Vietnam’s trade deficit with RoK widens

In October 2009, Vietnam and RoK inked a strategic partnership treaty which targets that by 2015, bilateral trade will be raised to US$20 billion a year.

The deal also states that the two sides will step by step achieve a trade balance.

Since then, Vietnamese-Korean trade has accelerated, reaching $17.7 billion last year.

This development indicates that the two sides will reach the set target soon. However, a closer look at Vietnam’s imports and exports with RoK shows that Vietnam will have to work hard to solve enormous problems in order to strike a trade balance.

In 2011, Vietnam’s total trade deficit was $10.16 billion. The trade gap with RoK amounted to $8.46 billion, or 83.2 percent of this amount.

RoK has become Vietnam’s 2nd largest trading partner in terms of trade deficit after only China. Vietnam’s trade deficit with China and RoK reached US$21.9 billion last year, and this was partly offset by trade surplus Vietnam enjoyed with other markets.

With RoK, Vietnam exports mainly crude oil, coal, coffee, seafood and rubber, all of which are raw materials. Other so-called “manufactured goods,” namely wood products, garments and footwear, are in fact subcontracted merchandise with little added value.

RoK exports to Vietnam genuine “manufactured” goods such as computers, electronics, components, automobiles, equipment, steel, plastic materials, fabrics, and footwear accessories.

In Vietnam, RoK’s products have gained the same footing as Chinese products. Though they are still being outnumbered by Chinese products, Korean goods are considered to have better design and quality.

Vietnamese consumers are familiar with Korean goods which range from Korean ginseng to multifunctional household appliances and easy-to-handle equipment.

To date, Korean bed ware, including pillows, blankets, bed cloth and bed foams, has penetrated even Vietnam’s rural areas. Korean fashion and cosmetics are ubiquitous in Vietnam’s cities and urban centers.

Korean entrepreneurs have also arrived in Vietnam to trade in consumer goods. The Korea International Trade Association has opened an office in HCMC.

Vietnam’s soaring trade gap with RoK in the past 2 years has also stemmed from the “double-edged sword” of the ASEAN-Korea Free Trade Agreement (AKFTA) which took effect on September 1, 2009.

Taking advantage of this treaty, Korea importers have come to Vietnam-based manufacturers to select local goods to ship them to their global supply chains.

However, as Vietnam offers only raw materials, Vietnamese export revenue of this sector to ROK was less than US$100 million despite incentives applicable for one year following the AKFTA.

Some biggest Korean players have been present in Vietnam and have built luxury hotels and set up agent networks, even in the most remote districts. Certain Korean exports to Vietnam have surpassed the US$1-billion mark.

Meanwhile, Vietnam’s trade deficit with RoK has been increasing, accounting for 34 percent of its total trade gap in 2008, 37 percent in 2009, 50 percent in 2010, and 83 percent, as mentioned earlier in this article, in 2011.

SMEs have difficulty using e-invoices in transactions

Only large enterprises are eligible for the application of e-invoices, while most SMEs find it difficult to apply the model in their transactions.

Nacencom, Smartcard Technology Joint Stock Company is one of the few small and medium-sized enterprises (SMEs) to use e-invoices. As the company operates in the field of providing digital signatures, its information technology infrastructure is relatively complete. Therefore, the company finds it easy to apply e-invoices in their business operations.

However, Director of Hien Quan Electronics Company Nguyen Van Tiep was afraid to apply e-invoices in the company’s operations. Tiep said that correcting invoice errors is unavoidable in transactions. Meanwhile, SMEs are still limited in using information technology, so they are not interested in using e-invoices.

According to Circular 32/2011/TT-BTC guiding the creation, issuance and use of e-invoices for goods sale and service provision, e-invoices shall be created, billed and processed in the computer system of an organization having a tax identification number upon sale of goods or provision of services and stored in computers of involved parties under the law on e-transactions.  

However, Hoang Quoc Khanh, Director of Nacencom, said that when intermediary e-invoice providers store all data from customer e-invoices, businesses are afraid of losing confidential information. In his opinion, they provide necessary information for relevant agencies to examine the integrity of information contained in the invoices. This is one of the reasons why many businesses do not want to use e-invoices.

Deputy Director General of the General Department of Taxation (GDT), Cao Anh Tuan, said that the country has nearly 500,000 businesses self-printing invoices or having invoices printed on order. The application of e-invoices in transactions is not widely used as it is a new field which requires both customers and businesses to use e-signatures. Therefore, GDT will create favourable conditions to encourage businesses which are eligible to use e-invoices, while others are encouraged to use software to print invoices. Currently, GDT has asked businesses to provide software for creating and self-printing invoices for six months to one year free of charge. Tuan said it is suitable for SMEs to print their own invoices by computer software.

A representative from Vietnam Airlines, Tran Thanh Hien, said that the airline is one of the first enterprises to apply e-documents and e-invoices in their transactions. Hien affirmed that the use of e-invoices has created favourable conditions for clients to store and check information on ticket prices and journeys. For other airlines, the use of e-invoices has helped them share information and implement payments among airline associations. For example, last year, Vietnam Airlines’ sales turnover through e-invoices reached nearly VND1,500 billion and is expected to reach roughly VND2,000 billion this year, accounting for 4-5 percent of total revenues. Hien said leading airlines in online ticket sales make nearly 20 percent of total turnover in this way, while Vietnam Airline’s online sales account for just 4-5 percent. Therefore, using e-invoices will help the airline speed up the process of selling tickets, improve its competitive edge in the region and the world, and meet customer demand.

Sharing experiences in the issuance and use of e-invoices, some businesses think that management thinking is the key to success. This means that managers should be fully aware that the application of e-invoices is an important solution to improve the quality of services and increase competitiveness. In addition, businesses should be equipped with a complete IT infrastructure and a financial accounting system.

The taxation sector has set up a team to support businesses in some groups and corporations in the field of electricity, post and telecommunications, and aviation to implement the use of e-invoices in their transactions.

Vietnam earns US$1.1 billion from exporting mobile phones

In the first two months of the year, Vietnam earned US$1.1 billion from exporting mobile phones and components, according to the Ministry of Industry and Trade (MoIT).

The MoIT said that this figure equivalent to that of garment and textile exports has contributed to raising the export turnover of the processing industrial group to more than US$9.75 billion (up 42.1 percent).

Of the fuel and minerals group, coal exports saw a record rise of 34.5 percent in volume but a decrease of 29 percent in value from a year earlier.

US official optimistic about TPP agreement

US Under-Secretary of Commerce for International Trade Francisco Sanchez expressed his optimism that Trans-Pacific Partnership (TPP) negotiations will be concluded by the end of this year.

The US official made this statement in Hanoi on March 7 as part of his visit to Vietnam on March 6-7.

One of the objectives of Sanchez’s visit is to discuss ways that Vietnam and the US can advance TPP as well as the specific commercial ties that can be helpful to both countries.

Vietnam and the US achieved a bilateral trade value of nearly US$22 billion in 2011, a significant increase in the past years, the US official said.

Vietnam benefits greatly from its open economy, Sanchez said, expressing his belief that the country can benefit even more by continuing its path of open market.

He pledged that the US will work closely with Vietnam bilaterally to continue the positive path Vietnam has realized in the last 17 years by opening its market and attracting the most innovative technologies to strengthen its economy.

Largest concrete pipe plant inaugurated

Vietnam’s largest concrete pipe plant was inaugurated in Hai Duong province, about 65km from Hanoi, on March 7.

The project, jointly implemented by China’s Jianhua Limited Company and Vietnam’s Dat Viet Concrete Joint Stock Company, was built on an area of 120,000 sq.m at a cost of more than US$14 million. It uses the pre-stressed high-strength concrete pipe assembly line imported from Europe.

In the first phase, the project has completed workshops, houses for workers, and offices, and attracted around 250 workers.

The first workshop began trial production on February 29, 2012, churning out pipes with a diameter of 300-600mm.

In the second phase, the plant will produce 700mm-1,000mm products with a capacity of 40,000 pipes per year, and concrete bricks with a capacity of 500,000 pieces per year.

With such a capacity, the plant will meet the demand of all architecture projects in Vietnam.

29 countries take part in Mining Vietnam 2012

Around 148 companies from 29 countries and territories are attending the leading International Mining and Minerals Recovery Exhibition and Conference (Mining Vietnam 2012) which opened in Hanoi on March 7.

They are introducing their advanced technologies, equipment and services to deal with the challenges of minerals and natural resources recovery in Vietnam, as well as improving mining productivity.

Bui Thi Thuc Anh, Director of the Vietnam Chamber of Commerce and Industry (VCCI) Exhibition Services, said the application of advanced technologies is the key task of most coal and mineral mining businesses. The exhibition is considered an important commercial event, with the aim of promoting the mining industry and developing it into a spearhead industry.

With numerous advanced technologies and solutions on display, the exhibition is expected to provide Vietnam with a useful lever to develop its mining industry, said Ian Roberts, managing director of PT Pamerindo Indonesia.

During the exhibition from March 7-9, there will be seminars and conferences on the latest trends and knowledge, as well as general information about the mining industry.

Vietnam-India Business Forum opens

Two-way trade turnover between Vietnam and India increased by nearly 20 times from US$200 million in 2000 to US$3.9 billion in 2011.  

The figures were released by Vo Tan Thanh, Director of the Vietnam Chamber of Commerce and Industry (VCCI)’s chapter in Ho Chi Minh City, at a Vietnam-India Business Forum on March 7.

Thanh added that the two countries aim to raise the trade value to US$7 billion in 2012. To date, India has invested more than US$770 million in Vietnam, mainly in the fields of health care, coffee, black carbon, and sugar.

Minister of Commerce and Industry and Textiles Anand Sharman said as Vietnam and India mark the 40th anniversary of their diplomatic ties this year, bilateral cooperation will be further fostered, especially in energy, information technology, health care and infrastructure, which are India’s strengths.

Sharman is leading a delegation from the Federation of Indian Chambers of Commerce and Industry (FICCI) to visit Vietnam.

The forum was organized by VCCI and the Indian Consulate General in HCM City, attracting 20 leading Indian businesses and many other Vietnamese partners.

Zero per cent import tax on diesel oil: MoF

The Ministry of Finance has decided to scrap import taxes on some kinds of diesel oil in a bid to lessen pressures on dealers, who claim they have been losing about VND1,000 per litre on fuel oil sold.

Under circular 39/2012/TT-BTC, which takes effect today, the import tax of 3 per cent on diesel will be removed.

Meanwhile, the Ministry said leaded and unleaded petrol would continue to attract a zero tax rate, as would kerosene for aircraft.

A tax of 5 per cent will continue to be applied on lubricants, while distilled oil and oil for machines will still attract an import duty of 15-20 per cent. –

Downturn clouds $1.5b FDI target

Deputy Director of the capital's Department of Planning and Investment Nguyen Van Tu has said it would be difficult to meet the target of attracting US$1.5 billion of foreign direct investment (FDI) this year due to the economic downturn.

The municipal authorities targeted this year to lure the same amount of FDI capital as last year, which will help the city to rank among the country's three leading FDI attractive destinations. The city's FDI attraction last year was positive with a total registered capital of $1.5 billion.

To attract more FDI, the city would continue to support the business community and speed up the improvement of administrative procedures to save time for businesses.

Tu said besides making public investment-related information transparent, the city would also expect to make a leap in land clearance to ease businesses in production sites.

According to the capital's General Statistics Department, the city has so far attracted 245 FDI projects totalling a registered capital of $3.6 billion.

Embattled seafood firm threatens closure

The jobs of thousands of workers at the Can Tho-based Binh An Seafood JSC (Bianfishco) are on the line after many were laid off "temporarily" by the company which faces possible bankruptcy.

The management announced earlier this week that the workers would be laid off during March 5 to 12 since "it cannot buy fish for processing since banks have refused to release funds."

Meanwhile, the company's president and CEO, Pham Thi Dieu Hien, has gone abroad for "treatment of an incrurable disease," according to her husband and new CEO, Tran Van Tri, who spoke to the media in Can Tho yesterday.

Tri, who replaced his wife after she left the country on February 23, said the company owes local farmers VND260 billion (US$12.4 million) for tra fish they supplied.

He declined to name the number of workers currently out of work. There are 4,000 on the company's payroll.

Tri said the company was negotiating to sell its tra processing plant in the Tra Noc Industrial Park No 2 (in Can Tho City) for $80 to $120 million. It also plans to sell its properties at 83 Nguyen Van Troi and 73 Cao Thang streets in HCM City.

The money thus raised would be used to pay off the company's debts and ensure the workers do not lose their jobs, Tri said without clarifying what the company planned to do after it sells off its plant.

Bianfishco hopes to pay off the farmers this month. The press conference was held in the presence of city authorities, including those from the Department of Information and Telecommunications.

Help urged for cashew industry

The Ministry of Agriculture and Rural Development has sent a petition to the central bank governor proposing cash-strapped cashew processors and exporters be allowed to have their bank loans rescheduled.

The ministry said commercial banks should give a six-month extension for the loans made to the industry and lower lending rates for cashew processors and exporters

At a meeting with the ministry early last month, Nguyen Thai Hoc, chairman of the Vietnam Cashew Association (Vinacas), said cashew exporters were struggling to find new export markets and maintain existing markets as global economic woes were still biting.

To make matters worse, companies in the cashew sector are facing the lack of labor which has led to a decline in production and a rising inventory while their bank loans are falling due.

Total overdue loans owed by cashew enterprises amount to VND5 trillion, mainly with Vietnam Bank for Agriculture and Rural Development (Agribank) and Vietnam Bank for Industry and Trade (VietinBank), Hoc said.

Hoc said he expected the banking sector would offer businesses in the industry soft loans so that they could ensure a budget of up to VND20 trillion to buy cashew from farmers from last month to late next month.

The average price of Vietnam’s export cashew rose to a record high of US$8,000 per ton last year. However, export revenue this year has steadily dipped, at about US$6,300-6,500 a ton, a year-on-year drop of over 20%.

Without support, Vinacas said, the cashew industry will be unable to export 190,000 tons of unshelled cashew worth US$1.7 billion, a rise of 15.4% from the previous year as targeted.
 
Vietnam footwear export to Brazil to face barriers

Vietnam’s footwear export to Brazil this year may slow as the South American nation is conducting an investigation into locally-made shoes, said the Vietnam Leather and Footwear Association (LEFASO).

Brazil in October last year launched an investigation into footwear material imports from China and finished footwear products from Vietnam and Indonesia over suspicion of tax evasion.

According to the Vietnam Competition Authority under the Ministry of Industry and Trade, Brazil has imposed anti-dumping tariffs on Chinese footwear since 2009. Brazil is investigating whether China has exported products to Brazil via a third country to evade taxes or not, said the authority.

In September last year, Brazil also launched an anti-dumping investigation into yarn imports from Vietnam and Turkey. At the time, MercoPress - South Atlantic News Agency said this was one of the efforts of Brazilian President Dilma Rousseff to restrict imports, especially from China, and to speed up Brazilian production.

According to the Vietnam Trade Office in Argentina, Brazil would strictly supervise imports from China and other Asian countries to prevent cheap products of these nations from entering Brazil, starting from the second quarter this year.

Those goods from Asia, mainly from China, from the second quarter must meet criteria set by the Brazilian side or would be disallowed to be imported into this nation. Actually, these measures are non-tariff barriers applicable to 240,000 types of products in industries like textile and garment, metallurgy, auto parts and children’s toys.

There has been an influx of cheap products from China into Brazil, according to a Brazilian high official. Two-way trade between Brazil and China last year amounted to US$77 billion, with Brazil having a trade deficit of US$11.5 billion, the official noted.

The trade deficit Vietnam had with Brazil in January reached US$13 million. Vietnam supplies Brazil with commodities such as seafood, rubber products, bags and suitcases, with footwear making up about half of Vietnam’s total exports to Brazil.

In January, Vietnam’s footwear exports to Brazil represented over 3% of Vietnam’s total leather and footwear export revenue while the value of textile and garment exports to Brazil accounted for around 0.25% of Vietnam’s total apparel exports. Therefore, the tougher import supervision by Brazil will certainly affect the local textile and garment sector.
 
Vietnam in need of construction bank: expert

A construction expert has underscored the need to set up a construction bank as suggested by the Ministry of Construction and the Vietnam Real Estate Association to help channel finances into the cash-strapped property market.

Pham Sy Liem, vice chairman of the Vietnam Construction Federation, told the Daily that the proposed construction bank could be seen as a factor to improve institutions for the realty market.

Property projects and building materials businesses need large amounts of long-term capital while most Vietnamese enterprises are used to depending heavily on bank loans. Therefore, the market will instantly turn volatile whenever monetary policy changes.

“A growing realty market does not reveal its own weaknesses. But given the current circumstances, we need to look for ways to improve its operation mechanism and market institutions. A construction bank may be a contributing factor in this regard,” Liem said.

If the bank is established, its main task will be to contribute to development and implementation of urban planning, especially in the infrastructure sector, and assist enterprises to gain easier access to capital. However, it will provide loans for only profitable projects.

Other lenders can contribute capital to the construction bank as banks, even those who are not knowledgeable about the industry, have for a long time provided loans for property projects and related sectors. The bank can also mobilize capital as normal lenders do, he explained.

Liem said the bank should initially be put under the Government so that it could gain hands-on management experience. Then, the bank can go public if it runs efficiently.

While the Government is speeding up the restructuring of the banking system, Liem said, the establishment of a construction bank will not create new pressure as it is part of the restructuring process.
 
Vietnam to reduce agricultural export hubs to improve quality  

Nguyen Thai Hoc, Chairman of the Vietnam Cashew Association, said at a recent conference held in Ho Chi Minh City that the association would limit the number of cashew exporters, to allow firms to improve their product quality, after the association received complaints to that effect from cashew importers.  

He also said that the quality of cashew nuts grown in Binh Phuoc Province, the country's largest cashew cultivation area, is being highly appreciated by foreign customers and also graded as one of the highest quality cashew nuts in the world.

In 2010, Vietnam’s cashew nuts almost ousted India’s cashew nuts from the Australian market, one of the biggest cashew nut consumers. However, at the conference for international customers of the Vietnam Cashew Association, the Chairman of Australian Cashew Association said that it would ban some Vietnamese cashew exporters for not ensuring quality.

According to Mr. Hoc, during the past two years, the association has been receiving many complaints as to the quality of cashew nuts. This is because of lack of professionalism. Some firms do not even have processing plants. They merely collected cashew nuts from small processers, disregarding quality standards, and ship the products as such, giving the cashew industry a bad name.

In 2011, Vietnam exported more than 166,000 tons of cashew nuts with contributions from 296 companies. Vietnam Cashew Association is now aiming to tightly control cashew nut producers to resolve this issue, Hoc said. Firms have to meet standards in processing, food safety, storage and quality to become a cashew nut exporter.

For several years the Vietnam Association of Seafood Exporters and Producers have also warned of the quality of export pangasius fish after many amateur trading companies jumped into the business. They competed with genuine producers in buying raw fish, sold their products at cheaper prices but failed to guarantee quality. As a result, several European customers sarcastically said that Vietnam sold “ice” to them instead of pangasius fish.

Among agricultural products, rice is the leading commodity which has good control. The government issued Decree 109, effective from October 2011, on regulations for exporting rice. However, in order to make the decree, the Ministry of Industry and Trade, the Ministry of Agriculture and Rural Development, and Vietnam Food Association had drafted it several times and conducted polls four times.

During the drafting process, the authorities had faced protests from firms, especially from trading companies, and small firms. However, in the face of failings in export of rice, the government had to promulgate the decree to protect the quality and the value of Vietnamese rice and farmers, from pressure to lower prices by importers.

Thus, after rice and coffee, cashew nuts have become the third commodity that authorities seek to reduce export hubs.

There were once less than 20 rice export hubs in Thailand, the biggest rice exporter in the world. But in Vietnam, before the Decree 109 took effect, there were more than 200 rice exporters. In Indonesia, one of the biggest coffee exporters, there are also a few exporters. In Norway, the largest salmon exporters, firms which want to export salmon have to ask for permission from the association.

The Ministry of Agriculture and Rural Development encourages the associations to restructure export hubs for the mainstay of agricultural produce to prevent the quality and prestige of products from being damaged.
 
Government to stockpile one million tonnes of rice  

Ministry of Agriculture and Rural Development on Tuesday sent a proposal to Prime Minister Nguyen Tan Dung for the purchase of one millions tonnes of rice for stockpiling from the winter-spring crop this year.  

The ministry expects the country rice output to reach 42.5million tonnes this year, a surplus of 7.3million tonnes over domestic consumption demand.  

According to the Ministry of Finance, the average rice price is expected to be VND3,400 a kilogram for the winter-spring crop in the Mekong Delta, where the price slid by VND500-600 a kilogram from early January.

In 2011, it prevailed at VND5,500-6,000 a kilogram, bringing farmers a 50 per cent profit margin.

Since February, the Mekong Delta has entered peak harvest time. Rice volumes are high while exports are facing difficulties.

As a result, the ministry has proposed to the Prime Minister to task the Vietnam Food Association to purchase one million tonnes of rice for stockpiling, aimed to assist farmers.

The rice purchase is expected to take place from March 13 to April 30. Businesses will be assisted with 100 per cent interest on bank loans.

The State Bank of Vietnam will instruct commercial banks to prepare enough capital for businesses to buy rice for stockpiling.

Seafood companies’ debts leave fish farmers in misery

Many farmers in the Mekong Delta, who have put huge investments into their fish farming ponds, are now struggling to earn a livelihood since the seafood businesses purchasing their products have refused to clear the payments.

With many farmers borrowing bank loans, and some even mortgaging their houses and lands to afford investments, some currently have to work for others, or sell their properties, just to be able to settle bank debts and make ends meet.

Nguyen Van Lien, aka Ba Lien, a 60-year-old fish farmer in Can Tho City, said the Binh An Seafoof JSC, based in the municipal Tra Noc 2 Industry Park, still owes him VND15.7 billion (US$753,600) for fish purchases in May 2011.

Earlier in 2009, Ba Lien joined hands with Pham Thi Mai, a local businesswoman, to invest nearly VND10 billion in the 55,000-square-meter fish farm. With some 800 tons of fish in the latest harvest last May, Lien expected to reap enough revenue to clear bank debts and earn profits.

However, with Binh An Co refusing to fully settle the purchases, what Ba Lien has now is not profits, but total debt worth more than VND15 million.

“With an interest rate of 1.8 percent a month, I have to spend hundreds of millions of dong just to pay the accrued interest every month,” the farmer lamented.

Lien had to resell 40,000 square meters of his farm for VND2.5 billion, which is only half of the sum he had paid for the plot, to ease the debt pressure.

But this is not all that Ba Lien has to suffer. Since he could not afford the daily VND60-million sum required to feed four fish ponds, he had to transfer the food supply task to a feed store.

“The store will feed the fish, and directly sell the products to seafood companies, with all revenues coming to their pockets to clear my feed purchase debt,” said Lien.

“It is like I am being hired to work on my own farm to pay debts.”

Similarly, Binh An Co is currently the debtor of many other fish farmers in Can Tho and other neighboring provinces.

Nguyen Quang Tuyen in Can Tho City said he has to leave his two ponds unused since the company still owes him VND2 billion after nine months of work. Meanwhile, Nguyen Van Tuan sold 117 tons of fish to Binh An Co last July. After seven months and 30 payments, the company still owes him VND600 million, he said.

At present, Tuan has to borrow from a loan shark to maintain the operation of his fish farm.

According to an audit report conducted in 2010 by Deloitte Co Ltd, Binh An Seafood Co has a total debt of VND1.39 trillion ($66.7 million) as of December 31, 2010, nearly VND1.22 trillion of which is short-term liability. The report also shows that the company has to pay interest worth VND78 billion for bank loans.

For his part, Binh An Co CEO Tran Van Tri told Tuoi Tre on March 8 that bank interest is the main cause for the company’s massive debt.

The company had to borrow from certain banks at an interest rate as high as 20 percent, said Tri.

Tri said the company had promised to clear the fish purchases with farmers within the next three months.

“We have two real-estate projects on Nguyen Van Troi and Cao Thang streets in Ho Chi Minh City,” he said.

“Once these projects are sold, we will have enough money to repay the farmers.”

Regarding the bank debts, Tri said he had considered selling the company.

“It is commonplace for businesses to have bank debts. And I am sure we can settle it.”

Like Binh An Co, the Soc Trang-based Van Hung Co has driven dozens of fish farmers in the Mekong Delta into a tough spot with its repudiating debts.

According to local police, the company owes around 30 farmers a total debt of VND20 billion.

Many debtors of Van Hung Co have to struggle to earn a livelihood by either leaving their ponds deserted, or by selling all possible assets to have money to revitalize their farming.

Ministry mulls lifting income tax threshold in 2014

The Ministry of Finance is drafting a new law on personal income tax collection, in which it recommends that the tax threshold be lifted to VND6 million (US$288) a month from the current VND4 million, said Deputy Minister Vu Thi Mai at a press briefing yesterday.

The new tax law is exptected to take effect as of January 1, 2014.

The finance ministry will report the draft to the government this May, and submit it to the National Assembly this October.

Along with the increasing threshold for taxpayers, the deduction for dependents will also rise to VND2.4 million a month, from the current VND1.6 million.

“The tax law amendment is hoped to ease the financial pressures of local households,” said Nguyen Van Phung, deputy head of the Tax Policy Agency under the Ministry of Finance.

“The current income-tax threshold and the deduction rate for dependents have lagged far behind the recent violent economic upheavals.”

Phung said the proposed rate increases are based on the inflation rates over the last few years.

Meanwhile, Mai said that with the new tax law, around 70 percent of taxpayers who currently have to pay taxes at level 1 will be exempted from the personal income tax.

"And some 70 percent of level-2 taxpayers will clear their taxes at the first level.”

Under current tax law, level 1 for taxpayers includes those whose average monthly income is between VND1 million and VND5 million. Tax rate for this level is 5 percent.

Meanwhile, those with income from more than VND5 million to VND10 million will be subject to level 2, with a 10-percent tax rate.

Similarly, taxpayers in other higher levels will also switch to paying taxes at lower levels, she added.

“Total tax collection is expected to drop by VND8.15 trillion with this amendment.”

Regarding the question of why the new law cannot take effect until 2014, rather than next year, Phung explained that 2013 is expected to see the amendment of the corporate tax law.

Petrol distributors promised help

Domestic fuel distributors and dealers have been struggling with increasing world petrol prices while a lid has been kept on retail prices in the domestic market.

During the first two months of this year, the volume of fuel imported declined by 31.7 percent while the world petrol price increased by 18.5 percent, the Ministry of Industry and Trade (MoIT) announced.

However, the decrease in imports is caused by declining consumption rather than a world price hike, the ministry said.

During an online meeting held by the MoIT on March 5, Vo Van Quyen, director of the Domestic Market Department under the ministry, said that in the past few days the basic petrol price was higher than the retail price on the domestic market.

Meanwhile, the domestic gasoline price now is much cheaper than that in other countries in the region, such as China , Laos and Cambodia. In Vietnam, the price of gasoline RON 92 now stands at VND20,800 (nearly US$1) per litre in comparison with VND26,288 and VND25,830 per litre in China and Cambodia, respectively.

To solve difficulties for local petrol distributors, the MoIT, in co-operation with the Ministry of Finance, will organise a meeting later this month.

The Finance Ministry indicated it might consider an adjustment to the retail petrol price. However, in the long-term, petrol prices will be controlled under Government Decree 84 or the market mechanism.

Price adjustment and tax reduction are being applied in the short term only, Quyen said.

Government Decree 84 allows businesses to adjust petrol prices up to 7 percent when the world petrol prices fluctuate 7 percent in the past 30 consecutive days. When the global oil prices are unstable from 7-12 percent, enterprises are allowed to increase the price by 60 percent of the increase while the balance will be offset by import tax adjustment and the fuel stabilisation fund.

The two ministries will ask the Government to amend part of Decree 84 regarding higher commission rates for retail petrol dealers.

"The two ministries would address the issues soon with the aim of ensuring the domestic market runs under the market mechanism while curbing inflation and stabilising the macroeconomy," Quyen said.

In the past few days, several gas stations in Hue and Da Nang cities had temporarily shut down or reduced volumes for sale under the impact of surging world prices while the domestic price was required to stay unchanged, Quyen said.

The MoIT would supervise the market regularly to ensure sufficient supplies, he added.

Petrol dealers are required to hold a reserve of petrol equivalent to at least 30 days of supply.

Fuel dealers claim petrol prices should be raised by up to VND1,000 per litre to prevent losses and to stabilise the domestic market.

Local currency gains in strength

Properly explained and enforced policies, together with drastic measures to curb dollarization, have helped to strengthen the local currency.

The downward pressure exerted upon the Vietnam dong from 2008 to 2011 was ascribed to the country’s significant balance-of-payments deficit, lackluster foreign reserves, soaring inflation, appalling financial policies and sour sentiments among market players.

This trend has been reversed recently, with the buying and selling prices of the greenback hovering about VND20,750 per dollar and VND20,850 per dollar at the moment.

Experts have pointed out several causes, including a more narrow trade deficit, rising remittances and emphatic gestures from the State Bank of Vietnam (SBV).