Further stepping up decentralization in order to develop road infrastructure in Thua Thien Hue province

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UPPSALA UNIVERSITY
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UNIVERSITY OF ECONOMICS & BUSINESS, VNU
UNIVERSITET
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MASTER THESIS OF MPPM
FURTHER STEPPING UP
DECENTRALIZATION IN ORDER TO
DEVELOP ROAD INFRASTRUCTURE
IN THUA
THIEN
HUE PROVINCE
Authors: Vu Cao Dam
Le Anh Tuan
Nguyen Ngoc Duong
Supervior: Dr. Nguyen
Khac
Hung
Dr. S\ en
Jungerheni
Class: MPPM Intake
2,'"
U-Group
Hanoi,
September

2011
Group
11:
Vu Cao Dam - Le Anh
Tu4n
- Nguyen Ngoc Duong
MA Thesis: Further Stepping Up Decentralization in Order to Develop Road
Infrastructure in
Thua
Thien Hue Province.
Supervisor: Dr. Nguyen Khac Hung &
Prof.
Sven Jungerhem.
Date of completion: 01 September
2011.
1/Aim:
The road system plays an extremely important role to any
countr\\
like the blood
vessel of a human body. Construction of roads requires big
investments,
which are, in
Vietnam, mainly from the state budget, of which the central budget (including the state
budget, government bonds, and loans through loan agreements with other countries or
international financial institutions) accounts for a bigger proportion than the local budget.
Many projects have
been,
over the past years, funded by the central
budget,
of which some

were not decentralized; others decentralized during their implementation; and, still others
decentralized from the beginning. The situation has been popular across the
countr>\
including
Thira
Thien Hue
Province,
although decentralization of management has become a
trend in many other countries with certain achievements. The Vietnamese Government has
had a guideline of acceleration of decentralization since 1986. including in the field of
management of central investments for road and bridge
constructions,
but there has not been
any specific legal provision for the field. This gap in management not only reduces the
effectiveness of government management but also give opportunities for negative issues such
as group interests or corruption which limit the
de\elopmenl
of road infrastructure in
Vietnam in general and in Thua Thien Hue in particular.
The study aims to contribute to further decentralization of management to develop the
road infrastructure of Thua Thien - Hue
Province,
work out a method for effecti\e
decentralization of management of investment in road and
bridge
constructions,
and make the
activity transparent to limit the corrupt issues mentioned
abo\
e.

2/Method:
Based on our desk study of related
theories,
existing legal and
regulator)
documents,
international seminar
articles,
and, our
inler\iews
and consultations of the stakeholders and
investigation of done projects, we shall describe our object of study and conduct a critical
analysis to arrive at our conclusions and solutions.
2.1
Theory
The authors ha\e found out a number of scholarly concepts and viewpoints, but only the
closest definitions to the study will be introduced in this thesis.
In
addition,
we have looked
into the reforms and decentralizations conducted by some developed countries that share quite
similar characteristics to Vietnam such as the landmass and government levels such as South
Korea, Japan, Thailand, and even Sweden, a country that has many preeminent advantages for
other countries to learn from. Those related contents have been made available at international
workshops or summary reports of authorities of those countries.
This method allows an overall view of the study, helps work out the development
trend,
contributions and shortcomings of the activity under question that will in turn enhance
confidence in real work and avoid its weaknesses in practice.
2.2

Interview
We have interviewed related public leaders such as the representatives of the central
Ministry of Transportation, the Provincial Department of Transportation, the districts and the
contracts, the latter being intermediary units.
Our interviews of related issues clarify the practical
problems,
concepts and viewpoints
that the other information channels may not give.
2.3
Investigation of some local decentralized projects
We will investigate some centrally-budgeted projects in Thua Thien Hue for their
actual practice, analyse and compare that to the existing regulations and
stakeholders'
viewpoints to arrive at relevant recommendations for practice and further study.
This method allows us to
haxe
the most
specific,
practical and
objective
consideration
of the topic.
2.4 Legal documents
We
will
investigate the contents related to the
topic,
which are found in Vietnam's
legal documents such as laws, government decrees, and other
documents,

in order to analyse
and provide a method for effective decentralization of the task of investor for effective RBC
investment management.
This method allows us to work out the legal gap, if any, of the
topic,
based on which
to propose additional contents for further legal amendments so that the study results can work
in practice.
3/
Result & Conclusions:
There is then an
ureent
need of a set of criteria as the basis for coherent logical
decentralization in the field, in avoidance of opportunities for corruption or group
interests
rhe set of criteria consists of two parts on road construction and bridge
construction. Below is a part of the set:
CRITERIA FOR DECENTRALISATION OF
INVESTORS OF ROAD CONSTRUCTION
I
1
2
3
4
5
ROAD CONSTRUCTION
CRITERION
Nature of
construction
Grade of

construction
Constructional
group
Competences
Constructional
scope
CONTENT
Projects of secret national
defence and security
Other constructions
Highway of traffic of more
than 30,000 vehicles per 24
hours or speed is more than
lOOkm/h
Highway of traffic of
10.000-30.000 vehicles per
24 hours or speed is more
than
80km/h
Traffic of less than
10,000
vehicles per 24 hours and
speed is less than 80km/h
Projects of national
importance by National
Assembly Resolutions and
other important projects
Total investment is bigger
than 1,000 billion VND
Total investment is smaller

than
1,000
billion VND
Project Investor must have
competences of Rank 1
Project Investor must have
competences of Rank 2
Involving two or more
provinces
Involving only one
beneficiarx
province
CONDITIONS FOR
DECENTRALISATION
No decentralisation
No condition
No decentralisation
Being experienced of participating in
management of projects of similar
grade
No condition
No decentralisation
Being
experienced
of participating in
management of projects of similar total
investment
No condition
Satisfying required competences
No condition

Similar competences of the invoked
provinces
No condition
NOTE
Special
grade
Grade
1
Grade
2
or
lower
Group
A
Group
A
Groups
B&C
4/
Suggestions for future research:
The study must be however continued in other pro\ inces to complete the set and add
some other criteria such as: the criterion of allocation of the central budget as in\estments to
provinces; the criterion on evaluation of
citizens'
satisfactions to constructions managed by
the central authority and provincial authorities as investors; subdi\ision of the proposed
criteria with ranges of score for each
5/
(
ontribution of the thesis:

Proposing this set of criteria for decentralization in the field of road and bridge
construction that is funded by the central budget is new. but the individual criteria of this set
is not new because they have been used individually throughout the country in many different
projects of different capital sources. However, the scope of their related legal documents has
not mentioned decentralization of management of central-budget RBC investments and even
such
foreign-ftinded
projects as
WB3,
ADB5. We therefore believe that the introduction of
this set of criteria in practice of decentralization of management of RBC investments will be
highly effective and contributing to the road development in the
province,
because: 1. It can
mobilize the competences of the provinces - they will be made more
active,
creative and
responsible for their decisions; 2. It will reduce many procedures and procedural durations
because it reduces intermediary levels; 3. It stops lobbying for becoming in\estor of a project
unsuitable with the experience and competences of a province that waste both time and
money; 4, The central authority can spend more time and human resources making
policies,
plans and strategies for development other than on settling micro affairs that
pro\
inces can do
well
Besides, because this study is highly
generalised,
we
have,

based on experience of
decentralisation of other
countries,
drawn out the inevitable trend and effecti\eness of
decentralisation. The trend not only suits macro-level issues but also the narrower field of
decentralisation of management of RBC investments as the topic of this study. This has been
clarified through our process of collecting and investigating
data,
related concepts, and legal
documents in Vietnam. Because every province plays an equal role in the political system of
Vietnam,
our selection of
Thira
Thien Hue or any other
proxince
is random and
representative. Moreover, Thira Thien Hue has representative characteristics for the other
provinces in the region and the whole
country,
so our selection of the province for this study
will enrich the information channels and study methods. As a
result,
the set of
criteria,
which
has been analysed, synthesised, and established, can be applicable suitably to many different
pro\
inces of the
country,
though more infonnation and data must be collected from specific

pro\
inces of application for proper adjustments.
ACKNOWLEDGEMENT
The thesis subject on decentralization interestingly came into being when our Swedish
professors asked us to form a
group,
consisting two members working for local govemments
and one for the central
government,
for our graduation thesis.
The deeper we investigated in the subject, the more we understood that this contains
pressing, up-to-date, even sensitive issues on large scales. Due to the limit of time and size of
the MA thesis, we ended up deciding to study decentralisation only in the field of management
of investment in road and bridge construction because we have certain professional knowledge
and a quite favourable starting point during the study.
In
addition,
we are grateful to both our
Vietnamese and Swedish professors for their enthusiastic guide of our research. Our sincere
thanks go to Dr. Nguyen Khac Hung. Chairman of the Board of Directors of Management
Consultation and Development, JSC. (MCaD) - our Vietnamese co-supervisor, who has spent
much time and
effort
guiding us through this study. Our special thanks go to
Prof.
Sven
Jungerhem - our Swedish co-supervisor from Uppsala University for his provision of much
new knowledge, experience and methods of study. Last but not
least,
we would like to thank

the Centre of International Training and Education
(CITL),
College of Economics and
Business under Hanoi National
Unixersity
for having introduced us to the professors, from
whom we have received very useful academic guides for this thesis.
Ha Ndi August
2011
Co-authors
TABLE OF CONTENTS
Page
CHAPTER 1: GENERAL THEORY ON DECENTRALISATION. DECENTRALISATION
OF MANAGEMENT, AND INTERNATIONAL PRACTICES 5
1.1
''Decentralisation"
and
"decentralization
of management" 5
1.2 International practices 7
1.3 Theory of management decentralization in Vietnam 9
CHAPTER 2: THE REALITY OF MANAGEMENT DECENTRALISATION
IN
COMMUNICATION AND TRANSPORTATION
IN
VIETNAM AND THUA THIEN -
HUE 14
2.1
Reality of management decentralization in communication and transportation
in Vietnam

14
2.1.1
Legal documents
14
2.1.2 Practice
14
2.2 Practice of management decentralization for road infrastructure in Thira Thien - Hue
16
2.2.1
General situation of road communication in Thua Thien - Hue
16
2.2.2 Practice of management decentralization for road infrastructure in
Thira Thien - Hue
16
a. Information collected from interviews
1
7
b.
Analysis of some decentralized projects 20
CHAPTER 3: CONCLUSION AND PROPOSAL OF A SET OF CRITERIA 25
3.1 Proposal of a set of criteria 25
3.1.1
Basis 25
3.1.2 Contents 29
3.2 Conclusions and Directions of further study 32
References
-^"^
Appendixes
-^"
INTRODUCTION

1.
Rationale
The road system of a country is consistent. To use it effectively requires a consistent
development plan and compatible exploitation standards to ensure smooth nationwide
transportation. The road system plays an important role in socio-economic
development,
but it
can hardly attract private investments because it requires huge funds and takes a long time to
take back those investments. As a result, road constructions are mainly invested by the state
budget,
and the central government budget accounts for a bigger proportion than that of local
governments in investment in road constructions.
In
the
past,
road projects invested by the
central government budget were all managed by the central government, but many of them
have recently been invested by the central budget through the Ministry of Transportation
(MoT) but managed by local governments through their Department of Transportation (DoT).
Some are first planned to be managed by the MoT but then transferred to DoTs. The questions
are,
"Why are
thew
including projects under
deplo\ment.
decentralised to local go\emments?
Can local governments manage those projects more effectively than MoT?
Since 2000. the Vietnamese
Goxernment
has been promoting its Public Administration

Reform, which encourages further decentralisation of management between the central and
local governments. There are some criteria for decentralisation of management of taxation or
budget,
\et there ha\e been no specific regulations on decentralisation of management of
projects on road infrastructure construction. The question is what projects (of which size.
nature and scope) should be decentralised to local govemments for more effectiveness.
2.
Objectives
and research question
The thesis aims to accelerate decentralization of management to de\elop road
infrastructure,
which is an urgent issue taken into consideration by this stud\. As a
result,
the
research question is
"Flow
can the task of investor be decentralized to manage in\estments in
road and bridge construction
cffccti\el\.
in avoidance of group interests and corruption?"
3.
Scope of study
The thesis shall study the impacts of regulations on investment management to propose a
method of decentralization of management of investment in road infrastructure. Due to the
limited time and resources for this study, the data since 2000 shall be collected from Thira
Thien Hue as a typical province for the study.
In
Vietnam's
political system, the provinces all have an equal relationship with the
central government. Being a province in Central Vietnam

with
an average landmass.
population,
and GDP per capita, compared to the other provinces. Thira Thien Hue has everv
normal ways of communication and transportation (i.e.
airlines,
railways,
roads,
sea
lines,
and
waterways) and corresponding infrastructure facilities for those communication. Because it is
a province of highly representative characteristics of all the other provinces. Thira
Ihicn
Hue
has been selected as the object of study. Besides, the statistics and analyses of this thesis have
been generalized, so its results can be applied to the other provinces of the country'.
4.
Methods of study
Based on our desk study of related
theories,
existing legal and regulatory documents,
international seminar
articles,
and. our interviews and consultations of the stakeholders and
investigation of done projects, we shall describe our object of study and conduct a critical
analvsis to arrive at our conclusions and solutions.
4,1
Theory
The authors ha\e found out a number of

scholar!)
concepts and \iewpoints. but only
the closest definitions to the study will be introduced in this thesis. In
addition,
we
ha\e
looked
intti
the reforms and decentralizations conducted
b}
some developed countries that
share quite similar characteristics to Vietnam such as the landmass and govemment levels
such as South
Korea,
.lapan,
I'hailand.
and c\cn
Sweden,
a countr\ that has
man>
preeminent
advantages
for other countries to learn from. Those related contents have been made available
at international workshops or
summar\
reports of authorities of those countries.
This method allows an overall view of the
study,
helps work out the development
trend, contributions and shortcomings of the activity under question that will in tum enhance

confidence in real work and avoid its weaknesses in practice.
4.2
Interview
We will interview related public leaders such as the representatives of the central
Ministry of
Transportation,
the Provincial Department of Transportation, the districts and the
contracts, the latter being intermediary units.
Our interviews of related issues will clarify the practical
problems,
concepts and
viewpoints that the other information channels may not give.
4.3
Investigation
of some local decentralized projects
We will investigate some centrally-budgeted projects in Thira Thien Hue for their
actual practice, analyse and compare that to the existing regulations and stakeholders'
viewpoints to arrive at relevant recommendations for practice and further study.
This method allows us to have the most
specific,
practical and
objectixc
consideration
of the topic.
4.4 Legal documents
We will
inxestigale
the contents related to the
topic,
which are found in

X'ietnam's
legal documents such as laws, govemment
decrees,
and other
documents,
in order to anal\se
and provide a method for effective decentralization of the task of investor for effective RBC
investment management.
This method allows us to work out the legal gap. if any, of the
topic,
based on which to
propose additional contents for further legal amendments so that the
studv
results can work in
practice.
CHAPTER 1
GENERAL THEORY ON DECENTRALISATION, DECENTRALISATION OF
MANAGEMENT, AND INTERNATIONAL PRACTICES
1.1
''Decentralisation"
and
"decentralization
of
management"
Decentralisation is a popular concept on many information channels and in various
legal documents. According to en.wikipedia.org, decentralization in an organization is defined
as follows, "Decentralization is the policy of delegating decision-making authority down to the
lower levels in an
organization,
relatively away from and lower in a central authority. A

decentralized organization shows fewer tiers in the organizational
structure,
wider span of
control, and a
boltom-to-top
fiow of decision-making and fiow of ideas." This concept of
decentralization appeared quite early when Henry
Fayol
- a mining engineer and a famous
French management theorist argued.
"Everything
that goes to increase the importance of the
subordinate's role is
decentralisation,
everything that goes to reduce it is centralisation."
(Fayol. 1916; available on internet).
Decentralisation of management is a more specific concept of decentralisation. It is
defined, also by Wikipedia
(en.wikipedia.org),
"Administrative decentralization seeks to
redistribute authority, responsibility and financial resources for providing public services
among different levels of governance. It is the transfer of responsibility for the planning.
financing and management of public functions from the central govemment or regional
governments and its agencies to local governments "
The recent practice shows that
"Decentralisation,
a worldwide
trend,
reflects a more
democratic and participatory approach to govemment

even
in countries traditionally
characterised by pronounced centralism" (Teresa TerMinassian.
1999:
pp 55).
1.1.1
Forms of
decentrali/ation
The few past decades of the world have witnessed
the
following forms of
decentralisation:
- In terms of origin, there are four major forms of decentralisation: the models from
France, the (former) USSR, the UK and the traditional model. This kind of classification is
now of almost no consideration. (Joint UNDP-Govemment of Germany. 1999, pp:
11-14)
- In terms of hierarchy and
function,
there are territory-based and function-based
decentralization. The former type is the provision of centrally-produced goods and services to
local administrative units in the government hierarchy: the latter is a delegation of
responsibility from the central level to
para-statal
organizations managed by the central
government or to non-public or non-governmental organisations. (Joint UNDP-Govemment of
Germany.
1999,
pp:
11-14)
- Classification by Berkeley argues that there are eight forms of decentralisation: (1)

decentralisation: (2) functional decentralization: (3) interest organization: (4) provincial-level
deconcentration;
(5) ministerial-level
deconcentration:
(6) delegation of powers to
autonomous authorities: (7) charity; and, (8) marketisation. (Joint UNDP-Govemment of
Germany.
1999,
pp: I
1-14)
- Based on the types of administrative framework and
functions,
which are responsible
for production and delivery of collective goods and services that were presented by the
L'nited
Nations in
1962.
there are four forms of decentralization:
svstems
of local govemments,
systems of partners, systems of multilateral
partners,
and
sv
stems of integrated
administrations. (Joint UNDP-Govemment
of
Germany.
1999.
pp:

1
1-14)
-
In
terms of
political,
spatial, market and managerial
purposes,
there are three types of
administrative decentralisation: deconcentration.
decentralization,
and delegation. (Joint
UNDP-Government
ofGemiany.
1999,
pp:
11-14)
1.1.2
Advantages and
disadvantages
of decentrali/ation
a,
Advantai^es
- Decentralisation gives an
opportunitv
of making
a
more
responsible,
open and

transparent
[government:
-
It
helps remove obstacles in
a decision-making
process',
- Decentralisation can reduce complicated bureaucratic administrative procedures and
increase government officials' sensitivity to local conditions and needs;
-
It
can enable central ministries to reach more local fields in need of service delivery;
- It helps reduce financial tension of the central govemment when local govemments are
empowered more to mobilize their funds through tolls and charges of services they deliver;
- Decentralisation can allow a more political representation of different groups in decision-
making;
- It can reduce amount of minor affairs so that high-ranking leaders in central ministries
can focus more on policy-making;
-
It
can create a local geographical focus for more effective coordination and more
opportunities for local people's participation in decision=making;
- Decentralisation can provide more creative, responsive and innovative programmes
through allowing local implementation of pilot projects;
-
It
can also increase political stability and national unification;
h,
Disadvantaijes
- It can remove the scale economic effectiveness and reduce the control of

the central
government over scarce financial resources. Weak administrative and technical competences
of local governments may lead to ineffective delivery of public services in some fields.
- Insufficient corresponding financial sources for decentralization of administrative
responsibilities to local governments make it difficult to deliver full services. Decentralisation
may sometimes make if difficult to coordinate national policies and may lead to private
benefits of local officials.
- During implementation of
decentralization,
a lack of trust between the public and private
sectors may worsen local cooperation.
(CIEM,
pp5-6)
1.2
International practices
An international conference on "Development and Decentralization in Asia"
held
in
Kytakvushu, Japan, in 2003 stated that "Decentralisation is one of the hottest topics all over
the world nowadavs".
1.2.1
In Korea
Facing the fact that
"In
late 1997. Korea's foreign reserves were virtually depleted and
the countrv was on the brink of the declaring a moratorium" (Seung-Woo Chang 2002; pp 01),
the South Korean govemment decided to reform the public
sector,
including a "change from a
centralized to a decentralized government" (Seung-Woo Chang 2002; pp 26)

It
means to transfer more service delivery responsibilities to local govemments in order
to make them more responsive and to devolve responsibility within public agencies to give
frontline managers greater incentive and ability to respond to citizen's needs (Hee Joon Song
2003;
ppl5),
specifically:
- Implementation of Full-scale Autonomy: Local autonomy came to be understood not
only as a grass root
democracy,
but also as an important means of enhancing and social
development through competition among local government.
- Reshuffling Local governments: includes merger and abolition of local administrative
units.
- Workforce Reduction
- Delegation of Functions and Resources: Approximately
?>%
(1.174
functions) of all
functions managed by the central government have been delegated to local governments
through the scrutiny of the Committee. (Hee Joon Song 2003;
ppl5)
Five years of the drastic reform have resulted in successful achievements: "As a result
of relentless
nationwide
reform including the public
sector,
the Korean economv has bounced
back rapidly and was revitalized" (Seung-Woo Chang 2002: pp 2).
1.2.2 In Thailand:

"Most Thai local
governments
have weak
capacitv
in financial
management,
planning and
service delivery, and generally lack adequate resources to deliver
service
effectively or to
provide needed investment" (DaNa Weist. 2003: pp 83). In
1997.
the Thai Pariiament passed a
programme
of lurllicr
decentralization.
Strengthening local govemment was identified as a policy
prioritv
in the Government's 7
National
l.conomic
and Social
Development
Plan
(1991-1996)
and
8^^
Plan
(1997-2001).
The

7'^'
Plan emphasized developing local infrastructure
facilities,
providing credit to expand and
improve local services, and assisting local authorities in mobilizing capital and formulating
development projects. The 8th Plan emphasized strengthening the management and budgetary
capability of local institutions, and supporting decentralization.
In
support of 8th Plan
objectives, the Department of Local administration within the
Ministrv
of Interior has work to
enhance local capabilities in three areas: i) Local administrative system: ii) developing tax and
property maps to enhance local revenue collections and increasing local tax rates; iii) training
local personnel. (DaNa Weist.
2003.
pp 84)
After six years' implementation, Thailand gained remarkable development. Effectiveness
of the decentralization was
seen,
and further decentralization was
made,
for
example,
in the
field of health, "The Ministry of Public Health is supporting the establishment of provincial
Heath Authorities that would be responsible and accountable for improving heath indicators
by purchasing and/or providing the right mix of health inputs that raise health outcome".
1.2.3
In

Sweden
Sweden, a developed country and a world-leading democracy, has carried out decentralization
in the spirit that "the responsibility and decision-making powers of municipalities have been
decentralised and shifted to even lower levels" (Lennart Gustafsson, Ame Svensson 1999: pp
72) in fields ranging from garbage
collection,
health
care,
education to physical planning and
building, where "local roads and streets are the responsibility of local govemments. all others
are the responsibility of the central govemment (Lennart Gustafsson. Ame Svensson
1999:
pp
76-77).
Obviously, the fact that almost all fields in Sweden have been
clearlv
decentralised has
contributed to making the
countrv one
of the richest nations in Europe and a leading
democracy in the world.
1.3
Theory
of management decentrali/ation in
X'ietnam
In
Vietnam,
"the local authorities were
verticallv
linked with the central govemment

and their exercise of power had to be carried out with due recognition of that vertical link"
(Nguyen
Khdc
Hung:
2003.
p:
136).
Like in
manv
other countries, there are five tvpes of
decentralisation in Vietnamese:
i)
Deconcentration:
the stale holds the
power
which is not
concentrated at the centre, but places officials to carry out its tasks; ii) Delegation: an agency
or official authorises a unit or subordinate to use some
power,
on its behalf to
carry
out some
special tasks: iii) Devolution: Give power or property to autonomous units to
carry
out the
functions; iv) Deregulation: One the other hand, to reduce cumbersome rules and
regulation,
and on the other hand, to make new and easy applicable rule and regulations for the public to
follow; and. v) Privatisation: apart from the notion of shifting the ownership from the state to
the private sector, this includes the ownership in the hands of the state while the tasks are

carried out by other sectors to make the state free to focus on macro level issues (Nguyen
Khac Hung:
2003.
p. 134). Of the
types,
devolution and deconcentration are two main forms
the government of Vietnam has developed.
However,
there has been much confusion over
decentralisation in Vietnam. This is indicated in the fact that a distinction is being made
between decentralisation of function and decentralisation of power. In realitv. there is a
tendency for the allocation of tasks (decentralisation of function) to become contrary to the
desired, decentralisation of power. This is widely seen as a major unwanted element of the
current situation as it amounts to a lack of
central
power to confer authoritv. leading to a
weaker state rather than stronger. (Nguven Khac Hung
2003,
pp:
137).
The
6^^
National Congress of Vietnam Communist Party (VCP) in
1986
marked an end
to the previous centrally planned economy with subsidy. To meet the demands of the new
phase, state management has been gradually decentralized with "clearlv defined duties,
responsibilities and powers of each level on the principle of democratic centralisation"
(Vietnam
t\Mnmunist

Party.
1987.pp:
118).
The state
clearlv
defines "the
authoritv
and
responsibility of each government level. The central level will decide macro-level issues while
management is decentralized to promote initiatives and the sense of responsibilitv of local
governments""(Vietnam
C\>mmunist
Partv. 1995. pp: 25), and even emphasized that "power
shall be delegated \o the closest government level of
settlement""!X'ietnam
Communist Partv:
1997,
pp: 52).
Decentralisation was however made
reallv
more drastic and specific in 2001 with the
requirement to "conduct strong decentralization in the administrative svstem along with
improved centralization and consistency in issuing institutions.
I
he
responsibilitv
and power
of each level, organization or individual shall be clearlv defined: personal
responsibilitv.
0

proper reward and discipline must be upraised: overlaps and "responsibility-passing" that
cause difficulties and delays at work and
seulement
of citizens' complaints must be
overcome""(Vietnam Communist Party. 2001. pp
216-217).
Accordingly, the Government's Public Administration Reform (PAR) Master Programme
2001-2010,
which realizes the VCP resolution, set the target of "By 2005. new regulations on
decentralization between the central and local govemments and among local govemments
shall be fully developed and issued to improve the authority and responsibility of local
govemments and enhance their relations and responsibility to citizens. Decentralisation of
tasks shall be made along with corresponding decentralization of finance, organization and
staff.
Issues under complete local authority, those in consultation of the central govemment
and those to be realized in line with the central government's decisions must be clearly
defined". In 2004, the Government issued Resolution No.
08/2004/NQ-CP
that expressed its
determination of "further promotion of decentralisation of state management between the
central
government
and the prov inces and centrally-run cities".
Decentralization in Vietnam has been taking place vibrantly for 25 years, a long time
by the time we conduct this study. Some people may wonder if such decentralization is
necessary or why it is repeated over different National Congresses of VCP.
Manv
summary
reports of its 20 years' renovation have shown clearly that Vietnam has been achieving
increasingly many more achievements in almost all the fields,

partlv
thanks to the
decentralization, whose lessons have been
drawn
and practice perfected along the
development process of the country.
In the early
21''
cenlurv. decentralization has become not only an academic concern but
also a quite important issue facing politicians in policy-making. However, decentralization is
still feared to trigger many problems such as " in highly decentralised budget
setting,
the
fiscal operations of subnational govemments can have important macroeconomic effects
which, in the absence of effective co-ordination mechanisms, can run counter to the
stabilisation efforts of the central government." Are those problems
reallv
strong barriers to
decentralisation? Or. are they merely reasons to justify delaved reforms or a retaining of
powers for private interests?
fhe
problems have been
thoroughlv
settled bv
manv
developed
countries in the worid. For
example,
similar barriers have been removed in South Korea when
" a strategy was devised to encourage the use of citizens' audit request system in order to

improve accountability in local govemments. The
citizens,
audit request system allows
citizens to request an audit by a higher-level office in case a local office is deemed to be
against public interests " OR "investment and loan projects above a certain size will be
subjected to stricter evaluation in order to improve local govemment finances. This is in
response to criticism that much wasteful spending has been caused
bv
unjustified events or
favours by local govemment ahead. The relevant laws have been amended to introduce a
financial penalty system whereby transfers to local govemments may be reduced if a local
government is found to have incurred financial losses through illegal activities or
procedures"(Seung-Woo Chang 2002; pp 48-49). Although this is
onlv
one of the
t>pical
solutions to bad consequences of
decentralization,
but no one has ever persuasively reason that
decentrali/ation will produce more disadvantages than advantages. As a result, achievements
of decentralizing countries prov ide clear ev idence of positive contributions of decentralisation.
Acceleration of decentralization and empowerment is considered a step ahead in state
management,
but to make decentralization successful is an art because decentralization should
reduce but not remove the powers of higher government levels while giving lower-level
governments more powers for ultimate improvement of public
alTairs
should not lead to their
abuse. Decentralisation must be understood in two ways: "top down" and "bottom up". That
is,

decentralized powers can be revoked when lower-level govemments have insufficient
competences or
conditions,
on
the
principle of "empowering a local government that can
realize those decentralized powers well."
In addition, to avoid interest-gaining and responsibility-passing in
decentralization,
the
competences of a lower-level govemment must be measured before a certain degree of
decentralization is determined for it in association of powers and responsibilities to specific
organizations and individuals so as to implement decentralized powers correctly. At the same
time,
to ensure the effectiveness of decentrali/ation. the decentralizing authoritv must not
leave
evervthinu
to the decentralized
one:
the former must reserve the power of control and
12
supervision over the latter. In short, decentralization must ultimately improve work
effectiveness; no matter in what approaches it is conducted.
Finally, both the theory and practice of decentralization so far applied in the rest of the
w^orld
are quite cleariy on a macro level. However, we can not find any specific documents in
Vietnam and other countries that mention decentralization of management of Road-and-Bridge
(RBC) investments. This is an extremely important and sensitive field because it spends a
huge part of the state budget to gradually complete the infrastructure of road communication.
As a result, a study to accelerate and enhance decentralization in this field is very necessary

and urgent. It
will
be carried out in the steps below to seek a way for effective decentralization
of management of
RBC'
investments.
CHAPTER 2
THE REALITY OF MANAGEMENT DECENTRALISATION IN COMMUNICATION
AND TRANSPORTATION IN VIETNAM AND THUA THIEN - HUE
2.1 Realitv of management decentrali/ation in communication and transportation in
Vietnam
2.1.1 Legal documents
Although many legal documents (such as Budget Law No.
01/2002/QHI1.
Construction Law No.
I6/2003/OIII
1. Decree No. 209/2004/ND-CP on management of
constructional
quality.
Government Decree No.
12/2009/ND-CP
on management of
investment projects in
construction.
Decision No. 59/2007/QD-BGTVT of the
Ministry
of
Communication and Transportation (MoC
T)
on decentralization and delegation of authority in

management
of
centrally-funded
MoC
I
construction projects) have been issued.
decentralization
(f
management of centrally-funded
RBC'
investments remain vaguely
defined.
Despite the availability of related legal documents on. among other
things,
decentralized
budget management and decision-making on investment projects: there has not been no single
stipulation on the aspect of our study. It is
easilv
understandable because those documents
provide only decentralization of decision-making of projects related to state budget under local
management. As a
consequence,
it has not met expectations of good governance in general
and those of effective central state budget investment in road and bridge construction in
particular
2.1.2
Practice
Although the road
plavs
a vital role in socio-economic

development,
its big
investments and very long time of return rarely attract the private sector; as a
result,
most
investment projects in the field are funded by the central govemment of Vietnam through stale
budget
allocation,
government
bonds and loans gained through loans agreements that are
signed with other countries or international financial institutions. As a
result,
the central
budget often corners a bigger proportion in investments in road development than the local
budgets. It was a common practice in the past that investment projects under the central budget
were all
managed bv
the central authoritv (the Ministrv of Communications and
14
Transportation - MoCT). but many investment projects from MoCT budget have recently
been decentralized to local authorities (Provincial Departments of Communications and
Transportation - DoCTs) for management. Even some ongoing projects being managed by
MoCT divisions have been transferred to DoCTs. Questions then come about the reason(s) of
the decentralization to local governments of even ongoing projects; about whether local
governments can manage those investment projects effectively; and. about what the basis of
decentralization was. Questions similar to them always remained half-answered because they
were sometimes
clarified,
some other times
obscured,

and even vaguely explained
Over the past years, MoCT has conducted stronger decentralisation to other investors
and project management units (PMUs) for implementation and responsibilitv-bearing while
the ministry conducts only its function of state management and provision of institutions for
control and supervision. For
example,
the PMU of My
Ihuan
Bridge and PMU 1 have been
decentralised to become direct investors of some big traffic projects that involve investments
of billion VND, on a pilot basis. In
2010,
87 out of 267 projects in the field across the nation
have been decentralised to DoCT as investors.
Although the decentralisation has been increasingly promoted, poor-quality projects
have been found more popular over the past few years. For
example,
parts of some
constructions have been out of order just after being put into use (e.g. the National Highway
91 (in Can Tho), the National Highway 53 (in VTnh
Long),
the National Highway 48 (in Nghe
An),
some parts of the National Highway
lA
(under Project
W
B4). the National Highway
27B,
the surface of Thang Long

Bridge,
the road in
Phii
Yen Province ) It is a fact that few
projects have been carried out bv local investors in line with their respective
progress,
and
many have been prolonged or extended tor years before completion. This situation is caused
by the fact that most investors do not manage projects on their own but hire external
consultants to do so while the former are mainly responsible for management of project
quality. Besides, the competences of some local investors and PMUs remain too limited in
terms of skills and professions to meet the requirements of big-scale projects that require high
15
techniques. Those investors have entrusted their whole task of quality management to external
supervisory consultants.
When local public investors have insufficient management competences, series of
other consequences will arise and reduce the construction quality. As a
result,
the basis for
further decentralisation to correct local investors and PMUs. in avoidance of thin-spread
"egalitarian"
division of central investments to all provinces, especially when there is limited
budget for management of project quality.
However,
there are stills highlights of the
decentralisation in which competent investors manage and implement investment projects
effectively (e.g. DoCTs of Ha Nam and Thua Thien - Hue
2.2 Practice of management decentrali/ation for road infrastructure in Thua Thien -
Hue
2.2.1

(General
situation of road communication in Thua Thien - Hue
Thira Thien Hue is a poor province in Central Vietnam with a landmass of 5.053km"
and a population of
1.087
million people (as of 2009). whose GDP per capita in
2010
is
merely
1,015
USD). The population concentrates mainly in its
citv
and district centres. The
road system includes a national
subsystem,
including National
Highwav
lA,
Ho Chi Minh
Trail, and Pan-national
railway,
that link to the other provinces, and a local system. The road
systems have been constructed and renovated with provincial and central funds, and foreign
loans such as from the Asian Development
Bank,
the Worid Bank However, the provincial
subsystem is too small to meet increasing transportation needs in terms of both fiow of
vehicles and loads. To complete the subsystem in line with its plan to 2020 requires huge
funds while the local financial resources are limited, so the
province

needs central support in
the field.
2.2.2 Practice of management decentrali/ation for road infrastructure in Thira Thien -
Hue
Since
2000,
some projects, especially focal ones that require big
funds,
have been
deployed in
Ihira Ihien
Hue with central budget investments. Some such as VVB2 (for rural
16
communication) were originally managed by central authorities: some such as ADB5 (for
provincial roads) partially decentralised; some such as WB3 (for rural communication)
decentralised during implementation; and, still, some others such as RBC project of Ca Cut.
almost completely decentralised. How were those projects decentralised? What do the
stakeholders implement, think and propose? We will investigate those questions in the
following sections.
a. Information collected from in-depth
inter\iews
We have collected and analysed information from a sufficient number of the
stakeholders with critical thinking to identify the problems.
In
terms of psychology and
interests, any group has its own reasons to support its viewpoints and interests. Our critical
analysis will indicate core points that support effective management in terms of
decentralization in general and establishment of the set of criteria in particular.
a.l
Interviews with central stakeholders

We have interviewed Vice Department Directors and higher positions in MoCT and
Vice Directors and higher positions of some PMUs under MoCT (see Appendix I for the
corresponding interview questions). The interviews were conducted one on one with seven
interviewees.
Decentralization of management of RBC investments to provinces has been mainly
conducted since 2005.
In
general, the decentralized projects have a small total investment each
and require normal technology. The purpose of decentralization is to make organization of
those projects quicker and more effective. Decentralization is mainly based on the nature of a
project and the competence of a prov ince. apart from political factors. Results vary from
province to province, with some good results in one province and bad ones in another. The
decentralized projects have generally met
80"'o
of their set objectives. Some provinces carry
out those projects in line with their requirements of progress,
qualitv
and
disbursement,
but
some others have so weak project implementation competences in terms of techniques.
organization of
execution,
and procedures of payment that MoCT has to prolong the project
lifetime and send its staff to those projects for direct support.
17
Generally, all provinces want MoCT to further decentralize management of
constmction
projects to them. Most of the respondents agreed about further decentralization
but argued that the competences of provinces must be

improved,
and projects must not be
decentralized to weak provinces. As a
result,
all of the respondents agreed that there must be a
set of criteria for decentralization that include such criteria as constructional
crade.
constructional
group,
competences and nature of and geographical setting of a province (i.e.
provincial area, in mountain or plain).
a.2
Interviews with provincial stakeholders
We interviewed seven managers or higher positions from DoCT of Thua Thien Hue
Province, one after another (see corresponding interview questions in Appendix I)
In general, decentralization of management of RBC investments to Thua Thien Hue
since 2000 has been scattered and to a small extent: only six projects including one newly-
decided project. The interview also revealed that the province was ready for receiving
decentralization of central-level projects because it believed that the decentralization will
make them more active and quicker in decision-making because it is closer to the
Kical
practice so that those projects can be accelerated. Is that argument firmly based or expression
of an ambition to have more powers? In
fact,
the province has
successfullv
managed projects
decentralized to it and many big projects of Group B, so it is
readv
to undertake management

of big decentralized projects. In
addition,
no respondent dared sacrifice his professional life
easily to raise the point, because activities of project management are so
strictiv
legal that a
lack of competences can not
t\ilfil
such a task. As a
result,
the provincial wish of
decentralization tor more etTective management is reliable.
However, it was found that the respondents' knowledge of decentralization remained
insufficient
wlien,
for example, a respondent said that "the legal documents for
decentralization and management of capital construction are fundamentally complete ",
which is obviously contradict to the results of our analysis of related legal documents that
revealed that there is an absence of legal documents on decentralized management of central-
budget RBC investments.
In
addition,
though most of the respondents agreed about the need of
a set of decentrali/ation criteria, they could not identify those criteria except two respondents
proposing some criteria such as constructional
grade,
constructional
groups,
necessary
competences, and population size. We agreed with one idea that a govemment decree on

decentralisation, based on our set of criteria, must be issued to make transparent the
decentralized management of central-budget investments in capital constmction in general and
those in RBC in particular.
a.3 Interviews with contractors
We interviewed five general directors of contracting units that have participated in
RBC projects in
fhira
Thien Hue Province.
Generally,
the contractors answered our questions quite specifically and straight.
Fhough
some mentioned delays in implementation procedures in participating in projects
managed by both the
central
and provincial
governments,
most agreed that the province as
investor
settled the
related procedures and arisen problems during implementation more
quickly because the provincial authority was closer to practice while non-decentralised
projects took much more time to go through many different levels. In
addition,
thcv
argued
that projects managed by the province were slowly disbursed because the province did not
have active powers of funds, which was caused
bv
incomplete decentralization when the
central

government retained
the power of pavment. Finallv. the respondents proposed further
decentralization and one interviewee even argued that "upon
decentralization,
the province
must be given complete authority while the central govemment shall check the legality of
local activities other than have direct interferences in decentralized provinces."
In
addition,
the contractors
also
proposed decentralization criteria such as
constructional grade, constructional groups, local competences similar to those we have
proposed after our analysis of the legal documents.
a.4
Intersiews
at the district level
We interviewed
fwc
related section managers of the districts in Thira Thien Hue.
Because district govemment leaders
rarelv have
experience of project management, we started
our
interviews
first with technical section managers.
Our interviews indicate that district-level authorities have hardly had any cooperation
with
cenirallv-invested
projects in their respective districts though they have worked a lot with

19