Many ‘Easing’ Policies for Businesses

 

In late 2014, the Vietnam Report Joint Stock Company (VNR) released an annual report with the theme “Vietnam Economic Resilience: Perspectives of Big Companies.” According to the report, preference policies need to be enforced in 2015 to better support enterprises to boost their production and business activities: Reducing credit interest rates, lowering corporate income tax, strengthening business support and market search measures, improving the regulatory environment, speeding up administrative procedure reform, improving infrastructure, completing the investment legal system, facilitating private sector development, effectively supporting flagship products and new products, restructuring weak banks, and accelerating the restructuring of State-owned enterprises (SOEs).

 

Dr Tran Hoang Ngan, Vice Rector of Ho Chi Minh City Economics University and Member of the National Advisory Council for Monetary and Financial Policies, said Vietnam’s economy is likely to face two major challenges in 2015: World political and economic development is complicated and unpredictable, while Vietnam's economy has weakly competitive businesses.

 

Dr Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI), said a lot of investment and business laws are set to take effect in 2015, such as the amended Law on Enterprises, the amended Law on Investment, the Law on management of State capital use in enterprises, the Law of Real Estate Business and the Law on Housing. These laws relate to market economic institutions with modern and positive approaches based on the 2013 Constitution to create an opening business environment. With policies to be executed in 2015, businesses will have more room to improve profit.

 

Even in early 2015, the Government sent a message signifying that inflation will be capped at 5 percent to improve domestic demand, further slash interest rates, and stabilise the gold market. The National Assembly and the Government set GDP growth of 6.2 percent in 2015 and the State Bank of Vietnam (SBV) expects to boost the credit growth to 15-17 percent, further reduce interest rates, restructure debts, increase credits to the market, and ease approaches to capital sources for businesses. SBV said it planned to remove ceiling rates for short-term deposits.

 

According to his message delivered to the meeting with bankers in late 2014, SBV Governor Nguyen Van Binh pledged to revise up the exchange to 2 percent in 2015. Right in the first week of 2015, this promise was partially fulfilled when the central bank decided to devalue the Vietnamese dong to US dollars by 1 percent. The move aimed to actively lead the market to keep up with the development of domestic and international financial markets and solidify the foreign exchange market. Together with for-ex adjustment, the central bank said it will stand ready to ensure consistent measures, policies and instruments to stabilise exchange rate and for-ex markets.

 

In 2015, there is no sign that the State will waive the exclusive right to gold import. In 2014, the gold market was kept stable, thus minimising gold smuggling and illegal importing. However, consequently, the gap between domestic and world prices is always wide. According to experts, if the exclusive right to gold import were dropped, the big difference in prices will motivate gold importers to import more gold into Vietnam. Dr Le Xuan Nghia, Director of the Business Development Research Institute (BDI), said that this would only happen for the short term and possibly trigger pressure on foreign currencies and exchange rates but, in the long run, the narrowed difference would discourage gold import. Gold import will hence fall and pressure on the exchange rate will be eased.

 

The real estate market has gradually revived, though not as fast as expected. With the help of VND30-trillion stimulus package, market demand has increased slightly. However, slow disbursements and procedural problems are impeding this support package.

 

Industrial subcontractors are expected to prosper in 2015. The Ministry of Industry and Trade is drafting a decree on the development of supporting industries and assistance for Vietnamese companies engaged in global trade chains.

 

Also within the first week of 2015, some policies with long-term positive impacts on business operations took effect. For example, the Ministry of Information and Communications issued a plan for legal support for businesses in 2015.

 

The Ministry of Finance promulgated a circular on interest rates on investment credits and export credits. Interest rate on investment in Vietnamese dong was lowered to 9.6 percent per annum from 10.5 percent. Interest for export credits in Vietnamese dong was reduced to 7.2 percent per annum from 7.8 percent.

 

With policies from micro to macro levels, businesses are expected to have a more open business environment in 2015 to sustain development, improve competitiveness and solidify integration.