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21Oct/140

Women pilots blaze new career path

Last update 11:17 | 21/10/2014

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VietNamNet Bridge - A relatively new career path opening up in Vietnam is that of becoming a pilot, a highly rewarding profession that demands rigorous training and mastery of a diverse set of skills. Averie Nguyen meets some of the women that conquer our skies on a daily basis under the employ of Vietjet.

Diverse inspirations

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Vietnamese pilot Nguyen Phuong Anh and Filipino pilot Antonette Parucha.

Born and raised in the Polish capital of Warsaw, 29-year-old Anna Jastrzebska, who is fluent in three languages, bypassed other candidates to become Vietjet’s first female pilot in 2012.

Anna became familiar with planes and flying at a young age thanks to her father, an amateur pilot. “I am grateful that my dad is a pilot,” she says. “My passion for flying began when my father took me with him on his glider for the first time. That passion is still with me now.”

Unlike Anna, 33-year-old Filipino pilot Antonette Parucha was originally drawn to the uniform. “In college, a female student caught my attention one day when she wore a very nice outfit. When I found out it was pilot’s wear, I felt that I wanted to be in that uniform and one day I would be in that uniform,” she explained.

Before starting her career as a pilot, Antonette was a flight dispatcher and then a flight instructor. “I worked with Private Charter Aviation Company as a flight dispatcher after finishing a flying course,” she tells Timeout. “My bosses encouraged me to get a pilot's license and I did. Then, I worked part time as a pilot alongside my responsibilities as a flight dispatcher.”

After quitting her job as a flight dispatcher, Antonette flew as a charter pilot and also became a flight instructor. “As a flight teacher, I gained new skills and learned a lot when sharing my knowledge and experience to students. Whenever I released a student for solo (flight), I experienced mixed feelings of happiness and pride that I was now part of a future pilot’s career,” beams the former teacher.

Difficulties faced

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Polish pilot Anna Jastrzebska.

Both Anna and her husband work as pilots, their busy schedules making their moments together all the more valuable. “When we have spare time, we usually cook, play sport, or travel,” she says.

The living environment in Vietnam can also be a problem. “Traffic in Vietnam is what concerns me the most. I have to truly concentrate and be careful each time I go out,” she laughs.

Agreeing with Anna, Antonette adds “working here in Vietnam is different from what I’m used to because of the diverse nationalities that make up the working environment.” As far as the Filipino pilot is concerned, being far away from family is also a difficulty to overcome.

“Prior to applying to Vietjet Air, I had no plans to work outside my country. However, out of curiosity, I submitted my application and got accepted. I decided to give it a try and work outside my comfort zone,” she adds.

Some people might think that in this male-dominated industry female pilots need to try harder to be equal to their male counterparts. However, Anna believes that women and men have equal capabilities to do important jobs such as piloting aircraft. “With passion and determination, as well as satisfying strict requirements on professionalism, accuracy and problem-solving skills, women can do the job even better than men.”

Support received

Vietnamese 29-year-old pilot Nguyen Phuong Anh thinks that self-belief is the most important attribute that a pilot needs to successfully complete a flight. “I remember my first solo. Oh my goodness, I could not think about anything besides the question ‘am I ready?’ I kept asking my instructor ‘do you think I am ready?’ He just encouraged me, closed the door and then waved me off,” she recalls.

“My heart wanted to jump out of my chest. Lining up with the centerline, I paused for a second to make last-minute checks and take one final deep breath before setting the wheels of that moment in motion,” she continues.

“The moment you take an aircraft into the sky then bring it back safely to the ground, the moment you have to take care of everything on your own, the moment you know that you cannot make any mistakes, the moment you believe that you can do anything, the moment you are overcome with pride, they are unforgettable,” she proudly shares.

Agreeing with Phuong Anh, Antonette adds that the happiness of passengers is also an inspiration. “Many times I notice somewhat diverse facial expressions when passengers see me, a woman, sitting in the cockpit. I just give them a smile in reply,” she says. “My smile assures them that they will have a safe flight. For me, seeing happy and contented passengers after landing is priceless.”

Anna believes that since it is a relatively new career path in Vietnam, pilots and female pilots in particular receive a high level of support from passengers and colleagues. “This is the true gift for me when working in Vietnam,” she says.

She adds that her family’s support is invaluable. “I am lucky that I have a husband who always encourages me in my job and shares in the household chores!”

Having been born in a country with a vastly different way of living, Anna believes that the warmth of the locals has helped her settle into her new surroundings. “This country is very different from my motherland. Whenever I begin to feel the contrast in my appearance and lifestyle, the friendliness of the people always wins me over.”

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21Oct/140

Gov’t expects 5.8 percent economic growth for 2014

Last update 12:39 | 21/10/2014

Vietnam’s socio-economic development is progressing steadily, with economic growth likely to reach 5.8 percent this year, according to a Government report.

The report, which was delivered at the ongoing eighth session of the 13 th National Assembly in Hanoi on October 20, also showed that the economy continued to grow by 5.62 percent during the first nine months this year, higher than the same period last year.

Meanwhile, inflation declined to 2.25 percent in the nine-month period, the lowest in ten years, the report said, adding that the figure is expected to be less than 5 percent all year.

However, the report also pointed out that the country’s business environment and competitiveness have yet to improve, which, together with limited access to capital for businesses due to complex administrative procedures, resulted in a high number of business dissolution.

At the same time, slow credit growth and rising public debt were also a posing challenge to the country, the report said. The securities market is still unstable, while the real estate market was sluggish and exports by domestic firms remained low, it said.

Regarding the socio-economic plan for 2015, the report sets out targets of 6.2 percent for GDP growth and an inflation rate of 5 percent; a 1.7-2 percent decrease in poverty overall and a 4 percent decrease in poverty in poor localities; and 1.6 million new job opportunities, it said.

Later in the session, deputies heard a summary report on voters’ opinions, and a report on the NA Economic Committee's verification of the government's report on socio-economic development in 2014 and tasks for 2015.

They also debated reports on the prevention of and fight against corruption in 2014, and a proposal on the revision of textbooks for general education.

During the October 20 session, deputies also heard a report on the implementation of the State budget estimate for 2014, and a report on the budget estimate and central budget allocation for next year.

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21Oct/140

Bond issuances by gov’t limits bank loans

Last update 14:00 | 21/10/2014

VietNamNet Bridge – Businesses would have more opportunities to access bank loans at low interest rates if the government had not issued so many bonds, experts believe.

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Vietnamese have a saying “areca and rice, you can’t have both”. The areca nut tree, a drought-resistant plant, will bear good fruit in a dry year. Rice will wither and the rice crop will fail if it cannot get enough water. When farmers harvest bountiful rice crops, they will not have good areca crops, and vice versa.

The saying, according to analysts, reflects what is happening with monetary policy.

The government has issued bonds since the beginning of the year, but businesses complain about the lack of capital.

According to chinhphu.vn, the State Treasury had mobilized VND210.198 trillion worth of capital through bond issuances as of September 25, fulfilling 90.6 percent of the 2014 plan assigned by the Ministry of Finance.

However, analysts said the number of bonds was too high.

With expected capital of VND300 trillion to be mobilized through bond issuances, 2014 will be the year when government borrowing reaches the highest level.

Analysts said there had been no difficulties in mobilizing capital through bond issuances. As commercial banks have abundant capital, they throw the money into government bonds, a safe investment channel.

In other words, the government can easily seek capital to implement its development plans when issuing bonds, while commercial banks can use the optimal investment channel when buying bonds.

However, businesses have suffered from the profusion of bonds because they cannot access bank loans. Under such a scenario, commercial banks, which have injected money into bonds, do not feel compelled to increase lending to businesses.

Dr. Trinh Quang Anh, an independent researcher, commented that the volume of government bonds issued this year has created an obstacle to the possibility of a reduction in interest rates.

Agreeing with Anh, an analyst noted “that fiscal policy has caused major difficulties for monetary policy”.

According to the analyst, the government has continually borrowed money from commercial banks and then deposited the money in commercial banks. The state’s money in banks leads to an increase in the total money supply (M2).

Meanwhile, the capital that banks use to buy government bonds can actually be the state’s money deposited at the banks.

Dr. Phan Van Tinh, in an article published recently, said this was “using chicken fat to fry chicken”.

This will make it even more difficult for the State Bank to draw up monetary policies and regulate money-supply sources to curb inflation and stabilize exchange rates.

As a result, monetary policy regulating part of the capital in the national economy has been ineffective, he said.

Regarding the public debt, Deputy Chair of the National Assembly Nguyen Thi Kim Ngan said the debt is now about 64 percent of GDP, and if it reaches 65 per cent, the “red-light” alarm would turn on.

Read more: http://dongtalk.com/forums/index.php/topic/14607-bond-issuances-by-gov’t-limits-bank-loans/#ixzz3GoiKR5Lt

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20Oct/140

Get rid of outdated policy on sale promotions: businesses

Last update 14:00 | 20/10/2014

VietNamNet Bridge – Under current regulations, the selling price of goods and services during promotions must not be lower than 50 percent of the price prior to the sale.

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Many businesses believe this policy is outdated and needs to be changed.

State agencies, for example, this month refused to allow Sheraton Saigon Hotel & Towers, a 5-star hotel in HCM City, to offer a “buy 1, get 1 free” sale, under which clients would get a free glass of cocktail or beer between 4 pm and 6:30 pm.

The state management agency said the promotion violated the government’s Decree No 37 issued in 2006 on management of sale promotion activities.

The HCM City Tourism Association said many other hotels and travel firms had encountered this outdated regulation.

A lawyer commented that the regulation reflected excessive intrusion of the state in business operations.

He noted that many sellers and service providers want to stimulate demand by offering big discounts. However, with outdated regulations, businesses have found it difficult to boost sales and clear big inventories.

An official of the HCM City Tourism Association said that tourism agencies would be turned down by state agencies if they asked permission to offer such discounts.

However, many sales promotion campaigns with discounts of 80-90 percent continue to be run by some companies.

“I know a lot of companies have a “buy 1 and get 3 free” program. But they have not been punished,” he said.

Nguyen Thi Khanh said the city’s tourism association had sent a petition to state management agencies, requesting that the regulation on ceiling discount rates be abolished.

As the tourism sector is experiencing difficulties with the number of tourists on the decrease and low occupancy rates, Khanh said the state should think of creating more favorable conditions for hotels and travel firms to run promotions to boost demand, rather than setting restrictions that hinder business.

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20Oct/140

Taiwanese steel-maker wants to have its own fleet in Vietnam


Last update 09:47 | 20/10/2014

VietNamNet Bridge – Taiwanese-invested Formosa Iron and Steel Co., Ltd. based in Ha Tinh Province, in central Vietnam, has asked for the Ministry of Transport’s permission to establish its own steel-transport fleet in Vietnam.

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According to Formosa’s petition sent to the Ministry of Transport, Ha Tinh province, the National Maritime Administration and the Board of Management of the Ha Tinh Economic Zone, after building two blast furnaces, each year the company would produce 7.1 million tons of finished steel products. It would need to have a fleet to transport such a high volume of steel products in Vietnam.

The company said that at least three million tons of steel products would be consumed in Vietnam, mainly in HCM City and Hanoi.

Formosa is a wholly-foreign owned firm. According to Article 6 of Decree No. 140/2007 / ND-CP detailing the Commercial Law regarding business conditions for logistics services, foreign firms offering maritime transport services are only allowed to establish joint-venture company fleets, in which the capital contribution ratio of foreign investors shall not exceed 49%.

However, in its petition, Formosa explained that its fleet would only transport its own steel products, so the fleet would not affect the business activities of other carriers.

Read more: http://dongtalk.com/forums/index.php/topic/14600-taiwanese-steel-maker-wants-to-have-its-own-fleet-in-vietnam/#ixzz3Gipbb1Do

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20Oct/140

Big businesses ask for tax leniency while exploiting every legal loophole


Last update 17:00 | 20/10/2014

VietNamNet Bridge – Corporations have many methods to bleed the national budget’s dry: evading tax, declaring inaccurate taxable income, delaying tax payments, and committing trade fraud.

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The Vietnam Coal and Mineral Industries Group (Vinacomin), for instance, has once again asked the state for tax and fee reductions on mined coal, citing huge losses due to overly high taxes and fees.

Analysts, however, says that Vinacomin often asks the state to reduce its taxes and fees when it encounters difficulties.

Last year, for example, the government cut the company’s coal export tariff to 10 percent from 13 percent, amid public opposition.

Vinacomin enjoyed its tax cut, but the government had to raise export tariffs in an effort to restrict exports in order to store coal for domestic use.

In late 2013, Vinacomin also asked the state for reduction and exemption of many kinds of taxes on their bauxite exploitation and processing projects in the Central Highlands, even though the company had been given many tax incentives.

In another case last year, Vinashin, the shipbuilder, asked the state for VAT and import tariff cuts. Most recently, Vinalines, the shipping firm, has asked for preferential port fees.

The loose management of state agencies has been exploited by enterprises seeking to squeeze money from state coffers.

A number of fraudulent VAT refund cases, for instance, have been discovered recently, worth billions of dong in each case.

In late 2013, the Kien Giang provincial police discovered fraud in a VAT refund case in one locality. A sum of VND109.4 billion had been refunded to a business declaring an export deal worth VND1.094 trillion, which they found existed only on paper.

And in December 2013, HCM City police uncovered five cases of smuggling and tax evasion. Of these, the taxes appropriated by the Saigon Food Technology Company totalled nearly VND100 billion.

Cao Anh Tuan, deputy general director of the General Department of Taxation, said that taxation bodies had inspected more than 39,000 businesses by the end of September, forcing businesses to pay VND7.4 trillion in additional taxes.

Of the 39,637 businesses inspected in the first eight months of 2014, the taxation bodies found signs of transfer pricing at 1,938 enterprises.

Not only have taxpayers been found breaking the law, but tax officers have also appropriated state money or lent a hand to taxpayers to commit fraud.

In late 2013, authorities discovered that HCM City’s District 1 Taxation Sub-department had kept VND1.441 trillion worth of taxes in its coffers that should have transferred to the state budget.

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14Oct/140

Firms keep up with pay rises

Last update 09:18 | 13/10/2014

VietNamNet Bridge – Both multinationals and major local companies have increased salaries by nearly the same rate this year, a survey by Mercer, a global provider of human resource services and its associate in Viet Nam, Talentnet Corporation, has found.

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While the former pays 10.4 per cent higher, it is 10.5 per cent for domestic giants.

Hoa Nguyen, leader of Mercer Remuneration Surveys and Human Resource Consulting at Talentnet, speaking at a seminar in HCM City yesterday (Monday), said with not much change in business conditions and lower inflation forecast, the salary increase, nearly the same as last year, is expected to be at the same rate next year too.

The pharmaceutical, consumer goods, and chemicals industries were the top three in terms of salary hikes – at around 11 per cent — since they are not being impacted as much as others by the economic situation.

Real estate and banking saw the lowest salary increases of 8.4 per cent and 8.9 per cent due to difficult business conditions.

The survey pointed out that the difference in base salaries paid by multinational and Vietnamese companies remained high at 30 per cent, she said, adding that the difference gradually widen from professional to executive levels.

To attract talent from multinationals, local firms are willing at this juncture to pay out of their salary range for high-level positions.

However, it would take a number of years before big local companies' pay catches up with multinational companies', Hoa said.

For now, to attract, motivate, and retain the best employees, local companies often use long-term incentives such as stock offers and stock options.

When it came to paying bonuses, banking and oil and mining topped (22.7 per cent and 17.7 per cent relatively) with big local companies paying more than multinationals.

Trading and technology were the two sectors with the lowest bonuses.

The employee turnover rate last year decreased by 2 -3 per cent, with multinationals having lower rates than local companies (12.2 per cent versus 17.1 per cent), she said.

Multinational companies have in fact had the lowest rate for the last five years.

The highest turnover was in pharmaceuticals, consumer goods, and insurance due to a shortage of talent.

The jobs of sales managers, sales executives, and marketing managers remained, as they have for long, the hottest, with companies having difficulty recruiting personnel and keeping them for long.

During periods of tough market conditions, sales managers are more important to businesses than marketing specialists since they directly bring revenues to the company.

A total of 473 multinational and local companies with more than 164,790 employees in various industries took part in the survey.

Last year's survey had polled 418 companies.

The increase in the number of Vietnamese companies taking part in the survey indicates their more serious attitude towards remuneration and desire to improve their salary budget more effectively and know exactly how competitive their salaries are compared to the market.

Godelieve Kroonenberg, Mercer's market business leader, ASEAN Information Solutions, said more flexibility in benefits, flexibility in pay mix, and more tailored communications with employees could be key to retaining employees for Vietnamese firms.

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14Oct/140

Thai firms spot opportunities in Viet Nam

October, 14 2014 09:13:00

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Capital flow to Viet Nam has increased sharply recently, especially after the purchase of Metro Cash & Carry Viet Nam by Thailand's Berli Jucker, for US$879 million, earlier this month. — Photo tamnhin

by Van Dat

HCM CITY (VNS) — The recent increase in investment flows from Thai enterprises has shown that Viet Nam is vital for Thailand's economy, especially after the ASEAN Economic Community comes into effect in 2015.

Recent information from the Thailand Board of Investment shows that the country's outward investment in ASEAN-member countries has undergone an upward trend since 2007, with last year's investment at US$4.5 billion, equal to Thailand's investment in the EU.

Most of the Thai investment in ASEAN was in Singapore, Indonesia, Viet Nam and Myanmar, according to Chokedee Kaewsang, deputy secretary general of the Thailand Board of Investment.

With more than US$1.4 billion between 2009 and 2013, Viet Nam was ranked third in receiving investment from Thai enterprises, after Singapore and Indonesia.

Capital flow to Viet Nam has increased sharply recently, especially after the purchase of Metro Cash & Carry Viet Nam by Thailand's Berli Jucker, for US$879 million, earlier this month.

In addition, the Thai-owned Robins department store made its Viet Nam debut in Ha Noi in April. It will also open a 12,000-square-metre store in HCM City's Crescent Mall shopping center in District 7 in November.

It also plans to open stores in other major cities, including Hai Phong, Da Nang, and Can Tho in the Mekong Delta.

Several other Thai enterprises which have invested in Viet Nam have also decided to accelerate their investments.

Amata Corporation, Thailand's largest industrial estate developer, which built a 70- sq.km2 industrial city in Thailand 25 years ago, has decided to build a modern and integrated city industrial estate, Amata Long Thanh, in Dong Nai Province covering 1,285 hectares.

According to a report in the Bangkok Post, the corporation has signed a cooperative agreement with Dong Nai Province's People's Committee to develop the US$530 million industrial estate.

With the ASEAN Economic Community taking effect next year, Thai investors are anxious to take advantage of the Vietnamese government's ambitious drive to increase economic growth to more than 8 per cent annually.

Twenty years ago, Amata built the Bien Hoa Industrial Estate in Dong Nai Province, and is now eyeing more opportunities in Viet Nam.

Two other Thai giants, Siam Cement Group and CP, which have had success investing in Viet Nam, also have plans to expand, according to the Viet Nam Chamber of Commerce and Industry.

Early this month, the US$22 billion Victory petrochemical and oil refinery project funded by Thailand's oil firm PTT and its strategic partner Saudi Aramco was approved.

The project will be located in central province of Binh Dinh.

Many Thai investors say they prefer Viet Nam to Cambodia, Laos PDR or Myanmar because of the country's political and economic stability and its geographical position near the sea.

Panpimon Suwannapongse, Thai Consul-General to HCM City, who recently organised a trip with Vietnamese provincial administrators along the Southern Economic Corridor, said that Thailand sees Viet Nam as important because of its long coastline, which makes it convenient to transport goods by boat.

In the Mekong sub-region, Viet Nam is the end-point of many major roads and the Mekong River, where goods can be easily transported to the Thai mainland.

Viet Nam's export potential and the coming single market in the ASEAN Economic Community are other factors as well.

Suwannapongse said that Viet Nam and Thailand also plans to support less-developed countries such as Cambodia, Laos, and Myanmar.

Panat Krairojananan, CEO at Surint Omya Viet Nam, said that Thai businesspeople who have been working in Viet Nam for several years said it is much more convenient to export goods to the US from Viet Nam. He added that Thai companies could export commodities from Viet Nam through Route R1.

"Thai businesspeople plan to pour cash into Viet Nam for a long time. Previously, only a few Thai companies had entered Viet Nam, but now there are many more," he said.

Because of fears of economic stability at home, Thailand also wants to invest in a country like Viet Nam that can share investment risks.

Similarity in culture and a predominantly young population of 90 million are other factors that have influenced Thai interest in Viet Nam.

"Although infrastructure in Viet Nam is still not complete, it is a good time for us to come. More companies from other countries will arrive in the future, and it will become more competitive for us," he said.

The Thai CEO said his company, Surint Omya Viet Nam, which has two factories producing calcium carbonate, will open another facility in northern Viet Nam.

Tran Huu Phuoc, deputy chairman of Long An Province's People's Committee, who visited Thailand with other provincial leaders on the recent trip on Route R1, said that Thai enterprises wanted to invest in Long An Province as well.

Phuoc added that there was still great potential for industrial, trade and tourism cooperation between the two countries. — VNS

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14Oct/140

Experts urge gradual consumption tax hike

October, 14 2014 09:15:42

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A worker operates a packing line at theThang Long Tobacco Co Ltd. Experts say Viet Nam should raise special consumption taxes on goods like liquor and tobacco. — VNA/VNS Photo Lam Khanh

HA NOI (VNS) — Viet Nam should increase special consumption taxes on goods like liquor and tobacco in "reasonable" increments over several years so as to discourage smuggling and other forms of illicit trade, experts have said.
Speaking to Viet Nam News on the sidelines of the recent 11th Asia-Pacific Tax Forum, they said that a gradual rise would also reduce the impact on consumers.

The experts were referring to increases to the special consumption tax on liquor, beer and tobacco that have been proposed in draft amendments to the Law on Special Consumption Tax.

The draft law, now under discussion, is expected to be approved this year and come into force on July 1, 2015. It seeks to hike the tax on tobacco from 65 per cent to 70 per cent on January 1, 2016, and to 75 per cent in 2019.

The tax on beer will be increased from 50 per cent to 55 per cent on July 1, 2015, to 60 per cent in 2017 and 65 per cent in 2018.

The special consumption tax on liquor with alcohol content of above 20 per cent will be raised from 50 per cent to 65 per cent and that on liquor with less than 20 degrees would be increased from 25 per cent to 35 per cent.

Daniel Witt, president of the International Tax and Investment Centre, said that gradual tax adjustments with carefully-planned roadmaps are required to avoid creating a shock and increasing smuggling and illicit trade.

"The Government of Viet Nam's approach is in the right direction," he said.

But he said "The 10 per cent increase is too high and should be set at just 5 per cent annually, the same increase proposed for beer. Again, all products should have the same, gradual tax increase."

Higher upfront increases could risk incentivising smuggling and shifting consumption to the black market as consumers would substitute consumption to other products that had not experienced the large tax increase, which would pose risks to Government revenue, he added.

Agreeing, Stephane Gripon, general director of Diageo Viet Nam, said: "The proposed increases are substantive and could have significant impacts on legitimate business if not implemented in a reasonable way.

"We are concerned that any excessive increase in tax will only lead to widespread unrecorded and untaxed alcohol."

He said the hikes should not begin before 2016 and should be phased over three or four years. More importantly, he said, this should be done equally for all alcoholic beverages – beers, wines, spirits – over the same period of time.

He suggested an increase of 5 per cent per year from 2015 to 2017.

Rob Preece, lecturer in excise at the University of Canberra, Australia, said one of the causes for increasing black market trade was that the penalties were too small, and many people would be willing to take the risk to earn high profits.

"The principle is slow adjustment to minimise unintended consequences," he said.

Witt said efficient co-ordination between relevant authorities, including police, tax and customs officials as well as the health ministry was critical to addressing the issue.

"Tax policy and rates should be neutral," he said, adding that tax increases should not hurt competitiveness. ‘Neutral' refers to a level that will not force businesses to change their economic routines to accommodate the tax.

Striking a balance in revenue, employment, investment, consumption and production was important, other experts said.

The forum heard that a two-year study into the development of excise tax policy in the context of the ASEAN Economic Community 2015 was to come out this year. This is expected to provide Viet Nam as well as its ASEAN neighbours with a roadmap to modernise excise taxation and ensure more stable revenue and consumption. — VNS

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10Oct/140

Draft law requires banks to offer consumer credit via finance companies

Last update 17:00 | 09/10/2014

VietNamNet Bridge – Commercial banks will be forced to stop providing consumer loans if they don’t have finance companies of their own, under a draft document being compiled by the State Bank of Vietnam.

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The draft has attracted special attention from bankers as most of them now want to develop retail banking services after a long period of providing loans to businesses.

The central bank, when compiling the legal document, said it was necessary to separate consumer lending from banking operations and put lending under the management of finance companies.

This would also help make clear the responsibilities to be taken by finance institutions, while commercial banks can only take limited responsibility for their contributed capital.

However, analysts have warned that the regulation, if realistic, would do more harm than good. Bankers understand that subprime customers are not their subjects. And if finance companies are put under commercial banks, this would push commercial banks into subprime lending.

Do Thien Anh Tuan, a lecturer of the Fulbright Economics Teaching Program (FETP), noted that the splitting of consumer lending from commercial banks was not used in many other countries. Providing consumer credit is usually a basic operation of retail banks.

An economist noted that commercial banks need to be given the right to decide whether to set up finance companies of their own, depending on their business strategy.

HDBank and VPBank have bought two finance companies to implement their specific business plans, with the focus on targeted clients.

OCB does not intend to set up a finance company, though it is also planning to develop retail banking services.

The economist said the central bank, by setting up the regulation, has tried to pave the way for restructuring of finance companies, most of which are in bad condition.

He noted that the deal of Western Bank merging with PetroVietnam Finance Company (PVFC) to form PVcomBank was a “typically perfect mission”.

Non-bank finance institutions, including finance companies, are a part of the government’s financial system restructuring project.

What will happen if the draft regulation turns out to be successful? The economist said there would be a new wave of finance companies, and many merger & acquisition deals.

According to the State Bank, there are 17 finance companies and 41 commercial banks operating in Vietnam.

The banks will have to set up finance companies themselves or take over existing finance companies. However, it would be difficult to do both.

Under the government’s Decree No 141, a finance company must have the minimum legal capital of VND500 billion.

This means that a bank will have to have VND500 billion to own a finance company, which is believed to affect bank cash flow and safety indexes.

Read more: http://dongtalk.com/forums/index.php/topic/14545-draft-law-requires-banks-to-offer-consumer-credit-via-finance-companies/#ixzz3FljeUCP2

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