Socialist Republic of Vietnam

Govt Officials Vow to Clear Tax, Customs Problems

The Ministry of Finance (MoF) will continue to intensify administrative reforms in tax and customs sectors, removing all remaining problems and punishing any customs or tax officers violating regulations to create more favorable conditions for businesses in Vietnam, an MoF official promised at a meeting with businesses yesterday in Hanoi.

"MoF will take measures to improve some tariff policies and customs procedures, which domestic businesses complained were inadequate and complicated," Deputy Finance Minister Truong Chi Trung said the conference with the participation of leaders from the ministry, the General Department of Taxation (GDT), the General Department of Customs (GDC) and representatives of over 400 enterprises in the northern region.

Around 650 claims in the form of documents relating to tax and customs and 45 direct ideas were voiced at the conference. Most of the anger was focused on criticizing tax agencies' delay in refunding taxes and the pestering by many customs officiers who often wait for bribery from import-export companies.

"Companies waste too much time waiting for tax refunds," said Tu Thi Bich Loc, director of My Anh Garment Co. Ltd., adding that her company has completed all required procedures for the tax refunds from early 2004, but still have not received any money from tax agencies.

"We also petitioned to the GDT about the delay but did not have an appropriate response," she said.

Some companies also complained about a rule introduced by the Finance Ministry on value-added tax (VAT) collection runs contrary to the governments's economic policies.

Currently, enterprises buying domestically produced materials are required to immediately pay the 10% VAT while other companies importing foreign products have a period of 270 days to pay, exemplified Doan Thi Huu. Nghi, vice director of Hiep Hung Co. Ltd.

Under Vietnam's current VAT Law, local firms have to pay a VAT tax rate of 10% for domestic materials and then they must wait for take tax refunds. However, they often have to wait very long despite the fact that tax agencies are required to pay refunds to businesses within a 15-day period from when its tax returns are filed. In case the agencies conduct an inspection on businesses' tax refund documents, the period is extended to 60 days.

The regulation pushes enterprises to import materials, which runs counter to the state policy of encouraging domestic material use, she explained.

According to entrepreuneurs, the setback often lasts for at least three months to over one year, with the refund amount for some companies reaching hundreds of millions to five billion Vietnamese dong.

Acknowledging the problem, Nguyen Thi Cuc, GDT deputy chief said the setback partly resulted from tax policies and pledged to make changes. Tax refunds will be given to enterprises soon while amounts exceeding VND200 million each will be refunded immediately, she added.

Ms. Cuc also agreed and said that the taxation department will change the VAT law to allow businesses using domestic materials to also have 270 days to pay VAT.

Tax agencies will probably pay interest on the tax amounts that are refunded late, said Nguyen Van Ninh, GDT chief.

Meanwhile, leaders of the General Department of Customs present at the conference also admitted to some issues in the customs formalities and policies that companies said were complicated and unreasonable. The leaders promised they would take measures to tackle problems including harassment by customs officials.

As for the preferential corporate income tax (CIT) rates applied for enterprises in economic processing zones (EPZs), industrial zones (IZs) and high-tech zones, the government will continue offering the incentives that were applied before January 1, 2004, in a bid to attract foreign direct investment, said Nguyen Van Ninh, Director of GDT.

Regarding the value-added tax (VAT) applied to EPZ enterprises, nine types of services provided to EPZ enterprises will be VAT-free: insurance, banking, telecommunication, consultancy, accounting, auditing, transportation, loading, and office leasing. (Labor Jul 27 p3, Youth Jul 27 p1, Econet Jul 27 p2, Pioneer Jul 27 p4, Young People Jul 26, VNA Jul 27)

Vietnam Signs Berne Convention on Literature Copyright Protection

Vietnam has officially joined the Bern Convention on Literature Copyright Protection, which is to become effective in the country from the fourth quarter of this year, according to a source from the Ministry of Culture and Information (MoCI).

It is the first international agreement on the issue that Vietnam has signed to date apart from the other two similar bilateral agreements with the US and Switzerland in 1999, the source added.

The Vietnamese State President gave his signature to the convention on June 7.

Under the convention, Vietnam will have to respect and protect the copyright reservations for works of literature from 155 other member nations and will in return have its works protected in those countries.
MoCI officials, however, are now concerned about the incapability of Vietnamese authorities in ensuring the protection of such rights for foreign authors due to a bulky but ineffective operational mechanism.

Vu Manh Chi, head of the Copyright Department under the ministry, also voiced his concern about a possible sharp fall in the volume of translated books when the convention comes into life, as many local publishers are unable to approach foreign writers or pay the royalties.

He cited out the dramatic decrease in the number of US and Swiss books translated into Vietnamese after 1999 as an outstanding example of the outcome of the agreements between Vietnam and these two foreign countries.

His department has now instructed publishing houses nationwide to look for foreign works whose copyright protection periods already end for translation and publications in order to ensure a considerable volume of translated books for the coming period.

Copyright protection is still new and remains a difficult mission in Vietnam. The Vietnam Writers Association is proceeding with a project to set up a literature copyright protection center but it is still on paper as there are still not enough writers registering to participate in the center.

Since 1999 Vietnam has translated between 500-700 foreign books per year, including republications. (HCM City Law Jul 26 p1, Sports & Culture Jul 23 p39)

Seafood Firms to Survey US Market

The Vietnam Association of Seafood Exporters and Producers (VASEP) will organize a trip for local seafood businesses to survey the US market from October 25 to November 2 this year to understand the market reaction after the anti-dumping shrimp lawsuit.

Vietnamese seafood businesses will meet and discuss information with Vietnam Embassy's Commercial Office, New York-based Vietnam Trade Center, law firm Willkie Farr & Fallagher, H&T and attend All Asia Food Expo and West Coastal Seafood Shows during the trip.

The Vietnamese delegation also seeks to do business with other US seafood partners.

The US is the world's second largest seafood importer, according to the United Nations' Food and Agriculture Organization (FAO). The country is Vietnam's biggest consumer, which accounts for 35% of the total seafood exports.

Vietnam estimates to export 10,300 tons of frozen shrimp products in July this year, mainly to Japan, EU and the US, pricing between $1-11.1 a kilo of tiger prawn, up from $10.1-10.2 in June. The prices of shrimp in the Mekong Delta region were at VND82,000-95,000 ($5.3-6.1) a kilo this week, up by VND4,000-7,000 ($0.26-0.45) against a week before.

However, Vietnam is now a defendant in an anti-dumping shrimp lawsuit in the US market, leaving the country's fisheries sector with more difficulties. The Department of Commerce (DoC) on July 7 ruled that Vietnamese exporters had dumped shrimp products in the US market with margins ranging from 12.11% to 93.13% for shrimp imports from Vietnam. (VietnamNet Jul 22, Countryside Today Jul 26 p2, Young People Jul 26 p14)

Vietnam Attracts $962.5Mln Worth of Fresh FDI in Jan-Jul

Vietnam attracted 359 foreign direct investment (FDI) projects with total pledged investment of nearly $962.5 million in the period between January 1 and July 22, 2004, a Government source said.

This has raised the total number of operational FDI projects in the country to 4,738, capitalized at nearly $42.81 billion.

According to the Government's General Statistics Office, Taiwan was the largest foreign investor in Vietnam in the period with total investment of $263.2 million, followed by Canada with $152.2 million, South Korea with $146.2 million, Japan with $70.95 million and Malaysia with $55 million.

The southern province of Dong Nai attracted the most FDI in the period with $177.68 million, followed by Binh Duong province with $162.5 million, Thai Nguyen province with $147.65 million, Ho Chi Minh City with $95.29 million, Hanoi with $54.55 million, Vinh Phuc province with $46 million and Lang Son with $40.34 million.

Of the fresh FDI attracted into the country, 38.29% is to be invested in heavy industries, 22.8% in agriculture, 18.56% in light industries, 8.95% in hotels and tourism, and 3.17% in building offices and apartments.

FDI firms in Vietnam are likely to generate industrial production of VND11.68 trillion ($743.9 million) in July this year, up 14.21% against the same month last year and accounting for 36.73% of the country's total.

This will bring up the total industrial production of FDI companies in Vietnam to VND75.11 trillion ($4.78 billion) in the first seven months of this year, up 14.4% year on year and accounting for 36.1% of the country's total.

The total export revenues of FDI companies in the country are expected to reach $7.74 billion in the first seven months of this year, up 32.4% against the year-earlier period and accounting for 54.65% of Vietnam's total export revenues in the period. So far this year FDIs have spent nearly $5.94 billion on imports, up 17.8% year on year. (GSO, Vietnam Panorama)

Vietnam to Unveil Protectionist Tariffs on Automobiles

Vietnam's Ministry of Finance (MoF) is to administer reduced tariffs on domestically produced automobile components, while imposing higher taxes on those imported.

The ministry is set to adjust the system of taxation on imported automobile components, under which taxation will be applied on individual parts, instead of the current system based on CKD (complete knocked-down) and IKD (incomplete knocked-down) packages.

The ministry is striving to administer a tax policy that moderately protects local production. Domestically produced components have a competitive edge and will see a reduction in taxes. The components that cannot be made locally will see lower individual rates. A common tariff on individual components will be defined independently of the vehicle type.

The MoF is also considering revising its methods of calculating tax and introducing taxation on an individual basis.

Taxation rates on components will be calculated on an individual basis for three types of vehicles: less than 16 seat vehicles; over 16 seat vehicles and trucks with under 5 ton loading capacity; and trucks over five ton loading capacity.

The onset of this taxation scheme will bring only minute changes in total automobile component taxation, avoiding protests from domestic automakers.

However, MoF officials foresee some problems with the new taxation scheme, notably trade fraudulence. For example, components destined for cars of less than 9 seats could potentially be used for assembling trucks as well.

In addition, it is difficult for management bodies to assess component types for the wide range of domestically produced vehicles. Many legal documents need to be issued and thorough inspections will be required to ensure effective implementation.

The MoF finally has fallen back on its former method of tax calculation, though it foresees some objection from auto-makers.

Under the MoF's plan, the average taxation rate on components used for less than 16 seat cars will be the same as the currently applied CKD rates, while higher rates will be applied for other vehicle types.

The proposed new policy, for example, will face objection from producers of over-five-ton trucks and over-30-seat buses as they will face higher taxation (they now enjoy low tax based on the CKD form, ranging from 3-5%).

Components encouraged to be produced in Vietnam, including engines, gearboxes and bodywork, will see taxation rates of 15%-30%. Vietnamese-produced components will see rates of 30-40% (now 40-50%) in order to force local producers to sharpen competitiveness. Taxation rates for other components will be from 0% to 15%.

The MoF is now seeking support from other relevant bodies for the proposed method of taxation. The Ministry of Industry and other ministries will table their opinions before the Government makes the final decision.

The Vietnam Automobile Manufacturers Association (VAMA) sent a document to the government office, warning of potential difficulties with the newly planned taxation scheme. It said that the new method would require increased resources, time and expenses from both auto makers and state bodies.

Furthermore, it will be difficult for foreign component suppliers to fall in line with the new and complicated method with as many as 20,000 components per car model.

However, the proposal on maintaining the current CKD and IKD tax policy has not been accepted.

According to Quach Duc Phap, head of the Tax Policy Department under the MoF, tax policies should be adjusted in line with the amended strategy on auto industry development. The new strategy focuses on the development of component production instead of automobile assembly as in the past.

The matter now is how to build up a reasonable tariff structure on individual auto parts, he said.

He said the new tariff should meet three requirements. It should avoid marked increases on currently applied rates in order to reassure auto-makers, while creating favorable conditions for negotiations for WTO accession and diversify local production. (VietNamNet Jul 26)

Vietnam Spends $162Mln on Automobile Imports in Jan-Jul

Vietnam is forecasted to spend $162 million on importing 12,000 automobiles in the first seven months of this year, up 1.4% in value and down 4.5% in volume, according to the governmental General Statistics Office (GSO) figure.

In July, the country is estimated to spend $25 million to import 2,000 automobiles.

The decrease in automobile imports is largely attributable to the fuel price hikes and the possible floating of petroleum firms on the countries stock market.

In the seven-month period, Vietnam is predicted to spend $227 million to import auto spare parts and kits.

Last year, Vietnam imported 20,200 cars valued at $257.8 million, a respective decrease of 30.4% and 1.2% over 2002. (General Statistics Office Figure July 2004)

Vietnam Rejects UN Refugee Watchdog's Policy

Vietnam has critically opposed the United Nations High Commissioner for Refugees (UNHCR) over a series of "incorrect activities", including its offers of asylum status to Central Highlands ethnic minority people to encourage them to illegally flee to Cambodia.

Foreign Ministry Spokesperson Le Dzung emphasized yesterday that the UNHCR has ignored Vietnam's repeated notices and criticism to continue to lure ethnic minority people to flee their homeland in the Central Highlands to the neighboring Cambodia.

"The UNHCR's action is wrong and only serves the interest of Vietnam's hostile forces to incite ordinary people who are enjoying peaceful lives in the Central Highlands to illegally flee across the border to Cambodia, thus destabilizing security along the Vietnam-Cambodia border and violating Cambodia's sovereignty," Dzung said.

He confirmed that those ethnic minority people who have illegally fled across the border to Cambodia and now voluntarily return home will never face prosecution, punishment or discrimination for their past activities. They will be granted favorable conditions to return to normal life and reintegrate into the community as soon as possible, he added.

The spokesman also mentioned the statement by Cambodian Prime Minister Hun Sen on the solution to the problem regarding the Central Highlands ethnic minority people who illegally fled to Cambodia.

Hun Sen's initiative involves the interviewing of illegal border crossers from Vietnam's Central Highlands by Cambodian authorities. Those who express a desire to return home will be allowed to so whilst those who want to live in a third country and are accepted by a third country will also be let go. In the case where asylum seekers are unable to find immigration permission from a third country, they will be repatriated.

In related news, the NGO Committee of the Economic and Social Council of the United Nations (ECOSOC) has turned down a request by the Free Vietnam Alliance (FVA), that it be allowed a consultative status at ECOSOC.

FVA is regarded by the Hanoi government as a hostile force that provides false reports on human rights in Vietnam. (Pioneer Jul 26 p3, Youth Jul 26 p16, VNA Jul 24, VOV Jul 24)

First Full Tax Regime for Securities Trading

The first comprehensive tax regime for the securities trading sector - including new tax breaks - is expected in August. In a draft circular, the finance ministry has proposed different rates of value-added tax (VAT) and corporate income tax (CIT) for stock market investors, securities companies, investment funds and organizations that trade in securities.

Securities companies will pay a CIT rate of 20%, compared to the 28% cent paid by companies in all the other sectors of the economy.

Foreign investment funds that invest in unlisted or listed companies will be taxed 0.1% of the value of each of their transactions.

All other companies, whether listed or unlisted and including entities that have invested in the stock market, will be subject to CIT of 28%.

All businesses involved in the sector will be exempt from VAT, from brokers to foreign investment funds.

The draft circular also stipulates that new securities companies and fund management companies will be exempt from CIT for the first three years, and will pay a reduced rate of CIT for the following five years.

"The taxes are a way of encouraging the development of the country's securities market, which is still in its infancy," said Nguyen Duc Chi, director of the capital markets division of the ministry's Banking and Financial Institutions Department.

"The wording of the circular makes it difficult for institutional investors to commit fraud by representing themselves as individuals so they do not have to pay tax."

Furthermore, Chi said money transfers via bank were strictly monitored, again making it difficult for investors to get away with fraud.

Tran Le Minh, senior analyst at Viet Fund Management, said this was the first time a tax regime had been proposed for the securities sector, despite the country's first bourse having opened in Ho Chi Minh City in 2000.

Phan Minh Tuan, chief representative of Dragon Capital Hanoi, said the expansion of preferential policies and measures to encourage enterprises to list on the stock exchange was necessary given that the market was still weak.

Nguyen Son, deputy head of the Securities Market Development Department under the State Securities Commission, said the tax levels were "acceptable".

If they were any higher, they would be a significant burden to investors, Son said.

Nguyen Hoang Hai, the general secretary of the Vietnam Association of Financial Investors, agreed a "soft" tax level was needed in the early stages of the market's development.

"The amount of taxes collected from securities trading activities will be low, as many investors have suffered losses, including individual investors who are exempt from the personal income tax."

Close to 17,000 accounts for securities trading have been opened in Vietnam, a small number by global standards.

"It is essential that the government apply a suitable tax rate that is attractive enough to investors, including foreign ones," Hai said.

But he warned that increasing the flow of capital to the stock market could reduce investment in real estate, which would harm economic growth.

"However, on the other hand, once companies are more able to mobilize capital from the securities market, the capital supply burden on commercial banks will be reduced." (VIR Jul 26 p15)

VN-Index: Down 0.9 Points to 240.94

Vietnam's shares closed lower Tuesday for the third consecutive trading day as local investors lowered their expectations of listed firms in the second half after seeing that the government has been failing to control inflation.

Local enterprises will face higher business costs in the second half as the consumer price index (CPI) was recently forecasted by both the Ministry of Finance and Ministry of Trade to continue to rise, one stock trader in Ho Chi Minh City said.

Inflation, according to some local financial experts, may jump over 10% to a possible 12% this year after reaching 7.7% in the January-June period. The two ministries are considering floating the retail price of petroleum products along with global prices and a salary hike of around 30% for six million state employees in Vietnam in October.

The country reported an economic growth of 7% in the first half. It targeted to reach a GDP growth of 7.5-8% in 2004, however, some experts proposed the government reduce economic growth to reduce inflation.

The index closed 0.9 points, or 0.37%, lower at 240.94 Tuesday, compared with its record high this year of 279.71 on April 1. Eleven stocks closed down, seven remained unchanged, four ended higher and two went untraded.

On-floor stock trading volume went up by 23% to 161,560 shares from 131,350 shares yesterday. Turnover increased by 13.5% to VND3.36 billion from VND2.96 billion.

"Many stocks are expected to continue falling in the coming days, after investors register to receive first-half cash dividends," another stock trader in Hanoi said.

Moreover, foreign investors, who had played a driving-force behind the recovery of 67% of the country's unique stock market index (VN-Index) in the first three months of this year, reduced their purchases in recent trading days.

Foreign investors bought 7,320 shares on-floor today, accounting for 4.5% of the total volume on-floor. They also sold 3,000 SAV shares on-market.

Bach Tuyet Cotton, or BBT, was also today's most active stock with 44,320 shares changing hands on-floor worth VND611.6 million, accounting for 27.4% of the market volume and 18.2% of the total turnover on-floor.

BBT shares closed VND100, or 0.72% higher at VND13,800, compared with its debuting price of VND21,600 on March 15.

Market heavyweight Refrigeration & Electrical Engineering, or REE, was the second most active stock. The stock closed down VND300, or 1.27%, at VND23,500 on a volume of 32,370 shares.

VTC Telecommunications, or VTC, was hardest hit, dropping VND1,000, or 2.67% to VND36,500 on 310 shares.

Bim Son Packing, or BPC followed with a drop of VND500, or 2.5% to VND19,500 on 100 shares.

In off-market deals, local investors traded 10,000 KHA shares at VND24,900 each.

Local institutional investors traded 30,382 15-year CP4A2604 government bonds off-market at VND99,364 each off-floor. The bonds were issued on June 4, 2004 with an annual postpaid interest rate of 9.2%.

They traded 1,000 BID1_100 on-market at VND96,000 and 500 BID1_200 at VND92,700 each

Vietel Further Reduces Planned Mobile Phone Subscription

The Vietnam Military Telecoms Co. (Vietel) has recently submitted a new mobile phone charge plan to the Ministry of Post & Telecoms only ten days after the firm submitted its first phone charge plan to the ministry.

Accordingly, subscribers of Vietel's mobile phone network, which will start operations from August 1, will be subject to a monthly subscription of VND69,000, compared with VND90,000 in the previous plan.

The call charge will be VND139 for every six seconds for inter-network calls and VND149 for roaming calls between Vietel network and other domestic networks (VAT included). The respective charges of the previous plan were VND145 and VND160.

The move is interpreted to be in response to the announcement of the Vietnam Post & Telecoms Corp., which operates Vietnam's two largest mobile phone networks, to reduce its monthly subscription from the current VND100,000 to VND80,000. (Econet Jul 27 p6)

Vietnam Still Grappling with War Consequences

The Vietnamese government and people are still facing many difficulties in overcoming aftermath of the war nearly 30 years after the last independence war ended in 1975, a senior social official has admitted.

The government will need at least a few years to settle basic long lasting problems resulting from wartime periods, said Deputy Minister of Labor, War Invalids and Social Affairs, Mr Nguyen Dinh Lieu.

"It will take one or two years for us [his ministry] to deal with petitions from 25,000 people nationwide who are scared from recent wars and now ask for government recognition and assistance," Lieu said.

The deputy minister, meanwhile, could not tell when Vietnam would complete human identifications for 500,000 graves of nameless war martyrs and find remains of the total 300,000 soldiers who remain missing in action (MIAs).

Vietnam also lacks money to help close relatives of war martyrs, war invalids and other veterans and their families to live a better life as many of them are now trapped in poverty and hunger, he said.

The Ministry of Labor, War Invalids and Social Affairs (MoLISA) calculates many of these people are living in 150,000 dilapidated houses and estimates total funding of VND850 billion is required for repairing them.

"We [MoLISA] expect to find sufficient capital to complete this task in the next two years," Lieu said without uncertainty.

Other thorny issues relate to low government allowances to these people and war victims, including five million Agent Orange-affected people.

"We [the government] cannot dodge these issues any more," Lieu said, but admitted that the government has yet to find suitable solutions.

Though repeatedly vowing to provide special care for war heroes and victims and their families, the Vietnamese government has to date been only able to provide insignificant assistance to them and has had to depend on international and domestic donations.

The country's top leaders today all delivered similar pledges to revolutionaries and their families to mark the 57th National Day for War Invalids and Martyrs, but no one knows when the spirit of such messages will be fully translated into reality.

At present the government can offer these people VND100,000 ($6.4) per head per month at most. (VNExpress Jul 26, The People Jul 27 p1, Labor Jul 27 p1, Youth Jul 27 p1, Pioneer Jul 27 p1)

PM Demands Careful Plan for Growth in Capital Hanoi

Head of the Vietnamese government, Prime Minister Phan Van Khai, has urged the authorities in Hanoi to carefully map out a development masterplan for the capital city and the surrounding areas.

Talking with local leaders yesterday in Hanoi, Khai advised the city to employ foreign planning experts if required to ensure that no mistakes would be made in the directions for socio-economic development in the city by 2010.

The PM told the capital city to focus not only on attracting more foreign and private investment to boost economic growth but also on improving infrastructure and protecting the environment.

The PM agreed in principle to give local bodies greater authority in licensing foreign direct investment projects, with a capital level of up to $40 million.

With industrial production increasing by 15-16% and services up by more than 11% so far this year, the city can achieve the expected GDP growth of between 10.5-11% in 2004, city authorities reported.
Ahead of the meeting with the PM, city authorities had already worked with 11 ministries and government agencies on specific issues relating to the development of the capital.

The local leaders now call for more state funding in major projects to hasten economic development in the city by 2010. They seek a yearly investment package of VND4,000 billion ($255 million) or direct funding from the state budget for projects to build bridges spanning the Red River, the city's belt roads, railways and the proposed metro.

In the last four years, Hanoi has recorded a GDP growth of 10.71% with industrial production going up by 40.4% and the service sector by 57.2%, annually.

At the end of 2003, Hanoi reported that the industrial sector accounted for 40.4%, services 57.2% and agriculture-fisheries-forestry 2.4% of its economic structure.

Having only 0.3% of the country's land area and 3.7% of the total population, Hanoi contributes 8% to the country's GDP, 10.1% to national industrial production, 9.15% of total export earnings, 10.2% of total development investment capital and 14.5% of national state budget revenues. (VNS Jul 27 p1, The People Jul 27 p1, Young People Jul 27 p1, Labor Jul 27 p1)