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December 2, 2008

Vietnam to help businesses through tax cuts
Vietnam may lower business taxes and cut interest rates on consumer loans to help companies weather the global financial crisis, Reuters quoted government officials as saying Monday.

At a business-government forum, Finance Minister Vu Van Ninh said his ministry would consider a proposal by the business community to waive the 10 percent withholding tax on interest payments to offshore lenders.

Waiving the tax would help borrowers reduce investment costs and make their projects more attractive to lenders, said Ashok Sud, Chief Executive of Standard Chartered in Vietnam, Laos and Cambodia, and head of the bank working group of the Vietnam Business Forum.

Meanwhile, the State Bank of Vietnam, the country's central bank, would adjust the interest rate ceilings on consumer lending, now capped at 150 percent of its base rate to make the loans viable, Deputy Governor Nguyen Van Binh said.

Business people called on the communist government to boost exports, improve infrastructure and deal with corruption to ease the burden from the global economic slowdown.

They said exports, the value of which is estimated to be worth the equivalent to 85 percent of Vietnam's gross domestic product this year, would slow in 2009 due to lower consumer spending in the United States, the European Union and Japan, which together generate 61 percent of export revenues.

Hanoi has projected export growth to more than halve to 13 percent next year from an expected 32 percent rise in 2008.

"By increasing productivity and reducing the costs of doing business, Vietnam can maintain and improve export growth," Michael Pease, Chairman of the American Chamber of Commerce told government officials, diplomats and executives.

The State Bank of Vietnam's Binh said the government would also approve this month a directive detailing bank mergers and the central bank has assigned a working group to cooperate closely with foreign banks in setting up wholly foreign-owned units in Vietnam.

More than 80 foreign and Vietnamese banks are doing business in the country, a quarter of which are undercapitalised and may not be stable, said Standard Chartered's Sud.

Ninh's deputy, Tran Xuan Ha, said the Finance Ministry has sought government approval to expand foreign ownership in unlisted companies to 49 percent, on par with those listed on the main exchange .VNI. He gave no timeframe for an approval.

Replying to a request from stock investors to delay personal income tax on securities investment, Ha affirmed that the tax was to be imposed as from Jan. 1, 2009 only on investors who make profits and that a delay of the tax needed parliament approval.

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