April 25, 2019
“Fiscal Governance for Sustainable
Growth and Development in Asia
Pacific region”
1
Mr. sakounseng Sengkhamyong
Technical Official
Fiscal Policy and Law Department, Ministry of Finance
1. Overview of Lao PDR
2. The role of Fiscal governance in improving
the effectiveness of fiscal policy
3. Conclusion
Presentation Outline
2
Capital city: Vientiane Capital
Total area: 236,800 sq Km
Population: 6.8 million (2016)
Currency: Kip
3
Lao Economic Development
4
GDP Growth and GDP per capita
Source: Ministry of Planning and Investment
(%)(USD)
1,569
1,806
1,949 2,226
2,408
8.02 8.03
7.61
7.27
7.02
6.4
6.6
6.8
7
7.2
7.4
7.6
7.8
8
8.2
-
500
1,000
1,500
2,000
2,500
3,000
2012 2013 2014 2015 2016
GDP Growth Rate GDP per Capita
Growth
5
Lao Economic Development
11.0% 10.6% 9.7% 9.5% 9.6%11.0%
12.3% 13.0%13.1%
13.9%14.7% 15.5% 15.8% 16.0% 15.7% 14.9%
2.4% 2.5%2.1% 2.0% 2.0%
1.9%1.6%
1.9% 1.7%1.9%
1.7%2.2% 2.5% 2.9% 2.7%
2.6%
13.4% 13.1%11.8%
11.5% 11.6%
12.9%13.9%
14.9% 14.9%15.8%
16.4%17.7%
18.3%18.9% 18.4%
17.5%
3.2%
1.4%2.3%
1.1%1.7%
3.2% 2.8% 2.9%2.4%
6.6% 6.0% 6.5% 6.1%5.7% 5.3%
1.8%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Government Revenue
Tax revenue Nontax revenues Domestic revenue Grants
(% of GDP)
Budget revenue during the past 10 years (2001-2016) average 16% of GDP. In which, domestic
revenue, average 14% of GDP and ODA average covered 2% of GDP, the State budget execution
has tendency to get better and better, the ratio of domestic revenue compare to GDP increased
from 14% of GDP in FY 2000-2001 to 17.5% of GDP in FY 2015-2016.
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Lao Economic Development
16.6%
14.5% 14.1%12.6%
13.3%
16.0%16.8%
17.8% 17.3%
22.4% 22.4%
24.2% 24.4% 24.6%23.7%
19.3%
22.2%
19.1%
21.1%
15.7%
18.2%
19.9% 19.9%20.9% 20.7%
24.7% 24.4%25.6%
30.8%29.1% 28.9%
25.5%
-5.5%-4.6%
-6.9%
-3.1%
-4.9%-3.8%
-3.1% -3.1%
-3.4%
-2.3%
-2.0%
-1.5%
-6.3%
-4.5%-5.2%
-6.2%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
Government Overall Balance
Revenue Expenditure Overall Balance
(% of GDP)
16.5% 16.1% 16.6% 17.3% 17.3%
21.5% 21.7% 22.0% 21.2% 20.1%
-5.0% -5.6% -5.4%-4.0%
-2.8%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2015/16 2017 2018 (PLAN) 2019 (PLAN) 2020 (PLAN)
GOVERNMENT OVERALL BALANCE
(PLAN VIII)
Revenue Expenditure Overall Balance
First generation of PFM reform
- Revised legislations
- Centralized treasury, tax and customs
administration
- Fiscal decentralization (Sam-sang)
- PFM assessment:
- PER
- PETS
- PEFA
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Key achievements in first generation of
reforms
Example Treasury Reforms
Hundreds of bank accounts on all
levels of government
Closing of bank accounts &
consolidation to a single, zero
balance account
No centralized treasury functionCentralized Treasury with cash
management division
Basic GFIS functions, manual
processes, no connection to local
levels
Upgrade of GFIS system and roll-
out to provincial treasuries
→ Supported by a sound legal framework (Budget Law,
Accounting Law, Tax/VAT Law, SAO, etc.)
Implementation Challenges
• Limited technical knowledge and skills
• Staff rotations slowed down reform process
11
• Multiple reform efforts at the same time
• Ambitious scope of reforms
• Reforms stalled with change in MoF
management and commitment
Public Finance Development Strategy to 2025 and Vision to 2030
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Challenges for Lao PDR
• Fluctuation of commodity prices
• Country capacity (HR, legal framework and
finance systems) is low
• Need to enhance business environment and
regional trade
• Natural disasters
Lao PDR and the International Context
External opportunities
• Uprising Asian economies
• Access to international markets
through ASEAN
• Rapid development of science and
technology
• International and regional integration
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Lao PDR at a glance
Potentials
• Political stability, peace & security
• GDP/capita: US$ 2,408
• Stable macro-economy and
exchange rate
• Abundant natural resources (water
forestry, mineral resources)
Challenges for Lao PDR
• Lao PDR remains in the group of LDC countries
• Abundance of natural resources has not been
utilized efficiently
• Inefficient use of public resources and donor aid
• Need to improve government capacity
• Public debt levels remain high14
PFM challenges over the past 15 years
• Budget Preparation not based on credible data
• Planning and execution did not strictly follow the Law
• Fiscal reporting was delayed and incomplete
• off-budget spending
Revenue and expenditure management
• Shortage of qualified personnel
• Coordination between entities only sporadic
• No systematic and regular monitoring mechanisms
• Debt management not centralized
Institutional and personnel
management
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Public Finance Management Vision 2030
Provinces covering their
own expenditure
sound
By 2030, PFM is/has …
self-reliant
self-strengthening
A legal framework in line
with international
standards
aligned with the regional and
global integration
a single State
budget plan Bond, capital and money
market are strong and
stable sources for funding
Public finance entities as
the engine of economic
development
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Public Finance Development Strategy 2025 in
the country’s broader development path
Public Finance Development
Strategy
National Socio-Economic Development
Plan
Guidelines on delegating
responsibilities to local levels (Sam Sang)
Increase global and regional integration
Party Guidelines
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Macro Targets
• at least 7,2% (per year)Annual GDP
growth
• doubled since 2016 rates
GDP/capita
• below economic growth rate
Inflation rate
• within ± 5% per yearUSD Exchange rate fluctuation
• between 18-20% of
GDP
Public revenue
• below 65% of GDPPublic debt
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Some Targets for the Public Finance Development Strategy 2025
Prudent PFM by strictly adhering to the State Budget Law
Implement the State Budget Plan as approved by the National Assembly
Ensure public servants are equipped with sound political ideology and sufficient technical capacity
Develop a comprehensive modern legal framework
Limit revenue leakages and expenditure loopholes to ensure sound planning and fiscal disciplines
Apply modern systems in line with international standards
Manage public debt prudentially19
Strategies 1-3
Strategy Goal
1. Macro-
economic
stability
• Dynamic, stable, balanced economic growth
• Strong PFM foundation to control budget deficit and reduce public
debt
• Development of stable government reserve funds
2. Revenue
policy and
collection
• Maximize revenue collection
• Setting fair tax and customs policies
• Efficient revenue collection
• Effective ODA management
• Use of proceeds from natural resources for sustainable development
3.
Expenditure
policy and
rational
spending
• Enhanced efficiency of budget expenditure management and
transparency
• modern and systematic expenditure management
• Delegation of responsibilities to the local level
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Strategies 4-7
Strategy Goal
4. Public debt
management
• Centralized management of external and domestic borrowings
• Effective debt management and minimization of costs
5. Personnel
strengthening
• Effective delegation of responsibilities to the local level
• Capacity building of civil sector
• Development of training and educational institutions
6. Strong
accounting,
audit and
financial
control
• Alignment of public/private accounting systems, audit and reporting to
international standards
• Enhance financial control and anti-corruption measures
• Impose measures for violators of fiscal disciplines
7.
Modernization
of public
finance entities
• Alignment to regional and global practices
• Development and application of technology for revenue collection and
expenditure management
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Strategies 8-10
Strategy Goal
8. Legal Framework
• Improvement of the fiscal regime according to the Party
and Government guidance
• Revision of public financial framework
• Improve Investment Promotion Laws
9. International
Integration and
Cooperation
• Implementation of international agreements
• Increase regional and global economic financial
cooperation
10. Management and
Development of State-
Owned Enterprises
• Manage government investments for sustainable
economic revenues
• Strengthening of SOEs Joint Ventures
• Development of financial services 22
Ministry of Finance
• Translation of PFM Strategy into Annual Work Plans
Public Finance Entities
• Integration into
• Allocation of
Master Plans Programs Projects Activities Targets
Human Resources Budget
Funding 2018 – 2020 2021 - onwards
External Internal External Internal
Human Resources Capacity Building Plan
Coordination with development partners > Optimization of resources
• Results
• Areas for
improvement
• Recommendations
Reporting
AdjustmentMonitoring
ImplementationFinal
Evaluation
Implementation/Monitoring/Reporting/Coordination
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Implementation Plan for the Public
Finance Management Reform
Stage 1 Phase II (2018-2020)
6 prioritised programmes
Technical team has suggested 2 implementing phases:
• The main objective is to develop a complete set of public finance management infrastructure such as policies, legislation, organizational structure, personnel and management tools
Phase I(2018-2020)
• The objective is to develop fiscal stability and step up to international standards
Phase II(2021-2025)
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Implementation Plan includes
6 Programmes:
1. Fiscal Policy Improvement
2. Legal Framework Development and
Improvement for Public Finance Sector
3. Revenue Management Reform
4. Expenditure Management Reform
5. Modernization of Public Finance Sector
6. Organizational Structure and Human Resource
Development
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Programme 1: Fiscal Policy Improvement
➢ Research and improve financial policies in all aspects based on Vision to 2030 and Public Finance Development Strategy to 2025 by focusing on improving the State budget structure for the right balance in 2020 (fiscal deficit of not more than 3% of GDP)
➢ Revise revenue policies:• Revise Tax rate
• Improve Tax structure
➢ Revise Expenditure policies:
▪ Develop Medium-Term Fiscal Framework (improve State fiscal statistic as a comprehensive system)
▪ Develop Medium-Term Expenditure Framework
▪ Develop annual budget plan (ceiling)
▪ Develop Public Debt Management Strategy
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Programme 2: Legal Framework Development and Improvement for Public Finance Sector
➢ Review Tax policies:
Most of the work completed in 2017: value-added tax, consumption tax, which are being improved and developed into Tax Law and Consumption Law;
Plan for 2018 is to review Land Tax and Assets Tax policies to move to the development of Assets Tax Law in 2019.
➢ Will complete 100% the development of secondary legislation
In the Public Finance sector Laws, 65% of secondary legislation was developed and the remaining of 35% will be developed in FY 2018-2019;
➢ In some Laws, although secondary legislation could not be made, implementation instructions have been identified in different Categories and Articles.
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Programme 3: Revenue Management
Reform
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➢ Implement Tax Development Plan:• 4 development plans, 11 priorities
➢ Improve legislation
➢ Improve revenue management collection
➢ Tax modernization
➢ Improve human capacity and Institution
11 prioritiesed for 2018-2020
1. Review existing legislation and develop new ones 2. Follow Laws, rules 3. Identify Large Tax Payers 4. Expand the implementation of VAT 5. Improve services for Tax payers 6. Improve the usage of technology 7. Improve the current information to be an information centre
based in Tax Department 8. Promote international cooperation 9. Improve internal inspection, transparency and honesty 10.Increase Tax staff capacity and skills 11.Carry out duties based on technicality and organizational
functions of the Tax Department
➢ Implement Tax Development Plan:
– Implement the Compliance Program to prepare for the future
implementation of the Authorized Economic Operator (AEO) project
– Develop National Single Window (NSW) for Costumes clearance
➢ State Owned Enterprises Reform:
– Develop SOEs Development Strategy Plan;
– Develop monitoring, report and evaluation plan for SOEs implementation;
➢ Implement State Assets Development Strategy and
Management Plan
Programme 4:Expenditure Management Reform
➢Budget Reform:– Develop budget based on State Budget Law revised in 2015, develop medium-
term fiscal framwork, change budget preparation from COA to baseline budgeting, prepare budget plan in the suggested timeframe and policies;
– Enhance budget allocation by creating mechanisms to consult with local level for each prioritized task;
– Implement Procurement Law and apply it in the public investment projects, administrative expenses;
– Develop rules and set up regularly inspection exercise;
– Coordinate with Ministry of Planning and Investment to build payment system with full information and follow up the implementation of State investment projects;
– Reseach on technical revenue management for centralized revenue collection and implement state budget based on the National Assembly approval.
➢ Treasury Reform:
– Continuing improving National Treasury Single Account;
– Improve and develop payment systems through the use of
modern tools and link to Budget, spending units at each level,
and banks;
– Implement Automated Clearing House (ACH)
– Continuing improving cash management and budget balance
– Improve on-time payroll system at Central level
– Improve information system and report on budget
implementation on timely manner.
➢ Debt management:
– Centralized domestic and external debt management
– Develop Debt Management Strategy and Medium Term
Loan Framework
– Develop manual for Loan Approval, Insurance, and
Impact analysis for Companies and the Nation.
Programme 5: Modernization of Public Finance Sector
➢ Complete the development of modern IT system to manage
public finance in 2021;
➢ Develop IT Strategy for Public Finance sector;
➢ Continue developing GFIS until the completion of FMIS
development;
➢ Continue developing ASYCUDA and DMFAS;
➢ Manage the development of TAXRIST and be able to use in
2019.
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Programme 5: Modernization of Public Finance Sector (Cont.)
➢ Develop FMIS based on WYG recommendations and complete in FY
2018-2021;
➢ Continue improving Road Tax, SMART VAT, SMART TAX to be
more modern and comfortable;
➢ Research Tax collection system and fees for Land and tax payments
through the banking system;
➢ Apply E-OFFICE;
➢ Research on E-STAFF and E-ASSET
Programme 6: Organizational Structure and
Human Resource Development
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Vision: Staff with knowledge and skills and are
appreciated by society
Mission: Effective and efficient fiscal and budget
management to enhance livelihood of
citizens
Moral: Honest, fair, modern and professional.
Ready to provide services
1. Organizational Structure
➢Continue improving the Organizational Structure in the Finance sector
to be in line with new development;
➢ Points to be addressed: legislation framework to 2020 will develop
15-16 Laws, Law impact assessment and conflict resolution on Laws
are not available;
➢ Procurement process based on Laws;
➢ Centralized domestic revenue collection;
➢ Sam Sang from District level particularly the Taxation sector;
➢ Security
Complete Job Description by dividing into civil servants and contractual
category. If this task is completed, it would contribute to staff stability
and reduce number of people in the ‘To be recruited list’.
Criteria set up will help to select the right candidates with the right
specialization and competent.
Develop modern legislation to manage staff.
2. Prepare Job Description and Criteria of each Position
➢ Conduct Capacity Assessment to support the training needs
preparation, may start in the main sectors;
➢ In Taxation sector, the lack of competent staff to manage in some
areas is the issue, such as in multi-businesses across countries,
electricity, mining, etc.;
➢ Develop specific and systematic training courses;
➢ Develop general training courses.
3. Human Development
Training systems for Finance staff at Central level
Training systems for Finance staff at local level
❑ Implementation, Monitoring and Evaluation Plan
for Public Finance Management Reform
➢ The Government appoints the Public Finance Management
Reform Steering Committee, led by the Minister of Finance
and consists of line Ministries and the relevant sectors;
➢ The Ministry of Finance appoints the Public Finance
Management Reform Implementing Committee led by Vice
Minister of Finance and consists of relevant Departments;
➢ Appoints Technical Team (Fiscal Policy and Law
Department) as Secretariat, develop Monitoring and
Evaluation Framework for each reform period;
❑ Implementation, Monitoring and Evaluation Plan for Public Finance Management Reform
❖ Ministry of Finance Management endorses
Implementation Plan for Vision to 2030 and Public Finance
Development Strategy to 2025 in Feb 2018;
❖ Organize Launching to start the Implementation Plan for
Vision to 2030 and Public Finance Development Strategy
to 2025 in June 2018;
❖ Disseminate the Implementation Plan for Vision to 2030
and Public Finance Development Strategy to 2025 at
Central and local levels.
Thank you !
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