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Vietnam to Open Market to Foreign Trading Companies

The Ministry of Planing & Investment is coordinating with relevant agencies to compile necessary documents to guide the establishment of foreign-invested firms operating in the areas of import, export and distribution.

"The Government of Vietnam will also release the restrictions on the operations of the Vietnam-based branches of foreign trading companies", the Minister of Planning & Investment Vo Hong Phuc said.

According to the current Foreign Investment Law and the Trade Law, foreign trading companies are not allowed to set up companies, offices or branches in Vietnam.

The amended Trade Law, which is expected to be ratified in 2005, will clearly regulate the establishment and operations of the branches of foreign trading companies.

Vietnam's total export revenue is expected to increase by 29.7% on-year to more than $23.6 billion, and import spending will be up 23.2% on-year to $28.06 billion in the January-November period of this year, according to official government official estimates. (VNExpress.net Nov 26)

Vietnam's GDP Growth Likely to Exceed 7.2%, Says WB

Vietnam's gross domestic product (GDP) growth rate this year is likely to exceed last year's level of 7.2% thanks to correct and effective policies, according to the Vietnam Development Report 2005 and the report on the country's economic development and reform released by the World Bank (WB) on November 25.

The WB's forecast is lower than the Vietnamese government's estimate of 7.6% for the year after Vietnam's cabinet announced it posted high economic growth of 7.4% in the first nine months.

Concerning the country's economic situation over the year, the WB said that market challenges, particularly anti-dumping cases and the reduction of garment and textile quotas in exports to the US, have not drastically influenced Vietnam's export activities. The shipment of garments and textiles abroad has remained impressive and the export volume of wood products has increased sharply.

Although October's imports surged 21%, a large proportion of the budget deficit has been made up by the large volume of foreign remittance, the official development assistance (ODA) loans and the foreign direct investment capital, says the report.

The process of negotiation for the World Trade Organization accession is proceeding positively, the restructuring of businesses has been accelerated, and the banking system has been reformed considerably, it states.

As for inflation, Martin Rama, Lead Economist of the WB in Vietnam, cited the limit of the source of supply, triggered by droughts and avian influenza, as the main factor behind the recent price hike. However, he said, the rise will slow down in the remaining months of this year.

According to him, Vietnam's credit growth is at a high level but has nothing to do with inflation. However, it is necessary to pay more attention to the quality of credit growth, he added.

While assessing Vietnam's capability of self-reliance, Klaus Rohland, Country Director of the WB in Vietnam, said Vietnam should be more active and rapidly make full use of preferential loans for development investment because this preferential treatment will not last forever.

The reports have also praised Vietnam's achievements in public finance and administration. Budget revenue and expenditure have shown positive signs and the National Assembly's competence regarding the budget has increased with budget management allocations to local administrations. As a result, local administrations were assigned to manage 44% of the total State budget. The taxation system has been managed effectively with a remarkable amount of revenue coming from commerce, especially the value added tax (VAT). Poverty reduction programs have brought practical benefits to the people as well, they said.

The public administration reform is developing well initially. The policy to increase salaries for public employees will effectively combat corruption. However, the reports called for careful consideration to avoid overloading the State budget.

In regards to challengers ahead, the donors' reports indicated the need to take drastic measures to improve the banking and taxation systems, fight corruption and enhance transparency in public management.

The reports were issued by the World Bank in collaboration with a community of 24 international donors, in anticipation of a consultative group meeting for Vietnam slated for early December in Hanoi. (VNA Nov 26, The People Nov 26 p7, Youth Nov 26 p1, Young People Nov 26 p3, Econet Nov 26 p2, The Law Nov 26 p1, People's Army Nov 26 p8)

The US Customs, after investigating 66 garment and textile enterprises in Vietnam in August, has recently decided to prohibit 12 Vietnamese garment firms from exporting their products to the US market. In face of this situation, the ministry urges Vietnam's Export - Import Management Departments and Vietnam Customs to jointly strengthen control over garment and textile enterprises and draw lessons of business management.

The inspectors, on the same month, visited eight countries including Vietnam with a view to inspecting the garment and textile firms' capacity as well as their ability to meet export standards, environmental requirements and safety and labor regulations.

Last year US customs found fraudulent certificates of origin (C/O) in 17 local firms when it inspected 150 garment and textile enterprises in Vietnam. (Youth Nov 25 p11, Vietnam Agriculture Nov 24 p1, Pioneer Nov 24 p2)

Automakers in Vietnam Bag Super Profit from Protectionism

Foreign-led automobile manufacturing companies are enjoying large profits due to the protection of the Vietnamese government in the auto industry, according to statistics from the National Assembly's Economic and Budgetary Committee.

Car assemblers in the country are now selling cars at 1.5-2 folds and 2.5 times higher than those in regional countries and their parent firms' quotations, respectively, whilst up to 90% of the car value are made in foreign countries, it said.

Prices of locally-assemble cars are now as high as imported ones, which are levied at combined imported tariff rates of 300%.

According to the committee, car purchasers now are mainly state-funded organizations and state-run enterprises, who use the State Budget to buy their luxury means of transport. Therefore, prices are of no concerns.

Thanks to these purchasers, the demand for cars has not been affected by price orientations, it said.

Earlier this year, car prices in Vietnam were pushed up by 15-28.8% due to the special consumption tax rise to 24% from the 5% in 2003. The price is sure to rise once again when the special consumption tax soars to 40% next year.

According to the committee, as of late 2003, Vietnam had 660,000 automobiles, equaling less than 1% of the Southeast Asian region and 4% of Thailand. (Investment Nov 26 p12)

Four Resolutions Get NA's Approval

The Vietnamese National Assembly passed four resolutions at the meeting held yesterday. They related to education, supervision of infrastructure construction investment, the master plan for the construction of the Ho Chi Minh Road, and law making.

Some 380 voters, accounting for 76.9% of total NA deputies, supported the adoption of the Education Resolution. One of the focal points of the resolution is that primary school graduation examinations will be abolished starting in the 2004-05 school year.

Also, State budget spending on education and training will be increased to 20% of the total budget by 2007 or 2008. The increased spending aims to improve school curriculums and simplify examinations to relieve students' study loads, crack down on cheating in examinations and diploma issuing, and prevent rampant growth of classes outside the approved curriculum such as evening classes.

The resolution placed importance on the need to seek measures in expanding tertiary education, promote vocational training, and improve the capability of teachers and education managers.

The resolution on the supervision of capital on State-funded construction of infrastructure, called for the government's initiatives to restore order in infrastructure construction by inspecting, supervising and monitoring the use of State capital in those projects.

Among the requirements, the government is asked to issue specific regulations governing the supervision and inspection of State budget disbursements while an institution should be established to specify the responsibilities of individuals involved in infrastructure construction projects, especially those who play decisive roles.

The government also must clear out bad debts of VND5 trillion ($318.5 million) in infrastructure construction projects by 2006 and report the results on the debts to the NA annually, said the resolution, which got approval of 384 NA deputies or 77.6% of the total.

Regarding the construction of Ho Chi Minh Road, the country's largest currently being built, 77.2% or 382 NA delegates agreed to build the highway starting from Pac Bo in the northern province of Cao Bang, and ending in the southernmost province of Ca Mau.

The construction is divided into two stages with the first stage (two-lanes over 3,167-kilometers) expected to be completed with 2010. The second stage (up to eight lanes), will be commence 2010-2020.

The delegates also asked the government to prepare a more detailed financial plan for the project before approving the total construction cost estimated at VND33.6 trillion ($2.1 billion) in the first stage.

In addition, the NA adopted a resolution on the ordinance and law program in 2005.

The NA heard reports concerning the amended education draft law, the railway draft law and the draft law on signing, joining and implementing international treaties.

NA deputies will debate the amended education draft law today (The People Nov 26 p1, Labor Nov 26 p1)