of revenue. On the expenditure side, reduction of the number of officials by 20 percent in 1988-1990, the abolition of the petroleum subsidy, donation of agricultural machinery and fertilizer to “cooperative farms” and subsidies to state enterprises were accomplished. On the revenue side, tax reform and revision of public utilities fares were carried out. In 1989 system of transfer from state enterprises was abolished and profit tax was introduced. In 1991 all enterprises, both public and private, were taxed by profit tax (45 percent) uniformly, and tax rates were simplified. Electricity, water and telephone charges were raised to strengthen the finance of these enterprises, which have not been privatized.

## Mongolia

The pre-reform budget deficit was entirely financed by COMECON aid, mostly from the former USSR. The financial situation deteriorated rapidly after the second half of the 1980s. In 1988, the budget deficit as a share of GDP was more than 20 percent. The tax structure was changed from the command economy system to a new one appropriate to a market economy first in 1991. Further reform came into effect in 1993. The old “turnover tax” on price differential was eliminated. Under the new customs law, exports are not taxed, while imports pay uniform 15 percent tax. A 10 percent sales tax on imports and domestic production has been introduced. The sharp deline of government expenditure (22 percent in 1992) was the result to the cut in subsidies and transfers to eliminate the price distortion channeled through fiscal measures.

## V ietnam

Before 1988, Vietnamese government revenue largely depended on transfers from state enterprises, accounting for more than three quarters of the total revenue. Since 1989, with the deteriorating performance of state enterprises these transfers have declined. In order to decrease dependence on this revenue, the Vietnamese government made efforts to establish a uniform tax system which is suitable for a market economy. Still, because of imperfect tax collection and the existence of an ad hoc tax concession, reform in the tax structure remains insufficient. It should be noted that the revenue from crude oil is increasing, now accounting for about 20 percent of total revenue. On the expenditure side, the most important part of the reform is the abolition of three subsidies — export subsidies, food procurement and direct subsidies to state enterprises — in 1989. However, the reduction of government expenditure has shown little progress because the direct subsidies were merely replaced by subsidiary loans.

The relationship between the central and local governments has similar problem as in China. Large expenditures by the central government combined with small tax revenue derived from the decentralized tax collection system puts large pressure on central government finance.

## 3 -1-2 Price Liberalization

Price reform, or price liberalization, is one of the most important microeconomic measures, which is targeted toward improvements in the smooth functioning of market mechanism in the economy. In centrally planned economies, the price of commodities, services and production factors are basically set by the public sector. There is no room for the price mechanism to work, resulting in an imbalance of supply and demand (in most cases