Production Support

The two first resolutions of the Vietnamese Government this year concentrate on economic development and production - business support.

 

The Resolution No. 01/NQ-CP on key directive and regulatory measures to socio-economic development plans and budgetary estimations in the fiscal year 2013 and the Resolution No. 02/NQ-CP on a number of solutions to remove difficulties against enterprises, support the market and settle bad debts have been lately signed by the Prime Minister.

 

The Government advocated close, prudent but flexible monetary and fiscal policy in line with economic progress. According to the Resolution No. 01, a number of solutions have been proposed for 2013 with the most important focus on strengthening macroeconomic stability and inflation control.

 

The State Bank of Vietnam (SBV) is responsible for directing and coordinating with other ministries, agencies and localities to exercise prudent and effective monetary policy; using flexible and efficient tools of monetary policy; and closely associate with fiscal policies to control inflation and reach a sound growth rate.

 

The Government underlines monetary and financial solutions to economic stability and production support. The SBV is assigned to regulate interests and credits in adherence to inflation control targets and economic growth support; guarantee safety of liquidity and operations of credit institutions and the economy. Exchange rates will be regulated to the market and currency value will be guaranteed. Gold market will continue to be tightened in order to stabilise the market and domestic gold prices will be brought closer to international rates. These issues were started in 2012 and will be underscored in 2013.

 

Banking industry restructuring also called the attention of the Government. In 2012, only one reshuffle was completed but this year the Government will direct concerned parties to basically complete restructuring of poor-performing financial and credit institutions and strictly punish any act of violating laws on finance and banking business.

 

The Ministry of Finance plays an important role in fiscal policy regulation. It is liable for directing and coordinating with other ministries, agencies and localities to consistently and effectively implement solutions concerning State budget to ensure spending and collection plans. It is asked to strive for increased incomes while minimising expenditures to reduce budget deficit.

 

Public investment is another important issue this year. The Government has assigned the Ministry of Planning and Investment to direct and coordinate with other ministries, agencies and localities to strengthen management over State-funded investment or investment using government bond proceeds. The ministry is responsible for reviewing and arranging the list of priority of State-funded investment projects, allocating capital for projects which are completed and put into operation but not received enough capital, important, urgent and effective projects which are likely to be completed in 2013. Capital advanced by the State Budget will be repaid.

State-funded projects will not be kicked in large number this year. Together with that, slow-going and capital-short projects will be transferred or terminated.

 

The Resolution No. 02/NQ-CP on a number of solutions to remove difficulties against enterprises and support the market will east burdens on the people and support production. The Government pledged not to issue policies on collection of vehicle fees - a move expected to slow the vehicle boom. Besides, the registration fees on vehicles with less than 10 seats will be reduced to 10 per cent for the first registration. Local fees are variable but the amount shall not be greater than 150 per cent of the government-set value. Registration fees will be 2 per cent from the second time and this rate is applied nationwide. This means that vehicle registration fees in major cities like Hanoi and Ho Chi Minh City will not be more than 15 per cent. Provinces and cities can apply any rates between 10 per cent and 15 per cent.

 

Certainly, automobile market will positively react to this tax policy. People also temporarily feel relieved about circulation fees aimed at restricted personal vehicles. This very high rate fee was proposed by the Ministry of Transport at the end of 2011. An automobile is imposed an annual fee from VND20 million to VND50 million, depending on cylinder displacement.

 

The fees for motorbikes in five centrally governed cities are VND500,000 each if the engine displacement if less than 175 cm3 or VND1 million if the capacity is greater.

In the very early days of 2013, the Government issued two economic management resolutions, focusing on dealing with difficulties against the manufacturing sector. However, according to economic experts, this goal seems to conflict with inflation taming target. Inflation needs to be controlled to stabilise the macro economy but companies need to loosened credit policy. This forces the Government to choose what to be boosted and supported, not freely loosened to trigger inflation return.

 

According to the insurance, this year’s priority sectors are agriculture and rural development, export, and SMEs. Besides, Vietnam still has to remove difficulties for the market. An important solution is to stimulate domestic consumption. With a population of nearly 90 million, Vietnam is a big, diverse market which is worth stimulating. In addition, the country also needs to look for export markets to ease domestic production strains.