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VIETNAM
VIGNETTES®
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© 1997-2003 Vietnam Venture Group, Inc.®
All rights reserved. June 1, 2003
Issue
No. 68
June
2003
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Our 6th year on the Internet & 10th
year in Vietnam
A Periodic Report
to Our Clients
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COMMENTARY: Forward, ever forward |
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It's a new test. That's what winners tell ourselves when faced with a set-back. A new test to challenge our strength and the depth of our resolve. Others may fail to see their way clearly and falter. Pathfinders always seem to weather the storm and complete the Passage better than others. To gain a better perspective, see our commentary (linked above) and our dispatches (linked below). |
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Tax Policy Changes Due First Quarter Results Reviewed |
Developing BaRia-VungTau Province Garment Industry and US Import Quotas Dollar's Drop Has No Effect Here |
See VVG's monthly feature on Current Economic Indicators of Foreign Direct Investment in Vietnam
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Prior On-Line Issues Of No. 63 January 2003 | No. 64 February 2003 | No. 65 March 2003 | No. 66. April 2003 | No. 67 May 2003 |
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COMMENTARY
t's a new test. That's what winners tell ourselves when faced with a set-back. A new test to challenge our strength and the depth of our resolve. Others may fail to see their way clearly and falter. Pathfinders always seem to weather the storm and complete the Passages better than others.With great thanks to Gail Sheehy http://gailsheehy.com who first wrote about "Passages" and then "Pathfinders," we all have our challenges to overcome. Some may call them problems, many often see them as insurmountable. They go by many names, including SARS, missed goals, broken homes, lost dreams.
There always appear to be those who seem to escape total collapse, like "Teflon-Bill (Gates or Clinton), and those who get hit hard and yet appear to be on the come-back road (President Clinton or Donald Trump), or those who don't yet seem to have had any major challenges at all as they reach the top (Steve Wynn).
And there are those whose fall from grace is so dramatic as to attract national and world-wide attention, such as a former high-school classmate, scion to a multi-billion dollar real estate empire who will soon stand trial for murder, or a 21-year old street hustler, shot in the back 6 times by a wealthy antiques dealer who himself was tried and acquitted three times, only to die of AIDS before his last trial could be competed.
We too have faced tests before, many times. And with each we find that what does not kill us makes us stronger.
To our friends who want to know that there will be better times, we say "Go out and work for that to happen." To our friends who are tired and feel they cannot cope, we say, "Read and speak to others, learn how you are stronger than you know you are."
We cannot all be Pathfinders as some will not survive their Passages. But to those of us who are, do not allow what ever challenge you face to get the better of you.
With thanks to Ms. Sheehy, we offer the following of her many wisdoms:
Creativity can be described as letting go of certainties.
If we don't change, we don't grow. If we don't grow, we aren't really living.
The secret of a leader lies in the tests he has faced over the whole course of his life and the habit of action he develops in meeting those tests.
With each passage of human growth we must shed a protective structure [like a hardy crustacean]. We are left exposed and vulnerable - but also yeasty and embryonic again, capable of stretching in ways we hadn't known before.
DISPATCHES
Big changes in tax policy likely. The Government plans to implement sweeping changes in the tax policy in a move to stimulate investment and create a level playing field for local and foreign investors.
At a news briefing about the cabinet meeting in mid May, Finance Minister Nguyen Sinh Hung said the Government will ask the National Assembly to consider amendments to the laws on value-added, corporate income and special consumption taxes. "The move aims to help businesses accumulate more capital for re-investment and to eliminate tax disparities between local and foreign-invested enterprises, though the State will see its annual revenue drop by VND3 trillion (US$200 million)," Hung said.
According to the Government's proposal, the VAT rate of 20% will be abolished and only two rates will apply, 5% and 10%. Goods and services currently adjusted by the special consumption tax will be subject to a 10% VAT, and the taxable price will be the selling price plus the special consumption tax. Export services will be tax free in order to boost foreign trade.
An unwelcome and hotly debated plan is that automobiles and motorbikes will be taxed higher under the Special Consumption Tax Law. [However, see Auto story, below.] Autos, currently subject to a preferential rate of 5%, will be taxed 50% next year and 100% one year later. Motorbikes will also be subject to the tax when Vietnam reduces import tariffs.
A common tax of 28% will apply to both local and foreign businesses besides the preferential tariffs of 10%, 15% and 20%. While local businesses will no longer be required to pay extra profit tax, foreign businesses will not be taxed on profit repatriation. However, profit earned from the transfer of land-use rights or land lease will be subject to the tax.
Another welcoming point is the budget for sale promotion, advertising and marketing will be allowed at up to 10% of corporate spending compared to the current 7%.
Many other goods and services will benefit from the tax adjustments. For example, lottery businesses will pay a tax of 10% instead of 20%. The tax for air conditioners and golf course business will be cut to 15% from the current 20%.
First Quarter Results. Vietnam's economy in the first quarter posted significant achievements. The GDP growth rate increased 6.9%, industrial production 15.5% and export 35.9% year-on-year. According to Deputy PM Vu Khoan, Vietnam will not revise down its economic targets for this year but will take more stringent measures to overcome challenges.
The National Assembly (NA) is expected to pass eight legal drafts or amendments during the 45-day sitting. It will also give opinions on nine other drafts. The eight drafts to be passed are the Statistics Law, amendments and supplements to the Special Consumption Tax Law, the amended Corporate Income Tax Law, the National Assembly Supervision Law, the National Border Law, amendments and supplements to the Law on the State Bank, the amended Value-added Tax Law and the Accounting Law.
The drafts up for discussion include the Construction Law, amendments and supplements to the Cooperative Law, the State Emulation and Reward Law and the amended Stated-owned Enterprise Law. The other five are the amended Law on the Organization of People's Councils and People's Committees, the amended People's Council Election Law, the amended Fisheries Law, the amended Land Law and the amended Criminal Procedures Law.
Also on the agenda is discussion of tax revenue in 2002 and 2003. Deputies will hear reports by different NA sub-committees, the Government and the judiciary sector.
Vietnam will be Southeast Asia's strongest performer with a gross domestic product (GDP) growth rate this year forecast at 6.9%.
According to a report issued by the Asian Development Bank (ADB), Vietnam's economy will continue to perform well despite uncertainties elsewhere.
The country last year posted a GDP growth rate of 6.4% and is forecast to achieve 7.1% in 2004. Macro-economic stability as well as institutional and structural reforms are expected to fuel domestic demand that will help the country achieve higher growth.
The Vietnam-U.S. bilateral trade agreement and improvements in the world market are projected to help Vietnam's export increase 9.1% this year and 8.4% next year. Foreign investment inflow this year is estimated at US$764 million and overseas remittances more than US$2 billion.
The bank,
however, warns improving competitiveness in the face of increasing external
pressure arising from regional and international integration is a challenge that
must be addressed to sustain high growth.
Vietnam's economy in the first four months