DIRECTIVE

ON FORMULATION OF THE SOCIO-ECONOMIC DEVELOPMENT PLAN AND STATE BUDGET ESTIMATES FOR 2007

In furtherance of the Xth National Party Congress' Resolution on orientations and tasks of the 2006-2010 five-year socio-economic development plan, with an important target of accelerating economic growth, raising the efficiency and sustainability of development, and quickly bringing our country out of the underdevelopment state, the Government already submitted the 2006-2010 five-year socio-economic development plan to the National Assembly for decision.

The Prime Minister hereby requests ministries, branches, localities, economic groups and corporations 91 to thoroughly grasp the Xth National Party Congress' Resolution and the 2006-2010 five-year plan, continue with renewal in all aspects, from the thinking on the direction of economic reform to the contents and methods of formulating plans; exploit to the utmost potentials and advantages so as to accelerate economic development; in the immediate future, concentrate efforts on formulating the socio-economic development plan and state budget estimates for 2007, with the following principal requirements and contents:

A. PRINCIPAL OBJECTIVES AND TASKS OF THE 2007 PLAN

I. OBJECTIVES AND TASKS

The year 2007 is the second year of realizing orientations and tasks of the 2006-2010 five-year socio-economic development plan, a crucial year in sustaining the momentum for the fulfillment of the objectives of the 2006-2010 five-year plan and for effective international economic integration.

The Prime Minister hereby requests ministries, central agencies and localities to concentrate efforts on properly performing the following principal objectives and tasks:

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To create a favorable environment and conditions in order to reduce costs and raise the quality of services. To improve the quality of domestic trade, attaching special importance to the development of distribution networks in the context of integration. To consolidate and reorganize the real estate market.

To associate the enforcement of the Anti-Corruption Law and the Law on Thrift Practice and Waste Combat with the improvement of construction and investment management. To reorganize project management units; to step by step put an end to closed investment and construction; to enhance supervision and inspection so as to effectively prevent embezzlement and waste and ensure the quality of projects. To create conditions for the economy to develop stably and sustainably at a rate higher than that of 2006.

2. To effect socialization in various social domains, encouraging the private sector to invest therein.

To renew state management and extend the rights to autonomy and accountability of non-business units operating in the culture, healthcare, education, physical training and sports domains; to generate a sustainable change in educational and training development; to step by step improve the quality of social services. To continue effectively implementing the comprehensive strategy on economic growth, hunger eradication and poverty alleviation and the millennium development goals.

To apply policies to step up the generation of new jobs, develop the vocational training system and improve the quality of human resources with an appropriate structure.

To effectively address pressing social issues, especially crime, drug abuse and traffic accidents; to control population growth.

3. To reduce environmental pollution, improve environment quality, and basically solve the problem of environmental deterioration in plants, industrial parks and densely populated areas; to improve the environment in highly polluted rivers, lakes, ponds, ditches and canals.

To improve the capability of forecasting unfavorable natural and weather changes. To raise the capacity of preventing and minimizing negative impacts of natural disasters and unfavorable climatic changes on the environment, to promptly respond to and overcome consequences caused by natural disasters.

To exploit natural resources and environmental conditions in river basins in a rational, effective and sustainable manner, ensuring ecological balance, nature conservation and bio-diversity preservation. To promote communication, education, training and fostering work so as to raise awareness about the environment, considering environmental conservation and protection as a responsibility of the whole society.

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5. To strengthen and consolidate defense and security, firmly preserve national independence, maintain social order and safety, especially in key regions, border areas and islands, forming a stable political environment for economic development and international integration.

II. TASKS OF FORMULATING THE 2007 STATE BUDGET ESTIMATES

Ministries, branches, localities, economic groups and state corporations shall formulate the 2007 state budget estimates in strict accordance with the provisions of Law on State Budget, the Government's Decree No. 60/2003/ND-CP of June 6, 2003, detailing and guiding the implementation of the Law on State Budget, and relevant legal documents, paying attention to the following contents:

1. The 2007 state budget revenue estimates should be formulated in strict accordance with current policies and regimes in a positive manner so as to encourage production and business development, expand markets and fulfill international commitments on tax. At the same time, effective and rational solutions should be worked out to enhance tax collection management, combat tax losses and tax evasion, smuggling and trade frauds, and limit outstanding tax debts.

To formulate the state budget estimates with the targeted mobilization level of over 22% of GDP, of which tax and fee revenues account for over 21%. To increase the estimated domestic revenues (excluding revenues from crude oil) by at least 14-16% on average over the 2006 figure.

2. The 2007 state budget expenditure estimates should be formulated on the basis of criteria and norms for the allocation of the 2007 state budget decided by the Prime Minister. When formulating and allocating the 2007 budget estimates, attention should be paid to the following contents:

a/ In 2007, to focus on the allocation of development investment expenditures to target programs on socio-economic development, hunger eradication and poverty alleviation in the 2006-2010 period, with priority to be given to mountainous areas, the Central Highlands and difficulty-hit ethnic minority regions; to attach importance to the allocation of investment capital for traffic and irrigation infrastructure, development of power sources and rural infrastructure; to continue prioritizing investment capital for education and training, science and technology, and people health care, etc.

Ministries, branches and localities should arrange in their 2007 development investment expenditure estimates adequate domestic capital contributions to ODA-funded projects, capital for works and projects under construction (especially key and urgent projects and works and capital construction works which will be completed and commissioned in the year), capital for the work of planning and investment preparation; capital for payment of amounts still owed to completed capital construction components of project; and capital for repayment of amounts advanced from the state budget. The remainder shall be allocated to new and important projects and works, particularly the national ones, projects on irrigation, rural traffic development, infrastructure in flood-diverting and 'slowing areas, tourist infrastructure, infrastructure in trade villages, commercial infrastructure, aquacultural infrastructure and support for trade promotion and market expansion activities, etc.

To provide targeted additional allocations of development investment capital from the central budget to local budgets and other targeted allocations under the Prime Minister's decisions.

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In the course of formulating the 2007 state budget estimates, ministries, branches and localities should combine the estimation of budgets for state agencies with the implementation of the Government's Decree No. 130/2005/ND-CP of October 17, 2005, on the rights to autonomy and accountability for payrolls and administrative management funds, applicable to all state agencies, and combine the estimation of budgets for public non-business units with the implementation of the Government's Decree No. 43/2006/ND-CP of April 25, 2006, defining rights to autonomy and accountability for the task performance, organizational apparatus, payroll and finance of public non-business units, respectively.

c/ For expenditure estimates for national target programs, Program 135 (phase II), and the Program on planting five million hectares of forests: Based on the list of national target programs in the 2006-2010 period, program-managing ministries and branches shall coordinate with the Ministry of Investment and Planning and the Ministry of Finance in finalizing reports on the review and evaluation of the implementation results in the 2001-2005 period, formulating objectives and tasks of, and amending and supplementing mechanisms and policies applicable to, national target programs in the 2006-2010 period for submission to the Prime Minister for approval; at the same time, to determine specific objectives and tasks of, and the 2007 expenditure estimates for, national target programs, Program 135 (phase II) and the Program on planting five million hectares of forests and send them to the Ministry of Investment and Planning and the Ministry of Finance for including into the 2007 state budget estimates, which will be reported to the Government and submitted to the National Assembly according to the provisions of the Law on State Budget.

d/ To continue allocating budget capital and mobilizing other financial sources according regulations for carrying out wage reform under the wage policy reform scheme.

The Ministry of Finance shall guide ministries, branches, central agencies, localities and state budget-funded units to apply measures to create sources for wage reform in strict accordance with regulations along the line of earmarking part of the 2007 revenues which they are permitted to retain according to current regulations for wage reform, saving at least 10% of the 2007 regular expenditures (excluding wages and amounts of wage nature); and carrying forward unused amounts (if any) of the previous year's capital sources for wage reform for continued spending in 2007. Local budgets shall use at least 50% of annual revenue increases and unused amounts of previous year's revenue increases (excluding increases of revenues from collection of land use levy) for carrying out wage reform in 2007. If all the aforesaid sources are not enough, the central budget shall provide supports to ministries, central agencies and localities in order to ensure adequate sources for carrying out wage reform according to regulations.

e/ For ODA-funded programs and projects, estimates should be fully formulated in strict accordance with the provisions of the Law on State Budget and its guiding documents, the Government's decrees on management of investment and capital construction and on ODA management and use, with attention paid to detailed estimates of ODA capital and domestic capital contributions to each program and project, depending on the source of capital, capital construction investment capital or non-business capital, so as to ensure their execution schedules.

f/ The central budget and local budgets of all levels shall set aside contingency funds according to the provisions of the Law on State Budget for active response to natural calamities, floods, epidemics and for the performance of important and urgent tasks not yet included in the estimates.

In the course of formulating the 2007 state budget estimates, ministries, branches and localities should fully anticipate expenditures for the implementation of policies and regimes as well as for performance of new tasks (if any) in order to prevent the lack of funds for the performance of regular tasks and newly arisen tasks and the implementation of adopted policies after the budget estimates have been allocated by competent authorities.

3. Formulation of local budgets of all levels

As 2007 is the first year in the new period of budget stabilization according to the provisions of the Law on State Budget, the 2007 local budget estimates shall be formulated along the line of developing local budgets, increasing the self-balancing capacity and reducing additional allocations from higher-level budgets or increasing the percentage (%) of amounts to be remitted to higher-level budgets as compared to the previous budget stabilization period in accordance with the provisions of the Law on State Budget.

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a/ Estimation of state budget revenues in localities: Based on the objectives set in the 2006-2010 socio-economic development plans already approved by Party congresses of various levels, the capability of realizing the 2006 socio-economic and budgetary targets, forecasts on economic growth and revenue sources in 2007 for each branch, domain and economic establishment and newly arising revenue sources in localities, to fully and accurately calculate revenue sources for each domain and each kind of revenues according to regulations. Domestic revenue estimates (excluding revenues from crude oil) shall increase at least by 14-16% and revenues from import and export activities by 8-9% over the 2006's figure.

b/ Estimation of local budget expenditures: Based on criteria and norms on the allocation of the 2007 budget expenditures and the 2007 socio-economic development tasks of localities, to formulate specific local budget expenditure estimates for each spending activity according to regulations.

Based on estimates of state budget revenues in localities, local budget expenditure estimates shall be calculated on the basis of criteria and norms for the allocation of the 2007 budget expenditures and revenues and determination of revenue sources to be enjoyed by local budgets according to decentralization; to determine the revenue shares (%) between the central budget and local budgets and additional allocations from the central budget to local budgets in 2007 (if any), which shall be kept unchanged during the new budget period.

c/ For the proceeds from the collection of land use levy, localities shall estimate corresponding capital construction expenditures for investment in socio-economic infrastructure projects and projects on population relocation and resettlement, and construction ground preparation.

d/ For revenues from construction lotteries, in 2007, targeted allocations shall be provided from the central budget to local budgets corresponding to the estimated annual revenues from construction lotteries, which shall be kept unchanged during the 2007-2010 period, for investment in social infrastructure, primarily for education and healthcare.

e/ Localities shall calculate sources for carrying out wage reform according to the provisions of Point d, Section II of this Circular and the guidance of the Ministry of Finance.

f/ The estimation of to be-mobilized development investment capital shall comply with the provisions of the Law on State Budget and the Government's Decree No. 60/2003/ND-CP of June 6, 2003, ensuring that the balance of mobilized debts (including amounts planned to be mobilized in the year) shall not exceed 30% of capital construction investment expenditure estimates of provincial-level budgets (100% for Hanoi city and Ho Chi Minh city in particular). At the same time, local budgets shall arrange capital for repayment of due debts and mobilized amounts (both principals and interests) according to the provisions of law.

g/ In estimating local budget expenditures, detailed budget expenditures for each spending domain shall be allocated in the order of priority defined in Clause 2, Section II of this Directive and in strict accordance with the provisions of the Law on State Budget; as for capital construction investment expenditures, it is necessary to identify capital construction debts and advanced capital amounts, etc., so as to arrange capital construction investment expenditure estimates in the 2007 local budgets for their full payment; to estimate expenditures for the implementation of national target programs (for tasks to be performed by localities) on the basis of identifying specific objectives and tasks of each national target program to be implemented in localities in 2007.

h/ Based on the prescribed norms for the allocation of freight and price subsidy estimates, localities shall take initiative in allocating funds and provide freight and price subsidies in accordance with their practical situation of goods items, products, support levels and support areas, etc.

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4. Along with the formulation of the 2007 state budget estimates, ministries, branches, central agencies, localities and state budget-funded units shall analyze and assess the results of budget spending in 2006; concentrate efforts on directing and organizing the final settlement of the 2005 state budget and checking the approval of the 2005 budget settlement in strict accordance with the Law on State Budget; handle violations and settle existing problems and wrongdoings detected and recommended by inspection and audit agencies.

5. In the course of formulating the 2007 state budget estimates, ministries, branches, central agencies, local authorities and units should comply with the Government's program of action for thrift practice and waste combat under the Prime Minister's Decision No. 25/2006/QD-TTg of January 26, 2006, ensuring thrift and efficiency in the estimation, allocation and use of budgets, and the implementation of the Prime Minister's directions on reducing 2007 budget expenditures for overspent items in 2006.

Heads of ministries, central agencies and localities should concentrate efforts on directing and reviewing all steps in the allocation, management and use of state budget, especially capital construction investment capital and loans so as to ensure that budget capital shall be allocated to proper subjects for proper purposes in strict accordance with set regimes and that the management and use of budget capital shall be effected in strict accordance with regulations and be subject to reporting, inspection and audit regimes in order to prevent losses and waste.

6. Ministries and central agencies shall formulate budget expenditure estimates for each implementing unit and each important spending task and send them to the Ministry of Finance and the Ministry of Investment and Planning for sum-up and reporting to the Prime Minister.

Ministries, central agencies and localities shall take initiative in preparing detailed explanations on their 2007 budget revenue and expenditure estimates according to regulations.

B. PLANNING TIMETABLE AND ASSIGNMENT OF IMPLEMENTATION RESPONSIBILITIES

I. PLANNING TIMETABLE

1. In June 2006, the Ministry of Planning and Investment and the Ministry of Finance shall give guidance on the framework socio-economic development plan and the state budget estimates for 2007, which shall serve as a basis for ministries, branches, localities, economic groups and corporations 91 to formulate their respective plans.

2. In June and July 2006, ministries, branches, localities, economic groups and corporations 91 shall formulate their socio-economic development plans and state budget estimates for 2007; and send reports thereon to the Ministry of Planning and Investment and the Ministry of Finance before July 20, 2006, for sum-up and submission to the Government.

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4. In September 2006, the Ministry of Planning and Investment and the Ministry of Finance shall report to the Government on the socio-economic development plan and state budget estimates for 2007 for the Government to submit them to the National Assembly according to the provisions of the Law on State Budget.

5. Before November 20, 2006, the Prime Minister shall assign the 2007 socio-economic development plan and budget estimates to ministries, branches, localities, economic groups and corporations 91 on the basis of the National Assembly's resolution on the 2007 state budget estimates and tasks.

6. Before November 25, 2006, the Ministry of Planning and Investment and the Ministry of Finance shall provide detailed guidance on the 2007 socio-economic development plans and state budget estimates to ministries, branches, localities, economic groups and corporations 91.

7. Before December 10, 2006, ministries, braches and localities shall make final decisions on the allocation of plans and budget estimates to their subordinate units on the basis of tasks assigned by the Prime Minister and the guidance of the Ministry of Planning and Investment and the Ministry of Finance.

II. ASSIGNMENT OF IMPLEMENTATION RESPONSIBILITIES

1. The Ministry of Planning and Investment:

a/ To assume the prime responsibility for, and coordinate with the Ministry of Finance in calculating and deciding plans and major balances for use as the basis for ministries, branches and localities to formulate their 2007 plans;

b/ To assume the prime responsibility for, coordinate with the Ministry of Finance and provinces and centrally-run cities in, formulating plans on stabilization of local budgets (development investment capital amounts) in the 2007-2010 period;

c/ To assume the prime responsibility for, and coordinate with the Ministry of Finance and concerned ministries in, studying and formulating criteria for and principles for the allocation of capital construction investment capital to ministries and central agencies in 2007; provide targeted allocations from the central budget to local budgets so as to support capital construction investment and other targeted allocations and submit them to competent authorities for decision for use as a basis for formulation of the 2007 plans on distribution and provision of targeted allocations to localities;

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e/ To assume the prime responsibility for, and coordinate with the Ministry of Finance in, drafting development investment plans and capital construction investment capital allocation plans; coordinate with the Ministry of Finance and national target program-managing ministries in assessing national target programs in the 2007-2010 period (under the Government Office's Official Letter No. 1275/VPCP-VX of March 10, 2006) and drafting plans on the allocation of capital to programs and projects and 2007. To sum up plans on the allocation of expenditure estimates to national target programs;

f/ To work with ministries, branches and localities on the 2007 socio-economic development plan, investment and national target programs.

2. The Ministry of Finance:

a/ To assume the prime responsibility for, and coordinate with the Ministry of Planning and Investment and localities in, formulating a plan on stabilization of local budgets in the 2007-2010 period (regular expenditures);

b/ To guide ministries, branches and localities to evaluate the fulfillment of the 2006 state budget estimates; to formulate budget estimates and notify the examination numbers of state budget revenue and expenditure estimates of 2007 to ministries, branches and localities according to their assigned domains;

c/ To assume the prime responsibility for, and coordinate with the Ministry of Planning and Investment and concerned agencies in, formulating and summing up the 2007 state budget estimates; to work with ministries and central agencies on budget estimates and with provincial/municipal People's Committees (according to the provisions of the Law on State Budget) on the 2007 state budget estimates.

3. Ministries, central agencies, economic groups and corporations 91:

a/ To coordinate with the Ministry of Planning and Investment and the Ministry of Finance in formulating socio-economic development tasks and budget estimates in the domains under their management.

b/ National target program-managing ministries and branches (identified in the Government Office's Official Letter No. 1275/VPCP-VX of March 10, 2006) shall coordinate with the Ministry of Planning and Investment, the Ministry of Finance, ministries, branches, central agencies and localities in elaborating contents of programs in the 2007-2010 period and in projecting tasks and funds for the implementation of the programs in 2007.

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4. Provincial/municipal People's Committees

To guide, organize and direct provincial/municipal Planning and Investment Services and Finance Services to closely coordinate with other services in formulating socio-economic development plans and state budget estimates and gather comments on the draft plans so as to obtain high consensus thereon before submitting them to competent authorities for decision, and report thereon to central agencies according to regulations.

The Prime Minister hereby requests ministers, heads of ministerial-level agencies and Government-attached agencies, presidents of provincial/municipal People's Committees, state economic groups and state corporations to organize the implementation of this Directive.