Credit institutions undergo drastic restructuring
The banking industry is drastically restructuring credit institutions (CIs) in combination with bad debt settlement to ensure their safe, healthy and sustained growth. According to Deputy Governor of State Bank of Vietnam – Nguyen Kim Anh, the restructuring of CIs has so far been positive with the non-performing loans (NPL) ratio of the entire banking system being kept at below 3 percent. To ensure the sustained growth of the banking industry, SBV will soon finalise the appraisal and approval of CIs’ restructuring plans besides closely supervising the operation of CIs, especially ailing ones, to timely take actions. The central bank has so far approved the restructuring plans of most banks. However, the restructuring plans of financial companies and financial leasing companies are still being prepared. As for State-owned commercial banks, the restructuring would focus on enhancing the banks’ financial status after their restructuring plans are approved by the Prime Minister, Anh said, adding that according to a decision issued last year the on restructuring CIs in combination with NPL settlements for 2016-20, State-owned banks must improve their charter capital to meet Basel standards. SBV’s Deputy Chief Inspector Pham Huyen Anh said the central bank would also resolutely deal with the cross ownership and violation of the limit regulation on ownership of shares at banks to avoid group interests, which could cause damage to the entire banking system. Solutions on trading NPLs according to the market mechanism would also be implemented together with measures to control risks of the trading method, Anh said. As for monetary management policy, Nguyen Thanh Ha, director of SBV’s Monetary Policy Department, said the central bank this year would continue to manage the monetary policy actively and flexibly in order to better control inflation and support economic growth. He did say however that there should be a close co-operation between monetary and fiscal policies and the State’s price management mechanism in order to make the policies effective, as inflation is under pressure owing to global price volatility, price hikes of goods managed by the State, and high growth of local consumption demands and securities markets. Moreover, the rising inflows of foreign direct investment, foreign indirect investment capital and divestment of State-owned enterprises would hit the central bank hard this year, and provide a challenge to balance cash flows to moderate the pressures on inflation, interest rates, and the USD/VND exchange rate, he said. At the forum, experts praised SBV’s handling of monetary management policy in recent years, noting it had helped stabilise the macroeconomy, support economic growth, and create confidence among investors. The experts suggested the central bank continue to apply the current stable and flexible monetary management policy as it was suitable and effective. According to Nguyen Xuan Thanh, director of Fulbright University Vietnam, the monetary management policy is operating so well that the central bank should not loosen it. SBV had to do so a year ago to support economic growth, which reached only over five percent in the first quarter of 2017, Thanh said, adding that the country’s gross domestic product (GDP) growth last year was supported significantly by the monetary policy. However, the policy should not loosen this year as the GDP rate was good in the beginning of the year, with positive signals in domestic demands and exports as well as in manufacturing and processing, Thanh added.
Foreign investors gear towards Vietnam
Domestic and foreign investors are pouring money into Vietnam, attracted by strong economic growth and a slew of sales by state-owned and private companies, according to the Reuters. Accordingly, Capital Research and Management Company, Dragon Capital and Mirae Asset Global Investments have devised plans to take up about three-quarters of stakes in the upcoming initial public offering of Vinhomes JSC – a realty developer of Vingroup. In April, Singapore wealth fund GIC came in as a pre-IPO investor and took a roughly 5.74 percent stake in Vinhomes by buying shares from Vingroup and other shareholders. Vinhomes’ first-quarter net profit jumped five times from the same period last year to 3.99 trillion VND (177.3 million USD), and revenue surged three times to 10.54 trillion VND, its financial statements showed. Vietnam’s strong growth prospects, the government’s plan to accelerate equitisation and successful private sector IPOs over the past two years have attracted many investors to the country. Though local equity markets in Vietnam have dropped 15 percent from a record high struck last month, analysts view the correction as short-lived.
Draft law designed to lift banks’ role in e-commerce
Payments for e-commerce transactions must be made via banks or authorised payment intermediary services, according to the draft of the amended Law on Tax Management. The draft law, which was recently released by the Ministry of Finance (MoF) for recommendation, aims to better manage and collect taxes on e-commerce businesses, which have developed strongly in Vietnam in recent years. Besides the tax agency, it is necessary to have close co-ordination among other relevant ministries and agencies to make tax management more effective, according to the draft law. Accordingly, the MoF has proposed that the tax department will build databases and apply electronic tax services, such as electronic tax declaration, electronic invoices and online tax payments, ensuring that 100 percent of taxpayers will have access to these facilities to catch up with e-commerce. The State Bank of Vietnam (SBV) will take measures to develop e-commerce payments and to ensure that cross-border services pay through payment service suppliers or licensed payment intermediary services. The MoF will co-ordinate with SBV in guiding commercial banks to deduct the tax that foreign social networking sites, such as Google, Facebook and YouTube, have to pay when they transfer money from organisations and individuals to the sites. Under the current legal regulations, every business or individual, regardless of having a business registration certificate or not, that earns over 100 million VND (4,400 USD) from trading activities, including those on social media operating as e-trading floors, must register, declare and pay taxes. However, tax authorities find it challenging to tax e-commerce businesses as it is not easy to control online business revenues given cash payment is so common in Vietnam. Currently, individual traders mainly pay personal income tax based on taxpayers’ declarations. To declare and pay taxes, individual traders must register their tax codes with the tax authorities. But online traders are reluctant to make tax declarations, while the tax authorities’ facilities and personnel for tax inspection and collection are limited, failing to catch up with the swift growth of e-commerce. The common practice of cash transactions in Vietnam also makes it impossible to determine the exact income of online shops. In developed countries, tax enforcement and control mechanisms are mostly based on declarations of taxpayers, but most transactions are made via bank accounts rather than in cash, helping secure full and accurate declaration by taxpayers. Experts therefore suggested that State management agencies should adopt measures to encourage online payment and reduce cash transactions to help oversee revenues of online traders. There should also be closer coordination between concerned authorities and intermediary payment banks
Legal framework on data management in need to boost digital economy
A workshop on Cross-border Data Flows took place in Hanoi on May 3 to discuss the importance of data access and sharing and the need to develop a legal framework on data management to boost the growth of digital economy. The event was co-held by the Central Institute for Economic Management (CIEM) and the Asia Cloud Computing Association (ACCA). Delegates talked about the prospects of Vietnam’s economy in the fourth Industrial Revolution (Industry 4.0) and the development of digital platforms for e-commerce, e-services and infrastructure for cyber-security. They also outlined Vietnam’s opportunities and challenges in effectively forming a management system of new digital tools in business. Speaking at the event, ACCA Executive Director Lim May Ann announced a report on “Cross-Border Data Flows: A Review of the Regulatory Enablers, Blockers, and Key Sectoral Opportunities in Five Asian Economies: India, Indonesia, Japan, the Philippines and Vietnam.” The report provides an overview of the current policies on data management in these nations and their impacts on the economic growth at large and the development of small- and medium-size enterprises. It takes an investigative look at the way the five Asian economies are aggressively transitioning to more digitally enabled economies. While there are similarities in the drivers of these transitions, there are also significant differences in the approaches being adopted. The Philippines, for example, has no explicit “digital economy” policy, whereas India has become “Digital India” and Japan is striving to be the “World’s Most Advanced IT Nation.” Conversely, the Philippines has no explicit cross-border data flow restrictions and was the first Southeast Asian country to formally adopt a “Cloud First” approach. Vietnam today is among countries with high numbers of Internet users, estimated to account for over 50 percent of the population; and the Internet access rates in the country are on a par with others in the region, said former Standing Deputy Minister of Post and Telecommunications Mai Liem Truc. These have significant impacts on the country’s digital economy, he noted. According to the ACCA, Vietnam holds huge potentials to expand the digital economy but the country’s legal environment for cross-border data flows is not as open as compared to other four nations. The ACCA cited a number of provisions of the Law on Network Information and Security, which require cooperation with the government and facilitate State agencies in carrying out “technical measures” when necessary, which imply allowing the Government to access encrypted information that could undermine users and personal privacy in Vietnam. Secondly, Decree 72/2013/ND-CP on Management, Provision and Use of Internet Services and Online Information requires IT companies to establish at least one server inside the country to “serve the inspection, storage, and provision of information at the request of competent state management agencies”. At the same time, Circular No.38/2016/TT-BTTTT, one of the documents guiding the implementation of Decree 72, also contains detailed regulations on the cross-border provision of public information. Certain providers of such content are required to implement content restrictions related to national and social security. Thirdly, the country has got tougher on taxation of the digital economy with stricter regulations for taxing income derived from Vietnam by digital companies from social media, accommodation and ride sharing sectors.Lim May Ann suggested that the Government of Vietnam should adopt a more cautious approach to ensure that building a safe cyber environment does not inadvertently restrict and hamper the potential of the digital economy and the entire economy at large.
PPP infrastructure investment should be promoted: official
Encouraging investment in infrastructure in the form of public-private-partnership (PPP) is necessary to tap into domestic and foreign capital sources and technology, said Deputy Minister of Planning and Investment Vu Dai Thang. Thang cited an estimate by the Asian Development Bank (ADB) that Vietnam needs about US$16-17 billion for infrastructure investment between 2015 and 2025. The figure was forecast to be US$17.2 billion by the Hong Kong – Shanghai Banking Corporation (HSBC). However, the State budget for public investment is limited, hence the need to mobilise investment from other economic sectors, Thang said. He noted that the Ministry of Planning and Investment had made several efforts to promote PPP investment in the forms of some Decrees, such as the government’s Decree No.15/2015/ND-CP dated February 14, 2015 on PPP investment and Decree No.30/2015/ND-CP dated March 17, 2015 stipulating the execution of some articles in the Law on Bidding about the selection of investors. However, the enforcement of those documents revealed many limitations, which failed to create an attractive environment and flexible investment methods for investors, especially those from overseas. The National Assembly has entrusted the government to study and draft a PPP law to remove difficulties and legal restrictions in promoting this investment form. The Ministry of Planning and Investment has embarked on the process to build the PPP law, which is expected to take three years. The ministry has collected opinions from relevant ministries, sectors, localities and businesses on the need for such a law, and submitted a proposal on building the law to the Government. The proposal will be considered at the cabinet meeting in May and submitted to the National Assembly in July 2018.
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