Photo: Duc Anh
Spending needs to be reined in given that State budget deficit is a problem, according to VEPR.
There should be more comprehensive regulations on the financial management of the Vietnam Fatherland Front (VFF), mass organizations, and special associations within efforts to cut public expenditure, the Vietnam Institute for Economic and Policy Research (VEPR) recommended in its research on spending on mass organizations, released last December to State agencies and to the general public recently.
Mass organizations, or State-sponsored mass organizations, also known as socio-political organizations, were founded by the Communist Party of Vietnam. The VFF and other mass organizations, after 1975, were organized as an extended arm of the Party in order to reach and mobilize the masses to participate in and support the Party’s policies, VEPR explained. Public associations, or “specialized associations”, were less connected and less strictly controlled by the Party and the government.
VEPR’s research gave three case scenarios on the total economic cost of the VFF, mass organizations, and special associations, based on its own estimates as official figures have not been released. In 2014 the total cost in the average scenario was VND52.68 trillion ($2.42 billion) and the best case scenario VND45.67 trillion ($2.04 billion). In the worst case scenario it was VND66.9 trillion ($3.1 billion).
The central budget for the abovementioned organizations in 2014 was VND1.261 trillion ($57.8 million), double the figure in 2006. “Support increased from VND781.3 billion ($34.9 million) in 2006 to VND1.8997 trillion ($85.08 million) for all the State mass organizations, accounting for about 1.1 per cent of the total State budget for central ministries and central agencies in 2014,” VEPR wrote.
This is equivalent to the amount of expenditure on the Ministry of Planning and Investment, the Ministry of Science and Technology, and the Ministry of Industry and Trade, it stated.
In 2012 there were 337,981 officials working for VFF, mass organizations and specialized associations nationwide, according to the General Statistics Office (GSO). “The numbers of working officials in the State bureaucracy who also hold posts in mass organizations are not included,” the report noted. “This number accounts for 1.1 per cent of Vietnam’s total workforce.”
“Up to 74 per cent of Vietnam’s population are members of at least one organization and 62 per cent are members of at least two organizations,” VEPR calculated. “These, theoretically, mean that Vietnam has among the highest participation in social organizations in Asia. An average Vietnamese is a member of 2.33 organizations, while the figure in China is 0.39 and Singapore 0.86.”
State budget burden
Spending on mass organizations is increasing at a time when the government’s fiscal policy space is particularly constrained, HSBC Vietnam’s At a Glance report, released in June, assessed. “In 2016 we forecast the budget deficit to widen again to 6.6 per cent of GDP, causing the public debt-to-GDP ratio to approach the National Assembly’s limit of 65 per cent.”
“The deficit was fairly manageable in 2010 and 2011 but widened sharply in 2012,” and “since then it has remained elevated, coming in at an estimated 6 per cent of GDP in 2015,” the report stated.
HSBC also pointed out that the deterioration in Vietnam’s budget profile can be primarily attributed to a steady reduction in revenues though a lack of progress on expenditure control is also an issue. The decline in fiscal revenues is mainly due to two factors: a fall in State oil revenues caused by the slump in global commodity prices and a slowdown in non-oil tax revenues.
According to the GSO, in the first five months of this year the State budget deficit was over VND66 trillion ($3 billion). This is quite high, especially when taxes and other State revenue are falling.