VietNam Business

Friday, December 24, 2010

New regulations out for business invoices

HA NOI — Businesses will be allowed to continue to use Ministry of Finance issued invoices until the end of first quarter next year, according to a newly issued instruction of Deputy Prime Minister Nguyen Sinh Hung.

The instruction amended the January 1 deadline in an attempt to deal with obstacles raised through the implementation of Decree No 51/2010/ND-CP, which allows most companies to print their own invoices instead of having to obtain them from official agencies.

The extension will help save money for those who bought the invoices from the Ministry of Finance but would not have used them prior to December 31 2010.

Under the instruction, Hung also agreed in principle with the finance ministry's proposal to continue selling ‘red' invoices to small-sized businesses and those in poor areas, who cannot afford to print invoices, until the end of next year. These invoices serve as official proof of commercial transactions for tax and other purposes. However, small businesses will have to print their own invoices as of 2012.

The new instruction also stated that vouchers used in banking and marine services, which meet international regulations, will also be recognised for purposes of taxation. According to current regulations, the vouchers are not recognised as invoices so banking and marine transportation businesses are still required to obtain ‘red' invoices to pay tax, wasting both time and money. More than 350,000 companies are expected to become eligible to print their own invoices.

Director of the General Taxation Office's Policy Department Cao Anh Tuan said besides providing greater freedom to companies to do business, the new policy would completely change business invoice usage.

It would also save the Government some of the costs it incurs in printing the invoices, while companies would not have to go through the rigmarole of obtaining them, Tuan said.

However, analysts warned there could be difficulties during the process.

Careful monitoring of the printing process was imperative to eliminate the possibility of fraud by print companies, they said.

Tax offices were set for a hard time as thousands of enterprises would register to print their own invoices, they added. — VNS

Industrial production surges past annual target

HA NOI — Industrial production in the first nine months of the year surged 13.8 per cent year-on-year, higher than the Government's 12 per cent annual target, to reach roughly VND574.5 trillion (US$30.24 billion), according to the General Statistics Office.

In September alone, industrial production valued VND70.7 trillion ($3.7 billion), up 15.1 per cent over the same period last year.

With a growth rate of 17.4 per cent in the January-September period, foreign invested enterprises topped the list, creating value of VND241.8 trillion ($12.7 billion). Private businesses followed with a surge of 12.7 per cent to VND201.1 trillion ($10.59 billion). State-owned firms faired the worst, churning out an output of only VND131.5 trillion ($6.9 billion).

The GSO reported that the processing industry accounted for nearly 90 per cent of the country's total industrial production value in the first nine months, noting that the industry's 14.7 per cent growth rate contributed significantly to the country's growth rate of 13.8 per cent in January-September.

The significant growth of the processing industry was, according to the GSO, due to the world's economy recovery, which had helped industrial producers, especially foreign invested firms, to enlarge their production in the wake of rising consumer demand.

Sport shoe production saw a robust surge of 25.2 per cent year-on-year, churning out 146.3 million pairs. Glass production also rose 22.8 per cent to 69.2 million sq.m. Cement, fridges, vans and motorbikes also reported significant increases between 16.4 per cent and 21.1 per cent.

However, the mining industry in the first nine months of the year reported a modest 3.8-per-cent growth over the same period last year, with coal only rising 1.4 per cent to 32.4 million tonnes. Crude oil exploitation even reported a 13.8-per-cent decrease to only 11.1 million tonnes in the first nine months.

Deputy director of the Ministry of Industry and Trade's Planning Department Nguyen Thanh Hoa said the industrial production's growth had surged and remained stable at more than 13 per cent since April.

Besides the global recovery, Hoa also attributed the positive results to the effective implementation of Government policies including the encouragement to use Vietnamese products and the measures to limit the trade deficit.

With the increasing rate, Hoa forecast that the country's industrial production would rise roughly 14 per cent this year. — VNS

VN needs to improve corporate governance in banks: US advisor

HCM CITY — Vietnamese banks need to improve corporate governance to reduce the risks to the banking system among other benefits, a seminar in HCM City heard yesterday.

Speaking at the meeting sponsored by the State Bank of Viet Nam and US Department of Treasury, Le Thanh Aân, the US consul in HCM City, said the Treasury had an agreement with the SBV to provide assistance in a number of areas, including corporate governance.

"The recent financial crisis is a compelling reminder of the critical importance of corporate governance and supervision of the banking system. No country's financial sector is perfect, but every country can seek to improve governance to make banking a stable pillar of the economy."

David Hawkins, the US Treasury banking advisor, said good corporate governance would create public trust and confidence in banks and the banking system.

"To have effective corporate governance, the board needs to establish good policies and procedures, goals that promote transparency, and systems to implement them and to control risks, have sufficient audit functions and good management information systems to keep informed of deficiencies and initiate corrective action when problems are noted."

Boards members should be and remain qualified, including through continued training, for their positions. They should have a clear understanding of their role in corporate governance and be able to exercise sound judgment about the affairs of the bank.

Under the direction of the board, senior management should ensure that the bank's activities are consistent with its business strategy, risk tolerance, and policies.

Banks should have an independent risk management function including a chief risk officer with sufficient authority, stature, independence, resources, and access to the board.

Risk management information should be tested for accuracy periodically.

The governance of a bank should be adequately transparent to its shareholders, depositors, other stakeholders, and market participants.

The role of the State Bank of Viet Nam is to provide guidance to banks for effective corporate governance.

It has to regularly perform a comprehensive evaluation of banks' overall corporate policies and practices, and evaluate their implementation through inspecting internal reports.

The central bank should insist on effective and timely remedial action by banks to address material deficiencies in their corporate governance policies and practices. — VNS

WTO calls on US to cut farm subsidies

GENEVA – The World Trade Organization called on US Wednesday to cut its farm subsidies, saying that they were so "considerable" that they could affect market prices.

In a report analysing Washington 's policies since 2007, the trade body said that while promoting its exports, the United States should also reduce "distorting measures ... including ... support for agriculture."

The WTO noted that support granted to the sector under the multi-billion-dollar 2008 Farm Act are mostly "linked to prices and or production."

Thanks to this support, "producers of cereals, oilseeds, and cotton are effectively insulated from market prices while sugar and dairy have market price support programmes," said the WTO.

"The large size of the agriculture sector means that the absolute amount of support is considerable, varies from one year to another depending on prices, and can affect world prices," it added.

Brazil also hit out against the US ' farm policies during the WTO's examination of Washington 's trade policies every two years.

"Agriculture accounts for only 0.8 percent of US GDP and it employs just 1.4 percent of its labour force," noted Roberto Azevedo, Brazil 's envoy to the WTO.

"Nevertheless, this sector displays a considerable arsenal of trade-restrictive and distorting measures."

Azevedo pointed out that most of the subsidies are concentrated on crops such as cotton soybeans and rice.

"When prices drop, those subsidies will be in place again precisely at the moment when they will provoke the largest distortions and most damage to producers elsewhere," he charged.

Washington 's subsidies to its agriculture sector is a key sticking point holding up long-stalled Doha negotiations for a new global free trade deal.

Its support for cotton producers has been judged illegal by the WTO, in a complaint brought by Brazil .

Brazil however agreed to not apply reprisals after both countries decided to wait for the new Farm bill in 2012 to see what modifications would be made.

Vietnam to relax bank lending rules to boost loans

Vietnam to relax bank lending rules to boost loans Vietnam’s central bank said it would let commercial banks lend money from a wider array of sources as of Oct. 1 to assuage concerns that new regulations would dampen lending and possibly hurt the economy.

However, a senior government adviser said the measures did not go far enough.

Bankers had voiced concern about the original rules, arguing they would hinder their ability to boost credit and lower interest rates. In response, and under pressure from the government, the central bank issued amendments late on Monday.

These allow banks to lend up to 25 percent of non-term deposits raised from economic institutions instead of keeping them as reserves. Banks can also lend money they have borrowed from the interbank market for terms of three months or longer.

A central feature of the new rules – raising banks’ capital adequacy ratio to 9 percent from 8 percent – remained unchanged.

The benchmark Vietnam Index gained 1.1 percent on the news, but share traders remained wary. Many analysts had flagged the original set of rules as a potential damper on the market and economy, and had hoped for bigger changes.

“The market is unlikely to see a big rally because traders are still cautious and they will look at how commercial banks react to the new circular in the near term,” said Doan Tran Phuong Phi, a broker at Ho Chi Minh City Securities.

Le Xuan Nghia, deputy director of the National Financial Supervisory Commission, said the amendments would not really help banks expand credit or cut interest rates. “The changes are not large enough to boost lending,” he said.

Central bank Governor Nguyen Van Giau has defended the original rules, saying they would make the banking sector safer. He also warned even stricter rules would take effect from January because of amendments to the law on credit institutions.

Earlier this year the central bank asked banks to restrict their interbank borrowing to less than 20 percent of deposits.

Dong lending rates range from 13 percent to 15.5 percent, although the government wants them cut to 12 percent. Banks promised in May to get nearer that level by the end of September.

Dollar demand stable, though pressures remain

Dollar demand stable, though pressures remain Vietnamese banks have enough dollars to keep the dong from succumbing to immediate pressure from higher-than-expected inflation and a persistent trade deficit reflected in this month’s data, traders said.

But economists warn that could worsen later in the year, putting the currency under renewed downward pressure.

On Monday the Ministry of Planning and Investment estimated the trade deficit hit an estimated US$1.05 billion in September.

The deficit for the first nine months of the year rose to $8.58 billion and the government expects the full-year shortfall to reach about $14 billion.

Annual inflation this month accelerated for the first time since March, hitting 8.92 percent. September’s consumer price index rose 1.31 percent from last month, the highest monthly rise since February, the government said last week.

Nevertheless, the dollar/dong exchange rate has been steady since the State Bank of Vietnam devalued the currency by 2 percent on Aug. 18.

“Banks now have ample dollar funds so they can deal with client borrowing and trading,” said a foreign exchange manager at a Hanoi-based lender.

Official and unofficial exchange rates have been close to the 19,500 trading band limit since the devaluation. At 0250 GMT on Monday there was a 40 dong, or 0.2 percent, difference between dollar/dong bid prices on interbank and unofficial markets.

The gap is sometimes seen as an indicator of pressure on the currency to depreciate.

Overnight dollar interest rates for loans on the interbank market have ranged between 0.41 percent and 0.46 percent, Reuters data showed.

Banks have benefited from dollar inflows at businesses that tend to receive payments from overseas during the later months of the year, traders said.

Still, Nguyen Minh Phong, an economist at the Hanoi Research Institute for Socio-economic Development, said the widening trade deficit and modest foreign direct investment inflows would keep the dong under pressure.

Thursday, December 23, 2010