VIET NAM

Viet Nam is a unitary and unicameral socialist republic. The President is the head of state, and executive power rests with the government (Chính phủ), headed by the Prime Minister. Legislative power is vested in the National Assembly (Quốc hội), composed of 498 members, directly elected for a five-year term. The National Assembly has the mandate to elect the President and Vice-President, the Prime Minister, the Chief Justice of the Supreme People's Court, the President of the National Electoral Council, and the Head of the State Audit, among others. As per the 2013 Constitution (Art. 4), the country has a single political party, the Communist Party of Viet Nam, and the whole government acts under the supervision of the Vietnamese Fatherland Front, the party‘s organization described by the Vietnamese government as “the political base of people’s power”.

The country’s local government system was established in 1945 as a three-tiered subnational government system, composed of provinces, districts and communes. Subnational governments are each governed by a People’s Committee holding executive power, and a People’s Council, which functions as the legislative bodies. Members of the People’s Council are accountable to the citizens, who elect them every five years. The number of councilors of the People's Council depends on the population of each subnational government. People’s Councils are headed by a Chairman, elected from among the councilors. According to the 2015 Law on the Organisation of Local Administration (amended in 2019), the People’s Council elects the People’s Committee at the same level.

The three tiers are structured in a vertical hierarchical manner among responsible jurisdictions. This means that each People’s Committee is normally accountable to both the People’s Council at the same administrative level and to the Committee at the higher level. Elections of the National Assembly and of People’s Councils occur simultaneously. The latest elections were held in June 2021. However, there is virtually no electoral competition at the central or local level, given that they all belong to the same unique political party.

Decentralisation of political and fiscal powers started in 1983 in Viet Nam, with the enactment of a resolution clarifying the sources of revenue of subnational governments and their competences. Decentralisation has been growing since1996 with the promulgation of the first Budget Law, which was has since then been replaced by the new Budget Law in 2002, until it is enshrined in the 2013 Constitution. The constitution mentions the devolution of powers and authority to local governments that may take various forms based on their characteristics (rural, urban, island, or special administrative-economic areas). It also delineates between the competences of subnational governments, and those of deconcentrate state administration, stating that: “The mandates and authorities of the local governments are established on the basis of demarcating the authorities of central and local state organs, and that within each level of local government”. In addition, Chapter IX of the Constitution and the 2015 Law on Organisation of Local Governments stipulate the role and operation of subnational governments.

In parallel, decentralisation in Viet Nam is characteristed by a strong degree of control and monitoring by the central government, as stated in Resolution No. 18-NQ/TW from 2017. Accordingly, the Vietnamese Fatherland Front has committees at all levels of administration, which act as deconcentrated entities to supervise subnational governments: the Chairmen of the committees participate in the corresponding People’s Council and Committees. Local governments must report to the National Assembly, the Vietnamese Fatherland Front Committee and the line ministries, in particular the Ministry of Home Affairs in charge of state administration, local government organization and administrative reforms.

Viet Nam emphasises transparency and accountability at all levels of government as a priority in public administration reforms. This led to the implementation of the Viet Nam Provincial Governance and Public Administration Performance Index (PAPI). PAPI is a policy monitoring tool, launched in 2009 and effective ever since, that assesses citizen experiences and satisfaction with government performance at the national and subnational levels in governance, public administration, and public service delivery.

TERRITORIAL ORGANISATION
MUNICIPAL LEVEL	INTERMEDIATE LEVEL	REGIONAL LEVEL	TOTAL NUMBER OF SNGs (2021)
8 295 communes (xã), 1 714 wards (phường) and 605 commune-level towns (thịtrấn)	529 rural districts (Huyện), 49 urban districts (quận), 51 district-level towns (Thị xã) and 78 provincial cities (thành phố trực thuộc tỉnh)	58 provinces (tỉnh) and 5 centrally-run cities (thành phố trực thuộc trung ương)
Average municipal size: 9 171 inhabitants
10 614	707	63	11 384

OVERALL DESCRIPTION: The subnational government level is organised into three tiers: provinces, districts and communes. The 2013 Constitution does not promote a common definition of local self-government structures, but the 2015 Law on the Organization of Local Administration (Art. 4, Chapter II and III) makes the distinction between rural and urban governments across the three tiers of subnational governments: rural subnational governments include provinces, rural districts and communes. On the other hand, urban subnational governments include centrally-run cities, urban and town districts and provincial cities at the intermediate level, and finally towns and wards at the municipal level. The composition of People’s Councils varies depending on the nature of the jurisdiction, consistently with topographic, demographic and economic features.

Viet Nam is also divided into 7 planning regions for administrative purpose (Northern midland and mountainous region, Red River Delta, North Central Coast, South Central Coast, Central Highlands, Southeast region and Mekong Delta). The most populous is the Red River Delta (23.4% of the population, including the capital-city, Hanoi), whereas the region of Central Highlands concentrates only 6.1% of the population. However, the density in the Red River Delta is ten times higher than the one in Central Highlands.

REGIONAL LEVEL: The regional level is composed of 58 provinces and five centrally-run cities (Can Tho, Da Nang, Ha Noi, Hai Phong, Ho Chi Minh City), meaning that they are administered directly by the central government. Provinces’ legislative branch is the People’s Coucil, composed of directly elected councilors and headed by a Chairman. The People's Council appoints a People's Committee, which acts as the executive branch of the province, composed of commissioners.

Provinces have an average of 1.5 million inhabitants, the most populated being Ho Chi Minh (9.2 million inhabitants) and the least populated being Bac Kan (317 thousands inhabitants) in 2021. The National Assembly holds the power to establish, merge, divide or adjust the boundaries of provinces and centrally-run cities. Provinces play a strong coordination role between the central and subnational governments. In each Provincial People’s Committee, a planning department is in charge of vertical coordination with lower tiers of government.

INTERMEDIATE AND MUNICIPAL LEVEL: Subnational governments include districts at the intermediate level, which are further divided into communes, wards and townships at the municipal level. The distinction between levels and types of subnational governments is based on a complex system of characteristics, such as population density and shares of the agricultural labor force. Mirroring the situation at central and regional level, intermediate and municipal governments have a People’s Committee as the executive branch, and a People’s Council holding legislative power.

In line with the ongoing decentralisation process, Viet Nam is increasingly leaning towards more asymmetrical territorial arrangements. Pilot policies have been launched since 2020 to develop new urban government models. Under this pilot scheme, the three major cities of Hanoi, Da Nang and Ho Chi Minh City have been given more leeway to reorganise their municipal units (districts, communes and wards) and create stronger linkages between the municipal and provincial government units.

HORIZONTAL COOPERATION: There is no mention of inter-municipal cooperation in Vietnamese legislation. However, both wards and townships have the duty to cooperate with competent agencies or organisations on the implementation of urban infrastructural development plans and service provision within the boundaries of their jurisdiction.

The Association of Cities of Viet Nam (ACVN) is an organisation representing Vietnamese cities, who can join on a voluntary basis. Its mandates include promoting exchanges and cooperation between Vietnamese cities, and reporting and advocating to the central government on issues related to urban planning, construction, management and development and inadequacies in regimes and policies for urban areas.

The Constitution (Article 112) and the Law on Organization of Local Administration compose the main legal corpus establishing the duties of local governments, in particular of provinces. The latter in particular regulates the principles of division of competences (Article 11), distinguishing between delegation of powers (Article 12), decentralisation of powers (Article 13), and authorisation to delegate powers to subnational governments or state-owned agencies (Article 14). They are supplemented by a set of legislations including the1996 Ordinance on the Specific Tasks and Powers of the People’s Councils and People’s Committees, as well as the State Budget Law. Both were revised in 2015 and effective since 2017. Finally, Provinces have the autonomy to both allocate functions and determine the fiscal relationship with districts and communes within their jurisdictions, resulting in various schemes of devolved responsibilities at the municipal level according to each province.

In practice, this system results in several overlaps, and devolved powers at the commune and district levels are often not matched by adequate funding. Even provincial councils have limited room to maneuver in most sectors, and Provincial People's Committees do not have the right to recruit new people based on needs if they are not allocated more staffing quotas by the central government. Recently, the Resolution No. 99/2020/NQ-CP from June 2020 set out the goal of clearly defining functions, tasks, powers, responsibility of each government levels and each state administrative agency to make the most of local potentials. It states that subnational governments may perform one or several tasks of state agencies, provided that each task is not assigned to more than two administrative levels.

Main responsibility sectors and sub-sectors
SECTORS AND SUB-SECTORS	Regional level	Intermediate and municipal levels
1. General public services (administration)	Public buildings and facilities	Civil registry; Public buildings and facilities
2. Public order and safety	Regional police; Regional firefighting services	Municipal police; Urban traffic signs; Municipal firefighting service
3. Economic affairs / transports	Regional roads, railways, airports and ports, inter-city and regional railway transport, pupils’ transports; Employment services; Support to local enterprises and entrepreneurship; Agriculture and rural development; Regional tourism	Local road; Local ports; Urban transports; Pupils transport; Local tourism
4. Environment protection	Nature preservation; Soil and groundwater protection; Climate protection; Sewerage.	Parks and green areas; Waste management; Street cleaning
5. Housing and community amenities	Construction and renovation	Construction and renovation; Distribution of drinking water; Public lighting; Urban and land use planning; Urbanism
6. Health	Regional hospitals	Primary healthcare (medical centres); Preventive healthcare
7. Culture & Recreation	Regional museums; Cultural heritage	Sports Libraries; Local museums
8. Education	Secondary education	Pre-primary and primary education
9. Social Welfare	Elderly and disabled people (benefits and services)	Social care for children, youth and elderly

Scope of fiscal data: Provinces and centrally-run cities

Other

Availability of fiscal data: Low

Quality/reliability of fiscal data: Low

GENERAL INTRODUCTION: The 2002 SBL (revised in 2015) set relevant spending assignments of subnational governments in Viet Nam, as well as a framework of limited autonomy over sources of revenue. Other recent laws include the 2019 Law on tax administration, 2019 Law on securities, 2019 revised Law on public investment, and 2019 revised Law on State audit. Although each local government has some autonomy in establishing its budget, budgets of lower-level governments must be examined and approved by the higher level of government. The National Assembly remains the highest authority over the state budget’s composition and allocation to line ministries and subnational governments. The 2002 SBL specifies that upper-level budgets, in particular provincial councils, can provide targeted additional allocations to support lower-level budgets. However, information remains scarce on the fiscal relationship between provinces, districts and communes. The figures in this section do not include data on the local government level.

Asymmetrical fiscal decentralisation is widespread in Viet Nam, in particular among provinces. For instance, in 2017, Resolution No. 54/2017/QH14 of the National Assembly created a legal basis to apply asymmetrical fiscal decentralisation, providing Ho Chi Minh City with more autonomy for increasing revenue from taxes, land management and introducing new user fees. According to this Decree, the city can increase tax rates on certain taxes (e.g. environmental protection tax) up to 25% higher than the standard tax rate.

In recent years, budget execution and fiscal reporting have become more transparent thanks to the implementation of a new Treasury and Budget Management Information System. In 2022, the government displayed efforts to increase transparency by publishing a “citizen-friendly” state budget online for the first time. A recent circular was also passed in 2022 to clarify the tasks and powers of the Departments of Finance of the Provincial Councils (22 tasks and powers in total, including advising and assisting the Provincial People's Committee in the state management of finance).

Subnational government expenditure by economic classification
2020	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total expenditure	1 403	16.2%	60.6%	100%
Inc. current expenditure	1 052	12.2%	63.3%	75.0%
Compensation of employees	-	-	-	-
Intermediate consumption	-	-	-	-
Social expenditure	-	-	-	-
Subsidies and current transfers	-	-	-	-
Financial charges	-	-	-	-
Others	-	-	-	-
Incl. capital expenditure	351	4.1%	53.5%	25.0%
Capital transfers	-	-	-	-
Direct investment (or GFCF)	-	-	-	-

EXPENDITURE: According to data from the Ministry of Finance, subnational government expenditure accounted for 16.2% of GDP and 60.6% of total public spending in 2020. While this is relatively high compared with global averages, it is important to note that subnational governments remain dependent on centrally-taken decisions for most of their expenditure allocations.

Starting in July 2022, the government is implementing a reform to increase and harmonise the wages of civil servants, which should induce an increase in staff expenditure at all levels, which will require to ensure that subnational governments have adequate resources to carry out the reform, or to provide support grants to subnational governments if needed.

DIRECT INVESTMENT: The share of local government in total capital expenditure in Viet Nam reached 53.5% in 2020. Subnational investment amounted to 4.1% of GDP, which is high by international standards and compared with other countries in the South-East Asia region. In 2020, investment represented about 25% of subnational government total expenditure.

The 2002 SBL states that provinces, communes, townships and cities have the power to mobilise, within their jurisdiction, revenue for infrastructure investment from organisations or individuals. It also sets spending tasks in infrastructure investment for public schools, lighting, water supply and sewage, urban traffic, and other public welfare construction works. The 2014 Law on Public Investment (currently under revision) clarifies the duties of the Chairman of the Provincial People's Committee in the coordination, approval of and reporting on the investments undertaken by local governments. This aims to improve transparency in terms of capital spending and budgeting, as well as for the overall public management of local governments’ initiatives. Specific arrangements are in place to support public investment by provinces, such as the Ho Chi Minh Investment Fund for Urban Development, a specialised financial institution created to ease the province’s access to financing resources for subnational investment in infrastructure. In 2007, this model was standardised by Decree and expanded to all provinces.

However, investment by subnational governments still operate under the tight supervision of the central government: urban development investment projects must be submitted to the Urban Development Investment Project Appraisal Division, under the Prime Minister’s authority, which provides a written opinion, and then send the project to approval to the Principal People’s Committee. This aims to ensure that subnational projects are aligned with broader national investment frameworks, such as the Viet Nam Green Growth Urban Development Plan to 2030.

Over the past decade, Viet Nam has experienced an important increase of public investment, particularly at the subnational level, due in part to ODA funding, which has been an important source of financing. The recourse to Public-Private Partnerships (PPPs) remains currently limited to some sectors (e.g. transport sector).

ⓘ No detailed data available for this country

According to the state’s budget for 2021, subnational government’s share of public spending is particularly high in education and vocational training (up to 88% of total public spending in the same category). Subnational governments also play a role in healthcare, economic services and public administration. However, decision-making in terms of subnational expenditure allocation remains largely concentrated at the level of provinces, which are themselves acting on behalf of the central government.

Subnational government revenue by category
2020	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total revenue	1 354	15.7%	57.6%	100.0%
Tax revenue	-	-	-	-
Grants and subsidies	529	6.1%	-	39.1%
Tariffs and fees	-	-	-	-
Income from assets	-	-	-	-
Other revenues	-	-	-	-

OVERALL DESCRIPTION: In 2020, subnational government revenue accounted for around 57.6% of total public revenue, i.e. 15.7% of GDP, which is relatively high compared to the global average. Subnational government revenue are first concentrated at the regional level, and provinces then make decisions related to resources allocation to lower-level subnational governments within their jurisdiction (Article 34 of the 2002 SBL).

Subnational government revenue is divided between intergovernmental fiscal transfers (39% of subnational government revenue), and so-called “decentralised revenue“, which includes own-source taxes, fees and user charges, but also the tax-sharing scheme, that is not classified as a grant in the national budget. Subnational government revenue are, however, largely dependent on decision from the central government, given that the tax sharing system takes into account provincial needs when allocating the funds, as it is commonly found in grant systems. In addition, The tax sharing scheme is often hindered by a lack of accountability and transparency, and long reviewing delays. There are strong fiscal disparities across provinces, with Hanoi’s and Ho Chi Minh City’s accounting for 20% of subnational government total revenue in 2020.

TAX REVENUE: Subnational government tax revenue includes both shared-taxes, which are described in the section below on grants, and own-source taxes.

Own taxes revenue is mainly composed of the tax on non-agricultural land use which represents around 0.04% of the GDP. It is administered and levied at the national level, and then redistributed to subnational governments. This recurrent property tax applies to residential, commercial and industrial land. The tax base is determined by the municipal or Provincial People’s Committee, and a progressive tax rate applies, ranging from 0.03%– 0.15% for residential land, and amounting to 0.03% for commercial and industrial land.

In addition, more minor taxes include the tax on agricultural land use, natural resources tax (excluding taxes on petroleum activities), license tax, and tax on transfer of land use rights. A list of potential own-source revenue sources is provided in Article 32 of the 2002 SBL. To increase revenue from the taxes on property, Viet Nam has planned to carry out a comprehensive property tax reform study, as set in the Sustainable Development Strategy for 2011–2020. The aim is to move from the current approach, essentially focused on taxing land, toward a land and building tax that will also encompass real estate.

Provincial People’s Councils decide the percentage of revenue to be shared between tiers of local governments’ budgets. By law, communes and townships are entitled to at least 70% of revenues from tax on transfers of land-use rights, land and housing taxes, license tax on individuals and individual households, tax on use of agricultural land collected from households, and registration fees for land and housing. Townships and urban districts are entitled to at least 50% of revenues from registration fees, excluding registration fees for land and housing.

GRANTS AND SUBSIDIES: Subnational governments receive grants and subsidies in the form of so-called “intergovernmental transfers” (including both general balancing transfers and earmarked transfers), as well as revenue from the national tax sharing scheme. In 2020, intergovernmental transfers alone accounted for 39% of total subnational government revenue. Yet, this share is under-estimated as it does not take into account revenues from shared taxes.

Most subnational government revenue originates from a tax sharing system calculated on the basis of provincial financing needs, meaning that poorer provinces will retain a higher proportion. The People’s Committee at each provincial level first drafts its budget proposal, get it approved by the People’s Council, and finally submits it to the People’s Committee at the higher administrative level. The sharing rates are approved by the National Assembly for a three- to five-year period, and the central government then consolidates budget proposals into the state budget. The proportion ofshared taxes retained by each province is determined for a period of 5 years (called “stability period”, the current one being 2022-2025). Shared taxes include: VAT, Personal Income Tax, excise tax on domestic goods, CIT and an environment protection tax. Over the past three stability periods (2007-2010, 2011-2016 and 2017-2021), there has been an overall decrease of the total of shared taxes allocated to subnational governments, from 90% of total collected taxes to 78% and 68% for less wealthy provinces such as Hai Phong and Da Nang. In comparison, the sharing rate of the wealthier provinces of Ha Noi and Ho Chi Minh City decreased, respectively, from 42% to 35% and from 23% to 18% over the three periods.

Balancing transfers are unconditional, formula-based budget transfers from the central government. In 2020, they accounted for 57% of intergovernmental transfers. The amount of transfers is approved by the National Assembly, for periods of four to five years. The redistribution system has an equalizing mechanism that aims to reduce fiscal imbalance between provinces and across districts, based on a wide set of criteria, including population, and geographical criteria to support island districts, border communes, islands and coastal areas, and for the new stability period, mountainous areas.

Earmarked transfers are allocated to projects co-financed by external funds (e.g., ODA funds under PPP models) and implemented by subnational governments under an on-grant mechanism. In 2020, they accounted for 43% of intergovernmental transfers. Based on a 2015 SBL provision, subnational governments can access ODA funding via an on-lend mechanism. These are capital investment projects proposed by Provincial Councils in consultation with the central government, and subnational governments can only access the funds with approval from the central government. They should be aligned with National Target Programs (NTPs), whose priorities for 2021-25 include socio-economic development, support to ethnic minorities and mountainous areas. The amount should correspond to around 10% of the central budget reserve's capital reserve.

OTHER REVENUE: Subnational governments can receive fees and charges (Art. 32.1 of the 2015 SBL and the 2015 Law on fees and charges), although their share in total subnational government revenue remain small and no disaggregated data is currently available.

Local fees and charges include mostly lottery fees, as well as fees on forest preservation, fees for assessment of environmental impact of projects and environment protection, including wastewater discharge, irrigation and the use of underground, surface and seawater; use of infrastructure, service and public utilities; use of roads and street pavements; fees for tours of scenic beauties, historical remains, cultural facilities, museums and libraries; fees for assessment and issuance of certificates for sports facilities; fees for land use rights certificates; and other charges for state administration relating to the rights and obligations of citizens. Subnational governments have also increasingly resorted to property income, land use levy and the sale of land-use rights, to increase their revenue.

Subnational government fiscal rules and debt
	Dollars PPP / inh.	% GDP	% general government debt	% SNG debt	% SNG financial debt
Total outstanding debt	59	0.7%	7.7	100%	-
Financial debt	-	-	-	-	-
Currency and deposits	-	-	-	-	-
Bonds / debt securities	-	-	-	-	-
Loans	-	-	-	-	-
Insurance pensions	-	-	-	-	-
Other accounts payable	-	-	-	-	-

FISCAL RULES: The 2002 SBL established that subnational government must follow a balanced budget rule. Regional state audit offices - units attached to the State Audit Office of Viet Nam – are responsible for auditing subnational governments and perform tasks locally as assigned by the State Auditor General. The Public Debt Management Law of 2017, in line with the 2015 SBL, acknowledges subnational government budget deficit and adds several conditions for subnational governments to manage the risk of local debt portfolios, based on the repayment capacity, and forbids overdue debts.

DEBT: The State Budget Law regulates local governments’ borrowing. The rule states that subnational government outstanding debt stock cannot exceed 30% of total subnational capital expenditure (Article 8, 2002 SBL). Under the control of the central government, subnational governments, mostly Provincial Councils and centrally-run cities, can borrow to fund provincial budget deficits and repay outstanding debt. Viet Nam is an ODA top receiver worldwide. The ability of subnational governments to access this source of revenue is regulated by the SBL. Part of a reform process concurrent with Viet Nam’s graduation to lower-middle income country, there is a decreasing access to concessional borrowing. Since the 2015 SBL, on-lending is included in the subnational government debt stock limit, enabling subnational governments to access government’s foreign loans and ODA (conditioned to the approval of line ministries).

Provincial-level People's Committees set borrowing limits for local budgets. As of 2019, the limit was set at 60% of local government budget in the provinces of Hanoi and Ho Chi Minh City, and at between 20% and 30% in other provinces. The provinces of Hai Phong and Dong Nai have the only ones to have access to commercial banks loans.

Subnational governments can also issue municipal bonds to invest in socio-economic development projects, upon approval from the Provincial-level People’s Council. Decree 01/2011 provides the framework for municipal bonds issuing, which must be approved by the Ministry of Finance. In 2021, there was a total of 14 municipal bonds issued, amounting to VND 11.2 trillion, with central government guarantee (1% of the total government bonds sector). Municipal bond issuance in the past eight years has been limited to two subnational governments (the Ho Chi Minh City Finance and Investment State-Owned Company and the Hai Phong People’s Committee), although other provinces have issued bonds in the past.

In 2020, the total public debt amounted to around 57% of GDP (below the statutory total public debt ceiling of 65% of GDP), a decrease since 2016 (63.7%). Subnational government debt, on the other hand, accounted for 0.7% of GDP (including on-lending) in 2020 (below the ceiling of 3% of GDP), and around 7.7% of total public debt.

TERRITORIAL MANAGEMENT OF THE CRISIS: The Vietnamese government implemented an effective response to the COVID-19 crisis, thanks to lessons learned from its experience dealing with previous health crises (e.g. SARS). The central government, through the creation of the National Steering Committee for COVID prevention and control (headed by the Prime Minister), delivered rapid guidelines to local governments. In addition, since the SARS outbreak, the country had increased investment in public health infrastructure, including in emergency operation centers and surveillance systems, which enabled the government to effectively manage the public health crisis. In May 2021, the central government set up a COVID-19 Vaccine Fund, an extra budgetary and non-profit fund to raise foreign and domestic donations and other financing sources for purchasing and producing vaccines.

Throughout the crisis, and despite the country’s centralised nature, Viet Nam applied a „whole-of-government“ and place-based approach. First, subnational governments were mobilised to provide free testing, meals and amenity services to all quarantine facilities, with support from the military. Second, ministries coordinated closely with provinces/cities, with communes, wards, and with residential quarters, where local officials informed individual households of government policies, and provinces/city authorities enjoyed autonomy to design responses appropriate to local conditions. Third, the central government implemented targeted containment strategies, with several local lockdowns (of villages, urban wards and sometimes whole cities based on the spread of COVID-19) and a national lockdown that lasted only two weeks. These strategies were made possible thanks to precision tools allowing measurement and hierarchising of infection risk: the F-scale for individuals, and the ‘high, medium, low’ tier scale for localities. Finally, the central government, via its sectoral ministries, developed a comprehensive communication strategy to raise awareness among the population about this issue and increase its trust in institutions, at national (Ministry of Health) and local levels, which facilitated the management of the crisis.

EMERGENCY MEASURES TO COPE WITH THE CRISIS AT THE DIFFERENT LEVELS OF GOVERNMENT: The COVID-19 pandemic in Viet Nam severely affected the economy, with a GDP growth of 2.6% in 2020, with an impact on employment and citizens’ income in 2020 and even more acute in 2021. The employment rate fell to 66.5% of the total population in 2021, impacting in particular the agricultural sector. Several people who lost their job during the pandemic exited the labor force entirely. The crisis particularly impact the youth, as their employment rate fell by 12% compared to pre-crisis level, reaching 39.9% in 2021, and women.

In 2020, the central government launched a fiscal package of VND 291.7 trillion (3.6% of GDP) to support the economy. It included measures such as deferring payment of VAT, CIT and PIT and several other tax obligations and land rental fees, exemptions of business registration tax and taxes on medical equipment, and deferral of contributions of firms and workers to the pension and survivorship funds. The same year, the central government passed Resolution No. 42/NQ-CP on measures to support those who are facing hardship due to the COVID-19 pandemic. It allocated direct cash transfers (total package with VND 36 trillion (0.5% of GDP) dedicated to affected workers and households (estimated 13% of the population), for a period of three months (April-June 2020).

Some subnational governments (e.g. Da Nang City) built up on this programme and contributed with their own budgets to expand the period and the range of beneficiaries of the programme, in particular to include more workers from the informal sector. Support measures continued in 2021.

IMPACTS OF THE CRISIS ON SUBNATIONAL GOVERNMENT FINANCE: At the central government level, total public revenue decreased by 2.8% in 2020 compared with 2019, driven by a decrease in revenue from crude oil, exportations and grants. On the other hand, total public expenditure increased by 2.3% compared with 2019, with an increase in capital expenditure and expenditure in health and social protection.

At the subnational level, the impact of the COVID-19 was striking, as subnational revenue decreased by 15.8% between 2019 and 2020, whereas expenditure rose by 26%. The crisis occurred at a time when many subnational governments were undertaking fiscal consolidation efforts. Consequently, most of the provinces had enough leeway to increase their borrowing significantly to respond to the challenges of the crisis, even though their fiscal space started deteriorating in 2020. Subnational governments were impacted differently by the crisis, the most severely hit being tourism-reliant cities, such as Da Nang and Hoi An. In Da Nang. These subnational governments had to actively use reserves and other lawful resources (including residual salary reform) to spend on COVID-19 prevention and control.

ECONOMIC AND SOCIAL STIMULUS PLANS: In 2022, Viet Nam’s National Assembly adopted Resolution 43/2022/QH15 (Resolution 43) to support Viet Nam’s economic recovery and help Viet Nam achieve a GDP growth of 6.5% to 7% between 2021 and 2025. This Resolution is accompanied by a financial package of USD 15 billion. In March 2022, the Ministry of Planning and Investment and USAID co-organised a conference to introduce Government Resolution 02/2022, which details measures for enhancing Viet Nam’s business environment and national competitiveness in 2022, with particular emphasis on socio-economic recovery and development. As of March 2022, 50 of 63 provinces had already prepared regional action plans and programs to implement this Resolution on the ground.

The recovery is also supported by aid from international donors, including USAID, UNICEF (to buy life-saving equipment and vaccine administration supplies), as well as from the World Bank, through an agreement of USD 221.5 million to support Viet Nam’s recovery from the COVID-19 crisis. The programme encourages policy reforms under two pillars: (i) an inclusive economic recovery, by easing the tax burden on businesses, improving access to financial assistance among vulnerable groups, reducing gender gaps in the workplace, and promoting financial inclusion; (ii) greening trade policies, accelerating the adoption of e-government, and increasing the uptake of renewable energy.