Many key exports to enjoy zero tariff in TPP markets

Member countries of the Trans-Pacific Economic Strategic Partnership (TPP) will remove tariff on between 78-85 percent of tariff lines for Vietnamese goods immediately after the TPP takes effect, possibly in 2018, according to the Ministry of Finance (MoF). 

Vu Nhu Thang, Head of Department of International Cooperation under the MoF, said at a press conference on November 9 that those goods include many key exports, such as garment and footwear, plastics products, wood products and rice. 

Three to five years later, from 97 to 100 percent of all tariff lines will be abolished, Thang said, adding that most member countries follow this roadmap, except for the US which has separate tariff reductions for each TPP member. 

Therefore, the TPP will open up opportunities for Vietnamese enterprises to boost Vietnam’s export goods to the member countries of the TPP, said Thang. 

On the other hand, Vietnam will also bring tariffs to zero for most import goods. 

Import tax will be abolished immediately for a majority of plastics and plastic products, chemicals and chemical products paper, wooden products; machinery and equipment, as well as garment and footwear, rice, fertilizer and milk and dairy products. 

For cars, the tariff will be removed on new cars in the 13th year since the TPP goes into effect. For cars with engine sizes from 3000cc and above, the tariff will be lifted in the 10th year. 

The tariff will be lowered to zero in 2029 for imported iron, steel, gas and oil; 

It is 2029 for chicken meat and 2028 for pork. 

As for whether prices will drop with the cut in import tariffs, the official said it is difficult to forecast as prices are influenced by many factors, such as purchase power, other domestic taxes and fees, among others. 

The Ministry of Finance said more educational activities should be held to popularise information about the TPP and Vietnam’s commitments under the pact, while making adjustments to domestic policies to facilitate and well manage import-export and trade, improve business environment and attract more investment. 

The TPP involves 12 countries in the Pacific Rim - Brunei, Chile, New Zealand, Singapore, Australia, Canada, Japan, Malaysia, Mexico, Peru, the United States, and Vietnam - is scheduled to take effect in 2018.

Car-buying sentiment of Vietnamese consumers on the rise

Vietnamese consumers who have found that they can now afford a car have begun to save money for their dream, according to recent figures on car sales and imports.

Vietnam’s biggest auto show this year, which concluded in Ho Chi Minh City on November 1, saw the highest-ever number of deals reached, while the total value of imported cars sold in the first ten months of 2015 surpassed what Vietnamese buyers spent for the entirety of last year.

The Vietnam Motor Show 2015 wrapped up with orders for 2,500 cars from 18 automobile brands, the biggest number ever recorded in 11 years of the event held by the local industry, according to the organizers.

At this exhibition last year, just over 560 car sale contracts were signed, the organizers added.

But they did not disclose the car sales of each automobile brand.

Vietnamese car manufacturer Truong Hai Auto (Thaco), which is currently assembling and distributing cars for three brands, Kia, Mazda and Peugeot, said it had secured 1,250 orders, according to The Saigon Times Online.

In particular, the Republic of Korea's brand Kia took the lead with 600 orders, followed by Japanese Mazda and French Peugeot with 550 orders and 100 orders, respectively, the news site said.

Mercedes-Benz Vietnam did not reveal the specific number of orders the company had signed during the exhibition, but said the number of contracts it signed rose 20 % compared to the 200 orders of last year, The Saigon Times Online reported.

The Vietnam Motor Show 2015 introduced more than 150 models and attracted over 178,000 visitors, the largest number so far.

Two weeks before the Vietnam Motor Show in Ho Chi Minh City, the Vietnam International Motor Show, dedicated to imported cars, took place in Hanoi with 50 vehicles from nine car brands showcased to 70,000 visitors with more than 170 car sale contracts inked.

The sales of locally-assembled cars and imported autos are also on the rise, according to official figures.

According to the General Statistics Office of Vietnam, the number of imported automobiles in October reached 11,000 units, worth US$203 million, up 28.2 % in quantity and six % in value compared with the previous month.

The October figures brought the total number of imported cars in the first ten months of 2015 to about 95,000 vehicles with a value of over US$2.31 billion, up 82.8 % in volume and 100.2 % in value compared to the same period last year.

The total import turnover in the first 10 months exceeded the revenue of both 2013 and 2014 combined, at US$1.57 billion and US$709 million, respectively, according to the statistics office.

The last quarter of the year is often the period of time when there is high demand for new cars so insiders said car imports may surpass 100,000 units worth over US$2.5 billion by the end of this month, The Saigon Times Online reported.

The Vietnam Automobile Manufacturers’ Association (VAMA) said by the end of September, sales of imported cars had risen 57 %, comparable to that of locally-assembled vehicles which soared 52 % over the same period last year.

Experts and analysts have said that with the reduction of duties on imported automobiles following the effectiveness of multiple regional and international free trade agreements, accompanied by cheaper fuel prices, car imports will continue to boom in the near future.

The VAMA forecast that with the average number of car imports ranging from 10,000 to 11,000 vehicles per month, the total volume may top 115,000-117,000 units in 2015.

The year 2018 is the turning point for Vietnam’s automobile industry as duties on cars imported from the Association of Southeast Asian Nations will be fully removed, the government said in a new decision aimed at giving a real boost to the sector.

Vietnam has only three years left to prepare and strengthen the competitiveness of its automotive industry, according to Decision 1829/QD-TTg on the action plan for the development of the automotive and automotive parts industry.

The decision, signed by Prime Minister Nguyen Tan Dung on October 28, is to follow the national industrialization strategy within the framework of the Vietnam-Japan cooperation program for 2020, with a vision toward 2030.

If the country cannot seize this opportunity, Vietnam will fall into the same situation the Philippines faced a few years ago, the government warned in the decision.

With an underdeveloped automotive industry and unclear development policy, car producers in the Philippines stopped assembling and began to import automobiles when the demand for cars started to pick up, causing a serious trade deficit in the country back then, according to the decision.

Clothing exports to Indonesia set new record

Clothing and textile exports to Indonesia for the nine months leading up to October soared to a 10 year high, according to the Vietnam Textile and Garment Association (VITAS).

For the January-September period, VITAS reported overseas consignments spiked 55% on-year to US$93.4 million.

Based on the better than expected figures, economists at VITAS have raised their prior forecast for exports to Indonesia for 2015 by 53.3% to US126 million.

VITAS also noted exports to Hong Kong for the eight-month period saw strong growth, surging 36% to US$175 million. 

Equitisation targets under scrutiny

The government has claimed that state-owned enterprises equitisation results achieved so far this year well reflects its approach to efficiency.

Although just 71.5% of the 289 state-owned enterprises (SOEs) planned for equitisation this year may complete their schedules, the Government Office Chairman and Minister Nguyen Van Nen told VIR that ‘this is not a failure’.

“The quality of equitisation is the most important, not the quantity,” he said.

While noting that the SOE equitisation process largely depended on market demand, Nen said the government meanwhile took a prudent step in selling SOE stakes.

“The government does not want to sell SOE stakes at any cost,” he explained.

According to the government report to the ongoing National Assembly session, since early this year, about 70 SOEs have conducted their initial public offerings, with more than 734 million shares going on sale, worth over VND7.34 trillion (US$341.4 million).

Also, in the past 10 months, SOEs have earned VND12.8 trillion (US$595.34 million) by divesting capital from non-core business lines and selling stakes, up 149% on-year.

The report indicated that the equitised enterprises’ performance had remarkably improved. Reports by 2,400 enterprises that underwent equitisation showed that on average, after one year their chartered capital increased by 68%, revenue climbed 34%, after-tax profits rose 99.9%, and income ascended 77%.

The government also reported that SOEs’ total asset value for 2015 was expected to increase 36% against 2010, with their equity, revenue, and pre-tax profits rising 62%, 18% and 56%, respectively.

Still, the government has been urged to speed up the equitisation pace and open the door wider for private investors to seize the opportunities emerged from the process.

National Assembly member Truong Van Vo from the southern province of Dong Nai said private enterprises, especially foreign ones, were seeking to gain entry to sectors controlled by the state, such as electricity, fertilisers, insurance, and banking.

“However, only a few SOEs have been actually equitized and the state still holds the majority of their stakes,” he said.

Echoing this view, European Chamber of Commerce in Vietnam’s vice chairman Tomaso Andreatta said in SOE equitisation the number of shares offered to private investors was often too small, ranging between only 5-20%, to effectively attract private strategic investment.

“Foreign investors are usually only interested in buying SOE shares if they can obtain decision-making power in the enterprise,” he said. “Instead, the state tends to retain the power to appoint all or a majority of the board members.”

He added that SOEs continue to enjoy preferential treatment, as opposed to private enterprises. Equitisation often meant shares were bought by employees of the SOE.

Cassava exports skyrocket

Cassava exports shoot up while exports of many other agricultural products shrink.

Vietnam shipped 3.42 million tonnes of cassava in the first 10 months of this year to get US$1.09 billion, up 22.6% in volume and 19.1% in value against the corresponding period last year.

The Vietnam Cassava Association (VCA) reported that cassava exporters have been encouraged as the Ministry of Finance lowered export duties of cassava slices from 5% to zero on September 4.

According to the Ministry of Agriculture and Rural Development, China remained the top importer of Vietnamese cassava in the three quarters, accounting for 89.17% of market shares. Meanwhile Japan and Taiwan (China) markets saw the highest growth.

The VCA has coordinated with the Ministry of Science and Technology to develop quality standards for Vietnamese tapioca based on the FAO (UN Food and Agriculture Organisation) criteria to enable the product to penetrate demanding markets and avoid dependence on a certain market.

Support on offer for beef and dairy industry

The Bank for Investment and Development of Vietnam (BIDV), ANZ Vietnam, and Meat&Livestock Australia recently organized the “Vietnam - Developing a Modern Integrated & Sustainable Beef and Dairy Industry” conference on October 9 in Hanoi.

Vietnam is integrating deeper internationally through free trade agreements (FTAs) with major economies and in particular with the TPP, the conference heard. During the integration process the livestock sector, including the beef and dairy industry, welcomes the opportunity to grow by accessing global value chains to expand markets. Receiving modern technologies and reducing investment expenditure accelerates the sector’s process of restructuring.

Integration also presents major challenges, however, such as the gap between the development of Vietnam’s livestock sector and that of developed countries, greater competition as tariff barriers are removed, limitations on input quality, including livestock breeds, and the high cost of Vietnam’s livestock products.

To provide support to the sector, Chairman of BIDV Tran Bac Ha the bank will grant short-term and long-term lending with many preferential policies in the 2016-2020 period to enterprises involved in developing the beef and dairy industry. BIDV is also willing to cooperate with related units to research and analyze the prospect for the industry as free trade agreements come into effect. It will also support local government departments to identify and adopt suitable policies and consult with enterprises that plan to become involved in the industry.

BIDV also committed to creating a credit package for the agriculture sector, of some VND25 trillion ($1.11 billion), for short term lending, which would account for about 3-5 per cent of its outstanding short-term credit. In the long term BIDV has also set aside VND80 trillion ($3.57 billion) in credit for the agriculture sector to 2020, focusing on agriculture projects using high technology. For the beef and diary industry BIDV has created a financial package totaling VND15 trillion ($669.45 million) with a range of preferential policies.

Mr. Dennis Hussey, CEO of ANZ Vietnam, told the conference that Vietnam is developing its beef and dairy sectors globally. This promises to create many jobs in rural areas, provide high-quality food for consumers, and make Vietnam an exporter of meat and milk in the region. ANZ is therefore delighted to partner with BIDV and the MLA in bringing leading industry experts in the sector to the country to provide support.

Luxury car duties first to go under TPP

Import duties on luxury cars with an engine capacity of over 3 liters will come down to zero ten years after the TPP takes effect, with duties on other motor cars to come down to zero three years later, the Ministry of Finance (MoF) told local media on November 9.

According to Mr. Ha Duy Tung, Deputy Director of the Department of International Cooperation at MoF, it was necessary during negotiations to build a reasonable roadmap for goods that need to be protected, which includes domestically-produced motor vehicles. Vietnam is unable to produces motor cars with an engine capacity greater than 3 liters so duties will therefore be removed sooner.

The lifting of duties will be implemented on new cars but do not apply to second-hand imported cars. Mr. Tung said that second-hand cars are not a recommended item so should be limited by quotas. The initial quota for second-hand car imports is 66 units in the first year after the TPP takes effect and will gradually increase to 150 units over the next 16 years.

Mr. Vu Nhu Thang, Director of the International Cooperation Department, said that tax adjustments are not targeted at raising revenue for the State budget but to implement the development strategy of the domestic automobile industry.

He added that member countries are now in the process of finalizing procedures for ratifying the TPP, with implementation expected in 2018.

Agricultural land use fees to be cut

The government has just submitted an amendment to a Resolution on budget planning for 2016, removing land use fees on land for agricultural purposes.

The tax will be removed completely by December 31, 2020 for most individuals, households, cooperatives, and farms with land assigned by the State, inherited, or purchased for the purpose of agriculture.

The amendment, however, does not apply to those with land assigned by the State not being directly used for agricultural purposes.

From 2011 to 2014 the revenue from fees on such land averaged about VND67.3 billion ($3 million) per year, with those subject to the amendment contributing some VND60.8 billion ($2.71 million) per year, or VND51 billion ($2.27 million) from individuals and VND7.7 billion ($343,651) from other types, while the military sector contributes about VND2.1 billion ($93,723) per year.

The government therefore predicts revenue from agriculture land use fees will fall to VND6.5 billion ($290,095).

If the amendment comes into effect, the government believes, it will encourage people to increase the scale of agricultural land use and increase the sector’s efficiency.

BIDV provides US$669 million loans to dairy, beef businesses

The Bank for Investment and Development of Vietnam (BIDV) yesterday announced that it has launched a credit package worth VND15 trillion (US$669.05 million) to assist businesses from beef and dairy industries to implement their hi-tech applied projects. 

The bank made the announcement at a seminar on Vietnam’s beef and dairy industry development hosted by BIDV, the Australia and New Zealand Banking Group (ANZ) and Meat and Livestock Australia Limited (MLA) in Hanoi.

Stating at the event, Deputy Prime Minister Hoang Trung Hai appreciated the cooperation relationship between Vietnam and Australia in many fields.

Australia has invested in large and modern agricultural projects, contributing to change of Vietnam’s agricultural industry structure.

Seventy percent of Vietnamese population is living in agricultural areas but the country has to import some products in big volume. Last year, Vietnam imported up to 240,000 beeves mainly from Australia and 1.5 million tons of milk raw material.

Therefore, he proposed Vietnamese and Australian businesses to closely work together on sustainable development of the dairy and beef industries, set up large scale production model, apply science and technology and improve added value in enhancement of global integration.

Da Nang seeks foreign investors

The central city organised an investment promotion week for 15 members of the Japanese Business Association (Keidanren), and 120 other Japanese businesses, in Japan from November 9 to November 12.

In a meeting with Kyohei Takahashi, Chairman of Showa Denko, and Kuniharu Nakamura, chairman of Sumitomo, chairman of the city's People's Committee Huynh Duc Tho said the city has offered investment from Japan in the high-tech, tourism and real estate sector.

Keidanren, which has 1,601 members consists of 1,281 companies, 129 industrial associations, and 47 regional economic organisations, had inked a Memorandum of Understanding (MoU) with the Viet Nam's Ministry of Planning and Investment in 2012 on setting up a dialogue link and holding discussions on economic growth and industrialisation in Viet Nam, as well as boosting investment from Japan.

Motoshi Mitobe, general director of Tokyo Keiki, which was the first Japanese company in the Da Nang High-Tech Park, with a US$40 million investment, said the investment in the central city was a long-term strategy of the company.

He asked Da Nang's leadership to speed up the completion of infrastructure, waste water treatment and green environment for investors in the High-Tech Park.

Chairman of Route Inn Group Nagayama Katsutoshi said the group has planned 10 hotels in Da Nang and other cities of Viet Nam.

In September, Route Inn Group signed a MoU with Da Nang-based Dong A College for training employees in tourism services. They will begin recruiting 200 graduates from the college starting in 2018 to serve in a chain of 320 hotels in Japan and Viet Nam.

In a talk with the leadership of Keidanren, the city also proposed to soon launch a direct flight between Osaka and Da Nang, as seven direct flights a week to Narita had helped promote tourism since its launch last year.

The central city was also committed to creating the most favourable conditions for Japanese businesses in the city in the future, the Da Nang's city leader said.

The city planned to build a 1.2ha Viet Nam-Japan Culture Centre and a 134ha industrial park for medium and small-size businesses from Japan.

Kana Miyazaki, deputy chief representative of the Japan External Trade Organisation (JETRO) in Ha Noi, said a recent survey by JETRO pointed out that 66 per cent of the 458 Japanese firms based in Viet Nam planned to expand their business during the next one or two years.

A recent survey by Shoko Chukin Bank from Japan showed that 40.7 per cent of the 3,750 respondents from various Japanese businesses in Japan said they would invest in Viet Nam.

According to the latest report, Da Nang has attracted 305 foreign investment projects worth $3.37 billion.

Japan ranked fourth among top investors in Da Nang with 89 projects worth $378 million, of which 55 projects involve manufacturing, creating 30,000 jobs for the local people.

The central city also hosted an investment promotion event in Berlin, Germany, this week calling investors from Europe in the tourism, high-tech and information technology (IT), and software sectors.

The city urged overseas Vietnamese businesses in Berlin and European countries to fund projects in Da Nang.

As scheduled, the city, in co-operation with Vietnamese Businesses Union in Europe, will host a Europe Business Forum next August. 

Engineering sector needs better policy

Mechanical engineering businesses need to get more essential and focused incentives to create their market for development, experts said.

Experts outlined their suggestions during a seminar on development strategy for mechanical engineering held by the Ministry of Industry and Trade yesterday in Ha Noi.

The government has so far formulated numerous policies to support the development of the mechanical engineering industry. However, local businesses have not yet received the incentives to develop the industry as expected.

Pham Anh Tuan, deputy director of the Heavy Industry Department under Ministry of Industry and Trade, said that last year, the export value of the mechanical engineering sector reached more than US$15 billion. However, the import value was over $26.5 billion. Meanwhile, the localisation ratio reached only 30 per cent and was lower than set target of between 40 per cent and 50 per cent.

Nguyen Tang Cuong, CEO of Quang Trung JSC, said his business has already invested heavily for many years to prepare for the strategic development of the domestic mechanical engineering. However, he was unable to access bank loans, which cost him a lot of time and opportunities.

Cuong also mentioned that businesses must concentrate on developing a number of key mechanical specialties and products in the field of agriculture, transport, construction and machine building. However, these products are required to have the following stages: design, moulding, assembly, and thermal treatment, in addition to testing and shipping.

Most Vietnamese mechanical engineering businesses only participate in assembly, while design and moulding have not received too much attention from businesses.

By doing such things, how can one develop mechanical engineering and join the global industry, Cuong asked participants. He noted that due to limited finances and human resources they needed to work out a specific strategy for businesses to develop.

Sharing a view with Cuong, Tran Van Quang, chairman of the Dong Anh Electrical Equipment Corporation, said businesses needed to get the support of the State to seek a market. If they did not, they would not dare invest.

Quang also said the State needed to offer more incentives to help businesses to participate in local projects, and gradually create products, while building their credibility in the local market. Locally-made high quality products which are competitively priced should be encouraged by limiting imported products.

If domestic businesses have to seek their own way to develop in the context of poor technology, limited finances and human resources, the local mechanical engineering industry will face too many difficulties, Quang said.

Deputy Minister of Trade and Industry Cao Quoc Hung emphasized that his ministry will take the suggestions from businesses to continue discussing and doing research to work out a more specific development strategy so as to offer better assistance for businesses.

However, businesses should not expect too much in the State's policies. They, themselves, have made every effort and work together to spur the country's mechanical engineering industry. 

High-end apartment projects rush for year end sale

Developers are rushing to launch their projects for the most fruitful time of the year – the end months which Vietnamese usually take big deals of purchasing accommodation.

According to Savills Vietnam, to the end of 2015, 12 projects with a total of more than 3,900 units will be launched in the Hanoi market.

Do Thu Hang, head of market research at Savills Vietnam said that the number of successful deals of houses and lands in the last months of the year would be at a high level, due to the increase from the overseas remittance and the traditional plan of Vietnamese to purchase houses and land at every year ends.

A range of projects have been launched in the market. Vingroup, a leading real estate developer has just launched its latest product into the marker named Park Hill Premium. This is the high-end unit with smart qualification. Park Hill Premium is consisted of four apartment blocks, a modern shop house and more than 15,700 square metres of landscape.

Refico, the developer of Watermark in Tay Ho area also just launched ten last but most beautiful units with many incentives.

Vu Thanh Tung, general director of Tay Ho Tay Development Joint Stock Company, the developer of Watermark project said that these units were the last opportunity for purchasers to by units located right next to the West lake.

Started construction since 2012 Watermark is an 18 storey building overseeing the West Lake which offers 218 high-end units. So far only 10 units left. The company is set to put these last units on sale on November 14. Those are two and three bed-room units equipped with luxury design and all are overlooking the West Lake.

Tung said that this segment of apartments has been attractive to most customers thanks to its high yield and the stable growth economy.

Tung added that the lower benefit from other investment channels such as bank interest and the up and down of the stock market have also made the real estate market more appealing to investors.

In the coming months, Hanoi’s apartment market will see a number of units released from a range of projects, such as MBLand Central Point Trung Kinh, MBLand Central Point My Dinh, HD Mon City, D’Le Roi Solei Quang An and FLC 265 Cau Giay.

According to the Vietnam Real Estate Association, the country property market is on the path to recovery and promises to remain busy in the upcoming months.

The association's figures revealed rising liquidity and falling inventories of the property market, with large numbers of successful transactions, especially in major cities such as Hanoi and Ho Chi Minh City.

Statistics showed that as of the end of September, property stockpiles declined to nearly VND59.4 trillion ($2.64 billion), dropping by more than half in figure compared to the first quarter of 2013.

The current property stockpile includes 11,380 apartments 8,542 houses and seven million square metres of land.

About 5,300 successful transactions were recorded in the nine-month period in Hanoi, representing a rise of 70 per cent over the same period last year. The southern market witnessed 5,300 successful transactions from the beginning of this year, double the figure a year ago.

Realty firms hunt for foreign buyers  

Many real estate investors in HCM City have been boosting their cooperation with foreign partners to better lure overseas customers.

Phuc Khang Corporation has inked a contract with Singapore's Genesis Global Capital so that it can promote its projects to foreign customers, aiming at business people, investors and experts in Vietnam. Genesis Global Capital will pump a total of USD300 million into Phuc Khang's projects over six years.  

Under a contract signed in late July this year, Japan's Creed Group will buy USD200 million worth of An Gia shares and advance loans to the firm to buy housing projects with the aim of building Japanese-quality housing in HCM City.

And Savills Vietnam has set up an office in HCM City to seek foreign buyers, targeting experts working in Vietnam.

In Hanoi, Tan Hoang Minh Group plans to promote its projects to regional countries, including Malaysia, Singapore and Hong Kong. It has carried out a marketing campaign in Germany. The group has set up a website in five foreign languages. A representative from Hoang Minh Group said foreigners account for 10% of its customers.

Le Hoang Chau, Chairman of the HCM City Real Estate Association, said many Vietnamese property companies are seeking to cooperate with foreign partners so that they can get access to foreign customers as Vietnam eases policies to sell houses for foreigners.

To buy an apartment or a detached house in Vietnam, foreigners must prove lawful residence in Vietnam, not an easy thing to do, and have financial resources to buy property. Foreigners are only allowed to buy apartments or detached houses at new residential areas, not those which have long established; so, they should seek contact property consulting firms for advices.

Under the current laws, foreigners are entitled to own no more than 30% of the number of apartments in a condominium project. For detached house projects, the rate is no more than 10%.

Currently, the foreign ownership is valid for 50 years, but the Ministry of Construction has proposed an extension of a further 50 years.

But foreigners point out the only property available is in unattractive developments in areas locals don't want to buy, that it is virtually impossible for a foreigner to gain residence status in Vietnam, even if they marry a local, and even then it entails costly and often contradictory and ineffective legal paperwork. Work permits are extremely hard to obtain and expensive, leaving most living long-term in Vietnam to constantly renew visas at high prices, forcing them to find a trustworthy local business partner to buy property for them, with no legal redress should the deal go sour.

Farmers keep growing low-quality rice despite low profits  

Farmers in Vietnam are planting low and average quality rice because they lack sufficient skills to change to crops with better returns.

According to the Ministry of Agriculture and Rural Development, an average 7.3 million of hectares is used to produce 45 million tonnes of rice every year. But although Vietnam is a major rice exporter, farmers still earn very low incomes.

The Department of Agriculture and Rural Development in Mekong Delta reported that even though productivity in the Mekong Delta had increased, rice quality remained poor. The ministry's report showed that farmers earned an average VND317,000 (USD15) per month.

Thach Puol, a farmer in Hau Giang Province, said, "I make a profit of VND12m a year. I can't support the whole family with it so my children went to Binh Duong Province to find work."

Thach said he still grew a low quality rice variety because it was easy to grow, attracted few pests and had high productivity. "It's suitable for farmers in rural areas, who don’t have access to new techniques," he said.

Farmer Le Van Hai also expressed a preference for low quality rice because the price disparity between poor and good quality rice wasn’t sufficiently large and the higher quality rice was more difficult to grow. However, the price gap in different quality rice is beginning to increase.

"Previously, the price disparity was VND250 per kilo. But this summer-autumn crop saw the price gap increase to VND350 per kilo," he said.

Fear of change is leaving farmers poor. In the last three years, farmers in the Mekong Delta have started to plant other kinds of low quality rice just because it's much safer to grow and has high productivity. This has had a negative effect on Vietnam rice exports, with Thailand and even Myanmar producing better quality rice for higher prices.

Assisting overseas Vietnamese to do business in Vietnam

The overseas Vietnamese community has been growing over the years and will continue to grow in terms of population, professions and places of residence. Their remittances to Vietnam are also increasing and flowing mainly into business activities.

A recent World Bank report on immigration and development shows that Vietnam was the 9th largest remittance recipient in 2014 with more than US$12 billion, accounting for 6% of its GDP and rising tenfold compared with the late 1990s. According to financial services company Western Union, when it began operating in Vietnam in 1994, remittances to Vietnam came from only 16 countries; the number has now risen to 187 countries. According to the State Bank of Vietnam, remittances from 1991 to 2014 rose by 38%, with the total amount reaching US$92 billion. In 2015, remittances are expected to increase by 10% from the previous year. Remittances are currently the second largest source of foreign capital after FDI and even larger than disbursed ODA. Excluding foreign currency that overseas Vietnamese bring with them when visiting the homeland, remittances still continue to rise, especially those from migrant workers.

In addition to covering daily expenses, remittances are an important additional source for national foreign reserves, bank deposits, capital for business activities and the property market. According to the Ministry of Planning and Investment, overseas Vietnamese have registered to invest in more than 2,000 projects. In the first nine months of 2015, total investment pledges by overseas Vietnamese reached US$290.5 million, equivalent to 0.6% of total FDI - most of which came from Germany, Russia, France and the US. More and more investment by overseas Vietnamese is flowing into services, manufacturing, education, healthcare and advanced technology.

Investment by overseas Vietnamese depends on many factors, particularly international relations and Vietnam’s position in the world, the domestic business environment and macroeconomic policy, their capacity and perception towards Vietnam as well as the cost and quality of remittance transfer services.

The remittance flow into business activities is increasing while that into bank deposits to take advantage of exchange rate differences is falling thanks to many favourable aspects such as the warming of the market, the government’s efforts to promote institutional reform, financial liberalisation and international economic integration, including lower interest rates on foreign currency deposits, personal income tax exemptions for remittance recipients, and relaxed regulations on home buying for foreigners and overseas Vietnamese.

What is more noteworthy are more than 400,000 highly skilled workers and successful businesspeople who are a significant force to help Vietnam increase the quality of integration, participate in free trade agreements - especially the Trans-Pacific Partnership - expand Vietnam’s overseas investment and develop a distribution system for Vietnamese goods abroad, promote innovation in hi-tech industries, and enhance the economy’s competitiveness and key products.

The Vietnamese community abroad is an inseparable part of the country and an important resource of the country. They possess increasingly growing and diversified economic and knowledge resources, and a desire to support their families and the nation. With that in mind, the government has made many adjustments to, among other things, nationality, household registration, immigration, residence, and property ownership rules to call for greater involvement of overseas Vietnamese in developing the domestic economy.

Nevertheless, relevant authorities should consider introducing more open and flexible mechanisms, providing more useful information on domestic policy, and diversifying channels to attract investment in order to encourage overseas Vietnamese to participate in business activities as a way to help build their homeland.

IT firms bemoan troublesome import procedures

Representatives of information technology (IT) enterprises have complained about the complicated export and import procedures for used IT products.

The Ministry of Information and Communications last week held a conference on management of export-import operations for used IT products in HCMC. The meeting aimed to provide legal updates for and get feedback from businesses.

At the conference, some IT companies said export and import procedures for secondhand IT products are time-consuming as they are handled by many State agencies, so a lot of time is required to prepare the dossiers of application for import permits. There are cases in which firms have to await decisions from the ministries of information-communications and industry-trade for customs clearance.

Representatives of Gameloft Co. Ltd. said mobile phones imported by the company for software testing and development are overseen by both ministries of information and industry-trade. This has significantly affected the firm’s design and software development.

Other firms also complained that they still had to apply for import licenses from the information ministry for small shipments containing two to three used IT products such as mobiles and tablets. As some firms wish to monthly import dozens of such small shipments, they could not meet the time of import permit application for software testing and thus lost contracts with foreign partners.

To Thi Thu Huong, deputy director of the IT Department under the information ministry, said mobile phones are currently regarded as consumer goods by the Ministry of Industry and Trade. The information ministry has proposed the industry-trade ministry transfer mobile phones to the category of IT products but the proposal has not yet been cleared.

Therefore, importers of mobile phones still need approval from both ministries.

Le Nguyen Viet Ha, deputy head of the Import and Export Goods Management Division under the General Department of Customs, requested the information ministry to provide clear requirements for certification for secondhand IT products to help companies implement customs procedures more easily. She also proposed electronic licensing be combined with electronic customs systems.

Nguyen Anh Tuan from the IT Department said the information ministry has introduced a draft decision of the Prime Minister on a limited number of cases in which goods on the prohibited list can be imported, including six cases involving IT products.

Earlier in end-October, the information ministry issued Circular 31/2015/TT-MIC strengthening management and monitoring of imports of used IT products.

Tax refunds delayed for exporters

A number of Vietnamese exporters have demanded tax refunds, saying they have not been able to claim taxes back though their documents have been approved by the taxman.   

Vu Thi Hoai Son, director of Tan Nhat Huong Company, asked Deputy Minister of Finance Do Hoang Anh Tuan during a tea break at a seminar on taxes and customs in HCMC last week why tax authorities always gave more priorities to foreign enterprises than local firms when it came to tax refund. 

She told the Daily that the tax agency has yet to refund around VND21 billion (US$942,300 million) in taxes although it has issued a decision to give back money to the company nearly one year ago. 

She added Tan Nhat Huong has submitted two other tax refund claims but the tax agency has not responded, spelling trouble for the company. It has had to take bank loans at high interest rates to continue operations. 

From now until the year-end, Tan Nhat Huong will continue asking for tax refund, the director said. She added her enterprise exports products made from rice so if it faces difficulties, its partners and employees would be affected.

An employee of Tan Nhat Huong at a recent conference also asked when the company could get tax refunds as the tax agency decided on August 26 to make payments to the firm. A leader of the HCMC Tax Department replied that he would look into the matter.

A representative from Uni Export Company Limited told the deputy minister of finance that the enterprise sent tax refund requests to the tax agency but the latter has not decided to refund tax, citing many reasons. 

Speaking to the Daily, the representative said Uni submitted documents to the tax agency in HCMC’s District 3. The agency said it needs time to verify the documents. 

“Uni’s tax refunds amount to VND24 billion. The tax refund delay has spelled trouble for Uni,” the representative said.  

The deputy minister of finance said the State budget has enough money for tax refunds. Some reasons behind the delays are insufficient documents and a lack of staff at tax agencies. He said the ministry has arranged a team to monitor and support the HCMC Tax Department to refund taxes to businesses.  

The finance ministry said it would find solutions to cope with difficulties.

Tuan said corporate income tax in Vietnam has been lowered from 25% to 20%, not much higher than in regional countries. Other taxes would be reduced in the coming time to enhance firms’ competitiveness. 

The Hepza Business Association (HBA) said though the one-door customs mechanism has been in place, firms must spend a lot of time on customs clearance procedures. The reason is that customs officers request certification for goods from relevant ministries and agencies, and it takes many days to get such certification.

Baoviet Fund sets up new entity

Bao Viet Fund Management Co. Ltd. (Baoviet Fund) has launched what is seen as one of its biggest member investment funds on the domestic market, with its size totaling VND1 trillion (US$44.6 million).

Dau Minh Lam, general director of Baoviet Fund, said Bao Viet Value Investment Fund (BVIF) was created for merger and acquisition (M&A) deals, and investment into State-owned enterprises (SOEs) undergoing equitization and capital divestment from non-core operations.

Another mission of the new fund is to tap into new opportunities arising from an increase of the foreign ownership limit at listed companies and the Trans-Pacific Partnership agreement over which negotiations have been concluded by trade ministers of 12 member states.

The firm has total assets of nearly VND28 trillion and is one of the leading assets managers on the market.

Lam said BVIF would acquire shares at initial public offering (IPO) auctions by SOEs, trade shares of restructured companies and buy into those firms divesting capital from none-core business operations.   

In addition, BVIF will invest in other assets to raise its net asset value and maximize profits for the fund’s members. Baoviet Fund also plans to launch an open-ended fund to invest in bonds.

Baoviet Fund manages Bao Viet Equity Dynamic Open Ended Fund (BVFED) and customers’ portfolios.

SSG opens shopping center in city

SSG Group, which is active in the real estate sector, has opened Pearl Plaza commercial center in HCMC.

The center covers 27,000 square meters in Binh Thanh District and has five floors and three basements for car and motorcycle parking. It is an integrated venue for shopping, dining, entertainment and sport.

The center is now 90% occupied.

Co.opmart Van Thanh supermarket is located in a basement of the center, covering 3,000 square meters. It stocks 30,000 essential products including fresh food, household items, fashion goods, and cosmetics. 

The ground floor is for coffee shops and promotion events of tenants at the main entrance.

Some of the home appliance, furniture and fashion brands available at Pearl Plaza are  Komonoya (Japan), HaLe, Viet Thy, Wannabe, PNJ, SJC, Jang In, JMG, Munich, and Lee & Crocs.

Pearl Plaza is also home to a California Fitness and Yoga center, DNP entertainment facility and CGV cineplex with seven studios.

Dinh Ngoc Ninh, general director of SSG Group, said Pearl Plaza is the first step taken by SSG Group to venture into the retail sector.

Pearl Plaza is part of a complex with 32 floors and four basements and over 101,000 square meters of floor space.

Auditing sought for BOT and ODA projects

The National Assembly (NA) Financial and Budgetary Committee has asked the State Audit Office of Vietnam to look into projects using State budget and property, including those funded by official development assistance (ODA) loans and Government bonds.

Regarding the State Audit’s 2016 plan, the committee said that next year audits should be conducted in the areas of public concern. According to the General Department of Taxation, the restructuring of State-owned enterprises (SOEs), the efficiency of State capital use at enterprises, build-operate-transfer (BOT) projects, and projects funded by ODA capital and proceeds from Government bond sales will be audited.

The committee also proposed auditing management and use of public finances, assets, and the efficiency of the projects which have been put into use. Such audits should be conducted to detect shortcomings and limitations in the processes of management and using State money and assets, thereby clarifying why the organizations and units that have been found to commit irregularities as debated at NA sessions on annual state budget approval.

The committee also proposed the State Audit audit the large projects finished in 2015, including a project renovating and upgrading National Highway 1A and Ho Chi Minh Highway section in the Central Highlands funded by State funds and Government bonds, projects in group A and some infrastructure and irrigation projects of national importance using State capital and foreign ODA loans.

A Ministry of Planning and Investment inspection showed the Nghi Son-Cau Giat BOT project and the Hanoi-Bac Giang section of National Highway 1A project saw their costs rising by VND1.2 trillion and VND819 billion respectively.

This year disbursements of ODA have reached about VND50 trillion, which is VND20 trillion higher than estimated.

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