Sourcing in Vietnam’s blog

The Finance Ministry has issued a circular under which local enterprises will enjoy value added tax exemptions for goods exported to foreign markets

However, the enterprises will be subject to export and import tariffs as well as corporate income taxes.

They will also comply with the double taxation avoidance agreement in countries with which Vietnam has signed agreements.

Under the circular, enterprises will pay duties on equipment and materials exported as assets for overseas projects. The corporate income tax (CIT) rate will be 25%.

If enterprises incur losses or their profits abroad do not reach the taxable threshold, local firms will only have to submit financial reports to relevant departments to calculate CIT. The losses will not be deducted from profits earned in the country.

In 2009, local enterprises invested US$7.2 billion in 457 project in 50 countries and territories, 43% higher than last year’s plan and 14% higher than the 1989-2008 period.

The European Union is looking to an early start of negotiations over a free trade agreement with Vietnam to boost bilateral trade and resolve trade issues between the two sides.

Sean Doyle, ambassador and head of the Delegation of the European Commission to Vietnam, said the EU’s anti-dumping tariffs on leather shoes imports from Vietnam had been an issue for four years. He pointed to the FTA as one of the resolutions to this major trade issue.

“We will have a solution to the issue if everything with FTA negotiations starts soon. We want it to start as soon as possible, even next month or in two months’ time if possible,” Doyle told the Daily before leaving a seminar organized by the European Chamber of Commerce in Vietnam (EuroCham) in collaboration with the EU in HCMC last week.

The EU earlier voted for a 15-month extension of 10% tariffs on leather shoe imports from Vietnam despite protests by certain European business associations including EuroCham.

Doyle explained industry in Europe was low in terms of exports as the world’s market was down, and a number of EU member states coped with fiscal and jobless issues. But, the European economy was pulling out of the global crisis.

Doyle said the EU now wanted to put an emphasis on FTA negotiations with Vietnam for the interests of both sides. He calculated it normally took about two years to complete such talks, through which anti-dumping disputes can be solved.

It is more difficult for the EU to reach an FTA with all ASEAN countries because the ASEAN members have different shopping lists and priorities, he said, so the EU is taking a country by country approach in a long-term perspective of a single regional agreement.

He said the idea of expanding trade was not for somebody to win or lose. “The more trade means more people will benefit… The target is to generate more trade.”

He said an FTA was what the EU had been working for years to get the opportunity for the countries like Vietnam and China to become attractive markets. Under such an agreement, the EU will reduce its import tariffs and want the countries it has trade negotiations with to reduce theirs.

“This is what everybody has been doing to set up a world trade system to give opportunities to the countries that have potential,” Doyle said. He added Vietnam had huge potential for growth and that it was good to see what was happening in this country.

One of the big opportunities for Europe now is selling and investing in Vietnam and China. Doyle said companies that were coming to invest in China also wanted to stay in the promising Vietnamese market for investment because they did not want to focus their investments on a single destination.

“This is a big advantage for Vietnam. So, anything that Vietnam can do is to make it more attractive to investors, from Europe and elsewhere,” Doyle said after touching on the China plus one model that European investors now preferred.

Source: VietNamNet/SGT

One of the world’s top rice producers, Vietnam said it planned to export 5.5 million tones of rice this year.

According to country’s Agriculture and Rural Development ministry, rice exporters have signed contracts to export 2.38 million tones of rice including contracts to export over one million tones of rice to Philippines so far.

The Ministry recently said that in 2010, agro-forestry-fishery export would bring a turnover of $16 billion, increasing $1 billion against 2009’s figure.

In the first quarter, the total quantity of rice to be exported would be about 1.5 million tones.

Philippines has lately announced that Vietnam has won the third phase bidding session in December 2009 with total rice volume of 586,554 tonnes at price of $664.9 per tonne, to be delivered at Philippines’ seaport. The delivery period will be from March to June 2010.

Source: Commodity Online

Vietnam exported US$7.5 billion in apparel and textiles to mainly the United States and Europe between January and October 2009, according to the Vietnamese General Statistics Office.

The Vietnamese government estimated the apparel export market to reach US$9.3 billion in 2009, up 3% from the previous year. Vietnam’s apparel exports to the US increased quickly as the US government in early 2009 stopped monitoring Vietnamese apparel coming into the country.

After the monitoring ended, more US apparel companies felt comfortable about sourcing in Vietnam. Vietnam is the second largest supplier of apparel to the United States, following China.

The US imported US$5.4 billion in apparel and textiles from Vietnam during the one-year period ending August 31, 2009, up 3.7% over the same period of the previous year. China shipped apparel valued at US$32 billion to the United States for the 12 months ending August 2009.

Source: Journal for Asia on Textile & Apparel

The leather shoe export turnover of Viet Nam in the first 11 months of this year reached US$3.57 billion, a 16 per cent year-on-year decrease.Based on this turnover, the country’s shoe exports for December are projected to be around $300 to 400 million, making an annual total of roughly $4 billion, which is much lower than the originally targeted $4.7 billion.

Diep Thanh Kiet, deputy chairman of the Viet Nam Leather and Footwear Association (Lefaso) said that the sector’s exports had reduced by 14 to 15 per cent while the decrease of the country’s exports as a whole had been 15 per cent.

Explaining the situation, an official from the ministry said the sector had faced stiff competition from Brazil, India, Bangladesh and Cambodia. Many investors had also moved their factories to Cambodia due to the fact that the country had been granted the EU’s Generalised System of Preferences (GSP) and did not have an anti-dumping tax for itsleather-capped shoes.

Sharing his ideas, Kiet said Viet Nam’s leather shoe businesses had been subject to the anti-dumping tax of 10 per cent imposed by the EU since 2007.

At the beginning of the year, the EU removed the industry from it’s GSP causing the export tax to rise to 16 per cent for a market that makes up 75 per cent of the sector’s total export turnover.

According to experts, at this tax level, the country’s leather export turnover this year would reduce by at least 30 per cent.

They said that the sector needed a united effort, something that had been lacking in previous years.

He added that in this context, the expansion of the domestic market was a bright point in the downturn but the difficulties that hampered the sector’s development would continue to be a hugs challenge next year.

In an effort to improve the sector’s business in the future, the association targeted continued development in both domestic and foreign markets next year.

Under the plan, made-in-Viet Nam footwear would increase it’s domestic market share to 50 per cent, 10 per cent higher than the current level.

However, the target would be a challenge because the lower-income market has been flooded with Chinese goods and foreign brands now occupy the upper-income market.

“An associating model between leather shoe businesses and material producers would reduce the costs of materials. Some enterprises have proposed to set up industrial zones for the model,” he said.

Recently, the Lien Anh industrial zone specialising in materials for the leather shoe and garment industries was launched and is expected to actively contribute to the sector.

Nguyen Thi Tong, general secretary of Lefaso said businesses should find their own key products and suitable market segments.

Tong added that to reduce pressures in export and avoid commercial barriers, businesses should invest in high-tech production lines.

Kiet said the sector needed support from the Government, especially in human resources training.

Leather supply was also a big issue as most of the leather tanning enterprises had stopped their production due to environmental problems.

“Therefore, State support should be given to businesses to improve their technology,” he said.

With an export turnover of $4.8 billion last year, Viet Nam ranked fifth in the world of leather shoe exports. There are over 500 shoe producing enterprises operating in the country, generating jobs for around 600,000 labourers a year.

Source: VietNamNet/Viet Nam News