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Reducing VIetnam’s Public Investment to Increase Salary Level

After a review of the expense budget, the Finance Ministry forecasted that about VND20,700 billion will be used to increase the minimum wage from VND1.05 million to VND1.15 billion in 2013.

Public investment will be reduced to compensate for the increase

What is being discussed in the National Assembly is garnering much attention from the public. One of the pressing issues is a plan to increase the minimum wage.

Salary increase lower than the proposal

According to the approved plan, employees and workers in state-owned corporations will see their salaries increase to VND1.3 million in May 1, 2013. The Finance Ministry calculated that in order for this to become a reality, the Government will need to set aside an additional VND60,000-65,000 billion.

Due to difficulty in the capital allocation process, the Government has repeatedly postponed the wage increase deadline, from the Standing Committee Meeting on October 16 to an official report at the beginning of the 4th Session of the 13th National Assembly on October 22.

However, the deadline postponement encountered some resistance from NA deputies. Many deputies expressed difficulties that workers and retired employees, who receive salary from the Government Budget, would face and be requested to keep the deadline unchanged. Others proposed the Government to review public investment activities, reduce inappropriate investment projects instead of maintaining the current salary and wage level.

A lacklustre economy coupled with a period of high inflation has resulted in much hardship for the majority of people who rely on their salaries for a living, therefore the eagerness for a salary increase. However, the most serious problem is the price increase of necessities even before there is any proposal to increase the salary level. As a result, people express their hope in social forums that the Government will implement measures to stabilize commodity prices, especially the necessities, which is even more important than the salary increase itself. The previous salary increase has always been met with an increase in commodity prices, which effectively negates the positive impact of the salary increase and makes people''s live even more miserable.

After the Government''s request and discussion in the Parliament, the plan to increase wage levels was proposed, but not as high as previously expected. Finance Minister Vuong Dinh Hue proposed to add VND100,000 to the current wage level of VND1.05 million, effective from July 1, 2013. Around 8.3 people who are receiving retirement pension and social welfare beneficiary will benefit from the raise.

The head of the Finance Ministry asserted, "This is the most practical proposal that the budget can withstand. The Government understands that this adjustment is what salaried employees, including myself, really want at the moment."

According to the Finance Ministry, in order to ensure enough fund for the wage increase during the last six months of 2013, the budget will need an additional VND20,700 billion, out of which VND18,400 billion is needed at the Central Government and VND3,300 billion is needed at the provincial level. Given the continuing budget deficit, this additional amount will necessitate the Government to restructure the expense budget. According to Mr Hue, public investment will be cut off by VND10,000 billion to around VND170,000 billion, below the budget deficit level. The Government also plans to issue VND55,000-66,000 billion of Government Bond in 2013 while still keeping in mind the issue plan in the 2012-2015 period. In addition, the Central Government will also need to reduce their expenses by 10 percent to make available the necessary fund.

Reduce public investment to prevent lavish spending
During his speech before the Parliament on October 30 afternoon, Minister of Planning and Investment Bui Quang Vinh admitted that in order to make possible the wage increase, the Government will need to reduce public investment activities in 2013. Also according to the Minister, compared to the demand in 2013, the proposed invested capital of VND180,000 billion is very low. This number will be even lower if the expected revenue from taxed land of VND39,000 billion does not materialize. Because of the proposal to cut off an additional VND10,000 billion for the wage increase, the public investment activities will be further reduced.

In 2013, the Government is expected to allocate VND93,100 billion, or 51.7 percent the budget, to provinces. Besides the common expenses of more than VND20,000 billion, the budget is only left with around VND66,000 billion. Minister Bui Quang Vinh reckoned, "Inclusive of the expenses for national programs, fund allocated to provinces currently represents 73 percent of the budget, while the remaining 27 percent stays with the Central Government".

The goal for public investment is to reduce inefficiency to prevent lavish spending and investment. With the above analysis, the Head of the Ministry of Planning and Investment affirmed the monitoring authority of the Parliament upon decisions made by the People''s Council at all levels.

The Government is also looking at the possibility of issuing about VND60,000 billion of government bond in order to assist provinces to finish incomplete projects. However, the Minister also noted that the total investment capital available for the next three years from 2012-2015 is only VND600,000 billion (maximum of VND222,000 billion in 2014 and VND244,000 in 2015 respectively, minus the 10 percent reserve for insufficient revenue). Thus, provinces need to implement appropriate investment strategies to prevent lavish spending and investment given the economic and budgetary conditions.

Source VCCI


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