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Policy digest December 2012
As requested by the Prime Minister in his Directive dated December 7, the Ministry of Finance will have to review and assess the collection and use of revenues from land, natural resources and public assets and propose solutions to enhance supervision of the financial status of enterprises.

* Prime Minister urges positive legal changes in the investment climate: As requested by the Prime Minister in his Directive dated December 7, the Ministry of Finance will have to review and assess the collection and use of revenues from land, natural resources and public assets and propose solutions to enhance supervision of the financial status of enterprises.

The Ministry of Planning and Investment must promptly draft a decree listing areas and industries eligible for investment incentives for the coming period.

The State Bank is tasked to improve credit mechanisms for foreign investment projects and develop criteria and mechanisms for checking total outstanding domestic and foreign loans of foreign-invested enterprises.

The Ministry of Trade and Investment must draw up a scheme to prioritize the development of enterprises in sectors with competitive edge during 2013-2020.

The Ministry of Construction will revise construction investment management mechanisms to be simple and practical, and classify real estate projects into those permitted to be implemented and those immediately suspended.

According to experts, Vietnam’s foreign investment incentive policies have been less attractive during the past six years as the country revised a series of laws and regulations (for example, the Law on Corporate Income Tax does not allow foreign investors in industrial parks to enjoy tax incentives since 2009). Therefore, they expect positive changes in Vietnam’s investment and business environment be introduced in 2013, thanks to the National Assembly’s passage of the revised Investment Law, revised Corporate Income Tax Law, revised Land Law, and Public Investment Law, and the Government’s enactment of guiding documents.-

* Anti-dollarization scheme to be finalized in tune with the revised Foreign Exchange Ordinance: An anti-dollarization scheme has been elaborated by the State Bank under the Prime Minister’s directions and is expected to be submitted to the Political Bureau for consideration by the year end. This scheme is in line with the revised Foreign Exchange Ordinance, which would impose in Article 22 strict limitations on foreign exchange use in all pricing, valuation, quotation, payment, advertising activities of residents and non-residents in Vietnam.

As per the scheme and relevant regulations obligating state groups and corporations to sell foreign currencies, the State Bank would request these groups and corporations to report regularly on their foreign-currency deposit balances at banks and guide them in selling foreign-currency amounts in excess of the permitted level.

According to director of the National Assembly’s Economic Committee Nguyen Van Giau, the revised provisions on foreign exchange use aim to restrict the right of individuals to use foreign currencies as payment and investment tools.

Le Xuan Nghia, deputy chairman of the National Financial Supervision Committee, said it was necessary in the immediate future to compel substantial increase in foreign-currency preserves of banks and in a long term to put an end to their U.S. dollar lending and mobilization.-

* Foreign experts propose amendments to the Competition Law: At a recent seminar on review of eight years’ implementation and proposed revision of the Competition Law, competition law experts from Japan International Cooperation Agency (JICA) and Vietnam Competition Management Agency focused on the Law’s provisions on competition suppression agreements, abuse of market dominance or monopolistic position, acts of economic concentration and unfair competition, and proposed improvements based on developed countries’ experience.

Though the Law and government decrees 116 and 120 of 2005 already specified the market share limit of each type of enterprise to be regarded as holding market dominance and being able to exert a substantial competition suppression, no guidance on methods to assess this ability is in place. To address this issue, the experts suggested that market share should only be considered a sign, among others, for identifying an enterprise committing market dominating or monopolizing acts because these acts depend on such elements as barriers in production chain participation or expansion and barriers in dropping out from market, purchase power, market demand and profitability of such enterprise.

The revised Competition Law should not only address economic concentrations based on consolidated market shares but also those resulting from merger, consolidation, acquisition or joint-venture deals between enterprises in different markets.

Fines for unfair competition practices should be increased from current VND 15-50 million to practically deterrent levels which can be determined on the basis of lost turnover of enterprises in a related or affected market.

Penalties against goods line associations involved in cases related to competition suppression agreements and a “basket” clause covering all these agreements should also be added.

The exercise of the right to complain about acts of unfair competition and identification of related markets should be facilitated with more flexible mechanisms.-

* Eight border-gate economic zones to be intensively invested: According to a scheme on revision and elaboration of criteria for selection of border-gate economic zones eligible for the state budget’s intensive investment during 2013-2015 recently approved by the Prime Minister, eight border-gate economic zones have been named as the country’s economic development and cross-border trade hotspots along the borderline for intensive investment, including Mong Cai (Quang Ninh), Dong Dang (Lang Son), Lao Cai (Lao Cai), Cau Treo (Ha Tinh), Lao Bao (Quang Tri), Bo Y (Kon Tum), Moc Bai (Tay Ninh), and An Giang (An Giang).

The Ministry of Planning and Investment is assigned to direct related ministries and localities in annually planning and providing central budget supports equal to at least 70 per cent of total required capital for these zones’ infrastructure development in compliance with the principles, criteria and norms of allocation of development investment capital from the state budget.

* VAFI recommends five real estate market de-icing measures: Hailing the Government-initiated measure of setting a higher ratio and specific design standards of small low-cost apartments as a stimulant for real estate purchasers, the Vietnam Association of Financial Investors (VAFI) has proposed five measures which it believe can heat up the real estate market.

These measures include (i) providing low- and medium-income earners with preferential loan interest rates as currently applied by the Investment Bank for preferred investment projects, for example: the State will provide an interest rate subsidy of 3-5 per cent for loans with preferential annual 7-per cent interest rate for to-be purchasers of apartments valued at under VND 2 billion in the first three years; (ii) given real estate prices have fell 30-60 per cent recently, administrations of major cities should consider investing in or purchasing some 25,000 low-cost apartments for resettlement, with the main financial source from the State Capital Investment Corporation (SCIC); (iii) the State Bank should drop the foreign-currency deposit interest rate to 1 per cent or even 0 per cent per year with a view to curbing the dollarization and goldization and helping further reduce Vietnam-dong loan and deposit interests (to some 8 and 5 per cent respectively); (iv) imposing 10-per cent value-added tax on gold piece and jewelry purchases while exempting people’s gold sales from this tax, thus reducing speculation and mobilizing idle capital for the real estate market; and (v) setting up “swift action teams” to help local leaderships plan and monitor the progress of real estate projects and advise on bailing out prioritized projects.

Earlier, the Ho Chi Minh City Real Estate Association has also proposed some practical measures in response to the real estate slowdown, including loosening conditions for foreigners to own departments in Vietnam, especially those at the price of at least VND 30 million/m2 and in certain areas with high security; prioritizing the settlement of bad debts and rescheduling of heavy-interest loans for real estate businesses, and facilitating their access to new loans; creating a new set of technical regulations and design standards for small- and medium-sized apartments; and developing apartments for rent at low rates (under VND 2 million/month) and apartments to be paid in installments within a period of 20-30 years.-

* Importers failing to register for quarantine to stop operation: Thousands of Vietnamese businesses that currently import agricultural products and materials from overseas will have to cease importation if they fail to register quarantine and import origin before the end of this year.

Head of the Ministry of Agriculture and Rural Development’s Plant Protection Department Nguyen Xuan Hong said countries exporting plant-based agricultural products and materials into Vietnam are required to register for plant quarantine in order to control epidemics. However, countries with contracts signed before July 1, 2011, would be allowed to continue exporting to Vietnam before foreign exporters can prepare their applications.

Deputy Minister Nguyen Thi Xuan Thu said the Government has not yet implemented check-ups for harmful plant protection drugs for 46 unregistered countries and territories exporting farm produce to Vietnam but soon countries without proper registration would have to stop exporting to the country, and it would no longer be easy on imported goods, given that Vietnamese exports have been strictly investigated for everything from microorganisms to chemicals.-

* Auto industry master plan revised: The Ministry of Industry and Trade has revised the automobile industry development master plan to cope with new trends on the market. The plan has been sent to the Ministry of Natural Resources and Environment for opinion before seeking governmental approval.

As per the plan, through 2020, the auto sector will focus on the domestic market and classify market segments to meet diversified demands. Auto factory plans should go in line overall national socio-economic plans and help boost auto manufacture.

Three major solutions have been proposed, including devising more stable policies, especially tax ones, toward the industry, manufacturing energy-saving and environmentally friendly vehicles, and creating more favorable conditions in terms of technology transfer and management training for supporting industries to raise localization rate to at least 60 per cent.

According to a plan of the Ministry of Planning and Investment, a complex will soon be built to gather together businesses, especially small- and medium-sized ones, in the supporting industries.-

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