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Regulations in the making (Vol.17 - No 201 May 2011)
At the Business Summit held on May 3 in Hanoi under the 44th Asian Development Bank’s Annual Meeting, Minister of Finance Vu Van Ninh briefed the participants on the strategy and orientations for development of Vietnam’s financial sector through 2020, covering a number of solutions for achieving the objectives set in the strategy.

* At the Business Summit held on May 3 in Hanoi under the 44th Asian Development Bank’s Annual Meeting, Minister of Finance Vu Van Ninh briefed the participants on the strategy and orientations for development of Vietnam’s financial sector through 2020, covering a number of solutions for achieving the objectives set in the strategy.

These solutions include (i) continued improvement of financial institutions to raise efficiency of mobilization and use of financial, natural and land resources, and pricing of goods and services under the market mechanism; (ii) adoption of policies to assure every citizen and the poor of access to basic welfare services; (iii) further reform of financial policies for public service providers, corporate finance policies and financial policies for reorganization and transformation of state enterprises; (iv) improvement of the legal framework for the financial market and services, and restructuring of the securities market for more balanced development; adjustment and formulation of financial policies and mechanisms in line with regulations and commitments within bilateral or multilateral framework; and (v) intensified administrative reforms in the financial sector, modernization of the national finance and development of standardized human resources for the financial sector.

Also at the summit, a Deputy Minister of Industry and Trade announced that the Vietnamese Government is considering reducing government guarantees for BOT projects, especially internationally funded power projects, and that the Ministry of Industry and Trade is drawing up a list power generation projects calling for public-private-partnership (PPP) investment. PPP investment would create opportunities for private investors to make optional proposals and provide appropriate ways to deal with these proposals. Under this form, the Government agrees to authorize the construction and operation of infrastructure facilities to private investors and in turn gets access to capital sources and experience of the private sector.

Governor of the State Bank of Vietnam (SBV) Nguyen Van Giau told the summit that the central bank will continue focusing on curbing the inflation and stabilizing the macro-economy in order to promote investment and trading activities within a healthier business environment. For the immediate future, the bank will continue applying the model of controlling mainly the total money amount (scale and speed of growth of total payment instruments) in addition to consistently administering monetary policy tools and exchange rates.

* The Prime Minister has recently requested ministries, ministerial-level agencies, the Social Policy Bank, the Bank for Development of Vietnam and the Vietnam Social Insurance to accelerate the realization of 25 government resolutions on simplification of administrative procedures applied by these ministries and agencies.

As reported by the Dau Tu (Investment) newspaper, these ministries and agencies must elaborate, collect comments of administrative procedure controllers and issue or submit to competent authorities for issuance legal documents on implementation of plans on administrative procedure simplification before June 30, 2011. They also have to assess and report on the impacts of simplified administrative procedures.

* SBV Deputy Governor Nguyen Dong Tien recently told the Lao Dong (Labor) newspaper that specific regulations on gold trading will be soon issued to guarantee the right and benefits of people who keep the precious metal. However, strict controls would be maintained over gold transactions.

Tien said the SBV’s Circular No. 11/2011/TT-NHNN (effective on May 1) to ban gold lending and acceptance of deposits by commercial banks would not have any impact on these people because most of them do not make savings in gold and have little demand to trade in it.

Commercial banks, however, can mobilize gold by issuing short-term deposit certificates to repay depositors if they do not have enough gold in store. These certificates can only be issued by May 1 next year.

As recently assigned by the Prime Minister, the SBV would draft and propose to the Government regulations on administrative sanctioning of illegal traders in gold and foreign currencies.

According to Tuoi Tre (Youth) newspaper, the SBV is also considering permitting banks that increased their charter capital to VND 3 trillion in 2010 to use such capital increase to provide loans without having to be counted into their credit growth limit in 2011.

* As reported by the Vietnam Economic Times, Deputy Minister of Science and Technology Nguyen Quan recently said that the ministry has finalized and proposed to the Prime Minister for approval a program to support the development of intellectual assets during 2011-15, in furtherance of Prime Minister Decision No. 68 of April 4, 2005, on approval of the Program on support for development of intellectual assets of enterprises.

The program will introduce more appropriate mechanisms for management of intellectual assets and help expand the scope of protection to outcomes of researches and yields of creative labor. It will provide supports for utilization of inventions not patented in Vietnam for production and business development, and for use of these inventions’ information in developing new products in Vietnam without violating patent laws.

The ministry will also support the registration for protection and management of intellectual assets and enforcement of regulations on management of scientific research outcomes, and development and utilization of valuable local specialties and exportable key products.

* The heads of the industrial zone authorities in some southern provinces within the southern key economic region have told the Dau Tu (Investment) newspaper that they longed to propose the Government to revise some points on investment incentives in the 2005 Investment Law, Decree No. 124/2008/ND-CP of December 11, 2008, guiding the Corporate Income Tax Law, and some other relevant documents they find inconsistent or irrational.

Head of the Dong Nai Industrial Zone Authority Vo Thanh Lap proposed the Government to adopt incentive policies for newly set up projects and expanded projects and provide more corporate income tax incentives for investors in industrial zones established under Decree 124.

Regarding Vietnamese enterprises licensed for goods trading which receive capital contributions from foreign investors after their business registration, Lap proposed issuance of clearer regulations permitting or not permitting these enterprises to continue conducting licensed goods trading activities in replacement of the Ministry of Planning and Investment’s guidance prior to the enactment of Decree No. 23 of February 12, 2007, and in consistency with Prime Minister Decision No. 88 of June 18, 2009, on capital contribution to or share purchase from Vietnamese enterprises by foreign investors.

Regarding import and export, head of the Long An Industrial Zone Authority Phan Thanh Phi proposed the Ministry of Industry and Trade to delegate industrial zone authorities to issue certificates of origin of goods forms AJ, E and AK, in addition to form D, so that export processing or industrial zone enterprises can enjoy preferences under the agreements with Japan, China and the Republic of Korea.

Lam Truc Nho, an investor in Phu An Thanh industrial zone (Ben Luc, Long An) raised a question about inconsistency between Decree No. 69/2009/ND-CP on compensations for ground clearance and Ministry of Finance Circular No. 117 of December 7, 2004, regarding exemption from or reduction of land use levy for industrial zone enterprises transferring land areas with infrastructure facilities for common use, requesting a uniform provision whether or not requiring these enterprises to pay land use levy upon transfer of land use rights to areas with built infrastructure in industrial zones.

* Regarding non-cash payment, director of the SBV’s Payment Department Bui Quang Tien has recently been cited by the Vietnam Economic Times as proposing the Government to revise or replace Decree No. 64/2002/ND-CP on payment via card service providers to promote the use of bank cards and concurrently issue regulations to enhance the management of card business, set specific standards on payment cards, apply international standards on confidentiality and safety of data in card business in Vietnam, impose appropriate fees or give fee exemption for card payment transactions via ATM, POS or reduce fee levels for card clearing payment via the inter-bank e-payment system.

He also called for value-added tax reduction or similar incentives for those involved in non-cash payment transactions and bank agents accepting card payments.

Deputy director general of the Bank for Industry and Trade of Vietnam (Vietinbank) Pham Anh Tuan suggested that the SBV and the Ministry of Finance (MOF) introduce regulations permitting commercial banks to appropriate reserves for bank card business risks, as the SBV’s Decision No. 20 of May 15, 2004, did not specifically guide methods of appropriating the reserve and the minimum reserve level.

Card business risks include credit risk and other risks. Card operation credit risk reserve will comply with provisions of Decisions No. 493 of April 22, 2005, and No. 18 of April 25, 2007, on debt classification, appropriation and use of reserves for banking risks.

Other risk reserves will be determined based on fraudulence rate and risk of issuance and payment operations of commercial banks in the Asia-Pacific region as announced by SBV in each period. Appropriated reserves must be accounted as banking operation expenses and reported to the SBV, the MOF and Tax Departments.

* The Vietnam Association of Financial Investors has recommended a new method of calculating securities transfer tax, namely capital gain tax (CGT), to replace the current two methods (25 per cent of net earning from securities transfer and 1 percent of securities transfer price upon each transfer) which it finds irrational.

As reported by the Vietnam Economic Times, most securities investors currently prefer the second method for its simplicity. For the market of listed stocks, this method would assure that the State collects 100 per cent of personal income tax from individual investors. However, this method has a big limitation that even investors suffering losses must pay income tax.

The CGT, which is widely applied by listed stock markets around the world, is in nature a presumptive tax but applies to a narrower range of tax-liable investors, especially investors that continuously deal in securities in small amounts. However, for the over-the-counter (OTC) market, this method is still inappropriate because tax offices cannot identify taxable securities purchase and sale prices of OTC dealers.-

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