Tax break anomalies discourage consumption of homemade goods

Existing irrationalities in tax incentive policies are responsible for domestic businesses preferring to export their products instead of selling them locally, a HCM City trade department official says.

This undermined efforts to reduce the trade gap and fight the use of dollars in the economy, said Vu Van Hoa, who heads the HCM City Industrial Park and Export Processing Zone Authority (HEPZA) with Sai Gon Giai Phong Newspaper.

Domestic businesses were exempt from value-added tax when exporting their products overseas but had to pay it if they sell their goods in the domestic market, he said.

This meant local consumers had to buy several made-in-Viet Nam goods under foreign labels at higher prices, he said.

Unsuitable tax incentives for businesses in export processing zones (EPZ) have also hindered exporters from purchasing raw material locally, which would normally save them time and transportation costs, said Nguyen Quoc Anh, head of production unit of Gunze Vietnam Co Ltd.

This was because EPZ-based businesses were exempt from value-added tax when importing raw material, but when they wanted to buy it locally, they had to pay prices that had value-added tax included in it by the suppliers.

Local suppliers did this to avoid cumbersome tax refund procedures, Anh said.

This situation has resulted in a mere US$800 million worth of raw material purchased by EPZ exporters from local suppliers each year, a modest figure compared with the supply capacity of local businesses, he added.

Meanwhile, imported fully-assembled or complete built computers were much cheaper than locally-made ones thanks to the zero import tax rate, said Nguyen Huynh Thy Khoa, director of the Long Vu Trading and Service Co Ltd.

Khoa said the ASEAN Free Trade Agreement (AFTA) stipulates that tariffs are eliminated on fully-assembled computers imported from ASEAN countries, while electronic components used in assembling local computers are subject to a two per cent import tax.

The zero tax rate on goods from ASEAN countries has also facilitated the inflow of goods from Europe that are routed through the regional bloc to avoid import tariffs, Khoa said.

Prime Minister approves MHB equitisation plan

Prime Minister Nguyen Tan Dung has approved State-owned Housing Bank of Cuu Long (Mekong) Delta (MHB)'s equitisation plan.

The bank will become a commercial joint stock company under the plan and will be permitted to issue shares to increase its charter capital.

The State will retain a VND3 trillion (US$144 million) stake after the equitisation, accounting for 68.1 per cent of MHB's charter capital of VND4.51 trillion ($216.7 million).

The bank plans to issue shares worth 31.9 per cent of its charter capital – 14.34 per cent will be auctioned publicly, 2 per cent will be offered to the labour union, 0.56 per cent to the bank's employees and 15 per cent to strategic investors.

Strategic investors will not be permitted to sell their shares for five years.

The central bank will be responsible for deciding MHB's share price at auction and advise the bank on selecting its strategic shareholders.

MHB was established as a State-owned bank in 1997. Since then, its asset value has reached nearly VND51.4 trillion ($2.5 billion), 171 times its initial worth.

The bank's equitisation follows the sell off of Vietcombank (VCB) and Vietinbank (CTG) – which are now listed on the HCM City Stock Exchange.

State-owned Bank for Investment and Development of Viet Nam (BIDV) is also planning to equitise, while Viet Nam Bank for Agricultural and Rural Development (Agribank) will become a one-member limited liability company, with the State being the sole stake holder.

Foreign investment falls by half

Foreign direct investment in Vietnam in the first four months topped US$4.02 billion, down by almost half compared to the same period last year, the Foreign Investment Agency said.

Investment in new projects was worth $3.205, 55 percent down from last year. Actual disbursement was, however, 0.6 percent higher at $3.62 billion.

Manufacturing attracted the highest investment of $2.45 billion.

Singapore was the biggest investor followed by Korea. Hong Kong, Malaysia, and Japan followed.

Japan, despite the disaster in March, invested $174 million in April to take the four-month total to $305 million.

Sales slump at luxury malls

Luxury shopping malls in HCM City have seen sales slump by 20-40 per cent compared to a year ago despite offering a spate of discounts and freebies.

At Vincom in District 1, which sells branded clothes, watches, footwear and other stuff, there are many people, but most of them are visitors rather than buyers.

At Parkson across the street, the perfume and cosmetics shops are deserted, as are footwear shops like Clarks and Geox.

The story is repeated at mall after mall in Districts 5, 11, and 7.

Duong, who has a chain of shops selling children's clothes at many malls, said sales were down 15 per cent compared to the same period last year.

He paid a rent of VND70 million (US$3,365) per month on the second floor at Vincom and sold just three sets of clothes a day. But he was stuck since his contract was for three years and he stood to lose a six-month deposit he had paid.

Many of the shop owners had negotiated with the mall to lower rents, he added.

The nearby Tax Trade Centre said the number of buyers had fallen by 30 per cent, while at Zen Plaza, sales was down nearly 20 per cent.

Tran Quoc Chung, general director of Phuong Phat Co which distributes international perfume brands in Viet Nam, blamed the falling sales on the lack of choice of goods.

In Thailand, Singapore or Malaysia, there is a far bigger choice of luxury products and they are cheaper than in Viet Nam.

For instance, an upmarket brand of handbag in Singapore costs 20 per cent less than in Viet Nam.

Huy, a consumer and resident of District 3, also blamed the lack of patronage on lack of quality control at malls, which allows imitations to come in, leaving buyers apprehensive.

Labor shortage looms for booming textile industry

Textile exports jumped by 33 percent in the first quarter to nearly US$4 billion but the industry is worried about a likely shortage of workers this year, according to the Vietnam Textile Association.

Pham Xuan Hong, the association’s deputy chairman, said exporters have signed many contracts in major markets like the US, Europe, Japan, and some other Asian countries and more are in the pipeline.

Their only concern now, especially for small and medium-sized exporters, is to find enough workers to execute their contracts in the middle and end of this year, he said.

Workers from rural areas have to move to cities where textile plants are located, but due to the rising prices of almost all goods and services, they find this unaffordable and choose to stay back and look for other jobs, he explained.

Textile exports were worth nearly $11.2 billion last year, a 23 percent year on year.

This year’s target is $13 billion.

Kon Tum targets 15% annual growth

The Central Highlands province of Kon Tum has set itself an annual growth rate target of 14.7 per cent from now until 2020, according to a socio-economic development plan that has been approved by Prime Minister Nguyen Tan Dung.

Accordingly, the province's per capita GDP is projected to double every five years: between 2010 and 2015 and between 2015 and 2020, reaching VND28 million (US$1,340) and VND53 million ($2,540), respectively.

To meet these objectives, the province targets a total investment of VND105 trillion ($5,034 billion) over the next decade, 30 per cent of which will be sourced in the first five years.

The growth will be driven by the agriculture sector, processing industries and other natural resources-based industries.

The province will shift to industrial crops of high economic value like coffee, rubber, sugarcanes and fruits, and fully tap the potential of forestry-based industries.

The province has identified agricultural processing, construction materials production, minerals exploitation and hydro-electricity as its key industries.

The province will also cultivate and process precious indigenous herbs and build trademarks for its agricultural products like Ngoc Linh Ginseng, Dak Ha Coffee and Mang Den Flowers.

Retail networks in towns and frontier districts like Dak To and Ngoc Hoi will be expanded and strengthened, while commercial outlets in outlying districts will be re-organised.

Vocational training will be improved with a view to train around 4,000 workers every year so that skilled workers will account for 60 per cent of the province's workforce by 2020.

Poverty eradication, improvement of living standards of ethnic groups and relocation of population in areas vulnerable to landslides or flash floods will be given top priority in the coming years.

Situated at around 600km from HCM City, Kon Tum is the uppermost province in the Central Highlands. It borders both Laos and Cambodia and is said to have great potential for mineral exploitation.

Central oil refinery to double capacity

The Vung Ro oil refinery in the central province of Phu Yen will double its annual capacity to 8 million tons, the investors, Britain’s Technostar Management and Russia’s Telloil, have said.

The cost of the plant, whose first phase will go on stream at the end of this year, will go up from US$1.7 billion to $2.5 billion.

Besides an oil refinery, the investors also plan to build a chemical manufacturing plant and a port.

Construction of the facility, which will occupy 200 hectares on land and 210 ha in the sea, began in the middle of last year.

The refinery will be Vietnam’s second after the first opened in Dung Quat last year.

Vietnam’s economic reform well on track: Incham

New sets of regulations and new modern equipment and technology at Vietnamese ports and management agencies show that the country’s economic reform to boost trade and production is well on track, said the Indian Business Chamber in Vietnam.

Those new changes have been very helpful to foreign businesses, especially Indian firms, said Mohan Kumar, Incham chairman.

But more are in need, including more simplified procedures and more transparencies in state management mechanism, to speed up the reform, said Kumar.

We are expecting more favorable economic policies and their adoption from now to the end of this year so that the Indian-Vietnam bilateral trade target this year will be fulfilled and more Indian investors will see their opportunities here in Vietnam, Kumar added.

Indian business community in Vietnam is also calling for the opening of a direct air route between the two countries.  

The ideas have been given on the sideline of a recent seminar, Vietnam latest regulations 2011, organized by Incham in Ho Chi Minh City.

The event focused on informing Indian business and their Vietnamese partners about new regulations and updates from HCMC state management agencies including the Department of Labor, Invalids and Social Affairs, Department of Planning and Investment, Customs Department and Tax Department.

Guest speakers of the seminar included Ho Chuong Duong from the Labor-Salary-Wage Department, Lai Tuan Phuong from Department of Planning and Investment, Nguyen Huu Nghiep, vice director of Customs Department, and Nguyen Trong Hanh vice director of Tax Department.

Vietnamese use plastic for cash, not shopping

Vietnamese spent VND550 trillion (US$27.5 billion) using credit and other cards last year, nearly 70 percent up from the previous year, according to the Vietnam Bank Association.

Debit cards accounted for 90 percent of this amount.

However, usage at merchants’ to make purchases accounted for a mere 0.5 percent.

Cash withdrawal accounted for 83 percent and bank transfers for 16 percent.

The total number of cards last year was 31.7 million, 50 percent higher than in 2009, with domestic and international cards respectively accounting for 93.6 and 6.4 percent.

The Vietnam Bank for Agriculture and Rural Development, or Agribank, leads with 6.4 million cards or 20.2 percent of the market share.

VietinBank and Vietcombank follow with 5.7 million and 5.3 million cards. There are more than 11,000 ATMs and 44,000 merchants in Vietnam.

ABVietFrance helps boost VN-Europe trade ties

The Vietnamese Entrepreneurs Association in France (ABVietFrance) plans to open its representative offices in Hanoi and Ho Chi Minh City this year to help with boosting Vietnam’s trade with the Europe.

The plan was unveiled by ABVietFrance President Nguyen Hai Nam at a seminar on France-Vietnam trade ties held recently in France’s Institute for the Study of Educational Entrepreneurs.

Nam said ABVietFrance has set to act as a bridge for overseas Vietnamese and French-Vietnamese businesspeople in France to seek domestic and foreign partners as well as open representative offices in Vietnam, France and other European countries.

He also informed that ABVietFrance will take part in organizing a forum for Vietnamese businesspeople in Europe in Austria in September 2011 to work toward its main purpose of promoting trade exchange between Vietnam and France and the Europe.

The seminar saw the presence of Patrice Jorland, General Secretary of France-Vietnam Society and Stéphan Bunouf, Business Development Advisor of Glaizer Group, among others.

Air Mekong launches direct flight to Phu Quoc

The Mekong Aviation JSC (Air Mekong) will launch a direct flight from Hanoi to Phu Quoc Island in the southern province of Kien Giang on Thursday.

This is the first direct flight between the two destinations without transiting in Ho Chi Minh City, thus will help passengers to reduce half of their travelling time.

Daily Hanoi-Phu Quoc flights will depart at 6am in Hanoi and make return flights at 12.40pm.

Phu Quoc is the largest island in Vietnam with an area of 59,300 ha with two towns, Duong Dong and An Thoi, and eight communes. It is known for its pristine beaches and forests.

Phu Quoc is also called the Emerald Island because of its natural treasures and tourism potential.

Air Mekong, Vietnam’s third private air carrier, went into operation last October. It recently has received delivery of four Canadian Bombardier CRJ 900 aircraft, owned by the US company Skywest Leasing. Each aircraft has 90 business and economy-class seats.

Ministry to spend $3 million on trade promotion

The Ministry of Industry and Trade (MoIT) will set aside VND55 billion (US$2.8) million to promote national trade this year.

Titled the National Promotion Program 2011, the fund will be used to finance promotional activities proposed by 22 trade promotion organizations and 16 provinces.

These activities include exhibition fairs overseas to be held by producers of key export products such as textile and garment, furniture, and seafood.

MoIT however said this still modest budget wouldn’t be able to meet all of businesses’ needs and was asking for more funding from the government.

Domestic banks publish positive business results

Many domestic banks have reported positive business results in the first quarter and said they were confident of hitting their annual targets.

The HCM City bourse-listed Eximbank (EIB) posted a pre-tax profit of more than VND1 trillion (US$50.7 million), up 26 per over the same period last year and over 35 per cent of its annual target of VND3 trillion ($144 million).

Asia Commercial Bank, listed on the Ha Noi exchange under the code ACB, estimated its first quarter profit would reach VND900 billion ($43.2 million). With the first three months of the year known for being a notoriously quiet time for business, ACB said it was confident of hitting its profit target of VND4.1 trillion ($196.8 million) this year.

Due to the Government's tightening of monetary policy in order to rein in debt, the Military Bank set an annual profit target of just VND2.9 trillion ($138.8 million), up 27 per cent from last year. It estimated Q1 profits to be nearly 25 per cent of that target.

DaiA Bank, a small bank with a charter capital of VND3.1 trillion, on Monday announced Q1 pre-tax profits of VND80.8 billion ($3.9 million), equivalent to 63 per cent of this year's target.

Shareholders of Techcombank have just approved the bank's ambitious profit plan of VND4 trillion ($192 million) this year, up 46 per cent over last year.

Although the bank has yet to post results for the first quarter, General Director Nguyen Duc Vinh was confident that the bank could accomplish its business plan.

Vinh said that shareholders would invest VND5 trillion ($240 million) in the bank this year, including VND1.9 trillion ($90.5 million) in retained earnings from last year and VND3.1 trillion ($147 million) from convertible bonds.

ODA disbursements climb 181%

Ha Noi disbursed nearly VND489 trillion(US$23.5 billion) of Official Development Assistance (ODA) in the first four months of this year, reaching 181 per cent of the targeted plan.

Most of that disbursed money was focused on construction projects including the Ha Noi drainage project and the Nam Thang Long-Tran Hung Dao urban railway project, said the city's Investment and Planning Department.

Under the city's 2011 plan, 20 projects will be targeted. They also include the Ha Noi Railway Station-Nhon urban railway pilot project, the Phase 1-Ha Noi urban transport development project and the Van Tri-Bac Thang Long urban infrastructure project.

At a recent meeting with the Ha Noi urban railway project's steering board, Ha Noi People's Committee Chairman Nguyen The Thao asked relevant offices to tackle any difficulties they were faced with so the construction of Nhon Station could begin as scheduled in the fourth quarter of this year.

Construction of other stations along the route is expected to begin in the second half of 2012, and the route will be put into operation in 2016.

The Nam Thang Long-Tran Hung Dao route will be finished in 2017.

The Prime Minister has approved five underground and overground railway routes for Ha Noi that will link its suburbs to the centre.

Ministry invests in twenty agro-encouragement projects 

The Ministry of Agriculture and Rural Development has plans to invest in 20 agro encouragement projects to promote agricultural production capabilities for the poor. 

These 20 projects will be implemented at an estimated capital of VND101.2billion (US$5 million).

During the period 2011-2013, 11 projects will also be implemented, such as the development of  ranches in Thanh Hoa, Lao Cai and Tuyen Quang provinces with a capital of VND2.4 billion (US$120,000) and projects to produce vegetable under standard VietGAP in Hoa Binh, Bac Giang, Ha Nam, Hung Yen, Ninh Binh and Phu Yen provinces.

The projects will be carried out with an aim to help poor rural farmers learn how to manage capital well, enhance capability and organize production, raise income in each cultivated area, gradually improve their lives and finally escape poverty. 

The deputy Minister of Agriculture and Rural Development said since 1993, the national agriculture and aquaculture extension programme has increased the number of farming activities, with all cities and provinces now having programmes integrated into their governments and local budgets.

More than VND1.5 trillion (US$75.6 million) has been invested in the programme nationwide in the last five years.

In related news, the price of shrimp has hit a record high since the past ten years, in the southernmost Province of Ca Mau.  The price is now VND260, 000 per kilogram of 20 units, VND190, 000 per kilogram of 30, VND155, 000 per kilogram of 40 units and the white leg shrimp is at VND85, 000 per kilogram for 100 units.