The planned warm talk between the Ministries of Finance, Industry and Trade, and Transport on October 26 turned out to be a debate when the parties imputed the blame to each other. As a result, the main goals of the meeting, assessing the automobile industry development, and discussing measures to ease the car price fever, were not fulfilled.
On the morning of October 26, the ministries called an urgent meeting with all automobile manufacturers to ask why they had not cut selling prices despite a lot of preferences.
Deputy Minister of Industry and Trade Do Huu Hao opened the meeting by releasing the preliminary report about the automobile industry development in the last three years.
Mr Hao said that only bus and van manufacturers had successfully followed the plans on vehicle localisation, while car production still did reach the desired effects, though the government has been protecting local production.
According to Mr Hao, many experts think that it is necessary to cut taxes (import, luxury, VAT) to pave the way for more imports to enter the market. Higher imports will put hard pressure on local manufacturers, forcing them to lower selling prices. Vietnam will have to accept traffic jams for 2-5 years to wait for infrastructure to develop. If so, Vietnam will have a developed automobile industry, and Vietnamese people will have opportunities to own cars.Meanwhile, others said that in the current circumstances, Vietnam needs to develop infrastructure first, and then open its doors for imports.
We, when compiling the automobile industry development programme, referred to the infrastructure development programme of the Ministry of Transport. Therefore, the blame on us for the underdevelopment of the automobile industry proves to be unfair,said Mr Hao.
Director General of the Vietnam Engine and Agricultural Machinery Corporation (VEAM) frankly said that the Ministry of Finance was the main culprit in creating such a small and underdeveloped market.
He said that MOF had abused power when adjusting tax policies continuously, causing disadvantages for enterprises. MOF continuously reduced tax from 90% to 80%, to 70% and then 60%, while it did not consult enterprises and relevant ministries.
Please tell us if we need to continue building up the automobile industry? If the answer is no, please let us know, so that we do not make investment in production any more and shift to import cars to sell domestically. If the answer is yes, give us flexible policies so that we can exist,Mr Giang said.
Bui Ngoc Huyen, Director General of Xuan Kien Investment and Assembling Company, agreed that MOF should have a transparent roadmap on tax policies adjustment. If MOF changes tax rates so frequently, no foreign investor will dare make investment in Vietnam.
Mercedes Benz Vietnams Director General Udo Loersch said that his company planned to install a modern production line in Vietnam, but the plan has been delayed due to tax. He said that when the import tax on CBU cars changes continuously and the tax on car parts remains unchanged, automobile manufacturers suffer losses and they cannot lower selling prices.
A representative from GM Daewoo warned that if Vietnam opened the market too soon to import cars, it would pay a heavy price as other countries did. He said that no one could say that the automobile industry development strategy and tax policies were wrong. The problem is that all the policies must be carried out in a clear way and under the roadmap which has been given to investors.
A representative of the Ministry of Finance, Director of the Tax Policy Department Ha Huy Tuan kept calm before the criticism. Mr Tuan said that the tax policy had been set up to serve the strategy on automobile industry development drawn up by the Ministry of Industry and Trade, and the strategy on infrastructure development strategy drawn up by the Ministry of Transport (MOT).
Meanwhile, Deputy Director of the Science and Technology Department under MOT Chu Manh Hung said that the domestic market with more than 80mil people was big enough for all car joint ventures to make profit.
The infrastructure has sufficient capacity to satisfy the current circulating volume of cars,Mr Hung said, adding that it only depends on the Ministry of Industry and Trade to fulfill the automobile industry development strategy.
The meeting ended at 11.30 am with no solution suggested for automobile industry development.
Automobile tax policies since 1991
* 1991-2001: import tax on CBU imports was maintained at 100%, while the tax on car part imports under the modes of CKD and IKD was maintained at low levels, 3-25%
* Since 2002: The government allows the import of less than 9-seat CBU vehicles. Since May 2006, the government allows the importation of used cars
* The import tax on brand new imports was lowered from 100% to 90% in November 2005, to 80% in January 2007, 70% in August 2007, and 60% in October 2007
* The import tax on used imports was twice lowered since May 1, 2006, and the rate now is 20% lower than the initial rate
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