* Economic restructuring in focus: In a speech to wrap up the third plenum of the Party Central Committee (the XIth Congress) on October 10, General Secretary Nguyen Phu Trong said the national economic restructuring should be associated with renovation of the growth model.
As reported by Thoi bao Kinh te Saigon (Saigon Economic Times), the Party Chief emphasized the need to focus, in the next five years, on three restructuring pillars including: restructuring of investment, first of all public investment; restructuring of the financial market, centered on the system of commercial banks and financial institutions; and restructuring of state enterprises, especially state economic groups and corporations.
Specifically, in order to restructure investment, it is necessary to revise laws, policies and mechanisms for management of investment in general and public investment in particular; expeditiously determine criteria and priority order to serve as a basis for approving, rejecting or downsizing investment projects; and stop the overgrowth of economic zones and industrial parks and overexploitation of mineral resources.
Regarding the financial market restructuring, small-sized banks and financial institutions should be merged or consolidated, in order to improve prestige and maintain healthy operation.
Public debts and non-performing loans of state enterprises, foreign loan borrowing and repayment, foreign investments, especially those in real estate and securities, and gradual reduction of development investment capital supplied by commercial banks, should be more strictly controlled.
Before 2015, an end should be resolutely put to the practice that state groups and corporations invest outside their major business lines. State enterprises should be prioritized for development in key sectors largely related to socio-economic infrastructure and public services, and transformed into joint-stock or limited liability companies.
* Public debt restructuring strategy for the next decade: At an international seminar on management of public debts and national foreign debts held by the Ministry of Finance (MOF) on October 17 and 18, director of the MOF’s Department for Management of Debts and External Finance Nguyen Thanh Do reaffirmed that Vietnam’s public debts are still within the safety limit (45.7% against 50% of GDP) and annual liability to pay debts, both domestic and foreign, stands at 15% of budget revenues (50% of the safety limit).
According to Dau Tu (Investment) newspaper, the MOF is finalizing a strategy for public debts and national foreign debts in the 2011-2020 period, setting forth such goals as restructuring loan currencies, controlling debt payment liabilities, borrowing more long-term loans with fixed and preferential interest rates, bettering the management and use of loans and official development assistance source, and mobilizing more domestic capital to substitute foreign loans.
* More detailed regulations needed to gear up support industries: Prime Minister Decision No. 12/2011/QD-TTg of February 24 offers high incentives for development of such support industries as manufacturing mechanical engineering, electronic-informatics, automobile manufacture and assembly, textile and garment, leather footwear and hi-tech industries. Yet, it is still considered not radical and specific enough to attract investors, especially foreign investors, in the field.
There are no support industry projects for electronic industry invested in the country so far, Thoi Bao Kinh Te Vietnam (Vietnam Economic Times) newspaper reported.
Legal and industrial experts at a seminar recently held by the Vietnam Chamber of Commerce and Industry (VCCI) suggested more specific incentives, possibly provided in to be-issued documents guiding Decision No. 12, for different levels of high technology invested and hi-tech products turned out and greater attention to support industries instead of merely assembly lines as at present in order to facilitate participation of the country’s industries in the global value chain and substantially curb trade deficit and inflation. They proposed introduction of a more practical strategy for investment in sciences, technologies and training of human resources for support industries; more diverse forms of cooperation and partnership with foreign investors for supply of support parts and products; and regular review of infrastructure, tax and financial support policies in favor of investors in support industry parks.
* Heightened role of Vietnamese businesspersons to be resolved: President of VCCI Vu Tien Loc in a recent interview with the Vietnam Economic Times revealed some important contents of a resolution of the Political Bureau on businesspersons currently drafted by the Chamber. He said the resolution would uphold the role of the Vietnamese business circle as the representative of a new production force in a market economy, and set forth the objectives of promoting the role and capability of corporate managers and raising the ratio and quality of medium- and large-sized businesses of regional and international caliber.
To achieve these objectives, the draft resolution identified seven groups of solutions, including adoption of a unified attitude towards businesspersons and their role in the national industrialization and modernization; promotion of entrepreneurship among the youth; further improvement of the market economy institutions facilitating an equal and favorable production and business environment; provision of supports for businesses to grow and expand operations in rural areas; and formulation of a national program on training of businesspersons in corporate establishment and governance according to international standards.
* Roadmap of cutting import duty on ASEAN goods to be disclosed: The MOF is expected to publicize soon the Particularly Preferential Import Tariff in implementing the ASEAN Agreement on Trade in Goods for the 2012-2014 period, according to Investment newspaper.
From January 1, 2012, through December 31, 2014, almost all live animals imported from ASEAN countries which satisfy requirements on ASEAN rules of origin will be exempt from import duty. A few others will be subject to the import duty rate of 5%.
These import duty rates (0% and 5%) will also apply to cattle and poultry meat, unprocessed fisheries, vegetables, fruits, seeds (except grape fruit, lemon, lime and rice seeds which will be duties at the rate of 10% in 2012, then 5% in 2013).
In 2012, imported post-slaughtering, processed or unprocessed meat and meat-like byproducts will still be subject to the duty rate of 10% which will later be halved from 2013. However, fishery products, processed or unprocessed, will enjoy the rate of 0% instead of 5% at present.
* Continued inspection of foreign-invested enterprises reporting losses: The MOF’s General Department of Taxation will conduct in the last quarter of the year tax inspection of some 700 foreign-invested enterprises which have reported business losses.
According to Investment newspaper, the inspection of and fight against transfer pricing practices have recently recorded positive results, especially in Lam Dong, Binh Duong and Ho Chi Minh City. Some 500 loss-reporting foreign-invested enterprises recently inspected by local tax authorities have later cut their losses by over VND 3.6 trillion and, subsequently paid taxes of VND 1.2 trillion into the state budget.
The Ministry is expected to implement two tools to fight transfer pricing, including advance price assessment and enhanced coordination in price management between Vietnamese tax offices and parent companies of inspected foreign-invested enterprises.
* Unlisted scraps to be permitted for import: Under a draft joint circular on conditions on import of scraps and discarded materials for use as production materials prepared and recently unveiled for public comment by the Ministry of Industry and Trade, those outside the Ministry of Natural Resources and Environment’s list of scraps and discarded materials permitted for import may be imported with approval of the Ministry of Natural Resources and Environment after considering on a case-by-case basis whether they satisfy the national technical regulations on environment.
In the year following the year of consideration, the Ministry of Natural Resources and Environment will study and add these scraps and discarded materials to the list.
Scrap importers must have warehouses and yards for storing imported scraps and technologies and equipment for recycling these scraps and have solutions to disposing of scraps which cannot be recycled.
* Promotion of exports to the Customs Union member states: Director of the Ministry of Industry and Trade’s European Market Department Dang Hoang Hai recently told the Vietnam Economic Times that Vietnam will complete by the end of the year a report on the feasibility study of the conclusion of free trade agreements (FTAs) with the Customs Union member countries, including Russia, Belarus and Kazakhstan, which will pave the way for the country to open bonded warehouses and the lifting of the non-tariff barrier for Vietnamese businesses intended to export goods to these countries. The relatively high duty rate of 12% in these countries will be considerably cut for Vietnamese exports once FTAs are concluded.
FTAs will also help create a favorable environment for investment, foreign exchange remittance, service, tourism and technology transfer activities between Vietnam and these countries.
In a couple of months, principal FTA contents for negotiation will be put up for comments of businesses nationwide.
* Detailed guidance on project transfer tax proposed: At an annual roundtable talk on tax and customs policies between the European Chamber of Commerce and Industry (Eurocham) and the Ministry of Finance held last month, Eurocham representatives proposed the Ministry of Finance to provide as soon as possible specific guidance on tax on transfer of projects, especially real estate development projects, and tax rates applicable to real estate project transfer prices inclusive or exclusive of land, land-attached asset and project development right prices.
As explained by the General Department of Taxation’s representative, project transfers are now subject to the tax rate of 25% applicable to corporate incomes, regardless of their prices. Particularly, real estate transfers are also subject to value-added tax at the rate of 10%.
Regarding price transfer, Eurocham proposed the Ministry of Finance to amend Circular No. 66/2010/TT-BTC, permitting foreign-invested businesses to use foreign databases as a basis for comparative analysis, provided these databases are of clear origin which tax offices can inspect and verify.-