~ Le Viêt Nam, aujourd'hui. ~
The Vietnam News

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[Year 1999]
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Hanoi eyes gradual cut in business costs

HANOI - Vietnam aims to cut business costs for foreign firms gradually over the next few years to lessen the impact on the state budget and government utilities, a senior official said on Tuesday.

Nguyen Nhac, vice minister for Planning and Investment, said in an interview the government would strive to improve the country's competitiveness, but insisted policies needed to guarantee social and economic stability.
He also defended a rule that from July 1 will force foreign firms to raise local salaries in line with any consumer price index rise of 10 percent since a worker's last wage adjustment. Inflation is expected to run at about nine percent this year.
Nhac was speaking a week after the communist-ruled country announced measures aimed at cutting costs for foreign firms, a move welcomed in principle by investors who have long complained about Vietnam's expensive business environment.

The essence of the new measures, which mainly take effect from July 1, is to begin dismantling discriminatory pricing for foreigners and the practice of quoting services and local wages in U.S. dollars.
``We understand the issues and have a plan of action. We are not going to turn our back on foreign investors,'' Nhac said.
``Our aim is to increase Vietnam's competitiveness and implement unified prices in dong for foreign and local firms.''

He said international telephone call charges and electricity costs would be reduced further in subsequent years. Revisions would also be made to increase the tax-free threshhold for local and foreign workers.
The government planned future announcements dealing with collateral for loans and real estate businesses, he added.
But Nhac said it was hard to cut costs quickly in a country that saw a big drop in foreign investment flows last year.
Referring to higher ticket prices foreigners pay to fly Vietnam Airlines, he said: ``If we adjust this too quickly then Vietnam Airlines will go bankrupt.''

Responding to confusion among businessmen about whether all foreign entities would calculate local wages in dong currency from July 1, he said the Ministry of Labour, War Invalids and Social Affairs would issue a circular to clarify.
Some foreign lawyers have said it was unclear if that measure applied to representative offices, branches and companies operating under Business Cooperation Contracts.
He said foreign firms must look after their local staff, hence the rule to keep wages in line with consumer prices.
Vietnam would not let its wage earners suffer in times of economic crisis, he added.

``This is the social responsibility of the foreign company,'' he said. ``We will try to maintain social and economic stability.''
Nhac said unlike other countries, Vietnam was unable to spread its foreign investment message via international advertising because of the costs.

Reuters - March 31, 1999.