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Official Gazette

Friday, October 7, 2022

Policy digest Septermber 2012

Updated: 10:08’ - 28/09/2012

* Financial leasing firms to get duty break for imported equipment: The General Department of Customs (GDC) is currently working with other Ministry of Finance (MOF) agencies to revise regulations to allow financial leasing companies to enjoy import duty incentives for preferential investment project equipment.

This stemmed from a proposal of Vietnam International Leasing Company pursuant to Decree No. 16/2001/ND-CP on import duty exemption for used machinery and equipment imported for lease to licensed preferential investment projects to form their fixed assets.

As per Article 16 of the Law on Import Duty and Export Duty and Article 12 of Decree No. 87/2010/ND-CP guiding the Law, investment projects in preferred areas are exempt from import duty for goods imported to form their fixed assets.

Application dossiers for such duty exemption are specified in MOF Circular No. 194/2010/TT-BTC.

According to legal experts, this move is necessary because target beneficiaries of the duty incentives are preferential investment projects, not financial leasing companies, and in essence, import duty exemption aims to reduce costs and create favorable conditions for investors.

GDC deputy head Hoang Viet Cuong said the GDC would make a list of types of enterprise entitled to import duty exemption which lease machinery and equipment from financial leasing companies.     

* Used equipment imports likely to be halted: The Ministry of Science and Technology is considering two options of restraining the import of used machinery, equipment and technological lines as soon as possible.

The first option would restrain all used machines and equipment regardless of their manufacture date while the second option would bar the import of items used for more than five years up to the date of importation.

The move aims to prevent mass import into Vietnam of outdated equipment and technologies, especially those for steel production and non-ferrous metallurgy; production of coked coal; electrolysis of aluminum; production of chemical fibers, cement, flat glass, paper, liquor and soup base (monosodium glutamate); leather tanning; dyeing; and printing.

* Solutions to develop small- and medium-sized enterprises: The Prime Minister has approved a master plan on development of small- and medium-sized enterprises (SMEs) through 2015, aiming to establish 350,000 new SMEs in the period.

The master plan also targets that SMEs will contribute around 40 per cent of GDP and 30 per cent of total state budget revenues and create some 3.5-4 million jobs.

A total of eight groups of solutions have been determined, including improving the legal framework for market participation, operation and withdrawal of SMEs; supporting financial and credit access and raising the capital use effectiveness of SMEs; assisting SMEs in renewing technologies and applying modern technologies; developing human resources of SMEs; stepping up the formation of inter-linked industrial clusters with preferential access to land use rights; providing information for SMEs to development their outlets; setting up an SME development support system, including an SME support fund; and managing SME development plans in a stricter manner.

* Foreign-invested enterprises need to be redefined: Experts have strongly urged the redefinition of foreign-invested enterprises (FIEs) and clearer identification and unification of the purposes of limiting foreign ownership in Vietnam-based enterprises, with a view to facilitating their operation in some sensitive areas that need protection, e.g. pharmaceutical distribution, and stock market listing.         

Many suggested the law permit FIEs to be transformed into joint-stock companies with an unlimited foreign holding ratio. These companies should only be subject to ownership limits under specialized laws or the list of restricted sectors.

Some others recommended FIEs be defined as enterprises having foreign capital contributions regardless of percentage or those controlled by foreign investors (foreign holding of 51 per cent or more), according to international practices.

A more explicit definition of FIEs would help make investment and business registration procedures applicable to FIEs as simple as those applicable to domestic enterprises and avoid risks from inconsistent application of laws.

Foreign investors urged Vietnamese lawmakers to study experiences of foreign countries and re-determine the objectives of prescribing a foreign holding cap in the FIE definition, for limiting/encouraging foreign investments, for investment licensing procedures or for statistical purposes, and to use a unified definition in all relevant legal documents.

After the definition of FIEs is set, the next step would be to introduce a list of sectors where foreign investment is restricted or encouraged with clearly specified conditions. For instance, if an FIE wishes to do business in the distribution sector, the foreign holding must not exceed 30 per cent.      

To improve the efficiency of foreign investment and increase disbursements, some local authorities suggested that investment licenses should only be granted to investors that have disbursed investment capital according to their project investment registrations.

* More detailed regulations to wash up imported hazardous wastes: Taking advantage of some loopholes in the current regulations governing import of discarded materials, industrial refuses and wastes, including Government Decree No. 12/2006/ND-CP of January 23, 2006, and Ministry of Natural Resources and Environment Decision No. 12/2006/QD-BTNMT of September 8, 2008, mercenary importers annually ship into the country millions of tons of hazardous materials, posing a big threat to the environment, but have faced no criminal actions and therefore delayed re-export in accordance with the Basel Convention.

According to Tran Quoc To, deputy director of the Police Department for Environmental Crime Prevention and Combat, legal loopholes that need to be addressed to prevent illegal mass import of hazardous wastes include opaque definitions of hazardous wastes of large, very large or particularly large quantity; serious, very serious and particularly serious consequences of import of these wastes; equipment and machinery not up to environmental standards; clean discarded materials containing no impurities; and responsibilities of waste importers.

He proposed introduction of specific measures to verify the completion of re-export of violating imports, clear definition of responsibilities of ship owners when imported goods are identified as wastes likely to cause environmental pollution, especially in case these goods’ owners are unidentifiable, and issuance of more detailed regulations on temporary import for re-export of wastes, standards of cleansing of imports and process of random inspection upon customs clearance.

Methods of recycling or destroying these wastes should be introduced and international cooperation for information sharing and orchestrated actions enhanced, he said.      

* Legal framework preparations for to be-interconnected ASEAN stock markets: The recent inauguration of trading connection between Malaysia’s and Singapore’s stock exchanges has necessitated the building of a legal framework for Vietnamese stock exchanges to enter the “common playground” of regional securities markets, facilitating Vietnam’s outward investment and foreign indirect investments in the country through the securities market.   

According to Hanoi Stock Exchange director Tran Van Dung, three biggest challenges facing Vietnam’s securities market are awareness of domestic investors and enterprises, a mechanism for controlling cross-border securities transactions and preventing them from adversely impacting the domestic market, and legal grounds for participation in cross-border transactions and investigation into abnormal cross-border transactions.

The MOF and State Securities Commission will soon elaborate and issue regulations on management of foreign exchange, supervision and management of risks in cross-border transactions, and establishment and operation of securities companies acting as connecting portals and patronizing cross-border transactions conducted in Vietnam.

The Vietnam Securities Depository will study a depository-payment-clearing mechanism and the possibility of performing the CCP (central counterparty) function in the ASEAN securities market connection model.-


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