Cash-strapped city badly needs more breathing space

10-Dec-2019 Intellasia | The Saigon Times | 6:02 AM Print This Post

The issue of budget allocation for HCM City is revisited now as the city’s top leaders at the ongoing session of the municipal People’s Council, which began on Saturday, called on central authorities to reconsider the proportion of budget revenue the city retains. Currently, the proportion is set at 18%, and given the city’s budget revenue target for 2019 at VND400 trillion, the city is entitled to keep VND72 trillion while the rest must go to the central State budget.

In fact, the final amount can be a bit bigger as the city will also be subject to revenues higher than the centrally-assigned target, but the surplus is not substantial as seen in last year’s revenue just a tad higher than the target.

Speaking to reporters on the sidelines of the People’s Council’s meeting on Saturday, HCM City Chair Nguyen Thanh Phong complained that the 18 percent retained by the city is the lowest worldwide. A survey among major cities, according to Phong, shows that the lowest rate recorded earlier was in Tokyo, at 30%, while the highest was seen at a Norwegian city, at 60%.

According to Chair Phong, the city is requesting central authorities to gradually raise the proportion to 33 percent in the next ten years, a timeline already suggested by Secretary of the HCM City Party Committee Nguyen Thien Nhan.

Nhan as the city’s top leader at a meeting a fortnight ago urged relevant city agencies to submit a proposal to central authorities to loosen the purse strings for the city. Specifically, the proportion should be kept at 18 percent in 2018-2020, but should gradually be raised to 24 percent for the 2021-2024 period, and 33 percent for the subsequent five years.

In fact, the city, always touted as the locomotive for the national economy, has long faced a severe shortage of funding for development. Solutions to a lot of pressing issues such as traffic congestion, floodwater drainage, wastewater treatment, and environmental protection have got stuck due to undercapitalisation, let alone other pivotal projects for development like infrastructure development and climate change adaptation.

Inadequate funding for vital socio-economic projects makes it hard for the city to maintain sustainable development, and if the situation remains unaddressed in the near future, the locomotive may lose its momentum, adversely affecting the development of not only HCM City but the nation as well.

In an earlier study, HCM City experts put the total demand for investment capital in the city at VND850 trillion for the 2016-2020 period, but investment from the city’s State budget could make up a mere 20%.

This share of State investment in the city’s economy is deemed too low compared to the national level. Statistics from the finance ministry, according to, shows that due to obstacles to public investment disbursement, State investment in the local economy is estimated at 31 percent this year compared to 33.3 percent in 2018.

The HCM City economy, needless to say, is far better than the national economy in terms of investment efficiency. Its labour productivity is 2.93 times higher than the national average, while the incremental capital output ratio in the ten-year period of 2001-2011, according to a recent study, was 3.42 compared to the nation’s 5.65, meaning a sum invested in the city will generate an output 60 percent higher than in the country as a whole.

Apparently, the city needs more breathing space in terms of funding for development, if the country’s economic hub is to sustain growth to benefit itself as well as the national economy in the long term.


Category: Economy, Vietnam

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