for drafting the budget.

d/ The People’s Committees of the provinces and centrally-run cities shall guide, organize and direct the Planning and Investment Services, the Finance and Pricing Services to coordinate closely with the other Services, Commissions and branches in working out the plans for socio-economic development and drafting the State budget and submit them to the People’s Councils of the provinces and centrally-run cities for decision.

The Prime Minister urges the ministers, the heads of the ministerial-level agencies, the heads of the agencies attached to the Government, the presidents of the People’s Committees of the provinces and centrally-run cities to organize the implementation of this Directive.

THE PRIME MINISTER




Nguyen Tan Dung