Business Beat
Provinces need to do investment homeworkThe fashion these days for provinces is to organise events, mostly in HCM City, to introduce their investment potential in the hope of attracting businesses to their provinces. Although the content of these investment conferences is similar, provincial authorities are competing to offer the best possible incentives to prospective investors.
Of course, taking the initiative to sell themselves to investors is a huge step forward compared to the old mentality of harbouring suspicion towards private investors. Provincial chiefs now realise they need business and are rolling out the red carpet to welcome them while suppressing any irritants to investment.
But in the rush of competition, there is a danger of overdoing it. Although the incentive policies given to investors in remote areas are designed and fixed by the central government, provinces can still offer lower tax rates or lower land rents. The differences are covered by provincial budgets. Without a long-term vision, these sort of commitments might become a burden to poor provinces.
Most provinces make the same mistake of concentrating on general information rather than the specifics. They like to cite how far it is from their provinces to major ports and national routes but can not provide investors with specific data on labour skills, raw material supply, and basic costs of doing business. Instead of spending money on splashy conferences, they should carefully do their homework first.
Land sales remain mystery
A private company based in HCM City recently bought space in several local newspapers to advertise land for sale in the United States. The Phuong Nam share-holding company advertisement said with just US$120,000, Vietnamese people could own a villa in Houston, Texas. The project offered a chance for locals to own property in the US legally because the Vietnamese and the US governments had endorsed it. For people with less money, $32,000 could buy them a piece of land of 353 sq.m in the Diamond Star housing project. The price is just a fraction of what it costs to get land use rights in HCM City.
No wonder just one-and-a-half days after the advertisement appeared, people rushed to take up 81 land lots. A company representative told the local press formal contracts would be signed with buyers on June 30 and 85 days later, they could get their land.
But people are wondering how these deals can be carried out as the State Bank would never allow the transfer of money from Viet Nam to buy property in other countries. If Phuong Nam and its partner use the money acquired in Viet Nam for their own projects here, as seems to be the case, it is still unclear if they are allowed to do that. That’s why the advertisement has surprised many people.
Import tax crunch time
Local manufacturers are looking forward to July with some apprehension. This is when Viet Nam has to lower import tax on more than 10,000 products, in line with its commitments within the ASEAN free trade area. Nearly 8,000 products will have an import tax rate of 0-5 per cent. This will primarily affect paper, electronic goods, household appliances and construction materials. For example, the import tax rate for cement, glass, televisions, refrigerators, and washing machines will be cut to 20 per cent from the current 40-50 per cent.
At the same time, exporters are looking toward new opportunities to penetrate other ASEAN markets as import tax rates there will also be lowered.
Retailers are still gauging whether there will be price cuts resulting from the new tax rates. But most producers just want the Government to finish the competition law soon to prevent dumping by foreign suppliers on the local market. They said they are not afraid of competition but will be helpless if foreign manufacturers use dumping to snatch up market share.
Quota swap imminent
The Ministry of Trade is going to approach American authorities about borrowing garment quotas reserved for next year for this year’s exports, as local garment exporters are already using up existing quotas. After the two countries signed a textile agreement, it was decided that quotas for this year would be limited to US$1.7 billion. But garment makers said $400 million of this belonged to quota-free categories so real quotas this year reached just $1.3 billion.
Local garment makers said they have had sleepless nights because they have signed contracts, imported materials and organised production while not being sure if they are going to get the desired portion of quotas.
Some said they need transparency in quota allocation to prevent businesses without production capacity obtaining quotas and re-selling them to make quick profits.
VNS
