During 17-18/08/2004, in Ha Noi, the Investment Promotion Conference was jointly held by the Ministry of Planning and Investment, Vietnam Chamber of Commerce and Industry (VCCI), Keppel Corporation and Temasek Holding (Singapore).

There have been more than 500 enterprises, of which 200 from Singapore and other countries participated in the Conference.

At the Conference, Deputy Minister of Finance Le Thi Bang Tam delivered a speech on some following contents:

1. Tax reforms:

To formulate a comprehensive tax system, a modern tax management in order to encourage production, business suitable with the market economy and international integration. Vietnam has approved a master plan of tax reforms in period 2001 -2010. Implementing this plan, in 2003 and 2004, Vietnam had made laws to amend several tax laws, namely Special Consumption Tax (Excise Tax), Value Added Tax, Corporate Income Tax. The amendments of and addition to these laws have contributed to the establishment of a comprehensive and simple tax system which ensures the fairness in paying tax for all business entities, domestic and overseas. These also have improved transparency in tax policy. In addition, in 2003 Vietnam has basically completed the plan of tax cut in the framework of AFTA; tax on 95% of all goods imported from ASEAN has been cut to the level of 20% at the maximum.

In the coming period, the Ministry of Finance will check all of the tax laws issued and compare to integration principles in order to set direction and plan aiming at making it stable and fair for all economic sectors, as highlighted below:

- For Value added tax: a single tax rate will be applied which ensures fairness in tax responsibility and simplicity in tax calculation.

- Corporate income tax: as Vietnam economy is underdeveloped, business scale is small, technology is still at an average level, in order to encourage and to ensure the sustainable development of the economy as a whole and of business in specific, corporate income tax will be reformed in way that lowers tax burden thus increases capital accumulation and encourage investment. 

- Personal income tax will be amended in way that would expand the coverage of taxpayers, lower tax rate and simplify tax calculation, ensure fairness and minimize tax avoidance and tax evasion.

- Special consumption tax: expanding the coverage of tax payer, adjusting tax rates suitable with income and consumption adjustment purpose. Tax reduction and tax exemption will be abolished in order to eliminate discrimination between domestic and imported goods. 

- Import – export duties will encourage export and reasonably protect domestic products with a limited time. Tax policy will be adjusted and tax rates will be cut in accordance to international commitment. Self –protect measures shall be applied in order to protect domestically produced goods.

- For fees and charges: fees and charges will be consolidated for simplicity, effectiveness which ties to procedural reforms. Fees and charges will also be applied equally between domestic and overseas entities.

- Tax administration: reforms will aim at modernization in order to create favorable conditions for all tax payers. Currently, the Ministry of Finance is studying for the completion and expansion of the model of self-calculation and payment of taxes. In the coming time, the Ministry of Finance will develop an information network all over the country for the management of tax payers, from tax registration, tax code, invoice, tax payment and tax inspection as well. 

2. Customs reforms:

Customs administration reform is one of the important issues that have impact on import-export and that would create a favorable environment for foreign investment. For that reason, Vietnam has put its best efforts in reforming customs administration in the past years, making it easy, convenient and fast for import and export business as well as for investment and tourism, suitable with international practice. Since the promulgation of Customs Law in 2002, customs reforms have shown a significant improvement and make crucial changes, specifically as follows:

- The system of legal document in customs has been completed, more transparent thus created an equal playing field. These documents make clear of the role and responsibility of the person who declare as well as those of customs officer.

- Customs procedures are now more convenient. Reforms in customs administration have make three important objectives, namely reduction in the number of  document, reduction in procedure and shorten the duration of customs clearance (customs clearance now takes only a haft day as compare to one or three days).

- Customs administration has gradually become suitable with international standards, satisfying requirements of integration and international commitments to which Vietnam committed. In addition to customs procedure, customs inspection and supervision which are formulated on the basis of international standards, Customs Law also regulates the classification of import and export in accordance with HS Convention. Valuation of export for tax purposed conforms with GATT principles. Measures to protect intellectual property right are applied. For example, Vietnam has now allowed for the calculation of import value by GATT method for goods originating from more than 60 countries and regions.

Despite of the above achievement, there still exist significant issues in custom administration which have yet promoted trade. The most significant issues now are classification of goods and application of taxable price. There is yet a mutual agreement between businesses and customs authorities. Customs inspection is still manual and there still exists discretion of customs officers. The Ministry of Finance, therefore, shall put further efforts in reforming and modernizing the system of customs administration in the coming time in view of making it clear, convenient and suitable with international standards. To meet this objective, actions shall base on the slogan of CONVENIENT-DEDICATION-PRECISION. The road map for customs reforms will be as follows:

- Institutional reforms: A comprehensive review and completion of system of legal documents in order to make amendments and/or replacements of these documents for the purpose of conformity, transparency, simplicity and international standard suitability, creating conditions for a modern customs system.

- Modernization and application of information technology: the objective to focus on is to replace the current model of manual, dispersed administration with a centralized model, manual inspection and supervision will be replaced with method applying modern equipments. From now to 2005, the custom will study and set standards for a modern customs administration so that in 2006 a pilot project shall be implement and from 2007 to 2010, this model will be fully applied in practice.

- Human resource: Along with making role and responsibility of custom officers, the customs general department shall continue to put it efforts on training in order for the implementation of the modern customs administration model.

3. Developing capital markets:

In order to create a condition for business to mobilize indirect (portfolio) capital, Vietnam has recently made a significant effort on building and developing its capital markets.

The government bond market has been formed and is in its initial development phase. This would create precedence for the development of corporate bond market. Vietnam stock market has been in operation for 4 years with the opening of Ho Chi Minh City Stock Exchange Center. To encourage the development of the stock market, Vietnam has offered several incentives; foreign investors in Vietnam Stock Market are allowed to invest 30% of the total value of shares of a listed, profit expatriation tax is exempted, investors have the right to convert their profit to hard currencies for expatriation after tax payment. Individual investors are exempted from income tax for profit from investment in the stock market.  Thank to this equal and encouraging policy, 225 foreign investors has opened stock transaction accounts in Vietnam, among those 28 are institutional. Total transaction value of foreign investors in early six months of 2004 accounted for 7% of the total transaction in the market while their share in transaction account is only 1.22%.

In the current situation and requirements for the development of the economy, development and improvement of the quality and effectiveness of the capital market is very important. In the coming time, Vietnam is trying to build a developed capital market, attracting investors, especially encouraging foreign investors to invest in Vietnam, creating [favorable] conditions for businesses, institutions to mobilize capital. Core measures include:

- Completing guiding legal documents in field of capital market in the principle that is suitable with domestic situation and gradually suitable with regional market integration, specifically in stock transactions and stock markets. In the long term, Law in stock markets will be issued. Corporate bond market will be built and developed while that of government bond will be consolidated in order to create a reference interest curve for the market. 

- Policy framework will be studied and adjusted in order to encourage the participation of foreign investors in stock market, for example, increase the level of share foreign investors allowed to own, apply fee and charge policy, foreign exchange control will be adjust so as making it equal between foreign and domestic investors.

- Open the over-the-counter market (OTC) in order to create a condition for the transactions of the stocks that don’t meet listing requirements.

- Develop infrastructure, create conditions for the operation of financial intermediaries and market makers. The system of information publishing shall be consolidated and improved to protect rights and benefit of investors.

- Implement a pilot project and officially implement the connection of domestic capital market to regional ones in order to boost cross-border indirect investment. In the near future, Vietnam is considering to connecting its stock market to that of Singapore which would create a connection of Ho Chi Minh City Stock Exchange Center to Singapore Stock Exchange. This will create the most favorable condition for foreign investors to invest in Vietnam Stock Market. 

4. Developing of financial services and business supporting services:

The development of service markets, including those of insurance, accounting, auditing and tax advising is an important requirement for Vietnam in order to improve transparency and publicity in the economy, minimize risk in business. And this will create conditions for the attraction of investment resources. The Ministry of Finance is in its process to implement the Strategy to develop financial services and achievements have been made, specifically as follows:

- Insurance service: With the promulgation of the Insurance Law, the Vietnamese insurance market has become active within which there are participation of various forms of businesses, especially those of foreign owned as following the road map of international commitments, such as ASEAN and Vietnam –American BTA. Market share of foreign invested enterprises reached 39%. The recent successful privatization of Bao Minh insurance state-owned company has contributed to the improvement of state owned insurance enterprises. The number of form of insurance products increased rapidly thus satisfying customer demand. Total premium revenue has also increased significantly, accounting for 1.3% of GDP as compare to 0.25% in 1999.

- Accounting and auditing services: legal environment for accounting and auditing business has been improved in the past time with the issuance of the Accounting Law and internationally standardized accounting and auditing standards. These contributed significantly to the improvement of management capacity, transparency and publicity of the economy. Quality of accounting and auditing services have been gradually improved, meeting international standards as there are participation of a number of foreign invested auditing firms.

Financial market service activities, however, are still in small scale with limited services and to a certain extent have yet supported production and investment. In the coming time, Vietnam shall need to focus on several measures to improve the effectiveness of this market, specifically:

- Insurance services: Market will continue to be opened for foreign investor in accordance with integration commitments. In preparation for WTO accession, state-owned insurance enterprises will be privatized. Insurance services will be expanded and be improved in quality, satisfying social demand and contributing to the economic stabilization. Government management will be reformed in ways that would limit and gradually eliminate government interference. Supervisory indicator system will be completed in order to improve macro supervision of the government over this market. 

- Accounting and auditing services: Documents guiding the implementation of Accounting Law will be issued which would create legal environment for this group of services. The cover of business that required mandatory auditing will be expanded in order to improve the economy’s transparency and publicity so that protect customer right and benefit. [Accounting and auditing] services market will continue to be opened, following international commitments, allowing foreign invested enterprises participate in the market. Quality of services will also need to be improved.

- Tax advisory service: a legal framework for the healthy development of financial services, including tax advisory service need to be formulated.

5. Enterprise reform:

Beside the above mentioned reforms of financial policies, Vietnam has recently made rapid corporate reform of state owned enterprises in order to improve their effectiveness and competitiveness on the basis of creating an equal footing environment for all businesses and harmonizing (to) international integration. Hereinafter are the major results:

- As for legal framework, from 2001 to now, Vietnam has completed and issued legal documents in classifying forms of businesses, forms of business consolidation and reform, reform in the treatment of outstanding debt. These created precedence for state owned enterprises to reform and reorganize.

- The results are: Up to 2003, the overall business reform and consolidation plans for state owned enterprises for period 2002-2005 was approved. According to [those plans] 59% of 5000 state owned enterprises will be change in ownership in 2005. Together with these consolidations, big state owned corporation will be reform in forms of dissolving, merging or consolidating in order for the improvement of competitiveness. In general, all enterprises operate more efficient after privatization. 

Nevertheless, the process of state owned enterprises consolidation is slower than what has been planned thus making it difficult for the settlement of outstanding debt as well as solving labor redundancy issue. The government of Vietnam will put it best effort to boost business consolidation and improve effectiveness in order to make it ready for WTO accession. The Action plan includes:

- Creating a fair, stable, and transparent corporate finance policy which would encourage the development of production capacity of businesses of all economic sectors, such as:

+ Continue to implement supporting measures via investment in infrastructure in transportation, power and water supply. Continue to invest in science and technology, eliminate dual price policy for important services, such as communication and power etc.

+ Create and develop a system of business supporting funds such as science development support, credit guarantee support for small and medium enterprises, risk insurance fund, export credit support fund etc.

- Consolidation of state owned enterprise will be implemented in ways that would limit the number of enterprises with 100% state ownership. In 2010, only enterprises in fields of national defense, security and other core enterprises shall have 100% state ownership. 

- Government management enterprises will be reformed so that management agencies do not interfere enterprises’ operation. For state investment in enterprises, a pilot project by which a financial investment company is established in order to gradually move from subsidizing mechanism to one that manage capital only.

Tam hopes that, the reform of financial policies which has been done and will be done as mentioned will contribute to the process of improving investment environment and that it would mobilize more overseas capital and technology to Vietnam./.

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