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REVIEW of FINANCE - Issue 1, 2023
socio-economic development plan for the period of 2021- The proportion of investment capital from the non-state
2025, development investment spending has decreased economic sector increased from VND 1,173.9 trillion,
to VND 489,900 billion, accounting for 28.66% of total accounting for 53.69% of total social investment in 2015
state budget expenditure. The reason is the outbreak and to VND 1720.2 trillion, accounting for 59.48 % in 2021.
spread of the fourth wave of the COVID-19 epidemic and Through Figure 1, we can see that GDP growth
strict social distancing policy which made investment recovered clearly, maintaining a high rate, especially in
capital of the whole society, especially the State and the years 2017-2019 (with the corresponding growth rates
foreign direct investment capital decreased sharply. reaching 6.81 and 7.08% in 2017, respectively, 2018 and
According to the World Bank (2017), investment 7.02% in 2019). This is an encouraging result in the context
spending in Viet Nam is maintained at a high level of the world economy, global trade and economic growth
compared to the region and the world, showing that the in most regions, with economies only reaching about 6.84
State's investment in public infrastructure has continued %/year (reaching the target of 6%). GDP growth rate in
to be maintained in recent years, mainly because Viet the period 2016 - 2019 is quite high, averaging 6.8%.
Nam's infrastructure is still low and undeveloped. The State investment has brought efficiency and
For developing countries like Viet Nam, in the course quality to help economic growth, labor productivity of
of industrialization, public investment often plays the whole economy at current prices in 2021 is estimated
a critical role as the driving force for development. at VND 171.3 million/worker (equivalent to 7,398 USD)/
The proportion of public investment is often high in labor, an increase of 538 USD compared to 2020). At
the total investment of the whole society because the constant prices, labor productivity in 2021 will increase by
demand for infrastructure development is always high 4.71% due to the improvement of workers' qualifications
in total social investment. Using public investment as (the proportion of trained workers with diplomas and
a tool, the "tractor" creates a driving force to promote certificates in 2021 will reach 26.1%, higher than the 25.3%
industrialization, rapid growth and is a key tool for of 2020). Investment efficiency index (ICOR - Incremental
macroeconomic management. Capital - Output Ratio) decreased from 6.42 in 2016 to
Of the total development investment from the state 6.11 in 2017; 5.98 in 2018 and 6.08 in 2019. On average in
budget, investment in infrastructure development the 2016-2019 period, the ICOR coefficient reached 6.13,
accounts for a fairly large proportion. On average, over lower than the coefficient 6.25 in the 2011-2015 period,
90% of total development investment expenditure comes the average in the period 2016- 2020 ICOR coefficient
from the state budget. reaches 7.04.
Total social development investment capital in the In 2017, the Resolution of the 5 Conference of the
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2017-2021 period is estimated at VND 12,978.5 trillion, 12 Party Central Committee was issued, reaffirming
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equaling 45.8% of GDP, exceeding the 5-year average the requirement to develop the private economy to
target (32-34%). The investment structure has changed become the driving force of the socialist-oriented market
positively, the investment proportion of the State sector economy. This Resolution sets a target of 1 million
has decreased, in line with the orientation of restructuring businesses in the private sector in operation by 2020,
public investment and gradually reducing state and 2 million by 2030... The Resolution also targets the
ownership in enterprises and economic groups, especially private sector to contribute 50% of the GDP in 2020, 55%
the State sectors do not need to hold controlling shares. in 2025 and 60-65% in 2030.

TABLE 1: STATE BUDGET EXPENDITURE STRUCTURE FOR THE PERIOD 2017-2021 (BILLION)
Content 2017 2018 2019 2020 2021
Total state budget expenditure 1,461,873 1,616,414 1,526,893 1,787,950 1,709,200
Development investment spending 365,526 411,277 421,845 550,028 489,900
Interest payment 98,900 109,718 107,065 107,297 105,865
Aid spending 1,300 1,310 1,527 1,660 1,630
Always 906,019 954,117 951,254 1,072,068 1,059,197
Education and training expenses 217,057 230,974 257,593 249,471
Science and technology spending 11,263 12,310 12,675 10,763
Spending on salary reform, 35,767 55,323 25,505
downsizing the payroll
Additional expenditures to the 100 100 100 100
financial reserve fund
State budget reserve
Source: State budget public portal – Ministry of Finance

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