Intergovernmental fiscal relations
            and poverty alleviation in Viet Nam
A successful poverty alleviation
            strategy has four distinct elements: 1) identifying who the
            poor are, where they are located, and what they do; 2)
            analyzing why they are poor; 3) developing policies to
            improve their standards of living; and 4) supplementing
            income-improving policies with direct "safety net"
            policies to increase the poor's short-term consumption
            etitlements.  The precise mixture of
            "capacity-improving" investments and "safety
            net" policies appropriate for any country will depend
            on the country's income level, the extent and nature of
            its poverty problem, and many other factors.  The strategy
            chosen must be implemented effectively.  Spending and
            revenue decisions need to be more decentralized to ensure
            that the poverty alleviation policies adopted reflect the
            preferences, needs, and fiscal abilities of different
            regions of the country.  The nature of that decentralization
            depends on the country.  Pro-poor services throughout Viet
            Nam are underfunded.  This problem is particularly acute in
            the poorer areas.  Improvements in the system of
            intergovernmental finances could help ensure that each level
            of government, even in the poorer provinces, is adequately
            funded - and provided with sufficient expenditure and
            revenue raising autonomy - to support local investments and
            their operation and maintenance.  Since poor provinces are
            less able to mobilize additional local revenues to support
            services, well-designed intergovernmental transfers are
            particularly important. Provinces must play a greater role
            both in raising revenues and in allocating expenditures,
            with incentives built in to ensure that they do so
            responsibly and efficiently.  Local governments must - if
            they are to be held accountable for their actions - have
            some responsibility for determining local tax rates.  This
            will allow them to vary rates to collect more revenues to
            finance higher levels of public services if they so choose,
            and at the same time allow the central government to design
            its transfers in such a way as to ensure that local fiscal
            efforts are not discouraged by the receipt of such
            transfers.  Richer provinces will tend to collect greater
            revenues.  When transfers are needed to finance local
            spending in poorer areas, they should provide incentives for
            local revenue mobilization and allow for some degree of
            equalization.  Services deemed of national importance (for
            example, a minimum level of education, health care, and
            social relief) can be promoted by designing specific-purpose
            transfers.  These services must be identified and varying
            matching requirements established for different provinces
            depending on such factors as their own revenue base and the
            cost of providing services in that province.