Vietnam Anticipates New Wave of Foreign Investment

In response to growing concerns about deflation and economic downturn evidenced by the negative CPI growth in two consecutive months (minus 0.26 percent in June and minus 0.29 percent in July), Minister Dam analyzed "If GDP growth was negative in two consecutive quarters, the economy is considered falling into recession.

Vietnam’s economy still maintains high growth although the rate is lower than previous years and than the current plan. It has thus not slid into recession. Similarly, as regards CPI, if energy and food were excluded, the CPI growth was positive in the two months [June and July].” Besides, the Government discussed extensively this issue and anticipated a negative growth in consumer price index in August. And, from now till the end of the year, if no macroeconomic regulation measures are taken, inflation is highly likely to slump to less than 7 percent. Until now, CPI and inflation indices meet criteria set out.

 

In addition, to support the business community to develop, macro-economy must also be stable enough. In a heavily bank-dependent economy like Vietnam, banks must have abundant capital, low and stable interest rates. It means that inflation must be kept low to ensure a really positive margin of deposit interest rates. Therefore, keeping inflation at 7 percent or even lower in 2013 is very important for long-term macroeconomic stability. Importantly, Vietnam must avoid jerkiness in regulating inflation, which leads to snap reduction and quick return of inflation, said Minister Dam.

 

In response to positive outlooks of international institutions and foreign banks like Standard Chartered and HSBC on Vietnamese economy but dismal outlook of Vietnamese people on the matter, Minister Dam said we should not satisfy with what we have done but, on the global and regional scope, we have a relative good economic growth. One of the main reasons why international financial institutions as well as many international observers have a good outlook on the Vietnamese economy stems from very fundamental economic guidance of the Party and the Government. The government also carefully analyzed macroeconomic situation to avoid running after short-term goals and causing long-term macroeconomic instability.

 

Even, according to many investors, if Vietnam continues to implement drastic measures as it has done, a new wave of investment into Vietnam is quite likely in two or three years, said Minister Dam.

 

Concerning the draft law on personal income tax, which is expected to be ratified by the National Assembly and take effect on April 1, 2014, Deputy Finance Minister Vu Thi Mai said this adjustment is calculated on various factors like GDP growth, GDP per capita, CPI, minimum wage, wage reform plan, and statistical data on living levels and incomes of the public. Specifically, the amount of taxable personal income is VND9 million a month upwards (or VND108 million a year) instead of VND6 million earlier proposed from the current VND4 million. The reduction amount for a dependent person is VND3.6 million a month (or VND43.2 million a year) in place of current VND1.6 million. And, according to this proposal, up to 70 percent of current taxpayers will be free from income tax payment. This means that 2.6 million people out of a total of 3.8 million taxpayers do not have to pay taxes anymore. “Under the new tax rules, a person earning a monthly income of VND12.6 million and being responsible for taking care of a dependent will not have to pay taxes. This threshold is effective from 2014.

 

In addition, the draft Law on Personal Income Tax has opening regulations. Accordingly, in the case of strong market price fluctuations, the Government is entitled to submit recommendations for the change to the National Assembly,” Mai added.

 

Regarding increased fuel prices, the Ministry of Finance noted that price increases are under the authority of wholesalers. For its part, the ministry sent a written mandate to petroleum traders, requesting a price change within the limit of 7 percent on either side. The necessary time for two price changes is at least 10 days. Price changes are based on current pricing regulations. And, the Ministry of Finance and the Ministry of Industry and Trade will work together in necessary cases.

 

As regards electronic multilevel sales, Deputy Minister of Industry and Trade Nguyen Thanh Bien said that Department of E-Commerce and Information Technology under the Ministry of Industry and Trade on July 12, 2012 warned people and enterprises against the offer and transaction from online vendors. This uses both e-commerce and multilevel marketing methods. A recent notorious case is dealings on muaban24 website which was expelled by e-commerce associations. The Ministry of Industry and Trade has coordinated with authorities and localities to accelerate monitoring on online advertising and shopping activities. The ministry also said it is formulating a draft decree on e-commerce and is collecting opinions of businesses and the public for this issue. The draft decree will be sent to the Ministry of Justice for examination and submitted to the Government for consideration and ratification in the fourth quarter of 2012.