Financial Measures to Surmount Difficulties

According to the Ministry of Finance, consumer price index (CPI) climbed 2.6 percent in the first four months of 2012. Trade deficit shrank to US$176 million in the four-month period, about 0.53 percent of total exports. Credit interest rates were brought down, liquidity of the banking system improved, foreign exchange reserves increased, exchange rate stabilised and stock market revitalised. Some economic sectors made headways and maintained growth (e.g. ship building and repairing, vegetable processing and preserving, butter, milk, etc.). The country’s export turnover rose 22.1 percent year on year to US$33.4 billion in the January - April period.

Nonetheless, GDP growth was just 4 percent in the first quarter of 2012, the lowest level since 2004 (except for the first quarter in 2009), in which processing industry expanded only 3.04 percent, construction industry contracted 3.85 percent, and service sector slowed down. The index of industrial production (IIP) climbed only 4.3 percent year on year in the first four months, the lowest level for the past two years. Particularly, cement output fell 5.5 percent, steel production contracted 8.9 percent, motor vehicle output decreased 15.9 percent, and footwear production dipped 6.5 percent.

 

Meanwhile, the national inventory index soared up, especially in the processing industry. As of April 1, the sector saw inventory index jumping 32.1 percent against the previous year whilst falling 0.5 percent month on month. Some sectors saw a relatively high inventory index such as processing and preservation of fruit and vegetables up 94.8 percent, production of fertiliser and nitrogen compounds up 63.4 percent, production of cement, lime and plaster up 44.2 percent, production of motorbikes up 38.9 percent, costume production up 35.6 percent, fish processing up 35.2 percent, and motor vehicle production (31.6 percent). Import turnover shrank, especially automotive spare parts, petroleum, motorcycle components, raw materials for export production (clothing, cotton, fabrics, etc.).

 

The Ministry of Finance said, according tax code data, more than 18,700 companies were set up in the first quarter of 2012, down 10.2 percent year on year. Meanwhile, the number of businesses suspending operations with registered terms reached nearly 18,700. Some 10,350 enterprises went bankrupt, dissolved or ended operations in the reporting period, representing an increase of 14.8 percent over the same period of 2011.Particularly, 23.1 percent of them were operated for one year or less and 41.9 percent existed less than two years.

 

Retail and service sales slumped 7 percent on year in the first quarter of 2012. State-owned enterprises witnessed a decrease of 14 percent, non-State enterprises suffered a plunge of 21 percent, but foreign-invested enterprises enjoyed a growth of 24 percent.

 

Notably, at the end of 2011, outstanding tax debts accounted for 6.95 percent of taxes collected by the State Budget, an increase of 1.76 percent over 2010. At the end of February 2012, tax debts rose 28.5 percent from December 31, 2011. Unpaid taxes subjected to foreign-led enterprises climbed 25.7 percent and the growth of non-state enterprises and State-owned enterprises were 13.9 percent and 4.3 percent, respectively. Some industries had high rates of VAT debts over the same period of 2011, particularly real estate, transportation, manufacturing electricity and gas distribution, agriculture, forestry, fisheries, mining, restaurant and hotel sectors.

 

As of mid-March, 8,465 enterprises owed overdue customs duties, an increase of 6.04 percent from December 31, 2011. State-owned businesses accounted for 78.9 percent while non-state and foreign-invested enterprises took up 10.6 percent and 10.5 percent, respectively. Belated customs taxes mainly came from finished goods (unpaid export tariffs primarily came from raw materials and crude products).

 

To support businesses to maintain and expand operations, according to the Ministry of Finance, in addition to monetary and credit measures, the following solutions should also be adopted to help businesses resolve difficulties, maintain and develop production.

 

 - Group of macro regulatory solutions: Flexibly regulating monetary policies, based on liquidity status of the banking system and consumer price index, to quickly lower deposit and lending interest rates to support enterprises to overcome difficulties; Restructuring credit and prioritising credits for agriculture, rural development, export-oriented production, supporting industries, SMEs, labour-intensive businesses, and some segments of real estate and housing fields (residential houses, urban housing, etc.)

 

Remarkably, the government will support enterprises to access credit capital and raise capital from the securities market by developing this market and reducing 5 - 10 percent of administrative costs in five leading State-controlled commercial banks.

 

- Group of public spending solutions: Ministries, agencies and localities shall quickly allocate and assign basic construction investment capital, government bonds, and expenses for national target programmes; seek supplementary counterpart finance for ODA projects; implement solutions to accelerate basic construction investment. They shall add VND1,000 billion for watering systems, road construction, fishery development and cottage industry promotion, totalling VND4,000 billion in 2012.

 

- Group of tax and fee solutions: Extending six months for VAT to be paid in April, May and June 2012 (October, November and December respectively) as specified in the Clause 1, Article 1 of Resolution No. 08/2011/QH13; Reducing 50 percent of land rents in 2012 in accordance with the Decision No. 2093/QD-TTg and the Decree No. 121/2010/ND-CP dated December 3, 2010; Extending the nine-month time for unpaid corporate income tax in 2011 in accordance with the Clause 1, Article 1 of Resolution No. 08/2011/QH13; Exempting excise taxes in 2012 for fishing and salt production households; Extending a 12-month time for land taxes incurred by projects investors facing financial difficulties.

 

In particular, delaying road maintenance fees for cars and motorcycles through December 31, 2012 in order to reduce difficulties (input costs) for enterprises and people; slashing 30 percent of corporate income tax in 2012 for enterprises specified in Clause 1, Article 1 of Resolution No. 08/2011/QH13.

 

- Group of price controlling and subsidising solutions: Enhancing the efficiency of price management and control to ensure prices of commodities, especially inputs for production, restrict speculation and hoarding of goods for market price manipulations; reviewing and implementing subsidies for oil and electricity prices in some areas and beneficiaries (offshore fishing, agricultural production, poor households) if prices these items escalate.

 

- Group tax administrative procedure reform solutions: Stepping up the reform of tax and customs administrative procedures to reduce compliance costs for businesses: Shortening the time for clearance, applying electronics customs, expanding tax payment via banks, automating reception and return of tax and customs documents and procedures, reducing 10 - 15 percent of tax procedure costs for individuals, businesses and institutions.