HCMC’s faster development will contribute more to country: Finance Minister

Minister of Finance Dinh Tien Dung yesterday hoped that the National Assembly will approve the draft resolution on specific mechanisms for HCMC to develop more strongly, create breakthroughs and contribute more to the country’s Gross Domestic Product (GDP) growth.
A corner of HCMC (Photo: SGGP)
A corner of HCMC (Photo: SGGP)

At an NA discussing session yesterday noon, minister Dung said that most NA deputies supported the resolution’s issue. HCMC is the country’s largest economic hub and motive force, contributing one fifth of the country’s GDP. The city's growth rate is 1.6 times the whole country.

The number of businesses in HCMC account for one third of the country. HCMC has modern economic structure with 99 percent being industry and services. Therefore, the city’s faster development will contribute more to the country’s development, he affirmed.

HCMC now contributes to nearly 30 percent of total budget revenue annually. It has been the biggest contributor to the central budget with increasing contribution level showing the spirit of the city for the country.

Specifically, the ratio was 71 percent in 2004-2006, hiking to 74 percent in 2007-2010, 77 percent in 2011-2016 and 82 percent in 2017-2020. It is just like NA deputies’ statement that HCMC earns VND100, keeps VND18. In addition, the city has contributed over one third of the country’s revenues from export import and crude oil, which the central budget enjoys 100 percent.

2018 estimates which the NA has assigned HCMC is VND376 trillion ($16.56 billion). That means the city must earn over VND1 trillion ($44 million) a day. If HCMC agrees to raise its estimates by 1 percent, the revenue burden on other localities will much reduce.

However, the city’s growth rate has been slowing down, reducing from two digit number in 1986-2010 (10.2 percent) to one digit number in the following phase (9.6 percent). That has directly impacted the country.

Although other localities posted outstanding growth rates during the same phase, their contribution levels to central budget were not large and insufficient to make up the shortage. Aside from that, HCMC’s budget revenue growth rate have also slowed. It was about 20 percent previously but has dropped to 14-16 percent.

Because 80 percent of domestic revenues and 100 percent of export import and crude oil revenues in HCMC belong to the central budget, city difficulties and risks will largely affect the central’s budget.

According to minister Dinh Tien Dung, mechanisms and policies proposed for HCMC are mainly decentralization in land, investment, budget finance management, authorization among city government levels and public payrolls. These come within the jurisdiction of the central government at present.

The Government has proposed the NA to permit HCMC to study and build some legal regulations, which are short now, to report them the Government, the NA Standing Committee or the NA to allow pilot implementation.

Some NA deputies have expressed concerns about giving the city more autonomy in financial policies, especially property tax proposal, and budget revenue policy change.

Minister Dung said these concerns exact but when proposing the policies, HCMC and the Government have anticipated problems arising from these. Hence, the draft resolution has stipulated principles in order not to largely impact buisnesses, especially small and medium scaled ones, and minimize influences on cargo production and circulation nationwide.

The resolution’s issue does not mean immediate tax hike. HCMC will build specific projects to determine increase levels, and taxable objects; fully estimate impacts on business environment, residents’ lives and other social impacts to report to the city People’s Council, the Government and the NA Standing Committee or the NA to consider and decide.

The Government have discussed and agreed with HCMC that mechanisms will not basically change the balance of state budget and public debt in the five year financial plan as well as public investment plan in the phase of 2016-2020. The plan of allocating mid-term public investment capital for ministries and localities will not be affected.

HCMC’s faster development will contribute more to country: Finance Minister ảnh 1 Minister of Finance Dinh Tien Dung (Photo: quochoi.vn)

 From now until 2020, the city will continue contributing to the central budget with the current rate and the Government will not supplement more funds for the city because of budget difficulties.

HCMC will collect about VND20 trillion out of VND250 trillion from equitization in the country’s five year plan. The Government has proposed the NA to permit HCMC to keep this source of income.

In addition, the Government has proposed not to assist the city with VND18.8 trillion from the central budget as per plan to prevent from affecting the central budget and other localities in need of financial assistances.

Still that might affect the progress of projects in HCMC. So the city can study NA deputies’ suggestion to keep implementing the mid-term public investment plan assigned by the Government and refund received amounts when getting revenues from equitization and state capital withdrawal.

Minister Dung said that the book value of state capital withdrawal from 39 businesses under the city’s management in the phase of 2016-2020 approximates VND42 trillion. HCMC is expected to receive VND67 trillion from equitization.

In the upcoming phase, when the city sees stronger economic development, equitization revenue might not stop at VND20 trillion but it will be much higher than that. At that time the revenue left for the city will be significant according to the draft circular.

About land use fee and state property sale, Mr. Dung said that the city could keep 50 percent of the revenue before 2007 under the State Budget Law 2002 and the Prime Minister’s Decision 09. Since 2017, 100 percent of these belong to the state budget. The draft resolution allows HCMC to keep 50 percent like before.

The revenue is calculated after deducting costs on site clearance, removal and new headquarters’ construction. That is applied for central government agencies in the city except those belonging to national defense and security field.

It is expected that HCMC will remove 81 establishments of the central government to reclaim 50,949 square meters of land and receive VND17.8 trillion in the phase of 2017-2020. Still most of these amount will be spent on site clearance and new headquarters’ building, the city will enjoy only 50 percent of the small remaining amount.

Taking about increasing outstanding loan level for the city, Mr. Dung said that HCMC’s outstanding loan is estimated to reach VND22 trillion as of December 31, 2017, accounting for 40 percent of permissible level.

If increasing the level to 90 percent, the city’s loan will approximate VND70 trillion, accounting for 0.3 percent GDP under 2018 estimates. Current regulations require the loan level increase must ensure public debt safety and state budget balance.