Development investment based on the local budget in ha nam province

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Introduction
1. Rationale
Development investment from state budget plays a requisite role in the socio-
economic development of a country or a province in Vietnam. However, in recent
years, development investment from state budgets in Vietnam has still been
inefficient. This has been proved by various scientific researches on the efficiency of
public sector, in which development investment from state budgets is considered as
the key part. In fact, every research carried out has mentioned different aspects of
development investment from state budgets. Development investment from local
state budgets, recently, has contributed to the socio-economic development,
restructuring the economics of localities pursuing industrialization and
modernization, improving infrastructure and technology, promoting the construction
of modern rural areas. Nevertheless, development investment from local state budget
in some provinces or citiy in general and Ha Nam in particular has lately been
controversial due to depending almost on state budgets; moreover, development
investment from local state budget hardly prove its role in local socio-economic
development strategy. Until now, there has been no PhD thesis in development
investment from local state budget in Ha Nam Province.
Vietnam has 63 provinces and cities, of which around 20 provinces and cities
do not rely on central state budget. The other 40 provinces including Ha Nam have to
receive remarkable contribution from central state budget annually (revenues are
insufficient to cover expenditures). Ha Nam is a poor province whereas development
investment from state budgets play a vital role. Every year, this province depends on
central state budget funding sources, and 57 percent development investment are
funded by local state budget in the period 2008 - 2013. Budgets for development
investment have been inadequate to meet the demand of provinces, resulting in a
wide range of investment projects being delayed or halting execution. The problem
that needs solving is how to reduce the dependence of development investment from
local state budget of Ha Nam on the state budget, raising the activeness of budgets

invested in provinces. The fact is that planning and operating the development
investment from local state budget has inappropriate method and content; the
allocation of budgets among different industries and fields is unreasonable, for
instance, focusing much on investing and developing infrastructure instead of labor
or technology. Another measure is how to enhance the quality of making and
operating plans, changing capital structure, improving the management, thus
promoting development investment from local state budget in Ha Nam province.
Under the circumstances above, the writer has chosen the topic “Development
investment from local state budget in Ha Nam province” as the PhD thesis with an
aim to clarify the mentioned problems.
2. Research objectives
General objectives
Based on researching the development investment from local state budget of
a particular province as Ha Nam, the thesis works towards a goal of making

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suggestions for improving the development investment from local state budget of Ha
Nam as well as the provinces having the same status, in accordance with new
conditions, along with the trend of budget arrangement towards localities in Vietnam.
Specific objectives
a, Establish the theoretical framework of development investment from local state
budget; b, Analyze the current situation of development investment from local state
budget in the period of 2008-2013, hence, assess the influences of development
investment from local state budget in socio-economic development of Ha Nam
province; c, Determine limitations and causes of development investment from local
state budget of Ha Nam province; d, Illustrate opinions and orientations of
development investment from local state budget of Ha Nam province until 2020; e,
Make reccomandations for enhancing the development investment from local state
budget of Ha Nam and other provinces with homologous status.
3. Research subjects and scopes

Research subjects
a) Local state budgets: the concepts and establishment of local state budgets; b) The
development investment from local state budgets: the organic relationship between
the development investment from local state budget and development investment in
the area in general as well as examined the relation between the development
investment from local state budget and the socio-economic development of a
province.
Research scope
a, Place: Ha Nam province
b, Sience: The thesis focuses on researching development and investment from local
state budget in provinces. Local state budget includes: funds regulated from the state
budget and funds accumulated by local state budget for investment. The thesis studies
development investment from local state budget in Ha Nam province, both
theoretically and practically, focusing on: content, impacts, factors affecting, then
topropose solutions to increase development investment from local state budget in Ha
Nam province.
c.Time: +) Research on reality: development investment from local state budget in the
period 2008-2013; +) Research for future: development investment from local state
budget until 2020.
4. Contribution of the thesis
Academic and theoretical contributions:
- The thesis introduces a research framework including 5 steps. In each step,
content is mentioned in various approaches (methodology, research tools, research
content, and its results).
- By analysing features of development investment based on the local state
budget, the author help to clarify the content of development investment, criteria for
assessing impacts of development investment on the local socio-economic
development.
New conclusions and findings from research results

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- By applying the research framework, the thesis analyses the situation of the
development investment from the local state budget in Ha Nam in the period 2008-
2013 and gives some findings as follows: There are a number of reasons that make
the development investment from the local state budget fail to stimulate the socio-
economic development in Ha Nam province, of which the major one is the
inappropriateness in planning development investment from the local state budget.
There are no focal points. The objectives are too general. The development
investment capital is spreaded and covers so many sectors and industries. Therefore,
the structure of development investment from local state budget in Ha Nam is
irrelevant. The investment focuses mainly on infrastructure and forgets in some
extent to other fields such as technology science; human resource.
- The author uses the method of Ordinary Least Squares regression to estimate
the demand for the development investment capital in Ha Nam in general and demand
for development investment capital from the local state budget in particular in the
planned year. Therefore, the thesis’s recommendation can help Ha Nam’s government to
find out their solutions of mobilizing financial provincial budget for development
investment by 2020.
- Solutions in the thesis are to strengthen development investment from local
state budget in Ha Nam, in which focusing on changing the structure of investment
and structure of investment capital coming from the local state budget. In this thesis,
the author make clear that there can be two options for increasing total capital for
development investment coming from the local state budget. The author also
proposes a solution to change the structure of development investment from the local
state budget to help the province can make their investment more efficiently and
effectively in the future.
Structure of the thesis
Besides the introduction, conclusion and list of references and appendices, the
main content of the thesis is divided into four chapters:
Chapter 1: Literature review

Chapter 2: The theoretical framework for development investment from local state
budgets.
Chapter 3: Current situation of development investment from local state budget in Ha
Nam province in the period of 2008-2013.
Chapter 4: Views and recommendations to increase development investment from local
state budget in Ha Nam province.
CHAPTER 1:
LITERATURE REVIEW
1.1. Literature review
International studies: Generally, international studies have mentioned almost
full of both theory and practice in analyzing and evaluating public investment,
solutions to manage public investment effectively in some countries and territories.
However, public investment in each country has its own characteristics due to

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management mechanisms and certain conditions.
Domestic researches
Domestic researches related to the topic are collected by the author in many
aspects: overview of the research, performance, and management of development
investment from state budgets; and research on economic and investment of Ha Nam
province.
Overall, these studies have focused on performance of investment in general and
investment from state budget in particular in the scope of a province (city) or
investment performance in some industries, mobilization and the use of development
investment funds in a province, the management of development investment from
state budgets in a province or a city. On the other hand, there has not been any thesis
going into development investment from local state budget in case of Ha Nam
province.
Moreover, some studies have only mentioned the performance of development
investment from state budget, some just illustrate the management of state budgets of

the whole country or in a particular province. This thesis focuses on development
investment from local state budget in a province. Local state budget includes: funds
regulated from the state budget and funds accumulated by local state budget for
investment. Indeed, the thesis study development investment from local state budget
in Ha Nam province, the limitation of which is that development investment from
annual budgets depends on the regulation of the state budgets with the proportion of
about 57% from local state budgets in the period 2008 - 2013; budgets have not met
demand for development investment in the province, leading to a large number of
investment projects being delayed or halted construction. The author goes through:
content, impacts of development investment from local state budget on socio-economic
development, management as a cause of development investment from local state budget
being ineffective in local socio-economic development strategy, thus find solutions to
increase development investment from local state budget in Ha Nam province.
1.2. Research framework and methodology
1.2.1. Research framework: It consists of 5 steps, each of which is divided into
smaller contents with different prospects (research methodology, research tools, main
study contents and results to be achieved)
The research steps includes: a) Literature review of international and domestic
research. b) The theoretical framework of the development investment from local
state budget funds in Ha Nam province. c) Analysis of development investment from
local state budget in case of Ha Nam province. d) International and domestic context,
views, orientation and some solutions to enhancing development investment from
local state budget funds in Ha Nam province. e) Recommendation to strengthen
development investment from local state budget funds in Ha Nam province in the
future.
Research questions: the 5 research questions of this thesis are:
+) What are the contents of development investment from local state budget?
+) How does development investment from local state budget affect provincial socio-

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economic development?
+) Which factors affecting development investment from local state budget of Ha
Nam province?
+) What are the real situations of development investment from local state budget in
Ha Nam province today?
+) How can development investment from local state budget in Ha Nam province be
strengthened?
1.2.2. Research methodology: to achieve the objectives of the thesis, the author used
these main methods: statistical analysis, ordinary least squares (OLS) forecast
regression, comparative method, expert interviews, methods of analysis, synthesis,
diagrams, charts, graphs. Methods were used synthetically to take advantages and
resist any limitation in each method, hence, gain reliability in the results of research
to achieve the objectives.

CHAPTER 2
THEORETICAL FRAMEWORK FOR DEVELOPMENT INVESTMENT
FROM LOCAL STATE BUDGET
2.1. Development investment
2.1.1. The concept of development investment
There are different concepts of investment, and development investment, but in
short, “development investment is a fundamental component of investment, spending
current funds to conduct activities aiming at increasing or creating physical assets and
intellectual property, increasing production capacity, creating jobs and for
development goals”.
2.1.2. Characteristics of development investment
The author clarifies the characteristics of development investment as follows:
a, Require large funds and stagnated throughout the investment process; b, The
results of development investment activities that are construction works usually take
effect at the place of investment implementation; c, Development investment is
durable due to the fact that time for investment implementation and operating time of

investment results generally undergo many years; d, Development investment activity
is highly risky.
2.2. Local state budget
2.2.1. The concept of local state budget
According to the State Budget Law, local state budget is part of state budgets,
with revenue and expenditure being regulated by Law, decided by People’s Council
and local authorities, and approved by the government if they are consistent with
State budget law and other laws related to budget revenues and expenditures. The
state budget includes central and local state budgets. Development investment funds
belongs to local state budget managed by the local authority, which is the whole
development investment funds of three levels of local state budget implementation,

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including provincial budgets, district budgets and the budgets of communes and
townships.
2.2.2. Sources of local state budget:
a, Development investment funds divided by economic components include:
development investment funds of the State sector, the non-state economic sector and
the foreign investment sector. Among which, the development investment funds of
the State economic sector includes state budgets for development investment of
state’s credit and of state-owned enterprises. The thesis only studies development
investment funds from the local state budget mobilized for provincial development
investment locally called development investment from local state budgets.
b, Development investment funds from local state budget includes: +) development
investment funds from central budgets (both investment funds of central budget
regulated directly to the local and ODA projects managed by the local) regulated to
the province. +) development investment funds from local state budget accumulated
to invest by the local themselves.
2.3. Development investment from local state budget
2.3.1 The concepts and objectives of development investment from local state

budget:
Through researching development investment from local state budget, the
author has introduced the concept of development investment from local state budget,
which is the activities invested by resources managed and used (as assigned) by the
local authorities to maintain and enhance the capacity of the local economy through
increasing the value of local physical and non-physical assets in order to achieve the
objective of local socio-economic development. To understand clearly the concept,
the author also explained what development investment from local state budget
resources are; how to raise development investment from local state budget for the
purpose of creating, upgrading, and expanding asset value; and clarify development
investment from local state budget is an investment activity of local authorities from
local state budgets.
Objectives of development investment from local state budget: is for sustainable
development, interests of nation, communities, localities and investors. Development
investment from local state budget is development investment activity funded by state
budget to achieve the goal of the local socio-economic development: development
investment for infrastructure, addressing employment problem, eradicating hunger
and alleviating poverty, developing culture-health-education, security and defense,
protecting the environment and improving the living standard of citizens, promoting
investment from other sources on local areas (individual and foreign countries).
2.3.2. Characteristics of development investment from local state budget
The author clarified the characteristics of development investment from local
state budget through the following primary traits: a) Development investment
expenditures from local state budget are big, but often have the volatility, depending
on the balance of local state budgets; b, Development investment from local state
budget is the use of state budget to conduct development investment activities; c)
Development investment from local state budget managed by the State is mainly

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invested in infrastructure and socio-economic projects, which are unable to recover

capital; d) Investing in infrastructure and socioeconomic accounted for the majority
of local state budget; e) Development investment from local state budget
predominantly aims to ensure the local socio-economic development.
2.3.3. State management of development investment from local state budget
2.3.3.1. The objective of management of development investment from local state
budget
From the consultation of professional scholars, the author found that, on a
macro perspective, managing development investment from local state budget is to
meet the following main objectives: a) Achieving objectives of socio-economic
development strategy in each period of each region and of the country. b) Mobilizing
maximum and using effectively capital investment, human resources and material
resources of industry, local and society. c) Adhering to the provisions of law and
economic - technical requirements in investment.
2.3.3.2. Process of development investment from local state budget
The author agreed with other scholars on the process of development
investment from local state budget in a province; however, the following steps are
complemented: +) Identify investment needs. +) Establish and appraise plans for
development investment from local state budgets. +) Layout allocation plan for
development investment from local state budgets. +) Invest. +) Test, monitor, and
evaluate.
2.3.4. Contents of development investment from local state budget in a province
According to investment objects, development investment from local state
budget in a province includes: a) Development investment from local state budget in
infrastructure – socioeconomic (system of economic – technical infrastructure and
system of social infrastructure; b) Development investment for supporting activities
of state enterprises, economic institutions in fields that are essential for the economy
requiring state participation; c) Investing in purchasing public properties from local
state budgets; d) Development investment of science and technology by using local
state budgets; e) Development investment of human resources from local state
budgets; f) Development investment from other local state budgets. Each content

above is divided into smaller details in order to form a basis for analyzing the
structure of development investment from local state budget in Ha Nam province,
following investment content in chapter 3.
2.3.5. Effects of development investment from local state budget.
After consulting scholars, the author has completed and proposed a set of
indicators assessing the impact of development investment from local state budget on
local socio-economic development through the following groups: +) the effect of
development investment from local state budget on the development of local
infrastructure – socio-economic namely economic–technical infrastructure
(transportation, hydraulics, centre business districts, industrial zones) and social
infrastructure (education and medicine); +) the effect of development investment
from local state budget limits the increasing level of environmental pollution; +)
development investment from local state budget promotes other investing –

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developing budgets; +) development investment from local state budget has an
influence on the development of local technology; +) development investment
from local state budget improves the quality of life for inhabitants; +) development
investment from local state budget reduce poverty; +) development investment
from local state budget with the construction of modern rural area.
2.4. Factors affecting provincial development investment from local state
budget
2.4.1. The objective factors: a) Natural conditions; b) Economics; c) Political,
cultural, social; d) Policies; e) Opening market trends and international integration.
2.4.2. The subjective factor: +) Capacity of local authority’s management and
administration; +) Capacity of investors; +) Strategy of local socio-economic
development; +) Elements of projecting, plans of development investment from
local state budgets; +) Organizational model of management apparatus in
development investment from local state budgets.
2.5. Experience of development investment from the state budget in general and

local state budget in particular:
Studying two represented Asian nations like South Korea and Taiwan, and
two localities of Vietnam being Da Nang city and Phu Tho province, the author draw
the lessons on state management of development investment from the state budget in
general and local state budget in particular
2.5.3. Lessons for Ha Nam province:
a) Drawing up investment plans, appraising investment projects, and monitoring tightly
the development investment from state budgets play an important part in utilizing state
budgets in the most effective way; b) Countries and localities pay attention to
development investment from state budgets with a view to attracting other investing
budgets. They also take notice of training and developing human resources for the public
sector, stimulating technology (innovate new technology and products), and supporting
venture capital, especially supporting state budgets in this field; c) Countries such as
Taiwan and South Korea also decentralize investment from state budget in the same way
as in Vietnam, but they respect the decision of the central government; at the same time,
they encourage local governments to find ways for additional development investment
budgets in infrastructure; d) The success or failure of state management in development
investment from the state budget in general and local state budget in particular
depend heavily on thought, vision, leadership and moral qualities of the central
governments and local authorities; e) Nations such as Taiwan, South Korea and Da
Nang focus on development investment from the state budget in key industries and
key areas for the local as well as national development.




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CHAPTER 3: THE CURRENT SITUATION OF DEVELOPMENT
INVESTMENT FROM LOCAL STATE BUDGET IN HANAM PROVINCE
IN DURING 2008 – 2013.

3.1. Factors affecting development investment from the local state budget in Ha
Nam province
3.1.1. The effects of Ha Nam’s natural conditions and resources on the
development investment from the local stage budget
+ The favourable geographic position, and diversity in its land resources;
+ Diversified mineral resources, favourable climate, soil, and abundant human
resources, the developed infrastructure and socio-economic system are positive
conditions in developing modern industries, advanced agriculture which is various
both in farming, forestry and aquaculture.
3.1.2. Ha Nam’s economic potentials
The major industries in Ha Nam include producing cement and other
construction materials, textile, and handicraft (making bamboo products,… sung): +
Ha Nam has a lot of potentials to develop agriculture, both farming and raising; + Ha
Nam also has remarkable potentials in developing eco-tourism, mental tourism and
heritage tourism; + The development rate of the province during the period 2008-
2013 was about 11.7%.
3.2. An overview of the development investment in Ha Nam province 2008-2013
3.2.1. Development investment in Ha Nam province according to management
levels and investment portfolio:
During 2008 -2013, the total investment capital in Ha Nam reached 62.237,01
billion VND, increasing 11,7% annually. According to the management level, the
percentage of development investment project managed by the local authorities was
increasing. On the average, there were 72 projects managed by the local authorities.
According to the portfolio, investment in basic construction accounted for the major
part (72%) during this period.
3.2.2. Development investment in Ha Nam according to the economic sectors
during 2008-2013
The development investment capital were allocated for 20 economic sectors,
and hundreds kinds of products, with a great portion flowing into production,
infrastructure and socio-economic development. A number of economic sectors were

prioritized, including processing, manufacturing (43%), freighting (26%), agriculture,
forestry, aquaculture (7.3%). Other sectors accounted for 23.7%.
3.3. The current situation of development investment from the local state budget
in Ha Nam province during 2008-2013
3.3.1. The development investment from the local state budget in Ha Nam province
during 2008-2013
3.3.1.1 The scope of and increases in the development investment capital from the
local state budget in Ha Nam province during 2008-2013

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Table 3.2: The scope and proportion of development investment capital from the
local State Budget in the period 2008-2013 of Ha Nam.
Unit: Millions VND, %, current price calculations
Or.

Targets Unit 2008 2009 2010 2011 2012 2013
Average

stage
(2008–
2013)
1
Total development investment capital
from local state budget
Million

VND
757.843

849.592

1.080.844

1.305.036

1.774.914

1.348.780

1.186.168

2
The total development investment capital in
in the province
Million

VND
7.476.100

7.558.600

8.975.600

11.550.500

13.010.500

13.666.200

10.372.833

3

Proportion of investment development capital
from local state budget/the total development
investment capital in the province

%
10,14

11,24

12,04

11,30

13,64

9,87

11,38

Source: [25,105] and author's calculations
The scope and proportion of development investment capital from local state
budget in the period 2008-2013 were unstable. The proportion of investment
development capital from the local state budget accounted for 11.4% of the total
development investment of the province. (Table 3.2)
The increasing rate of the development investment capital from the local state
budget was unstable. The average increasing rate in the period was rather low (4%).

3.3.1.2. Development investment from the local state budget according to the
investment capital resources in Ha Nam province during 2008-2013
Table 3.4. Development investment from the local state budget according to the
investment capital resources in Ha Nam province during 2008-2013
Unit: Million VND, %, current price calculations.
Or.

Targets Unit 2008 2009 2010 2011 2012 2013
1
Development investment from
the local state budget
Billion
VND
757.843

849.592

1.080.844

1.305.036

1.774.914

1.348.780

2
Development investment capital
from the
funds allocated from
central state budget

Billion
VND
466.490

508.700

592.450

642.650

894.680

894.680

3

Development investment
capital from the self-
accumulated local state budget
Billion
VND
291.350

340.890

488.390

662.390

880.230

454.100

4
The proportion of the
development investment
capital from the self-
accumulated local state
budget/The total development
investment capital from the
local state budget
% 38

40

45

51

50

34

Source: [94,95,105] and author's calculations

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Development investment capital from the self-accumulated local state budget
accounted for 43% of the total development investment capital from the local state
budget, fluctuating. The proportion of the development investment capital from the

funds allocated from Central State budget over the total development investment
capital from the local state budget was 57% on the average.
3.3.1.3. Development investment from the local state budget based on the investment
portfolio in the period 2008-2013. (Table 3.5)
a) Development investment from the local state budget in infrastructure and the
socio-economy accounted for the largest portion (78.74%) in the total development
investment capital from the local state budget. Development investment from the
local state budget in the technical-economic infrastructure occupied 57.04%, in social
infrastructure 21.71%; b) Development investment from the local state budget in
other sectors occupied only 10.68% of the total; c) Development investment from the
local state budget in science-technology occupied 5.5% of the total and fluctuated; d)
Development investment from the local state budget in human resource development
fluctuated, accounting for 4.61% of the total; e) Development investment from the
local state budget in programs supporting enterprises and economic organizations that
requires the state participation accounted for 0.47% of the total.
3.3.2. The reality in management of development investment from the local state
budget in Ha Nam province
3.3.2.1. The process of development investment from the local state budget is
discussed in detailed as follows: a) Identifying the investment needs; b) The current
situation in making, verifying plans for development investment from local state
budget; c) Planning, allocating the development investment capital from the local
state budget; d) Implementing investment; e) Examining, supervising and evaluating
3.4. Evaluating the influences of development investment from the local state
budget on the socio-economic development in Ha Nam province in the period
2008-2013


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Table 3.5: The development investment capital from the local state budget according to the invesment portfolio

in the period 2008 - 2013
Unit: Million VND, %, current price calculations.
Or.


Targets

2008 2009 2010 2011 2012 2013
The
period
average
2008 -
2013
A1

Development investment from local state budget funds into the
system of socio-economic infrastructure 665.935

690.270

835.224

959.959

1.281.112

1.083.569


A

1
/ A x 100% 88

81

77

74

72

80

78,74

A2

Development investment from local state budget for supporting
activities of state enterprises economic institutions in fields that
are essential for the economy state participation
3.915

4.000

4.836

6.490

6.973

6.351


A
2
/ A x 100% 0,52

0,47

0,45

0,50

0,39

0,47

0,47

A3

Development investment from local state budget in
developing human resources 21.749

36.487

43.869

96.606

67.281

70.656


A
3
/ A x 100% 2,87

4,29

4,06

7,40

3,79

5,24

4,61

A4

Development investment from local state budget in science and
technology 22.833

30.661

19.121

117.502

148.235

98.228


A
4
/ A x 100% 3,01

3,61

1,77

9,00

8,35

7,28

5,5

A5

Development investment from local state budget in other fields 43.411

88.175

177.794

124.480

271.314

89.976


A
5
/ A x 100% 5,73

10,38

16,45

9.54

15,29

6,67

10,68

A Total of development investment capital from local state budget 757.843

849.592

1.080.844

1.305.036

1.774.914

1.348.780

100

Source: Author collected from [95, 105] and author’s calculations.

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3.4.1. The influence of development investment from the local state budget on
the socio-economic development in Ha Nam province
3.4.1.1. Development investment from the local state budget had a lot of
influences on the local socio-economic development (Table 3.8).
a) The influences of the development investment from the local state budget on
the local transport infrastructure: The number of communes with motorways
reaching their centres increased yearly (the number was only 96 in 2008,
increased to 116 in 2013, reaching 100%). On the average, about 160km of
highways and roads linking provinces, districts, and communes were newly
built, upgraded, or widened annually; b) Development investment from the local
state budget in the irrigation system helped to upgrade the current canals as well
as build a number of new ones. However, the number of newly built canals was
rather small; c) The influences of development investment from the local state
budget in the infrastructure in industrial zones: the number of industrial zones
with garbage-central - processing systems increased at a rather slow speed
annually. In 2013, there were 3 industrial zones with garbage- central-
processing systems; d) The influences of development investment from the local
state budget in the education infrastructure: The number of nationally-

standardized schools fluctuated year by year. On the average, 18 schools were
nationally standardized each year; e) The influences of development investment
from the local state budget in the cultural infrastructure: In 2013, 116/116
communes in Ha Nam province had cultural houses and libraries of their own,
improving the spiritual welfare of the people in the province.
3.4.1.2. The influences of development investment from the local state budget on
alleviating poverty and constructing modern rural areas: + The percentage of
poor households decreased year by year.+ At the end of December 2013,
development investment from the local state budget in constructing modern
rural areas achieved the province’s criteria on the construction of modern rural
areas. However, those achievements were still low. (Table 3.13) On the
average, about 160km of highways and roads linking provinces, districts, and
communes were newly built, upgraded, or widened annually.
Table 3.8: Results of development investment from the local state budget
in Ha Nam province in the period 2008-2013
Or. Criteria
Unit

200
8
200
9
201
0
201
1
2012

2013

1
Results of development
investment of technical-
economic infrastructure systems











1,1
The result of infrastructure
investment in developing











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transport systems

Number of kilometers of
highways, and roads linking
provinces, districts and
communes were newly built,
upgraded, or widened annually. Km 64

101

100

89

90

516

1,2
The result of development
investment of irrigation
systems’s infrastructure

Number kilometers of canals
were newly built, upgraded ore
widened annually Km 44

63

69

69

83

392

1,3
The result of development
investment of industrial zone’s
infrastructure

The number of industrial zones
with garbage-central -
processing systems increased
annually Iz 0

1

1

2

3

3

2
Results of development
investment of social
infrastructure.

2,1
Results of development
investment in the education
infrastructure











The number of nationally-
standardized schools fluctuated
year by year
Sch
ool 17

22

27

13

15

15

2,2
Results of infrastructure
development investment in the
field of health, population,
family planning










2,2,
1
Number of patient beds/
thousand population increased
annually Bed



29.8

31

31

31

20,8

2,2,
2
The percentage of children
under age 1 fully immunized
vaccines %

96.9

94.4

95.4

84.0

96,1

2,3
The result of infrastructure
development investment in the
environmental field

2,3,
1
The percentage of municipal
waste was collected and
processed and increased
annually % 77

85

85

85

90

95

2,3,
2
Forest coverage rate increased
every year % 0.11

0.12

0.08

-
0.03

0.7

5,5

Source: [25;94;105;108]

15

Table 3.13: Influences of development investment from the local state budget on
constructing modern rural areas in Ha Nam province
The number of investment criteria of new
rural construction achieved
15

14

13

12

11

10

9 8 6
Total commune has achieved the criteria 1 1 1 5 6 5 4 2 1
Source: [94, 114]
3.4.1.3. Development investment from local state budget contributed to ensuring
social stability in the province: Development investment from local state budget
created modest influences on social stability. However, a number of social
policies (children protection and care, free medical care for the poor,
preferential policies for people with meritorious were approved.
3.4.1.4. Influences of development investment from the local state budget on
stimulating development investment from other resources in order to meet the
aims of improving the local socio-economic system: Development investment
from the local state budget worked as a medium that attracted and maintained
and stimulated the investment from other resources (the development
investment capital, none-state investment capital, FDI). However, these
influences were modest. (Table 3.14)
3.4.1.5. The influences of development investment from the local state budget on
improving the quality of the public human resources: The quality of the public
human resources increased preliminarily, meeting the requirements of the state
management of development investment from the local state budget in the
province.
3.4.1.6. The influences of development investment on reducing the environment
pollution: The percentages of urban rubbish, solid and medical garbage which
were collected and processed annually increased. The percentage of land
afforested also increased yearly. The results were not high, though. (Table 3.8)
3.4.1.7. The influences of development investment from local state budget on
developing science and technology in the province: In the period 2008-2013,
hundreds of projects and innovative ideas were applied to boost the productivity
and improve the effectiveness of the state management in public organizations
and enterprises in the province.
3.4.2. Limitations and causes of development investment from local state

budget in Ha Nam province.
3.4.2.1. Limitations of development investment from local state budget in Ha
Nam province: + The development investment capital from the local state
budget did not meet the requirements of socio-economic development in Ha
Nam province; + The allocation of the capital between sectors and industries
was not reasonable. Development investment capital mainly flew into those
sectors such as socio-economic infrastructure and science and technology.

16

Human resource development was not sufficiently invested; + Development
investment from the local state budget in the socio-economic infrastructure: the
capital from the local state budget did not meet the requirements in this sector.
The investment was not focused. The road system was not linked reasonably,
failing to satisfy social and production requirements within the province as well
as requirements of linking with other provinces; + Development investment
from local state budget did not really complete its important role in constructing
modern rural areas in Ha Nam province.
3.4.2.2. Causes of the limitations: + The quality of making socio-economic
development plans was not good; Also, there were several weaknesses in
writing and verifying investment plans, in managing and planning and
implementing investment; + There were weaknesses in several stages of
development investment projects from the state budget in general and the local
state budget in particular, including proposing and verifying investment
projects, consulting, completing and using the projects; + The workforce in the
sector of development investment from the state budget in general and local
state budget in particular was of low quality.+ There were several limitations in
structuring the organizations, managing staff; + Inspecting and supervising
development investment from the local state budget did not bring good results;
+ The legal frame related to development investment from the state budget in

general and from the local state budget in particular included several
unreasonable points which were not adjusted timely.

17
Table 3.14: Influences of development investment from the local state budget on stimulating development investment
from other resources in the period 2008 - 2013
Unit: Millions VND, %, by comparison with 2010 prices
Or.

Targets 2008 2009 2010 2011 2012 2013
1
Total of development investment capital from local
state budget 885.351

893.038

1.080.844

1.120.645

1.392.985

998.601

Continuous growth rate -

0,87

21,03

3,68

24,30

-28,31

2
The total development capital in the province 8.733.928

7.944.655

8.975.558

10.716.773

11.388.356

11.852.420


Continuous growth rate -

-9,04

12,98

19,40

6,27

4,07

Influences of development investment from the
local state budget on stimulating development
-

-1.041

62

527

26

-14

investment in the province
3 Invested by the state sector
4.834.206

4.651.900

4.763.558

5.581.423

5.092.515

4.251.665

Continuous growth rate -

-3,77

2,40

17,17

-8,76

-16,51

Influences of development investment from the
local state budget on stimulating development
-

-434

11

466

- 36

58

investment in state sector
4
Invested by the none - state sector 3.157.392

2.856.461

3.262.000

3.612.306

4.547.653

5.415.520


Continuous growth rate -

-9,53

14,20

10,74

25,89

19,08

Influences of development investment from the
local state budget on stimulating development
-

-1.098

68

292

107

-67

investment in non-state sector
5
FDI investment capital 742.330

436.295

950.000

1.523.044

1.748.188

2.185.235

Continuous growth rate -

-41,23

117,74

60,32

14,78

25,00


Influences of development investment from the
local state budget on stimulating development
-

-4.748

560

1.638

61

-88

investment in FDI sector
Source: [25;105] and author’s calculation

18
CHAPTER 4: VIEWS AND RECOMMENDATIONS TO INCREASE
DEVELOPMENT INVESTMENT FROM LOCAL STATE BUDGET IN
HA NAM PROVINCE
4.1. The background, views and orientation about development investment
from the local state budget until 2020
By analyzing the national and international background related to
development investment from the local state budget, the author has indicated her

views and suggestions about development investment from the local state budget
in Ha Nam province until 2020.
4.1.2. Views about development investment from local state budget: +) It is
necessary to synchronise development projects on the bases of Ha Nam’s
internal strength and suitability with socio-economic development of the Red
River Delta and the whole country; +) Development investment from the local
state budget should be implemented on the basis of taking the comparative
advantages and strength of subregions and important sectors; +) Development
investment from the local state budget should stimulate investment from other
resources.
4.1.3. Orientation for investement development from local state budget: a)
Development investment from the local state budget is to be the pioneer, which
means it is to flow into those regions, sectors that have not been invested yet or
those that are difficult to be invested; b) A focus should be made in development
investment from the local state budget in developing the socio-economic system,
creating a breakthrough; c) Development investment from the local state budget
should contribute to stimulate the strength of the province;d) Investement
development from the local state should contribute to improve the local human
resources so that it can meet the demand.
4.1.2. Forecasts about the demand for development investment capital from the
local state budget of Hanam province until 2020
By using statistical analysis, ordinary least squares (OLS) forecast
regression, comparative methodthe thesis has forcasted demands for development
investment capital from the local state budget in Ha Nam province until 2020.
There are four different options, corresponding to different GDP rates and needs
for the average development investment from the local state budget in the period
2014-2020 in Ha Nam province (Table 4.5)


19

Table 4.5: Forecast about the demands for development investment capital
from the local state budget in Ha Nam province in the period 2014-2020

Order

Options
Growth rate
GDP(%)
Development investment capital
from the local state budget
(Million VND)
1 Option 1 8

2.492.000

2 Option 2 10

2.747.000

3 Option 3 11

2.884.000

4 Option 4 12

3.028.000

Source: Author’s calculation
4.2. Some solutions for development investment activities from the local state
budget in Ha Nam province.

4.2.1. Improving the quality of the formulation, management
planning, formulation, evaluation and development of investment plans from
local state budgets: a) Improving the quality of the formulation, planning
management development investment from the local state budget: Need to raise
awareness of the role of the formulation, management planning; Need to focus on
innovation methods for planning, development investment plans from the local
state budget and implementing the plan; b) Good performance in the preparation
and implementation of planed: Based planning: must be based on orientation,
strategic socioeconomic, potentials, advantages and resources of the province,
and in accordance with the planning of the Red River Delta and the whole
country. Create clearly goals oriented in planning. Unified, systematic
synchronized planning is the basis for the formulation and implementation of
development projects from local state budgets bring high efficiency; c)
Improving the formulation, evaluation and implementation of development
investment plans from the local budget: To complete the formulation, evaluation
and development of investment plans from local budget demands new necessitate
the combination of processes, methods, content planning. Ha Nam needs
proactive formulation, evaluation and implementation of development investment
plans from the local state budget in earnest spirit, to meet the strategic objectives
of socioeconomic of the province to 2020. To ensure the quality of the
development investment projects from local state budgets, we must adopt
methods of analysis and forecasting of science. It is urgent to transfer the
development investment work plan from the local state budget to the planned
medium-term investment; Following the CT 23/KT-TT, authors specify the steps

20
in planning process for development investment from medium-term local state
budgets - Ha Nam province should proceed.
4.2.2. Perfection, innovation and organizational structure of the investment
managers developed from local budgets: a) The author's thesis offers two

options and dissociates the manner in restructuring the organizational structure
and functions of investment management development from the local
budget: Forming the organization reviews rates of development investment
projects from local state budgets. The organization is available on the Ha Nam
People's Committee or Ha Nam authority for planning and investment but this is
an independent department. b) Improving the quality and accountability of state
managers for development investment from the local state budget:
Need to strengthen training and improve professional skills, abilities
Management for development investment state managers from local state budgets
at the provincial, district and commune; Should strengthen the responsibility of
the leader for their decisions at the local level (People's Council, People's
Committee, departments and branches of districts, cities).
c) Completing the training and recruitment examination mode for civil
servants, who working in the development investment activities from local state
budget.
4.2.3. Change the capital structure and investment structure evolved from local
budgets
The author has systematized resources and structural resources for
development investment from the local state budget in view of the author
according to Figure 4.1 of which:
+) Capital investment in developing from Ha Nam local state budget
consists primarily four sources: Income from fees, taxes (T1); revenue from land
(T2), budget revenues from the central regulation (T3) and ODA (T4).
+) Expenses for local state budget consists of 3 main items: recurrent
expenditure (N1), debt and reserves (N2) and the rest is spent on development
investment from state local budgets (N3).
The author made two major plans to increase total development investment
capital from local budget and have 1 option to change the development
investment structure from the local state budget. The specific plans are as
follows:

+) Option 1: To increase development investment capital from local
state budgets must be the T1 to T4 earnings: The author argues that it is
difficult to increase the T3 and T4, can only increase on the T1 and T2

21
increased T1 base, increase production, increase production would be a
precondition for increased T2.
+) Option 2: To increase development investment funds from local budgets
(other factors unchanged) can reduce the N1.
+) Option 3: Change the structure of development investment from local
state budget funds through the following methods: a) Increasing investment in
infrastructure socioeconomic development; b) Reduce the cost of development
investment asset purchases through the effective use of existing assets; c)
Increase in investment in developing human resources; d) Increase in investments
for the formulation and appraisal of planning, development investment plans
from the local budget; enact policies; e) Increase investment in science and
technology.

Figure 4.1: Resouces and structural resources fro development investment from
the local state budget.
Source: Made by author
4.2.4. Perfection of management development investment from local state
budgets: +) Should have guidelines and accurate investment decisions: to be
based on legal grounds, forecast, should match the actual needs, in accordance
with the planning, development planning, local resources methods; +)
Income from fees,
taxes
T1

Revenue from land

T2

Budget revenues from
the central regulation
T3

ODA
T4

Budget revenues
from the central
regulation
N1

N2

N3

Recurrent
expenditure


Debt and
reserves

Development investment

from

local state budget funds into the

system of socio-economic
infrastructure

C1

Development investment
from local state budget funds
to purchase public properties

C2

Development investment
from local state budget in
developing human resources

C3

Development investment
from local state budget in
science and technology

C4

Development investment for
supporting activities of state
enterprises, economic
institutions in fields that are
essential for the economy
requiring state participation
C5

Development investment
from local state budget in
other fields
C6


22
Completion of the appraisal of investment projects: The appraisal of investment
projects developed from the local budget should be done in an objective,
scientific and comprehensive all content Basic affect the feasibility, effectiveness
of investment projects; +) Perfection of bidding: Selection of contractors to meet
the following requirements: have the technical capacity; ensure financial
capacity, technical, human resource, machinery suitable for each package. Need
to prevent leakage thorough information in the tender and negative phenomena in
other tendering and encourages the application form "open tendering"; +)
Improve the quality of supervision of construction works and construction items;
+) Strict control and acceptance of the work, work items and settlement of
investment capital; +) Investment policy innovation in the province of Ha Nam:
To be issued promptly policies of Ha Nam characteristics such as: encouraging
investment policies, investment incentives, tax policy, revenue from land or
reduced consumer policy regularly; +) The local authorities have solutions for
develop contractor team (the direct enterprise which are done, construction
development investment from the local budget in the province).
4.2.5. Investment in development from the local budget to promote the
construction of new rural Ha Nam province.
Development investment activities from local budgets really have effective
role in promoting the construction of new rural Ha Nam province, the levels of
local industries need to: +) Have the changing structure plans livestock, crops
suitable to the geographical conditions, local soils; +) Guide farmers to apply

scientific and technological advances in production to improve productivity and
quality, reduce product costs; +) Have policies to support loans with preferential
interest rates for agricultural mechanization; +) Appling incentive policies to
attract investors at home and abroad to promote the project provided livestock
feed; +) Have the plan implemented disease prevention and monitoring of the
disease situation in the livestock and poultry.
4.2.6. Strengthen inspection and monitoring of development investment from
local budgets: a) Need to conduct inspections all stages, steps, stages of the
investment process developed from the local budget in the province of Ha
Nam. Must be dealt with severely, publicity and transparency of wrongdoings in
order to promote efficiency and effectiveness of the inspection. b) Need to
strengthen the supervision of the People's Council as the planned annual
monitoring, need to take the form of regular supervision with monitoring
irregular selective key projects. Promote and value the role of the unions, people
in the monitoring of development investment from local budget. The authorities,
at all levels and branches of government heads localities must complete the task

23
of providing relevant information, should be carried out regularly and comply
with the regulations on reporting regimes to monitor and assess development
investment capital from banks Local policies towards accountability must be
linked to those authorized.
4.3. Some proposals on development investment from state budget
4.3.1. Innovation mechanism to allocate funds for development investment
from the State budget:
The state budget allocated annually for the local or central prescribed by
the state in addition based on population size, land area and terrain characteristics
have to be based more on the potential and advantages local strength of the local
could solve key tasks for the development of locals to meet the strategic goals of
social-economic development of their territories.

4.3.2. Completing the legal content of decentralization of state for development
investment activities from the state budget:
Perfecting content on decentralization laws state administration for
development investment activities from the state budget based on the scale not
only capital but also must be based on the value of the investment (on economic,
politics, culture, history, role and significance of the works, projects). The
authorities and central agencies need to control the implementation of
development investment from local state budget, shown the spirit of investment
focus, avoid exceeding the capacity of local state budgets, avoid making wrong
investment policy.
Conclusion
Development investment from local state budget depends on natural
conditions, economic, investment scale and the ability to balance revenues and
expenditures of local state budgets. More importantly, development investment
from local state budget depends chiefly on the subjective elements of
organizations and individuals involving in such as: ability of the unit’s
investment implementation, management apparatus of development investment
from local state budgets, planning and projecting development investment from
local state budgets.
The author has developed a set of indicators to assess the impact of
development investment from local state budget on local socio-economic
development. The author has also determined the impact of development
investment from local state budget on socio-economic development of Ha Nam
province from 2008 to 2013. After analyzing the real situations of development
investment from local state budgets, a series of limitations and cause of

24
limitations of development investment from local state budget in Ha Nam
province has been pointed out.
Many countries around the world applied mechanisms, policies and models

of investment successfully, in which the author has studied two Asian countries
namely South Korea and Taiwan. In addition, the thesis also examines two
localities in Vietnam that are Da Nang city and Phu Tho province, thereby, giving
out lessons of both success and failure that can apply to development investment
from local state budget in Ha Nam province.
The views and orientations on development investment from local state
budget presented by the author stick to strategies of local socio-economic
development, limitations and causes of limitations of in Ha Nam province in the
period of 2008 - 2013. Besides, the author also predicted demand of development
investment funds from local state budget until 2020 in Ha Nam province under
the elasticity of investment funds according to GDP and the proportion of
development investment funds from local state budget over the total development
investment funds of Ha Nam province to assist this province develop plans to
mobilize capital local state budget in order to meet the investment needs in the
province by 2020.
Several solutions with an aim to raising development investment from local
state budget proposed in the thesis is of great importance as it optimizes the
efficiency of using this fund. The fundamental thing is to have a synchronized
deployment. In fact, the effectiveness of solutions to increasing development
investment from local state budget requires state and relevant ministries to have
necessary support for localities. By doing this, together with other funds of Ha
Nam province, the role of “baiting funds” of development investment from local
state budget will be upheld, fulfilling the strategic goals of socio-economic
development in Ha Nam province by 2020 and vision to the year 2030.