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.
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