Recent Trends and Challenges of Local Management in LAO PDR By Bouangeun OUNNALATH Ministry of Finance, LAO PDR

Outlines  Recent situation of local finance development  Achievements on Sam Sang Pilot  Challenges  Further Improvements

Recent situation of local finance development  Prime Minister’s Instruction Number 16/PM, dated 15 July 2012 on Sam Sang (Three Build Directive): Building Provinces as a Strategic Units Building Districts as a Comprehensively Strong Units Building Villages as a Development Units

Ojectives  Ability to mobilize and utilize all social forces in implementation of socio- economic development plan by tying the budget to national socio-economic development plan of provinces, districts and villages;  Increase responsibility of Budget units at each level in effective revenue collection management and execution of State Budget expenditure;  Explore sources of fund to provide to provincial, district and village socio- economic development;  Enhance self-determination of the people by providing opportunities to people to access information on formulation process, implementation process and evaluation of State budget

Basic Principles  The segregation of responsibilities regarding Budget revenue-expenditure between central level and provincial and district levels;  Enhance the ownership and accountability of central-level sectors, provincial sectors, Vientiane Capital sectors, and district and village-level sectors in development and implementation of budget based on the Principle of Centralized State Budget;  Facilitate financial services, put in place monitoring, inspection and reporting systems that are sound and can be audited at all times.

The Substance of Piloting the Three- formulation in Finance Sector  Responsibility of Ministry of Finance in the Three-formulation  Substance Formulation of Provinces as Strategic Units  Substance of formulation of districts as financially strong units  Formulation of villages as financially development units

Achievements on Sam Sang Pilot  People participation local development and gain benefits from public investment;  Improving public service at local levels;  Strengthen central-local relations on revenue administration and expenditure management;  Improving responsibility segregation in development and implementation of finance-budget tasks between central-local levels;  Fostering potentials of local level in order to enhance capacity to explore more resources for local development;  Capacity building for financial officer at local levels;

Challenges  The design of the intergovernmental fiscal transfer arrangement is that whereas Sam Sang has identified the district as the strengthening unit responsible for the delivery of local services, the current fiscal transfer arrangement is only up to the provincial level;  The provincial budget is currently consolidated by sector, leaving the districts with very limited leeway to allocate resources accordingly to local needs and priorities;  Benefits sharing between provinces, districts and villages not appropriate;  Responsibility assignment between central-local levels in some sector not clear.

Further Improvements  Continue to enhance the development in the pilot districts and villages and extend the lessons to other districts and villages based on economic potentials and criteria of each localities.  Line Ministries and provinces continue to align the three builds directive in work plan and program.  MPI and MoF strengthen the coordination with line ministries and provinces to link the three builds directive with planning and budgeting.  Ministries and provinces continue to assess and evaluate the implementation of three builds directive.

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