Fiscal decentralization in Vietnam: Emerging issues

Transition to market economy in Vietnam calls for accommodating changes in policies and institutions for providing public services. The paper traces t he evolution of fiscal arrangements, analyzes recent developments and ident ifies emerging challenges. Despite recent changes, the issues of incentives, accountability, autonomy and flexibility in decentralized provision of public services are yet to be addressed satisfactorily. The implementation of the new budget law provide s a legal framework. It also clarifies the: roles of different agencies and levels of government. The stability in arrangements is expected to bring a measure of certainty. On the flip side, the budget determination process i s predominantly "top-down" and local governments still do not have powers t o raise revenues. Further, there are wide variations in the administrative capacity and building capacity poses another challenge. It is also necessar y to introduce a simple and transparent formula based system of transfers t o offset revenue and cost disabilities.