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Ho Chi Minh City has ‘no time to react’ to abrupt budget cut proposal

Tuesday, October 25, 2016, 09:53 GMT+7
Ho Chi Minh City has ‘no time to react’ to abrupt budget cut proposal
Ho Chi Minh City

A proposal to cut a portion of Ho Chi Minh City’s annual revenue in the 2017-2020 period has disturbed city officials and economic experts alike.

The proposal was made during a working session of Vietnam’s lawmaking National Assembly on Saturday afternoon, when the country’s legislators discussed budget plans for 2017-2020.

Currently, Ho Chi Minh City keeps 23 percent of its annual revenue, with the remaining added to state coffers. But the proposal suggests cutting this to 18 percent.

This translates into an approximate VND80 trillion (US$3.57 billion) budget cut each year for the economic hub, which contributes more to state coffers than any of the country’s other administrative divisions.

Ho Chi Minh City Deputy Party Chief and People’s Council President Nguyen Thi Quyet Tam voiced her objection to the idea at Saturday’s NA discussion, saying the city's administration had never backed out of fulfilling even the most challenging tasks set upon them by the central government.

“But do not count on that and make it too difficult for Ho Chi Minh City,” she said.

According to Tam, the city currently needs over VND500 trillion ($22.32 billion) in capital to invest in its infrastructure, which she said was “too cramped”.

The deputy party chief added that Ho Chi Minh City had reduced its recurrent expenditure to the absolute limit, and that any further budget cuts would only hurt the city’s development and infrastructure, impacting the entire region.

As the country’s economic hub, Ho Chi Minh City welcomes hundreds of thousand of non-resident students who flood to the city every year, as well as a similar number of workers from other cities and provinces who take up jobs in the city’s massive industrial and export processing zones.

“Such an abrupt budget cut would leave [Ho Chi Minh City’s] economy with no time to react. The Government and National Assembly needs to reconsider [this proposal],” Tam said.


Nguyen Thi Quyet Tam, Ho Chi Minh City Deputy Party Chief and People’s Council President, at the National Assembly working session on October 22, 2016. Photo: Tuoi Tre

Even with 23 percent of its revenue retained, Ho Chi Minh City still finds itself short of capital for traffic network development plans, as its current budget only meets 30 percent of the money required, according to Director of the municipal Department of Transport Bui Xuan Cuong.

This is not the first time the city administration has complained about budget allowances relative to the size of its economy, as Ho Chi Minh City leaders have repeatedly called for a new financial and administrative mechanism to replace the current one that they say has been stopping the southern metropolis from developing to its potential.

The latest proposal was made in early June, when the city’s administration asked for a special mechanism that would allow it to retain a portion of export-import tax revenue; levy a surcharge tax on specific businesses and keep all of the money generated from the privatization of state-owned firms operating in the city.

Based on Saturday’s budget cut proposal, it seems that these calls by city leaders have been ignored by the central Government.

Revenue of approximately VND367 trillion ($16.38 billion) is anticipated for Ho Chi Minh City in 2017, which means that should the proposed cut go through, the city will keep VND66.06 trillion ($2.95 billion).


Vehicles stuck in a traffic congestion in Ho CHi Minh CIty. Photo: Tuoi Tre


Luong DInh Cua Street in District 2, Ho Chi Minh City is heavily flooded after a torrential downpour on September 26, 2016. Photo: Tuoi Tre

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