Prime Minister Nguyen Tan Dung said Vietnam's domestic automobile industry protection policies may reveal a lessonor two about business management.
Speaking with the media on the sidelines of the ongoing National Assembly session in Hanoi, Prime Minister Nguyen Tan Dung did not say whether or not he thought auto protection policies had failed.
He did, however, say that the country had experienced some failuresduring its transition to a market economy, which he said were part of the the price we had to pay.
As part of the automobile protection policy, which has been in place for a decade, high taxes have been levied on imported cars.
In return, the car industry investment licenses require investors to increase local content by five percent every year,Dung said.
The current tax, which has been cut twice in the last three months, is still as high as 60 percent.
Meanwhile, car makers have not delivered on their content pledges. Their local content is now ranging from only 2 to 12 per-cent. Car prices in Vietnam are still among the world's highest.
Dung said that because of several problems, even investors who wanted to use domestic material found it easier to profit from importing car parts than from buying them locally.
Unfortunately, we did not prepare any sanctions against them,he said. Thats a lesson for us.
He hoped the current policy of imposing tariffs on import spare parts, as well as car import tax cuts, would encourage local car makers to focus on increasing local content.
Car makers threat
Local car manufacturers have complained about the government's latest import tariff cut, which was welcomed warmly by the general public.
At a conference on car industry development strategy in Hanoi yesterday, representatives from car companies continued to protest the opaquetax policy, saying it only encouraged car importers.
General Director Nguyen Thanh Giang of the Vietnam Engine and Agricultural Machinery Corporation blamed the tax policy for hindering car industry development.
He accused the Finance Ministry of abusing its power to freely maneuver the policy in a harmful way to businesses.The ministry had not consulted car manufacturers before reducing car import duties, he added.
The unclear tax policy is leaving car manufacturers in the lurch,Giang said.
He called for the government to adopt flexible policiesto keep the domestic car industry alive, otherwise we'd rather import cars,he said.
Mercedes-Benz Vietnam Chief Executive Officer, Udo F. Loersch, echoed Giangs threat of halting production and turning to importing cars.
Their opinion was greeted with consent from representatives of other car companies who stressed the need for a clear tax change roadmap.
Stuck in the middle
The director of the Finance Ministrys Tax Policy Department, Ha Huy Tuan, denied the car makers' claims.
All tax policies have been based on existing strategies to develop the car industry and infrastructure,he said. We consulted responsible agencies before adjusting tariffs.
Deputy Minister of Industry and Trade Do Huu Hao admitted that the policy-makers were stuck between a rock and a hard place.
After hearing opinions encouraging lower car import taxes, Hao said the country would then have to suffer from traffic congestions for at least five years while infrastructure got up to speed.
Battling traffic congestion and pollution could cause cost hundreds of billions of dong every year.
Others suggested developing a road system first and cutting taxes later.
But this way,Hao said, the development of car industry would be hampered.
He admitted that the protection policy had not achieved its goals.
Car prices in Vietnam would not decrease soon enough, he said.
We will only see prices decrease when the market grows stronger and more competitive with more cars available,he concluded.
Inflation overshadows economic growth, say NA deputies
Policy makers and car industry insiders ask what is better for development: the countrys longstanding domestic car protection laws or recent moves to cut auto import taxes?
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