Message from the Chairman Dear Members, Chair 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, www.eurochamvn.org. 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 Email: email@example.com 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 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! Email: firstname.lastname@example.org With kind regards, Hotline: (84-8) 3997 1263 Website: www.eurochamvn.org Editorial contact Jan Wiehler Communication and Services Director EuroCham (Ho Chi Minh City) Tel: (84-8) 3827 2715 Preben Hjortlund, Email: email@example.com 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) 20 5 GDP forecast (RHS) 15 4 Inflation 10 3 2 Inflation forecast 5 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) 25 20 Others 15 Transport 10 Housing 5 Food 0 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 20,000 15,000 Foreign direct investment 10,000 State investment 5,000 0 0 1 10 10 10 11 11 11 12 12 01 01 20 20 20 20 20 20 20 20 /2 /2 1/ 4/ 7/ 1/ 4/ 7/ 1/ 4/ 10 10 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 Jeff.Ng@sc.com Jennif er.Kusuma@sc.com 5 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 recommendations. 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 intervention. 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. 6 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 Indicator 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. 7 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 technology. 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 businesses. 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: www.undp.org.vn 8 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 recorded. 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 www.vbf.org.vn 9 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. 11 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 companies. 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. www.dbavietnam.net 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. 14 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: firstname.lastname@example.org or visit GBA website: www.gba-vietnam.org 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) www.nordchamhn.org.vn 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 www.nordchamhn.org.vn. 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. 15 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. 16 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. 17 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. 18 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 email@example.com Ms. Thanh Thuy on firstname.lastname@example.org or call 08. 3827 2715 20 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 www.greenbiz2011.com conference presentations and event photos are available, in addition to our efforts to set up www.greenbiz2013.com. 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! Contact: 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 Email: email@example.com Website: www.greenbiz2011.com Coming soon: www.greenbiz2013.com 21 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 http://www.eurochamvn.org 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 Hanoi. 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 Vietnam. 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. 22 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 Sectors 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 VND 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 VND 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 infrastructure. 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. 23 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 enterprises): 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 infrastructure. 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) www.vblaw.com.vn Email: firstname.lastname@example.org 24 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 www.eurochamvn.org/Directory. 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!