VietNamNet Bridge - The Ministry of Finance (MOF) believes that policies on giving preferences to the automobile industry must be removed because they did not help develop the industry in the last two decades.

Vietnam dreams of developing the automobile industry

MOF has shown its official viewpoint that there was no need to continue offering too many preferences to automobile assemblers since the preferences were not helpful, while Vietnam has signed a series of free trade agreements (FTAs), bilateral and multilateral, under which it will have to cut the tariff on CBU (complete built unit) imports to zero percent.

This was the answer to the draft Prime Minister’s decision on the policies to be applied to implement the automobile industry development strategy compiled by the Ministry of Industry and Trade (MOIT).

The decision should have been released a long time ago because the automobile industry development strategy by 2025 was approved by the government in July 2014 already. The delay has been blamed on MOIT, which is in charge of compiling the Prime Minister’s draft decision.

In fact, MOIT began drafting the decision long ago as admitted by MOIT’s Deputy Minister Tran Tuan Anh at a workshop held in late April. However, the ministry was slow to submit the draft as it had to consider many factors.

Vietnam has always been in two minds about the automobile industry development. 

If it decides that developing automobile industry is a must, it will have to offer investment incentives to automobile manufacturers. Meanwhile, the existing automobile joint ventures complain that the market is not large enough and the policies are not encouraging.

MOF believes that policies on giving preferences to the automobile industry must be removed because they did not help develop the industry in the last two decades.

If it does not continue protecting domestic production with high import tariffs, it would see joint ventures leaving Vietnam, as they have warned many times.

MOF, commenting about the Prime Minister’s draft decision, has rejected a series of proposed preferential policies suggested by MOIT.

The ministry fears that the tax incentives would lead to low budget revenue, while the sources of income are reducing due to tariff cuts within the framework of FTAs.

It has also warned that the FTAs do not allow measures to protect domestic products.

However, analysts commented that the most important reason behind MOF’s decision to reject the preferences is that the preferences in the last 20 years could not help develop the automobile industry.

The industry, which has been well protected with a high tariff barrier, has been doing assembling rather than manufacturing.

MOF disagrees with the suggestion on allowing projects that make cars and car parts to access the state’s investment credit. 

TBKTSG