VIETNAM ECONOMIC HIGHLIGHTS: WIDER TRADING BAND, IMPORT

UNCLAS HANOI 000743 SIPDIS SINGAPORE FOR TREASURY TREASURY FOR SCHUN USTR FOR DBISBEE STATE FOR EEB/IFD E.O. 12958: N/A TAGS: EFIN ETRD EAID ECPS ECON EAGR VM SUBJECT: VIETNAM ECONOMIC HIGHLIGHTS: WIDER TRADING BAND, IMPORT TAX HIKES AND NEW PRICE CONTROLS ¶1. This cable is part of an ongoing series on developing economic stories in Vietnam. SECURITIES COMMISSION WIDENS SHARE TRADING BAND -------------- -- ¶2. The State Security Commission (SSC) widened the daily trading band on the Ho Chi Minh City Stock Exchange to +/-3 percent from the previous 2 percent and the band on the Hanoi Securities Trading Center to +/- 4 percent from the previous 3 percent, effective on June 19. Prior to the widening, the market had shown some slight signs of recovery, with the Ho Chi Minh Stock Exchange's VN Index gaining for four consecutive days. The band adjustment, while welcomed by traders and analysts, did not have immediate positive effects and the market closed down at 366 on June 20. IMPORT TAX HIKE ON COSMETICS, MOBILE PHONES AND AUTO PARTS -------------- -------------- ¶3. On June 12, the Finance Ministry raised tax rates on the following categories of imported goods: cosmetics (from 30 to 36 percent),mobile phones (from 5 to 8 percent) and automotive parts (from a range as low as 10 up to 29 percent),effective June 20. This increase is part of the Government of Vietnam's (GVN) effort to curb the ballooning trade deficit. FIGHTING INFLATION WILL REMAIN TOP PRIORITY IN 2009 -------------- -------------- ¶4. Prime Minister Nguyen Tan Dung has ordered ministries, governmental bodies, provincial authorities and state-owned enterprises to draft the socio-economic development plan for 2009. The PM stressed that the priorities for next year will remain focused on curbing inflation, stabilizing the macro-economic situation and ensuring social security and sustainable growth. He estimated that GDP in 2009 will increase by 7 - 7.5 percent, similar to the revised growth numbers for 2008. The PM also emphasized the importance of attracting and rapidly disbursing ODA and FDI capital and combating corruption. GVN INCREASES PRICE MANAGEMENT TO CURB INFLATION -------------- --- ¶5. As part of its efforts to curb inflation and stabilize prices, the GVN has ordered stronger supervision over prices of some "politically and economically sensitive" goods. The list of 14 products subject to price management now includes refined sugar, milk, pesticides, veterinary medicine, hard-seat train tickets and some animal feeds. In addition, the new decree also provides more measures by which the GVN can intervene to stabilize prices, including requiring certain companies to report regularly input costs and sales prices, prohibiting prices above the benchmark price set by the GVN and imposing administrative penalties on violators. ALOISI