EuroCham Vietnam Newsletter Q2 2012 by EuroChamVN

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									                                         Message from the Chairman
                                         Dear Members,
Preben Hjortlund, HITC                     The Vietnam Business Forum (VBF) held in
                                         Hanoi on the 29th of May gave the Chamber
Vice Chairs                              the opportunity to express our views and issues
Tomaso Andreatta, Intesa Sanpaolo        together with constructive suggestions to the
Le Duy Thanh, Shell Vietnam              Vietnamese government. This came at an
Louis Taylor, Standard Chartered Bank    opportune time as in today’s economic climate
Andreas Stoffers, Deutsche Bank AG       there are many pressing issues that need to
                                         be addressed. The latest VBF position papers
Treasurer                                are available to download on our website
Tom van der Lee,                I encourage you to read
FrieslandCampina Vietnam                 them and welcome your input and ideas on
                                         the business issues we are addressing.
Committee Members
Nicolas Audier, Audier & Partners LLC
                                           We would like to thank the members and companies who approached
Simon Britsch, Bayer Vietnam Ltd.
                                         the Chamber to raise their specific issues. Following the summer we
Jean-Michel Caldagues, EADS
                                         shall be again requesting your contributions to prepare for the next issue
Luc Cardyn, BNP Paribas Vietnam
                                         and update of the EuroCham Trade Issues and Recommendations
Juan Del Casar Ximenez, Fritta Vietnam
                                         Book or ‘White Book’, to be released before the next VBF session in
Kristof Claes, Brand Partner Co., Ltd
                                         December. We strongly encourage you to join and actively participate in
Nicola Connolly, Adecco Vietnam          EuroCham sector committees to address and shape the issues affecting
Costantino Sambuy, Piaggio Vietnam       your business in Vietnam.
Eric Sichere, L'Oreal Group Vietnam
Quang-Hue Vo, Robert Bosch Vietnam
                                            On the 16th June, we saw the opening of the “SME Business Centre”.
Executive Director                       The centre provides a free space for EuroCham members on the ground
Paul John Jewell                         floor of the EuroCentre in HCMC. With available private desks, power
                                         outlets, Wi-Fi and printing, the centre will enable members with a quiet
The EuroCham newsletter is published     and comfortable workspace in the centre of HCMC.
quarterly by the European Chamber of
Commerce in Vietnam with offices at:        In the last quarter, we have held a vast number of successful events
                                         for you, our members. These ranged from various luncheons and
G/F, Sofitel Plaza Hanoi                 networking events to a dialogue with HCMC tax officials, business
1 Thanh Nien Road, Ba Dinh District      briefings with MOLISA Vice Minister, Pham Minh Huan and senior
Hanoi, Vietnam                           advisor to the chairman of BNP Paribas and former President of the
Tel: (84-4) 3715 2228                    European Bank for Reconstruction and Development, Jean Lemierre.
Fax: (84-4) 3715 2218
                                             Last but not least, we held a very successful Food Festival in Hanoi
                                         with over 1,200 attendants enjoying food from all over Europe and
                                         entertainment for the whole family. Look out for the Food Festival
EuroCentre                               coming to HCMC on the 8th September and we look forward to seeing
49 Mac Dinh Chi Street, District 1       all of you there!
Ho Chi Minh City, Vietnam
Tel: (84-8) 3827 2715                       On behalf of the EuroCham Executive Board, I thank you for your
Fax: (84-8) 3827 2743                    continuous support and wish you all a safe and pleasant summer!
                                         With kind regards,
Hotline: (84-8) 3997 1263

Editorial contact
Jan Wiehler
Communication and Services Director
EuroCham (Ho Chi Minh City)
Tel: (84-8) 3827 2715                    Preben Hjortlund,
Email:           Chairman
Vietnam - In a consolidation phase
Growth to pick up as the year progresses
Vietnam’s weak Q1-2012 growth suggests that the monetary austerity measures introduced in the past 12 months
have worked. 2012 is likely to be a year of consolidation after several years of rapid economic growth. We expect
domestic demand and an improving trade balance to drive growth this year. Inflationary pressures are likely to remain
low until at least Q4, giving the State Bank of Vietnam (SBV) room to cut rates further in Q3.
We now forecast that GDP will grow 5% in 2012, down from our previous forecast of 5.8%. In line with the pattern in
past years, we expect growth to pick up as the year progresses. Inflation has eased faster than initially expected, and
we expect it to slow to a monthly average of 8.8% in 2012 from 18.7% in 2011. We expect the refinance rate to end
2012 at 9%, down from 11% currently, as the SBV aims to boost growth. Meanwhile, USD-VND is now likely to remain
stable in 2012. Our forecasts are shown in Figure 1.
                          Figure 1: Below-trend growth and inflation expected in 2012 (% y/y)
      25                                                                               7
                                                                                       6             GDP growth (RHS)
                                                                                       5             GDP forecast (RHS)
      15                                                                               4
      10                                                                               3
                                                                                       2             Inflation forecast
                                                                                       1             Policy Rate
       0                                                                               0             Policy rate forecast
       Jan-11   Apr-11    Jul-11    Oct-11   Jan-12   Apr-12    Jul-12    Oct-12

                                                                                   Sources: CEIC, Standard Chartered Research

Lower inflationary pressures ahead
Inflationary pressures are likely to remain low this year, with inflation likely to pick up gradually only in Q4. Headline
inflation fell to 6.9% y/y in June, slowing more sharply than we had expected. Easing food and energy prices, coupled
with a high base effect, are likely to depress headline inflation further. We expect food prices to stay flat on a m/m basis
in the coming months given that they have already declined for three consecutive months. Overall, inflation is likely to
bottom at around 5-6% y/y in Q3, before rising modestly again.
      Figure 2: The main drivers of inflation are likely to remain sluggish in the coming months (ppt contribution)

         Jan-10 Apr-10     Jul-10   Oct-10 Jan-11 Apr-11       Jul-11    Oct-11 Jan-12 Apr-12

                                                                                   Sources: CEIC, Standard Chartered Research
SBV expected to cut rates again in Q3
With inflation now easing more rapidly, the SBV has room to cut rates to support the economy. After the three rate cuts
of 100bps each in Q2, we expect the refinance rate to be cut by another 200bps in Q3, taking the key policy rate to 9%
by year-end. This should alleviate investor concerns about loan and credit access in the coming months, and support
domestic economic activity that has been weakened by global uncertainty. The decision to cut rates further will be
based on the potential FX market reaction; the market has received rate cuts well so far.
Export resilience amid regional weakness
Based on seasonal trends, we are optimistic that GDP growth will pick up as the year progresses. However, we expect
growth to consolidate in the next one to two years after several years of rapid expansion. Despite Vietnam’s increasingly
open economy, its export performance has been resilient, even as the rest of Asia experiences significant weakness.
We attribute this to international manufacturers’ diversification into Vietnam in recent years. As previous investments
turn into production, this is supporting Vietnam’s export growth during this challenging time.
Domestic consumption and the improving trade balance are likely to be the main contributors to growth in 2012. On the
other hand, investment may remain weak, hampered by low foreign direct investment (FDI) inflows. We expect the
services sector to help offset lower growth rates in manufacturing and agriculture. Manufacturing growth is likely to
underperform in the next few quarters relative to previous years, although it should improve from Q1’s 5.1% y/y figure.
                                                                                             Business Update
Improving trade balance expected in 2012
Vietnam’s improving trade balance has been a positive development this year. We expect this trend to broadly continue
for the remainder of 2012, but to moderate over the next few months. We forecast that Vietnam’s export growth will
outperform the rest of the region but be a touch lower than in previous years. The positive trend in the trade balance is
likely to boost the FX reserves and support the Vietnamese dong (VND).
Import growth is set to accelerate in the next few months due to rising demand for raw materials and crude oil. As a
result, we foresee a slight deterioration in the trade balance in the short term. Once the Dung Quat oil refinery resumes
production and the Nghi Son oil refinery is completed, the trend seen in Q1 is likely to resume.
Investment is likely to pick up slowly
Lower borrowing costs in the coming months and the government’s growth-supportive stance should support a
rebound in investment growth. Figure 3 shows that investment typically picks up towards the end of the year, during the
budget period. We expect state investment to make up a bigger proportion of investment in 2012 as international investors
exercise caution.
                        Figure 3: Investment likely to pick up as the year progresses, USD bn


      15,000                                                                                                         Foreign direct
      10,000                                                                                                         State



























                                                                                             Sources: CEIC, Standard Chartered Research
Local markets outlook
VND stability in 2012
The VND is expected to remain stable for the remainder of 2012. Official USD-VND rates have been unchanged this
year, and the narrowing trade deficit and lower inflation rates support a stable rate for now. On the other hand, there is
a small chance that falling local interest rates could increase pressure for VND depreciation. On balance, we now
expect USD-VND to remain unchanged at around 21,000 in 2012 as the government attempts to maintain FX stability
and promote trade growth.
Government bond yields to edge lower
We expect Vietnam Government Bond (VGB) yields to edge lower in H2-2012 on constructive supply-demand dynamics
and a dovish SBV. Given that we now expect the SBV to cut the refinance rate by another 200bps to 9% by Q4-2012
(versus our previous year-end forecast of 11%), we now see scope for the 2Y yield to bottom at 8.0% in H2-2012
(versus our previous forecast of 8.5%).
Supply-demand dynamics have turned highly favourable for bonds. Onshore banks’ demand has picked up following
an improvement in onshore VND liquidity conditions in Q2-2012. The government injected VND 240trn into the system
by purchasing USD/selling VND to boost the FX reserves, and through liquidity assistance programmes extended to
strategic sectors and troubled banks in February 2012 (this followed an injection of VND 30trn in late 2011). The
economic slowdown has also dampened credit demand, while growing confidence in the VND is encouraging deposit
placement with banks. Meanwhile, debt issuance is well on track – the Ministry of Finance had met more than 55% of
its 2012 gross VGB issuance target of VND 100trn as of June, or 54% on a net basis.
While we are generally constructive on VGBs, we suggest that real-money investors maintain Neutral duration exposure
to VGBs given external risks. Onshore liquidity conditions have shown high volatility in the past, as they are heavily
dependent on onshore regulations, policies and seasonal factors, as well as external factors. On balance, we now
expect USD-VND to remain unchanged at around 21,000 in 2012, as the trade balance is improving and CPI inflation
is coming off.

                              Standard Chartered Bank
                              Jeff Ng, +65 6596 8075                  Jennif er Kusuma, +65 6596 8250

Fossil Fuel Fiscal Policies
and Greenhouse Gas Emissions in Vietnam
Subsidies and taxes in Viet Nam’s energy sector, and their effects on economic
development and income distribution in the context of responding to climate change.
A new policy paper by the United Nations Development Programme (UNDP) looks at the
reform of fossil fuel fiscal policies in Viet Nam. Below is an overview of the main findings and
1. The challenge of fossil fuel subsidies
The G-20 and APEC leaders, including the Vietnamese
president, agreed in 2009 to phase out “inefficient fossil fuel
subsidies”. This issue is also being addressed at the Rio+20
conference (June 2012). Under a broad definition, fossil fuel
subsidies are any government intervention that can reduce
the cost of fossil fuel below what it would be without that
Viet Nam is currently capping electricity and fossil fuel
prices, in order to keep energy affordable. This forces losses
in energy state-owned enterprises (SOEs), and bail-outs
and investments amount to substantial indirect government
subsidies to energy prices. These policies are not sustainable,
benefit the better off more than the poor, and are counter-
productive for future growth and modernisation as well as
investment in renewable energy. They also contribute to
climate change.
Viet Nam’s economy is comparatively energy inefficient and
carbon intensive, fossil fuel consumption is rising fast, and
Viet Nam is becoming more dependent on imported refined
petroleum products and coal. This is also causing a rapid
rise in greenhouse gas emissions.
Fossil fuel fiscal reform may have economic, social and
environmental benefits, but major reform of how energy
SOEs are operating is complex. Reform efforts must also
consider the effects on businesses and consumers, because
energy will become more expensive, as well as inflation.
2. Fossil fuel prices and fiscal policies in Viet Nam
Fossil fuel consumption trends in Viet Nam

Biomass is still the most important primary energy source, but this is changing rapidly. Hydro-electric power accounted
for most electricity production in 1995, but by 2010 gas turbine generation covered 47% and coal fired thermal plants
17% of production capacity. By 2030, coal is projected to cover over 56% of all electricity production capacity. Viet Nam
would need to import about 80 million tons of coal per year, which is equivalent to roughly 60,000 average sized loads
of coal by river barge. Consumption of refined petroleum products has also grown rapidly, and Viet Nam is likely to
become a net oil importer by volume within the next five years.
Overall energy sector subsidies in Viet Nam
Electricity prices are capped and differentiated for different users. Domestic coal prices are set below world market
prices in order to enable cheap electricity production and manufacturing. There are also price ceilings in the refined
petroleum markets and various taxes and tax waivers. Most subsidies are indirect although direct subsidies have
happened. The losses of energy SOEs are compensated by the Government through a variety of subsidies, including
preferential access to financial resources as well as land, water and other natural resources, and a monopoly position
in energy markets. Using a ‘price-gap approach’, the International Energy Agency has estimated the (indirect) fossil fuel
consumption subsidies in Viet Nam between 2007 and 2010, see Table 1.

                                                                                       Energy Update
Table 1.         Estimated consumption subsidies in Viet Nam 2007 - 2010

                   Billion USD)
                                                            2007            2008            2009            2010
                   Energy source
                   Oil                                      0.32            1.09            0                0
                   Gas                                      0.09            0.21            0.13             0.23
                   Coal                                     0.01            0.01            0.01             0.01
                   Electricity                              1.68            2.25            1.06             2.69
                   Total                                    2.1             3.56            1.2              2.93
                   Total (% GDP in current USD)             2.95            3.94            1.24             2.83

                                                           Source: International Energy Agency (2011), World Bank (2011)

3. Potential effects of fossil fuel fiscal reform

A Computable General Equilibrium (CGE) model of the economy and an emissions accounting model (LEAP) were
used to assess future economic and emissions trends by comparing two scenarios with a ‘business as usual’ (BAU)
scenario: one where the estimated subsidies are removed, and one where fossil fuel taxes are introduced, in addition
to subsidy cuts. Analysis was also done of different options for re-investing additional Government revenue into the
most productive investments economically, into low carbon investments, or returning it to customers as a ‘rebate’ or a
reduction of taxes.

The CGE modelling of both scenarios indicated real GDP could be about 1% higher in the subsidy cut scenario than in
the business as usual scenario, and about 1.5% higher in the subsidy cut and carbon tax scenario, compared to the
business as usual scenario. Gross investment rates would be considerably higher. GDP growth would initially be lower
due to lower consumption and higher production costs, but growth would rebound strongly after the economy had
adjusted to the change in energy prices. The simulation results are shown in Table 2.

Table 2.         Impact of subsidy removal and tax on average annual growth rates (AAGR) of real macroeconomic
                 aggregates 2007-2020 (%)

                                                  BAU               Subsidy cut           Subsidy cut & Carbon tax
                                                  AAGR         AAGR          Change             AAGR       Change
                   Gross Domestic Product         6.31            6.41        0.1                 6.47       0.16
                   Consumption                    5.68            5.55        -0.13               5.39       -0.29
                   Gross Investment               4.11            4.59        0.48                4.9        0.79
                   Exports                        9.39            9.28        -0.11               9.1        -0.29
                   Imports                        7.8             7.7         -0.1                7.54       -0.26
                   Real Exchange Rate             -1.03           -1.0        -0.04               -1.12      -0.09

The economic structure will also change, with reduced growth in energy intensive sectors and increased growth in light
manufacturing, when compared to business as usual. The high energy intensity sectors that will see slower growth
employ mainly men (e.g. metal and fisheries) and low energy sectors that will see accelerated growth employ mainly
women (e.g. light manufacturing, textile and footwear).

The emissions modelling for the energy sector shows that both the cuts in fuel subsidies and the imposition of tax on
fossil fuels could result in a significant reduction in emissions because demand is moderated in response to higher
fossil fuel prices – in particular the combination of the two.

The power sector is the largest consumer of fossil fuels and the largest emitter of greenhouse gas emissions. Under
both scenarios it also accounts for the largest decline in emissions due to the price changes. In both scenarios coal
emissions would also decline, because of the significant increase in coal price, even though the model assumptions
are conservative in this regard.

4. Recommendations for fiscal reform of fossil fuels in Viet Nam

Viet Nam should reinforce the market reforms in the energy sector that were started in the last decade, with for example
the Electricity Law of 2004. This should include the removal of subsidies in the energy sector and introduction of selective
fossil fuel taxes, which will have multiple benefits. However, several additional actions are needed to optimise the
benefits and mitigate the potential negative effects of the reform of fossil fuel fiscal policies.

                                                                                     Energy Update
Prudent macro-economic management
A phase-out of subsidies and introduction of additional fossil fuel taxes should serve multiple macro-economic aims,
including a gradual reduction of annual budget deficits and public debt; improved efficiency of energy utilities and other
SOEs; improved international competitiveness; increased foreign and private sector investment in the (low carbon)
energy sector; and maintenance of a reasonably strong VND.

The reform process must happen gradually and in a phased manner in order to avoid shocks to the economy and
inflationary pressure. This means a gradual removal of price caps, followed by a step-by-step introduction of selected taxes.

Improve financial sustainability and attract more investment into the energy sector
Energy SOEs would receive higher prices and eliminate their losses. But they should operate more efficiently, particularly
by increasing competition in energy markets. They need to be restructured to make sure that they focus on their core
functions. Their current debts may also need to be restructured before they can operate adequately.

Private sector investors in electricity production or petrol trade need prices that allow an adequate return on investment
from fossil fuel fiscal reform. Regulatory restrictions on domestic and foreign private businesses will also need to be
relaxed in order to increase investments.

Make sure that GHG emissions mitigation is optimised and that energy security increases
As a result of higher prices, energy efficiencies will improve, domestic production of renewable energy will increase and
dependency on imports of coal would be reduced, when compared to business as usual.

Fiscal policy reform should occur in the context of development, registration and implementation of Nationally Appropriate
Mitigation Actions (NAMAs). NAMAs involve (international and national, public and private) finance and technology
development and transfer with international support. NAMAs represent an opportunity to limit the costs to Vietnamese
consumers and businesses of fossil fuel fiscal policy reform, and they could speed up the adoption of modern, clean

Protect poor households, workers and other potential losers from fossil fuel fiscal reform
Energy subsidies tend to be regressive, as more affluent households with higher levels of energy consumption are able
to capture most of the benefits of subsidies. However, low income groups will see a reduction in consumption growth and
certain workers may be affected more than others. Viet Nam has a block-tariff electricity pricing scheme in place for
residential electricity users (a lower rate for the first units of electricity) which might be enhanced to compensate low
income groups for increased prices.

Some sectors are likely to experience slower growth (e.g. metal and fisheries) and others faster growth (e.g. textile and
footwear), accompanied by male or female job losses and job creation. Transitions caused by fiscal reform will be
gradual but require support, such as targeted re-training programmes in order to compensate workers whose employment
opportunities will reduce.

Conduct additional research and analysis of the barriers to fossil fuel fiscal reform
Additional research is needed on the indirect subsidies at different steps in the fossil fuel value chains, and the barriers
to cutting the indirect subsidies and improving the operating efficiencies of the SOEs.

There is also a need for further research on the ‘winners and losers’ of fossil fuel fiscal reform. This should include male
and female workers and low income households. Socio-economic research, including clear gender analysis, is essential
for effective targeting of mitigation measures.

It is important that the impacts of changes in the regulation of the electricity and petrol markets are assessed, as well as
expectations from competitive energy markets, especially in terms of potential effects on different energy consuming

Such additional research and analysis will inform implementation of the suggested fossil fuel fiscal reforms in Viet Nam,
and enable a transition to a more competitive and greener economy. It would also critically inform the implementation of
Viet Nam’s forthcoming Green Growth Strategy.

            The full report titled “Fossil fuel fiscal policies and greenhouse gas emissions in Viet Nam”,
            published by the United Nations Development Programme Vietnam (UNDP) is available at:

                                                                                 Business Update
Mid-term Vietnam Business Forum held in Hanoi
                                                                 from the World Bank and the Asian Development Bank
                                                                 and others that are supporting Vietnam’s economic and
                                                                 social development.

                                                                 Proper Corporate Governance and transparency should
                                                                 be enhanced to combat corruption and fraud. Investors
                                                                 should be able to access fruitful and well - organized
                                                                 information which helps encourage investment and the
                                                                 efficient use of time as well as resources. The issues on
                                                                 work permits, overtime and maternity leave in relation to
                                                                 Draft Labor Code and Decree 46 are still among the top
                                                                 issues of concern of the foreign business associations and
                                                                 chambers of commerce since very little progress has been

The importance of the Midterm Vietnam Business Forum
(VBF) meeting on May 29, 2012 in Hanoi was highlighted
by the presence of Deputy Prime Minister H.E. Mr. Vu Van
Ninh. Discussion focused on how to move Vietnam’s
economy forward from stabilization to revitalization.

The mid-term VBF on May 29, 2012 is the first Vietnam
Business Forum to be organized by the VBF Consortium
in partnership with Ministry of Planning and Investment
(MPI), the World Bank (WB) and International Finance
Corporation (IFC). This is the preliminary milestone of the
VBF after IFC officially transferred the coordination
function of the VBF to the Consortium of 14 foreign and
local business associations and chambers of commerce in
February 2012. The Consortium established a New VBF              Local Business Community
Secretariat to coordinate all day – to – day activities of the   The business community values Resolution 13/NQ - CP
Forum. A Management Board consisting of seven                    on some solutions for easing difficulties against production
representatives from the VBF Consortium’s members                and supporting the market. Nevertheless, access to
was elected (AmCham, EuroCham, VCCI, JBAV,                       finance is still an outstanding issue for small and medium
KorCham, IFC, HYBA). The Management Board is led by              enterprises. The financial support from the Government
representatives of EuroCham and VCCI.                            through concessionary interest based on industrial
                                                                 standards, technologies, and job security is encouraged,
REVIEW OF INVESTMENT CLIMATE                                     rather than just based on the “efficient business plan”
                                                                 judgment of commercial bank staff.
Five chambers of commerce and associations representing
foreign and local business community reported in this            Due actions to promote supporting industries, including
session. The private sector believes that the Government         direct financing when there are sales exclusivity/product
has taken steps to stabilize the macroeconomic situation         underwriting agreements for core industries should be
in the short term, but that there remains a lot to be done to    undertaken as soon as possible, to help industry to expand
improve the long term attractiveness of the Vietnamese           land, plants; upgrade technologies; have access to
market for foreign investor and Vietnamese entrepreneurs.        research and development, training for highly skilled labor,
                                                                 international cooperation in technology transfer; and promote
                                                                 sales through trade fairs and partnership opportunities.
Foreign Business Community
Comprehensive implementation for the three coherent              Several Working Groups reported in detail on current
strategic priorities of restructuring the financial sector,      issues in the sectors of: Banking & Capital markets,
restructuring SOEs and improving the efficiency of               Infrastructure/Power and Energy, Ports, Investment &
investment in the public sector is a crucial step to be          Trade, Land, Tax and Education.
pushed forward. Additionally, it is desirable to receive
more specific information about developed plans and              To access the full working group reports, please visit
critical steps needed for the implementation of the strategies

                                                                              Business Update
Tax incentives for Business expansion – A real challenge
                                                     Almost 25 years since the release of the Law on Foreign Investment
                                                     in December 1987, Vietnam has been successful in attracting FDI
                                                     through investment incentive policies. Among those incentives,
                                                     Corporate Income Tax (“CIT”) incentives have proved to be one of
                                                     the most effective tools. In our view however various aspects need
                                                     to be improved to maintain the FDI flow into Vietnam.

                                                    Under the regulations on investment and taxation of Vietnam,
                                                    enterprises newly established from investment projects are generally
                                                    entitled to CIT incentives comprising of CIT exemption, CIT
                                                    reduction, and preferential CIT rates. Usually the incentives are
                                                    written into the Investment License or Certificate of the project.
                                                    Whilst those incentives are only granted to the specific project of
                                                    the enterprise when established, when those enterprises
expand their businesses, the additional income from such expansion is also entitled to CIT incentive (prior to 2009), but
actually under a different scheme, which is often different from the initial incentive granted for the project when
established. Nevertheless, in practice, enterprises having business expansion normally apply the initial incentive for all
their income including the additional income from expanded business. They are only aware of the difference in CIT
treatment on business expansion when they have a tax audit, but it is then too late for any adjustment.

So, what is “business expansion” exactly and what is the regulation on CIT incentive in this regard?

How to define “Business Expansion”

According to Investment regulations, business expansion or investment project for expansion refers to an investment
project for the development of a currently operating project for the following reasons: expanding the scale, increasing
capacity, renewing technology, improving product quality or reducing environmental pollution.
Whilst there is a definition for Investment purposes, the concept of “Business expansion” never appears in any official
regulations on CIT. The generally accepted treatment is to consider a number of scenarios including “installation of
new production line, scale expansion, technology renewal, eco-environmental improvement, and capacity
enhancement”. Accordingly, if an enterprise has any one of these activities, its additional income from such activity
would be subject to a separate treatment on CIT incentive in accordance with the applicable CIT regulations of each
specific period.

Regulations on CIT incentive for business expansion

As mentioned above, a different scheme of CIT incentive needs to be applied to the additional income from business
expansion, by referring to the CIT regulations applicable at that time (normally at the time the business expansion is in
operation and starts making profit). The principles of granting incentives for business expansion from 2004 onwards
can be summarized as follows:

       Prior to tax year 2009: Additional income from business expansion is entitled to CIT incentives, but these are
       normally less than the initial incentive package granted to the newly established enterprise. Especially for the
       period prior to tax year 2007, business expansion is also entitled to preferential CIT rates in additional to CIT
       exemption and reduction.

       From tax year 2009: There is no CIT incentive granted to business expansion.

       Enterprises with business expansion project which had started but not been completed until 31 December 2008,
       then completed and operated in 2009 shall be entitled to CIT incentive as regulated in Circular 134/2007/TT-BTC
       for the additional income from the expansion.

       Enterprises must separately record the additional income from expansion to determine the CIT amount entitled
       to exemption/reduction. When they fail to separately record the additional income from expansion, such
       additional income shall be determined based on the ratio of newly invested fixed asset value over the total
       original fixed asset value.

                                                      On the 3rd June, BeluxCham in co-operation with DBAV organized a friendly
                                                      football match. More than 150 Belgians and Dutch gathered at Parkland
                                                      stadium, Dist.2, HCMC city to watch the game and enjoy a great time together.
                                                      In the end, the cup went to the players from the Orange team. The fans of Red
                                                      team appreciated the way both of teams played, but not the final result of 9 -1.
                                                      All of the participants enjoyed activities for the whole family like face painting,
                                                      colorful balloons and dunk tanks.
                                                  Upcoming events
                                                  On the 28. June, Beluxcham members will have the pleasure to have a
business dinner with Belgium Ambassador Mr. Bruno Angelet at XU Restaurant at 71-75 Hai Ba Trung, Dist.1, HCM. The purpose
of this gathering is for Beluxcham members to exchange views on the overall state of the Vietnamese Economy as well as their
expectations towards the embassy in helping them promote the relations with the Vietnamese (local or central) authorities and
develop their projects. With this meeting Ambassador Angelet wants to establish a regular consultation with Belgian businesses
established in Vietnam.
On the 21. July, for the Belgium National Day. BELUXCHAM is holding a special dinner. Invitations will be sent out shortly.

CCIFV is developing its HR department:
Empower your Middle Management: CCIFV proposes a new training to help middle managers gain leadership skills, going from
supervising to leading (6-hours training in English - August 13th & 14th).
TALENTS: the new CCIFV HR e-newsletter. It aims at keeping its readers updated the last news (the Vietnamese regulations, the
evolution of the labor market, the trainings offered by CCIFV, etc.) and displays the best CVs.
CCIFV’s last events:
   After its successful intervention in Hanoi, Mr Ambassador Jean-François Girault met
   CCIFV’s members in HCMC over a debate luncheon last June 18th, to present his vision
   of Vietnam’s position on the international market. This event was followed by the inauguration
   of CCIFV’s Business Center with Mr Consul General Fabrice Mauries and the domiciled
   What a great Bowling Challenge! This last June 6th, the second edition of CCIFV team
   building gathered more than 75 persons: 10 companies competed in a pumped-up atmosphere!
CCIFV’s upcoming main events:
   CCIFV proposes a business delegation to Mongolia from August 31st to September 4th.
   CCIFV, in partnership with AFV, is organizing its traditional Cocktail de rentrée that gathers each year more than 400 persons.
   Come enjoy this unmissable event in Sofitel, on Thursday 27th September.

                                                    Dutch Social Club Vietnam (NLV under DBAV) organised the Queen's Day Party
                                                    on 21 April in HCMC. The evening was attended by more than 150 Dutch and
                                                    other nationalities with lots of fun, drinks and endless dancing. The dance fever
                                                    also lead to the complete success on the friendly football match between the
                                                    Netherlands and Belgium on 3 June in Parkland HCMC.
                                                    At the Annual General Meeting on 25 May, the board members for 2012-2013
                                                    were newly elected. The new board will be led by Jan Willem Winkelhuijzen.
                                                    On 20 June, DBAV and the Netherlands Consulate General co-hosted the dinner
                                                    event with the major press/media and DBAV key sponsors.
DBAV has also actively engaged and supported TEDx Binnenhof (the Dutch innovative talk platform initiated by the Ministry of
Economics affairs, Agriculture and Innovations in the Netherlands) a viewing party event was organized by the Consulate General
of the Kingdom of the Netherlands HCMC, on 25 June in Intercontinental Asiana Saigon.

Recent events:
The GBA Business Meeting on 4. June took place at Moevenpick Hotel Saigon with four interesting presentations. Mr. Paul Jewell,
Executive Director of Eurocham, gave an overview of EuroChams advocacy activities in Vietnam. The second presentation was the
legal and tax update of Ms. Helen Morris, Senior Associate of Lorenz and Partners. Besides, Mr. Jan Walter, Managing Director of
Fresenius Kabi Bidiphar Jsc, shared some experience, how a joint venture structure can work in the Vietnam market. Last but not
least, Mr. Sauer presented about an objective comparison between the bidding documents of German House Project.
                        Oktoberfest Hanoi 2012:
                        Under the patronage of the German Embassy, the OKTOBERFEST HANOI now returns this year 2012!
                        The event will take place on the 19th and 20th of October, at Cung Xuan Event Centre, 55 Vo Thi Sau,
                        Hanoi. Oktoberfest Hanoi 2012 promises to bring lots of enjoyment with popular Bavarian folk music
                        brought by the famous German band “Donautal Duo and Gaudimax”, free flow of original imported HB beer
                        from Munich and a sumptuous German buffet with various kinds of traditional Bavarian food, prepared by
                        Moevenpick Hotel.
Limited sponsorship packages are available. Please sign up before 31st of July as the event sponsors to get the early bird discount
program. If you have any question, please feel free to contact GBA office at +84 8 3823 9772 and
email: or visit GBA website: for more information.

April 9th, in HCMC, ICHAM held the Seminar “Investment in Vietnam–Business & Tax comparison in Asia”. Speakers of the seminar:
Lorenzo Riccardi, Chartered Accountant – CPA, Partner and Enrico Rossi, Finance Director, Perfetti Van Melle.
April 20th, in Dubai, ICHAM’s President joined the Annual Regional Meeting of the Italian Chambers of Commerce abroad, for the
Asia and South Africa area.
May 5th, in Hanoi, ICHAM’s President has been interviewed by the national TV channel VTC 10. Mr D’Ercole explained ICHAM 2011
activities and the future projects of the Chamber.
May 9th, HCMC, and May 14th, Hanoi, ICHAM organized a cocktail to introduce the
future Vietnamese Ambassador to Italy, Mr.Nguyen Hoang Long, to ICHAM’s members.
May 24-26th, HCMC, ICHAM supported organizing the Vietnam Business Forum
“Enterprise Partnerships for Development”. The forum was a great success: more
than 40 Italian companies and associations participated and met more than 90
Vietnamese partners during 300 business meetings.
June 4th, ICHAM held a General Assembly to vote the board 2012 – 2014. It is
composed as follows: President, Michele D’Ercole; Vice President, Fabio Albanese -
Datalogic Scanning; Treasurer, Trần Lê Văn Tỉnh - Tran Le & Partners; Coucillor,
Paolo Fornari - Viet - Y Trading Service; Coucillor, Leonardo Buscaroli - Interglobo
Far East; Coucillor, Enrico Rossi - Perfetti Van Melle; Coucillor, Luca dalla Vecchia - Piaggio. (*picture attached)
June 14th, ICHAM, HBA and VACOD signed an agreement to launch a new project: the opening of an info desk at the Toscana
Region’s Promotion office in Italy, for 3 months, to provide Italian companies with info about the Vietnamese market.

   Nordic Chamber of Commerce in Vietnam (Hanoi Branch)

                                  On May 22nd, Nordcham Hanoi organized its Annual General Meeting. The meeting took place at
                                  Press Club in Hanoi and was well attended by its members. The meeting went well and a new
                                  board was elected. The composition can be seen on our website In
                                  succession to the Annual General Meeting, Nordcham Hanoi organized an event with EU
                                  Ambassador to Vietnam, Franz Jessen. Mr. Jessen shared details on the upcoming free trade
                                  negotiations with Vietnam and its expected effects. The event took place at Press Club and was
                                  well attended with more than 50 guests joining the dinner event. The event was co-organized with
                                  the Nordic Embassies as well as ICHAM.
                                On June 6th, members of visited Ericsson’s head quarter in Hanoi where Vietnam CEO, Jan
Wassenius talked about Ericsson’s strategy globally and in Vietnam. Some 20 members joined the lunch-on event.
On June 14th, Nordcham Hanoi organized a “before the summer holiday” business mixer. The event took place at Press Club and
despite coinciding with a rain storm quite a number of members made it to the event and had a good evening.

Hanoi 6th April – ‘Possible Changes in Labour Law: Will It Affect Your Business?’
- Dialogue with MOLISA Vice Minister Pham Minh Huan
                                              Vietnam’s quality workforce is considered as an advantage which makes
                                              the country attractive for foreign investors. Changes in Labour Law will
                                              definitely affect the businesses of both local and foreign investors. With
                                              the growing need for discussion of this topic, EuroCham Hanoi invited Mr.
                                              Pham Minh Huan, Vice Minister of MOLISA to share his insights on
                                              current issues such as Maternity leave increasing from current 4 months
                                              to 6 months; Labour Contracts; limited number of overtime hours;
                                              Minimum wages for the FDI and domestic enterprises sectors; Work
                                              permits and potential limitation on the total number of foreign employees
                                              for each business. The luncheon drew a large number of participants and
                                              received very good feedback from members who welcomed the opportunity
                                              to discuss this issue directly with a vice minister.

HCMC 10th April - Vietnam Transfer Pricing – Crystal Balling the Future
                                                                                   Nitin Jain - Director, International Tax -
                                                                                   Transfer Pricing Leader, Ernst & Young
                                                                                   Vietnam Ltd. shared with us the tax
                                                                                   authorities activities in 2011 with
                                                                                   special emphasis on audits; Plans for
                                                                                   2012 including administrative set-up;
                                                                                   Audit pressure points; Audit experience
                                                                                   and what companies can do to assess
                                                                                   / mitigate risks, including discussion of
                                                                                   APAs. Participants also had a chance
                                                                                   to raise any other relevant concerns to
                                                                                   the speaker.

Hanoi 12th & HCMC 13th April - Myanmar – What’s going on?
                                       After years of isolation, political developments recently in Myanmar are overall
                                       very positive. There’s a sudden surge of attention to the country by the rest of the
                                       world; not only by politicians but also by business communities. New opportunities
                                       are already emerging a new market and huge labor resource with 60 million
                                       disciplined population, better
                                       relations with EU, the US, etc.
                                       But what indeed is the current
                                       political status? Which milestones
                                       have been reached and what is
                                       remaining? What about trade and
investment in Myanmar? Is this high time to invest in the last fertile land
of South-East Asia? Our guest speaker H.E Mr. Mikael Hemniti Winther,
Ambassador of Denmark to Thailand, Myanmar and Cambodia provided
an in-depth look into Myanmar, captivating the audience of nearly 100
guests with his first hand account of the country and his assessment of
Myanmar as a destination for foreign investors.

HCMC 18th April - EuroCham Annual Dialogue with HCMC Tax Authority
                                      During this annual tax dialogue, attendants were updated on the most recent
                                      developments and issues that will affect taxpayers in 2012. Among the issues
                                      discussed were the latest tax news and policies effective in 2012, which new tax
                                      laws will be applied in 2012 (PIT, CIT, VAT and import duties) and new policies on
                                      double taxation issues and transfer pricing rules. Mr. Nguyen Trong Hanh -
                                      Deputy Director, HCMC Tax Department, Mrs. Tran Thi Le Nga - Chief of
                                      Taxpayer Services Division and Mr. Nguyen Duc Thanh - Taxpayer Services
                                      Division Executive engaged in discussion with EuroCham members. The
                                      discussion was moderated by two panelists, Mr. Tom McClelland - Tax Partner at
                                      Deloitte and Mr. Thinh Xuan Than - Tax & Advisory Service Director at E&Y.

HCMC 24th April 2012 - Vietnam Tourism: Opportunities and Challenges
                                            Vietnam is very rich in resources and potential for tourism. However, it is a
                                            fact that Vietnam tourism is not developing as well as it could. Dr. Nguyen
                                            Thanh Rum – Director of HCMC Department of Culture, Sports and Tourism
                                            and Mr. Kenneth M Atkinson - Managing Partner, Grant Thornton (Vietnam)
                                            Ltd / EuroCham’s Chairman of Tourism & Hospitality Sector Committee
                                            discussed the challenges of tourism in Vietnam and the solutions being
                                            undertaken by the Vietnamese government in order to encourage investment
                                            in this industry.

Hanoi 25th April – Bui Kien Thanh, Economic Advisor to the Government of Vietnam
gives update
Since the mid 1980s, Vietnam’s economy has transitioned from a highly
centralised planned system to socialist-oriented market economy. As a result,
the country’s economy has experienced rapid growth and Vietnam now is
committed to global integration. Mr. Bui Kien Thanh, an economic advisor to the
Government of Vietnam who has witnessed all the transformations of the country
over that period was invited to EuroCham’s business luncheon to share his
expert insights into the country’s economy and finance. He delivered an interesting
business talk on how State management should be enhanced in all sectors of the
national economy and discussion about financial and monetary markets this
year; policies that the Government should develop in order to stabilise the
economy and achieve its GDP target this year. He also discussed the assessment of the management of interest rates
and other policies as well as activities of the banks; actions of Central Bank to stabilize the monetary policy; transparency
wheel in Vietnam and lastly, the advantages that foreign investors could take in Vietnam in the long-run.

HCMC 10th & Hanoi 17th May - Risk management – What works best in Vietnam?
The current Vietnamese economic and financial challenges exposed
one clear shortcoming: inadequate risk management practices and
inefficiency. Many organizations took on excessive risk with too little
regard for reasonable, realistic long-term performance expectations.
Integrated Performance Management & Risk Management provides
insight into what value drivers a company has to excel at as well as
what key risks it needs to manage to create and guard value. Risk
Management is a process applied in strategy setting and across the
organization, designed to identify potential events that may affect the
organization, and manage risks to be within its risk appetite. Finally,
this will provide reasonable assurance regarding the achievement of
the objectives of the organization. Mr. Bart Ziemerink and Mr. Edward
Chien of PwC Advisory Services gave their insights on simple tools that
can be used and guidance to manage risks and performance together.

HCMC 24th May - Jean Lemierre on the European Crisis and the Asian Perspective
                                    The Eurozone crisis sent an unprecedented shockwave through the European
                                    banking system, all the more serious in that it hurt retail banks providing services
                                    and financing for individuals and companies. It made clear that having solid banks
                                    is a fundamental condition of development, even in mature markets. That is a key
                                    lesson for many Asian countries
                                    which are currently going through
                                    reforms of their banking systems.
                                    Answers to the Eurozone crisis have
                                    been brought through an intense
                                    cooperation both within European
and world forums. This underlines that open dialogue and exchange at all
levels have become essential to solve such severe crises. Mr. Jean
Lemierre is the advisor to Chairman of BNP Paribas and former president
of the European Bank for Reconstruction and Development from 2000 to
2008. He gave a rather positive outlook of the Euro crisis and how it is
currently being handled by European governments and institutions.

Hanoi 15th & HCMC 17th May - KPMG Annual Tax Update
As every year, it was time again to review the implementation and affects of tax
reforms during the last year to foreign invested enterprises and expatriates as
well as update relevant news and policies in 2012 that may impact directly on
your business activities and your own benefits. KPMG’s leading tax advisors
Mr. Warrick Cleine - Chief Executive, Vietnam and Cambodia; Head of Tax,
KPMG Asia Pacific and Mr. Nam Nguyen – Partner. KPMG Ltd. provided their
analysis of the latest changes in Vietnam’s tax regime and practical insights on
how to navigate those changes.

Hanoi 28th May – Banking and Monetary System in Vietnam - Dialogue with Deputy
Governor of the State Bank of Vietnam, Le Minh Hung
                                                                                          Vietnamese authorities are
                                                                                          aiming to accelerate the
                                                                                          integration    of     Vietnam’s
                                                                                          economy into the world’s
                                                                                          economy. It is important to
                                                                                          develop a modern financial
                                                                                          system to support this plan.
                                                                                          However, the internationalization
                                                                                          process     will   bring     the
                                                                                          challenges to policy makers
                                                                                          in finance sector. On May
                                                                                          28th, EuroCham’s members
had a rare opportunity to meet a representative of the country policy makers - Mr. Le Minh Hung, Deputy Governor of
the State Bank of Vietnam - to gain his insights on the necessity of restructuring the financial and monetary system;
Will merger or liquidation happen if banks do not perform well? Will basic interest rates be reduced to 10% in 2012?
Will enterprises be facilitated to get access to cheaper loans and how? The present outlook and challenges to be met;
The targets and the policies needed to achieve them.

HCMC 15th June - Vietnam’s Real Estate Market – When will the ice block melt?
                                          The real estate sector has been in a frozen state after an ongoing crisis.
                                          Investors are keen to know when the market will thaw and what new
                                          opportunities will arise. Vice Minister of Construction Nguyen Tran Nam
                                          shared his insights about the market with a focus on current real estate
                                          market realities, the recovery of the market and government measures to
                                          support the real estate market. He also focused on real estate credit and
                                          looked at the situation in neighboring countries in comparison. Attendants
                                          used this opportunity to raise their question about the real estate sector
                                          directly to the vice minister.

HCMC 20th June - EuroCham & Swiss                           HCMC 27th & Hanoi 28th June - Labour
Business Association Joint networking                       Laws in Vietnam - What should you know?
@ Sheraton Saigon Hotel & Towers                            Oliver Massmann and Giles Cooper from Duane Morris
                                                            Vietnam LLC updated EuroCham members on what to look
                                                            out for in employment contracts. Issues included the form
                                                                                                    and substance of
                                                                                                    a labor contracts,
                                                                                                    notable changes
                                                                                                    under the new
                                                                                                    labor code, labor
                                                                                                    contracts      for
                                                                                                    expat employees
                                                                                                    and Decree 46 on
                                                                                                    work permits.

                                                                      Chamber Update
        Hanoi 26th May -
     European Food Festival

 EuroCham’s 7th European Food
 Festival in Hanoi took place on
 Saturday 26th May 2012 on the
 grounds of the garden of the
 Vietnam’s National Library. The
 Festival brought an evening of
 the best in European food, drink
 and entertainment to well over
 1,200 guests with the participation
 22 of stallholders from leading
 hotels, restaurants and retailers
 in Hanoi.

                                       European Food Festival coming to HCMC !
                                       Date/Time: Saturday 8th September 2012, 5:00pm - 11pm
                                       Venue    : Windsor Plaza Saigon, 7th Floor
                                                  18 An Duong Vuong, District 5, HCMC
                                          Gourmet European buffet style
                                          Free flow selected premium beers and wines
                                          Live Music
                                          Magic and circus show
                                          Games
                                          Lucky draw
                                          Kids playing corner with many interesting activities
                                       Sponsorship opportunities are open, please contact us for more details.
                                       Ms. Chung Thuy on
                                       Ms. Thanh Thuy on or call 08. 3827 2715

                                                                              Chamber Update
                                 GreenBiz 2013 Exhibition and Conference
                                 - Preparations are on the way
One year ago a press-conference announced the details of the
second edition of the most comprehensive European event on
sustainable business development: “GREEN-BIZ 2011 - European
Green Business Solutions for Vietnam”. After the event took place
in September 2011 in Ho Chi Minh City, businesses and Government
officials called it a major success for the development of a green
business industry in Vietnam.
Now the European Chamber of Commerce in Vietnam is delighted
to announce that the preparations for GREEN BIZ 2013 have
started and a Special Project Manager has joined the team.
Following a similar format to the first and second GREEN BIZ events, the conference and exhibition will attract participants
from academia, government, civil society, international organisations, press, business, making GREEN BIZ 2013 an
exceptional opportunity for business and debate alike. With a list of well known participants making opening remarks,
presentations, and discussions at the conference and an exposition with 69 exhibitors GREEN BIZ 2009 was a unique
event in Vietnam which helped foster green businesses, raised awareness and furthermore showcased solutions that are
feasible. GREEN BIZ 2013, taking place in Hanoi in September, hopes to match this success again! The event will be
open to participants from European and Vietnamese businesses, governmental and non-governmental organisations.
As in the preceding two GREEN BIZ events, which have been warmly received by both the Vietnamese and international
community, GREEN BIZ 2013 will again initiate and intensify the awareness of environmental issues, as well as offer
solutions to the challenges that lie ahead. GREEN BIZ 2013 will give the chance to address a wide range of topics and
discuss with the participation of leading international and domestic experts – ranging from the area of politics and
international institutions as well as businesses and academia.
                                                        The topics in 2011 focussed on adressing the challenges of
                                                        climate change, sustainable cities, environmentally friendly
                                                        technologies, green investments and sustainable strategies for
                                                        transportation and manufacturing, attracted thousands of visitors
                                                        during the two-day exhibition and conference. According to
                                                        industry observers, the event not only opened up new opportunities
                                                        for Vietnam in various areas of sustainable green solutions and
                                                        technologies, it also confirmed that Vietnam will attach high
                                                        importance to sustainable development. At GREEN BIZ 2011 the
                                                        presence of four Vice Ministers from MOIT, MONRE, MOF and
                                                        MOC has reconfirmed the strong commitment and strong signal of
                                                        the Vietnamese Government in ensuring sustainable green
                                                        economy and businesses for the country.
As the presentations aim to reflect Vietnam’s most current challenges and opportunities for cleaner solutions, the
particular conference and exhibition focus is still in progress and the most pressing environmental challenges and suitable
business solutions will be again reflected accordingly in September 2013 in Hanoi at the GREEN BIZ 2013!
GreenBiz 2011 has been very successful and we are happy to look back at an interesting conference and lively exhibition.
On our website conference presentations and event photos are available, in addition to our
efforts to set up Here we will provide you as soon as possible with the first information
towards EuroCham’s new edition of GreenBiz 2013. So please check our website regularly for the latest information.
We welcome already interested sponsors, exhibitors, partners and supporters, as well as experts, for support in the
early planning stage and participating already now towards shaping and focusing GreenBiz 2013!
                                                 Mr. Christoph Schill
                                               GreenBiz Project Manager
Ground Floor, Sofitel Plaza                                                                                  EuroCentre
1 Thanh Nien, Hanoi, Vietnam                                                         49 Mac Dinh Chi St., HCMC, Vietnam
Tel: (84-4) 3715 2228 ext. 13 Fax: (84-4) 3715 2218                        Tel: (84) 93 665 8805 Fax: (84-8) 3827 2743
                                                       Skype: GreenBiz2013
                                                Coming soon:

                                                                               Advocacy Update
                                                             Sector Committee (SC) Report
                                                                   April - June 2012
                                                     Please see below an update on the activities of various
                                                     EuroCham Sector Committees. To find out more about or
                                                     sector groups, please visit

1. CropLife SC: CropLife sector committee has decided to choose “Safe Use of Pesticide on Vegetables” as the main
   theme for its Stewardship Project 2012. Also within the project framework, on 1 November 2012, all EuroCham
   CropLife Vietnam members will launch the Stewardship Day in 6 key provinces in the Mekong Delta at the same
   time. Around 2,000 farmers are expected to benefit from this initiative through seminars and training courses on
   safe and effective usage of pesticide.

2. Human Resources (HR) & Training SC: on 19. April, the EuroCham HR & Training SC had a dialogue with the
   MOLISA Vice Minister Pham Minh Huan on the revised Labour Code. The meeting served as a chance for EuroCham
   members to seek clear interpretation as well as present a common voice with the MOLISA for some concerning
   issues of the revised Code before presented for National Assembly’s voting in June.

3. Information Technology SC: on 29. May, the EuroCham IT SC sent its position paper to the Ministry of Information
   and Communication regarding the draft Decree on IT services. The position paper highlighted members’ concerns
   on such provisions as the prohibition of the use of foreign IT-services for (amongst others) uploading data in the
   network environment, data center services, cloud computing services, which might hamper the operations of
   multinational companies and international banks; or the potential conflicts with Vietnam’s legal system itself and
   Vietnam’s WTO service commitments.

4. Multinational Committee (MNC): on 25. April, the FMCG companies of the Committee had a discussion meeting
   with the General Department of Taxation on the deductibility of Advertising and Promotion expenses regulated in
   the Corporate Income Tax Law. The meeting aimed to keep a constant and open dialogue with Vietnamese
   Government, especially when the CIT Law will be revised in 2013. In another development, on 28. May, a dialogue
   with Deputy Governor of State Bank of Vietnam on the “Banking and Monetary system in Vietnam” was held in

5. Nutritional Foods Group: in early April, the EuroCham Nutritional Foods Group (NFG) sent a join-letter with
   AmCham to the National Assembly Standing Committee members to put forward constructive comments on some
   critical issues in the draft Price law, i.e. price registration, list of essential goods subject to price stabilization. In
   another development, the NFG has raised concerns about the late inclusion of a ban imposed on advertisement of
   fomula for children under 24 months in the draft advertising law without due process of consultation with impacted
   stakeholders. This gives rise to the risk that many relevant facts could not be presented to ensure best process and
   rational decision making.

6. Pharmaceutical Group: in response to the Ministry of Health’s official request for consultation in its law making
   and revision process, the Pharma Group sent its comments respectively for the circular guiding the preparation of
   tender dossiers, law on pharmaceuticals and its guiding documents; and the draft 13 of a circular regulating the
   implementation of the right to import and export medicines by enterprises with foreign direct investment capital in
   pharmaceutical field in Vietnam. In addition, the Pharma Group is supporting the Department of Science and
   Training, Ministry of Health, to organise a workshop, on 29. June, on guidelines for SAE reports in clinical trial in

7. Tourism & Hospitality SC: on 24. April, the EuroCham Tourism and Hospitality SC organized a dialogue with the
   HCMC Department of Culture, Sport and Tourism on “Vietnam Tourism-Opportunities and Challenges”. In this
   quarter, the EuroCham Tourism and Hospitality SC made a significant change in its structure by merging with the
   Tourism Working Group at the Vietnam Business Forum level. This will help to have members’ voice fine tuned with
   other Chambers and clearly heard by Vietnamese Government counterparts.

8. Transportation and Logistics SC: on 20. June, the Transportation and Logistics SC sent the Vietnam Customs
   its comments on the draft Circular on guiding e-customs for import and export trading goods. The SC has also
   decided to choose “Supply Chain-Food Safety” as the key focus for this year.

9. Taxation and Transfer Pricing SC: on 11. June, the Taxation and Transfer Pricing SC sent the Tax Policy
   Department of the Ministry of Finance its comments and recommendations to the implementation of Law on
   Corporate Income Tax No.14/2008/QH12 and Law on Value Added Tax No.13/2008/QH12. The SC took this
   opportunity to draw Vietnamese Government’s attention to the deductibility of advertising and promotional
   expenses issue, which has been raised for a considerable number of years but not yet been resolved.

                                                                                      Legal Update
Update on Resolution 13
                                                     On 10 May 2012, the Government issued Resolution No. 13/NQ-CP
                                                     (“Resolution 13”) on Solutions to Reduce Difficulties for Production
                                                     and Business and to Support the Market.
                                                     Objectives of Resolution 13
                                                     In the first few months of year 2012, Vietnam's economy has not
                                                     done well despite the many positive endeavors which have been
                                                     made both at the policy level and by all industries and social
                                                     groups concerned. Inflation has been kept in check, the
                                                     macro-economy is basically stable, and social welfare has been
                                                     ensured. However, production and business have run into
                                                     difficulties, purchases on the market have reduced, and although
                                                     the economy is growing, its growth rate is less than that in the
same period in year 2011. Accordingly, in order for the Government to achieve the highest targets of socio-economic
development in year 2012, the main objectives of the Government are to reduce difficulties for enterprises, facilitate
production and business, assist market development and gradually restructure the economy aiming for the highest
quality, efficiency and competitiveness.
The Government therefore requires ministers, heads of ministerial equivalent bodies and Government bodies, and
chairmen of people's committees of provinces and cities under central authority, in accordance with their respective
functions and duties, to take the initiative in closely monitoring the actual situation and provide strong and effective
directions for implementing Resolutions of the Party and of the National Assembly (NA) and Resolution No. 01/NQ-CP
of the Government dated 3 January 2012 on basis solutions for executive operation of the socio-economic developmental
plan and on the forecast State budget for year 2012, and also to actively direct implementation of a number of solutions
for reducing difficulties for production and business and for supporting the market.
Below are specific noticeable solutions as instructed by the Government in Resolution 13.
Value Added Tax (VAT) Deferral
In light of Decree No. 56/2009/ND-CP of the Government dated 30 June 2009, the following enterprises are classified
as small and medium-sized enterprises (SMES):
The following enterprises shall be eligible to be deferred for 6 months payment of VAT of April, May and June 2012 by
the following enterprises which currently pay VAT by the tax credit method:

                                  Small-sized enterprises                          Medium-sized enterprises
                         Total capital     Number of Employees           Total capital       Number of Employees
     I. Agricultural,   Less than         From 10 people to 200        From 20 billion       From 200 people to 300
     forestry and       20 billion VND    people                       VND to 100 billion    people
     aquatic products                                                  VND
     II. Industry and   Less than         From 10 people to 200        From 20 billion       From 200 people to 300
     construction       20 billion VND    people                       VND to 100 billion    people
     III. Trading and   Less than         From 10 people to 50         From 10 billion       From 50 people to 100
     services           10 billion VND    people                       VND to 100 billion    people
i.  SMEs excluding those conducting business in the lotteries, securities, finance, banking or insurance sectors or
    producing goods and services subject to special sales tax (SST) and also excluding enterprises classified as Grade
    I or Special Grade belonging to Economic Groups and Corporations; and
ii. Labor intensive enterprises employing many workers in the sectors of producing and processing agricultural,
    forestry and aquatic products, textiles, leather footwear, electronic components, and construction of socio-economic
Reduction of 50% of Land Rent Payable
A reduction of 50% of land rent payable in year 2012 shall be applied to enterprises operating in the commercial and
services sectors which currently lease land from the State and which in year 2012 must fix the land rent unit price in
accordance with the regulations of the Government on collection of land and water surface rents.

                                                                                  Business Update
Corporate Income Tax (CIT) Deferral

The following enterprises shall be eligible to be deferred for 9 months payment of CIT for years 2011 and earlier which
has not yet been paid to the State budget (excluding the amount of CIT deferred pursuant to Decision No.
04/2012/QD-TTg of the Prime Minister dated 19 January 2012 granting an additional three month deferment of
CIT payable in the first and second quarters of year 2011 for small and medium-sized enterprises and for labor intensive

i.     SMEs excluding those conducting business in the lotteries, securities, finance, banking or insurance sectors or
       producing goods and services subject to SST and also excluding enterprises classified as Grade I or Special
       Grade belonging to Economic Groups and Corporations;
ii.    Labor intensive enterprises employing many workers in the sectors of producing and processing agricultural,
       forestry and aquatic products, textiles, leather footwear, electronic components, and construction of socio-economic
       infrastructure; and
iii.   Enterprises manufacturing mechanical engineering products which are the materials for further production or
       manufacture, and for enterprises conducting sea transportation (including transportation by both inland waterways
       and by sea), and manufacturing steel or cement.

Land Use Fee Deferral

Investors whose projects have financial difficulties shall be eligible to be deferred for a maximum 12 months payment
of land use fees by. Provincial people's committees shall report to the standing committee of the same level people's
council to consider and make a decision on the duration of specific deferments for each project and project group.

Submission of a Proposal of 30% CIT Reduction to the NA for Approval

In Resolution 13, the Government assigns the Minister of Finance, acting in accordance with authorization from the
Prime Minister, to report to the NA for its consideration and decision on a reduction of 30% CIT payable in year 2012
by the SMEs excluding:

i.     Those conducting business in the lotteries, real estate, securities, finance, banking or insurance sectors or producing
       goods and services subject to SST;
ii.    Enterprises classified as Grade I or Special Grade belonging to Economic Groups and Corporations; and
iii.   Labor intensive enterprises employing many workers in the sectors of producing and processing agricultural,
       forestry and aquatic products, textiles, leather footwear, electronic components, and construction of socio-economic

Banking Solutions

More importantly, the Government instructs the State Bank of Vietnam to preside over co-ordination with other ministries,
agencies and localities to carry out the following:

i.     To continue to implement a strict and prudent monetary policy; to use monetary policy instruments flexibly to
       ensure growth of lending and use of appropriate payment facilities to control inflation at the announced target, and
       to reduce interest rates to ensure compliance with fluctuations in inflation rates;
ii.    To continue to lower lending interest rates, prioritizing the sectors of agricultural and rural development,
       small and medium-sized enterprises, enterprises producing export goods, and support industries;
iii.   To take debt restructuring measures (regarding time for repayment, interest rates, new loans to replace old debts
       and so forth) and other necessary solutions, appropriate to each type and sector of production and business in
       order to facilitate borrowing by enterprises to service production and business, in particular where the borrowing
       enterprise has developmental potential or products which satisfy market requirements but the enterprise has
       financial difficulties; and
iv.    To push the schedule for restructuring commercial banks by dealing with weak and inefficient banks, and taking
       legal measures which ensure the stability of the system and ensure the legal rights of depositors and other banking
       service users.

                                          VB Law (formerly known as DC LAW)

                                     Ms. An Lucia Bellemans
Members can view complete member
                                     Ms. Frieda Depamelaere
profiles and update their own
                                     Mr. Aurelio Doetsch
company profile online by visiting
                                     Mr. Volker Miss
EuroCham SME Service Centre opens in Ho Chi Minh City                                                         Fre
                                                    On the 16th July, EuroCham together with it’s                e
                                                    partner business associations opened the "SME
                                                    Service Centre" on the ground floor of the
                                                    EuroCentre building in HCMC.

                                                    This much-anticipated SME service centre will help visiting EuroCham
                                                    members to find a private and comfortable space to do work in
                                                    the heart of HCMC. EuroCham Chairman Preben Hjortlund and
                                                    representatives from the partner chambers including CCIFV Chairman
                                                    Pierre-Jean Malgouyres were present at the opening ceremony held
                                                    at 5pm.

The centre, located on the ground floor of the EuroCentre 49 Mac
Dinh Chi St. in District 1, will provide 8 private business desk facilities,
along with high speed Wi-Fi and printing facilities. It is meant as a
free-of-charge service for EuroCham members, particularly those
who are based in surrounding provinces and travel into HCMC for
business meetings.

EuroCham Chairman Preben Hjortlund said, said: "This centre is
particularly aimed at our SME members to provide them with a quiet
and comfortable place to do some work while in HCMC so they avoid
having to sitting around in coffee shops and hotel lobbies while
waiting for meetings."

      The Centre is open to all EuroCham members from Monday to Friday between 8.30AM and 5.30PM

   Please note that EuroCham offices will be closed on Monday the 3. September due to public holiday.

                        Wishing you all a safe and pleasant summer!

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