Vietnam Industry and Trade News Bulletin for January 18,2016

A. OUTSTANDING GENERAL ECONOMIC NEWS

1. Banking and Finance

• ATM Overload Solutions: To prevent ATM congestion during the Lunar New Year, banks are proactively delivering cash directly to factories to pay workers.

• Interest and Exchange Rates: Deposit interest rates increased slightly (0.1–0.5%) for seasonal liquidity, but lending rates remained stable (6–9% for short-term). Exchange rates are forecasted to rise by 3–4%, while inflation expectations are at 6–7%.

• Strict Credit Control: The State Bank of Vietnam will tighten real estate and long-term credit in 2016. Failing financial companies or credit funds may face mandatory bankruptcy or mergers.

2. National and Local Economic Growth

• HCMC Performance: Ho Chi Minh City achieved a GDP growth of 9.85% in 2015, the highest in four years. FDI reached $4.6 billion, a 43% increase compared to 2014.

• Dependence on China: Experts warn that Vietnam must reduce its economic reliance on China, citing a massive $50 billion trade deficit (including $20 billion in smuggled goods) and China’s internal economic instability.

3. Business Environment and Challenges

• Tax and Fee Pressure: Enterprises are concerned about losing competitiveness due to rising taxes, fees, and the increase in regional minimum wages, which impacts social insurance costs.

• Tax Inspection Overload: Tax authorities in HCMC are under pressure due to a 15% inspection target on nearly 140,000 businesses, leading to concerns about the quality of inspections.

• Real Estate Crisis: Approximately 41% of real estate projects in HCMC (502 projects) are either suspended or have not yet started, often due to land clearance issues.

• Labor and Bonuses: Tet bonuses in Nghe An are generally modest, mostly equivalent to one month’s basic salary, while the rubber industry saw 20,000 workers quit due to plunging global prices.

B. NATIONAL ASSEMBLY NEWS

1. Election Preparations

• Official Date: The National Election for the XIV National Assembly and People’s Councils at all levels is set for Sunday, May 22, 2016.

• Personnel Planning: Meetings were held to discuss the structure, composition, and number of candidates for the next National Assembly term.

2. Legal Revisions

• Tax Law Amendments: Discussions focused on Export/Import taxes and Special Consumption Taxes. A key proposal includes reducing taxes on cars with cylinder capacities under 2,000 cm3 by 5% annually.

• Anti-dumping Regulations: There are suggestions to build a separate law for anti-dumping and safeguard duties instead of keeping them within the Export-Import Tax Law.

• State Audit Salaries: Proposals were made to increase the salary coefficients for the Auditor General to match the status of other high-ranking state positions.

C. INDUSTRY AND TRADE NEWS

I. ELECTRICITY

• Price Commitment: EVN committed to not increasing electricity prices in 2016 despite challenges from El Niño and water shortages for hydropower.

• New Price Mechanism: A draft proposal suggests allowing price adjustments within a 3–5% range every 3 months and establishing an Electricity Price Stabilization Fund.

• Infrastructure Projects: The Bac Lieu wind farm (VND 5,217 billion) was completed; Mong Duong 1 Thermal Power Plant began commercial operation; and a new 110kV substation was started in Thanh Hoa.

II. HEAVY AND SUPPORTING INDUSTRIES

• FDI Wave in Electronics: New projects from Samsung suppliers (United More, New–Hanam, INTOPS) are entering Vietnam, signaling a “golden opportunity” for the electronics industry.

III. IMPORT AND EXPORT

• Logistics Bottlenecks: Exporters are struggling with 15–20 types of shipping fees and surcharges imposed by foreign shipping lines, significantly reducing product competitiveness.

IV. DOMESTIC MARKET AND MANAGEMENT

• Petrol Price Stabilization Fund: There is an ongoing debate about the transparency and necessity of the Petrol Price Stabilization Fund, with critics arguing it prevents consumers from enjoying deeper price cuts.

• Market Threats: Sugar smuggling from Thailand (400,000–500,000 tons/year) and Chinese confectionery mislabeled as Vietnamese specialties are harming domestic producers.

• Food Safety: Authorities reported thousands of “dirty meat” cases, but most only faced administrative fines instead of criminal prosecution due to legal loopholes.

• Vehicle Testing Fees: Clarification was provided that the new fuel consumption testing fee (VND 16–16.5 million) applies to manufacturers and importers for new models, not individual car owners.

V. INTERNATIONAL INTEGRATION AND PROMOTION

• Trade Defense: The US Department of Commerce delayed the anti-dumping tax results for Vietnamese pangasius, which is seen as a potentially positive signal for exporters.

• Agricultural Cooperation: HCMC signed MoUs with Japanese and international partners to build international-standard value chains for shrimp, orchids, and mangoes.