[By Vivel Ramkumar | Contributor]
When President Obama arrives in Vietnam this weekend, he will surely praise its leaders for their impressive achievement of sustained economic growth and poverty reduction. He will also talk about the benefits of the Trans-Pacific Partnership, thanking Vietnam for being part of the trade pact. But he should also highlight how modernizing governance can play an essential role in fulfilling Vietnam's aspiration of future prosperity.
Image: Vietnamese Deputy Prime Minister Pham Binh Minh shakes hands with U.S. Secretary of State John Kerry in Washington, D.C. in March. (Jim Watson/AFP/Getty)
There are signs that the government is acquainted with these issues and the changes they entail. A recent example is the path charted in "Vietnam 2035," a report that the government released earlier this year with the World Bank. (See here.) The report lays out how Vietnam can grow its economy while protecting its environment, promote equity and social inclusion, and improve the state's effectiveness and accountability.
The report highlights the interconnectedness of the economic and governance challenges that Vietnam faces as it enters the next phase in its development. For instance, it points out that Vietnam, as it loses access to concessional financing, will need to rely more on global capital markets, stating that this will "expose the country more directly to the scrutiny of global capital markets and private creditors, placing additional demands on prudent fiscal management and transparency, and the country's creditworthiness more broadly."
This observation is quite timely, as the government has been trying since last year to find an auspicious moment to issue $3 billion of bonds on the international markets. (See here.) In this context, one important way through which the government can woo risk-averse international investors is through increasing fiscal transparency, which is shown to improve the marketability of sovereign bonds.
Vietnam has a poor track record on fiscal transparency, as measured by the International Budget Partnership's Open Budget Index (OBI), an independent assessment of budget transparency. (See here.) The 2015 OBI found that Vietnam did not achieve basic international standards on budget transparency by failing to publish in a timely manner two of the most important budget documents: its budget proposal for the coming year (which the government presents to the legislature for approval) and its audit report (which independently verifies whether the government has executed the authorized budget in line with the law).
Encouragingly, Vietnam seems to be moving in the direction of sharing more information on the national budget with its citizens and international investors. Last year, Vietnam revised its State Budget Law and inserted provisions that require it to publish the state budget and related reports starting from the 2017 budget. This means the government should publish its budget proposal later this year. Having the budget available to the public in advance of being adopted by the National Assembly will be an important and welcome change, creating an opportunity for citizens and civil society to have input into plans for raising and spending public funds.
The significance of the change, however, will depend in part on how much information is presented in the document. It should include detailed estimates of expenditures, revenue, and debt. But it should also shine light on some of the darker corners of fiscal policy, such as extra-budgetary funds, support for state-owned enterprises, and quasi-fiscal activities. And then information on the approved state budget should be complemented later, once the fiscal year is completed, with an assessment of the actual results achieved from the implementation of the budget.
If Vietnam publishes its budget and audit report consistent with international norms, then it will fulfill two key requirements for joining the Open Government Partnership, a global multistakeholder initiative for open and accountable governance. While a number of countries interested in improving their image internationally would like to be a member of the initiative, OGP sets minimum good governance requirements that a country must meet before it can join. (Seehere.) Once a member, a country then lays out an action plan for future changes to promote transparency, empower citizens, and fight corruption - steps that are precisely in line with Vietnam's desire to modernize its economy and bolster the state's effectiveness and accountability.
While Vietnam has been well short of meeting the minimum OGP requirements, with the recent changes to its budget law, as well as a newly adopted law on access to information, it is now very close to becoming eligible for OGP membership.
President Obama should seize this opportunity to encourage Vietnam to commit to joining OGP and offer U.S. support to help make it happen. The United States already provides technical assistance to Vietnam's Ministry of Finance. It could redouble these efforts, assisting Vietnam in steps it is taking to improve fiscal transparency, consistent with both its revised budget law and OGP requirements. Other assistance could also include fostering a more open debate around the budget, with opportunities for civil society input.
OGP membership would also be a logical complement to the Trans-Pacific Partnership. Improved governance, including more open and responsive budgets, are the best way to help ensure that the gains achieved from economic reforms can have a positive impact on all sections of the population, particularly the most vulnerable. Making the commitment to join OGP would be an important step for Vietnam on its path to building a solid foundation for future prosperity.
Joel Friedman and Duong Thi Viet Anh co-authored this piece.
Vivek Ramkumar is director of International Advocacy & the Open Budget Initiative at the International Budget Partnership, a nonprofit organization headquartered in Washington, D.C., that collaborates with civil society around the world to analyze and influence public budgets in order to reduce poverty and improve the quality of governance.
Joel Friedman is a senior fellow with the IBP’s Open Budget Initiative and the vice president for fiscal policy with the Center on Budget & Policy Priorities, a D.C.-based nongovernmental public policy think tank.
Duong Thi Viet Anh is the managing director of CDI, which is a Vietnamese nongovernmental, nonprofit organization working for the rights of the disadvantaged groups to build a society of equity, solidarity, and sustainable development.