Business Beat
The new year has arrived but the announced tariff cuts on certain imports from ASEAN countries under AFTA have not been made; it appears now that the chop would come only in the second half of 2003. The Government says it is working on a customs harmonisation system to fall in line with other ASEAN countries, which will not be ready until the second half.Although it issued early in 2002, the schedule until 2006 for tariff reductions, each year the Ministry of Finance has to formally publish adjusted rates. It has not for 2003.
It is still not clear whether the new rates to be announced in July will be retrospectively applied but businesses have played safe, not cutting prices yet and the market has been stable, belying earlier predictions.
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The banking sector got some good news as well as some not-so-good news: the percentage of bad debts has fallen to 8 per cent in 2002 from 8.5 the previous year, but their value rose. Bad debts include overdue and frozen debts, and non-performing loans. According to the State Bank of Viet Nam, their volume increased because of additional categories classified as bad debts.
Meanwhile, in a banking sector meet last week, delegates complained about policy lending and commercial lending not being completely separated. Having to sometimes use commercially mobilised capital for policy lending hits their profitability in the long run, they said.
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Information technology experts say Viet Nam is trying to enter the global software market at the cost of the domestic market, which holds huge potential. Software ads in local newspapers are sadly limited to accounting and business management packages. In a classic case of the grass being greener on the other side, Vietnamese software writers have made a beeline for foreign companies to create specialised software for other fields like health care, tourism and entertainment. So much so, that when a bid for a software package came up for the SEA Games to be held here, Chinese companies won hands down.
Market development is also very weak. Corporate customers have not recognised the benefits of specialised software and the biggest customers – Government agencies – have not been able to pinpoint their needs. For them, information technology implies buying hardware, sales of which, incidentally, thrives at the year-end when everyone rushes to spend their allocated budgets.
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The arrest of the director of Dong Nam Company for tax evasion has left many mobile phone users in the cold. This company has been the official distributor of Nokia and Samsung cell phones for several years now. While smuggled mobile phones are a dime-a-dozen in the market and much cheaper, many people bought from Dong Nam, either to be guaranteed of after-sales service or just out of respect for the law. But it appears now that the company has been sourcing instruments through another channel too – illegal imports. However, what takes the breath away for sheer effrontery is the revelation that the company has been selling smuggled phones in its showrooms where they rubbed shoulders with legitimate imports.
Preliminary investigations reveal a huge difference between the number of mobile phones imported officially by Dong Nam and the number sold by it. In the past three years, through three importers, the firm imported less than 170,000 instruments while it sold 360,000. Investigators believe the modus operandi has been to buy smuggled phones, put the Dong Nam name on it and sell it, to pocket huge profits while leading hundreds of thousands of buyers down the garden path.
Not satisfied, the company has been evading import taxes by quoting lower import prices than actual, and also income tax with most buyers not bothering with invoices. According to the tax man, while the company’s turnover increased from VND31 billion in 1999 to VND137 billion in 2002, the VAT it paid dropped from VND479 million to minus VND1.3 billion in 2002. In spite of the huge amount though Dong Nam has never applied for tax refunds. Strange. However, one does not know if the slip actually led to the company’s fall.
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The success of HCM City-based infrastructure investment company, CII, might encourage other companies to jump on the bandwagon. After winning the right to collect tolls on two main streets in HCM City for nine years, the company decided to go public. Investors lined up from three a.m. to apply and in just one morning, the company reported oversubscription.
The issue fetched CII VND95 billion and it is planning a second issue this quarter to raise another VND300 billion. on the bourse, its shares are trading at a 20 per cent premium now.
The demand for capital to build infrastructure in HCM City is almost insatiable. To develop the Thu Thiem Peninsula alone needs at least VND8,000 billion. No surprise therefore that the city has identified issuing infrastructure shares as a way out of the capital crunch.
