NATIONAL ASSEMBLY'S ECONOMIC AGENDA PURSUES TRANSPARENCY

UNCLAS SECTION 01 OF 02 HANOI 000746 USTR FOR DBISBEE SIPDIS E.O. 12958: N/A TAGS: ECON EAID EFIN EINV KCOR KPRV PGOV VM SUBJECT: NATIONAL ASSEMBLY'S ECONOMIC AGENDA PURSUES TRANSPARENCY AND COMPETITIVENESS REF: A) Hanoi 530 B) Hanoi 482; C) Hanoi 738 HANOI 00000746 001.2 OF 002 ¶1. (U) Summary: Vietnam's 12th National Assembly jumped right into the debate over how to improve the country's macroeconomic situation, grilling ministers and publicly grumbling about the country's economic management. In the end, the Assembly fell in line behind the Government's macroeconomic policies. Significant laws that the National Assembly passed this session include the so-called Law on Laws, which reorganized the enactment of legal documents, and new rules governing real estate, taxation, the hydrocarbons sector, nuclear energy and expanding the size of Hanoi. The Assembly held its 12th session from May 6 to June 3, 2008 in Hanoi. End Summary. JUMPING INTO THE ECONOMIC DEBATE -------------- ¶2. (U) Like much of the country, the members of the 12th Session spent much time discussing the current economic situation. The Prime Minister opened the session by making general remarks, but did not leave time for questions at the end of his speech. NA members then grilled the ministers of Industry and Trade, Finance, Planning and Investment, Transportation, Labor and the State Bank over inflation and macroeconomic stabilization measures (Ref A). Many were uncharacteristically vocal with concerns that inflation could reverse gains in poverty reduction, even going to the press with complaints that the government had "abandoned" its hallowed growth and poverty reduction targets. JOINING THE FIGHT AGAINST INFLATION -------------- ¶3. (U) Despite the grumblings, the NA still agreed to the Government of Vietnam's (GVN) proposal to lower the GDP growth rate to 7 percent from its earlier target of 8.5-9 percent. Bowing to the realities of double-digit inflation, the NA also agreed to discard the old "inflation-below-growth-rate" target, adopting instead the general goal of "gradually" reducing price increases. NEW ECONOMIC LAWS -------------- ¶4. (U) In addition to validating the GVN's economic targets, the National Assembly approved eleven laws, including laws on real estate, taxation, hydrocarbons, nuclear power and the enactment of legal documents. All eleven laws will become effective on January 1, 2009. The Assembly held its 12th session from May 6 to June 3, 2008 in Hanoi. LAW ON LAWS: MUCH-NEEDED REGULATORY TRANSPARENCY -------------- - ¶5. (U) One of the most anticipated laws in this session was the Law on Promulgating Legal Enactments (commonly known as the Law on Laws),which aims to simplify the way that Vietnam enacts laws and regulations (which now consist of more than 20 types). The Law on Laws encourages transparency and public participation in the law-making process, requiring, for example, each drafting agency to publicize draft laws online for 60 days for public comment. After that period, all legal enactments become effective 45 days after the date they are signed or enacted. ¶6. (U) The Law on Laws phased out Prime Minister Directives, Ministerial Decisions and Directives and Inter-Ministerial Resolutions. Although it retained the commonly-used inter-ministerial circulars, it specifically discourages their use since they lead to ambiguity and overlapping responsibilities among issuing authorities. According to the new Law, Vietnam's legal documents will be the Constitution; ordinances, laws and resolutions by the National Assembly; orders and decisions of the President; Government decrees; Prime Minister decisions; Supreme Court resolutions and circulars; ministerial circulars; State Audit decisions and laws issued by provincial authorities. TAXATION -------------- ¶7. (U) The NA passed a new revised Law on Corporate Income Tax which, among other things, reduced the tax burden on most businesses from to 28 to 25 percent (except for the hydrocarbons sector which was placed on a different tax rate of 32 to 50 percent). Assembly delegates debated the appropriate rate publicly, with many of them making the case that Vietnam had to match or best the corporate tax rates of neighboring countries in order to remain competitive among HANOI 00000746 002.2 OF 002 prospective investors. Individuals and small family businesses will be subject to the new Individual Income Tax Law from January 1, ¶2009. OIL AND GAS -------------- ¶8. (U) The NA amended the Oil and Gas Law to define more clearly state management functions over the activities in the oil and gas sector. One amendment gave preferential tax treatment to investments in coal and gas projects and authorized the Prime Minister to approve project extensions beyond the current 30 year maximum. Other amendments pursue clearer regulations, placing hydrocarbons contracts under the responsibility of the Ministry of Industry and Trade, and stating more clearly the rights and obligations of parties involved in oil and gas contracts. NUCLEAR ENERGY -------------- ¶9. (U) The new Law on Nuclear Energy aims to promote the safe use of nuclear energy, and is believed to pave the way for the construction of a nuclear power plant in Vietnam to be built in 2012. FOREIGNERS GAIN REAL ESTATE FOOTHOLD -------------- ¶10. (U) The National Assembly also passed a resolution to allow foreigners to buy residential homes in Vietnam. The resolution limits ownership to foreigners who are involved in direct investment projects in Vietnam, high-skilled laborers working in Vietnam and those married to Vietnamese citizens and residing in Vietnam, among others. Approximately 16,000 out of 81,000 foreigners living and working in Vietnam qualify under the above criteria. Eligible buyers will be allowed to purchase only the structures but not the land. The properties must be occupied by the owners, they cannot be used as investments and the rights expire after 50 years -- after which the foreigners must sell or donate the dwellings. BULGING HANOI -------------- ¶11. (U) The NA approved a plan to enlarge the capital city of Hanoi by 3.34 million square kilometers (1.29 million square miles) at the expense of neighboring provinces, effective August 1, 2008. This is the fourth time the government has adjusted Hanoi's administrative borders, with previous expansions in 1961 and 1978 and a contraction in 1991 (Ref B). ¶12. (U) The expanded border of Hanoi will encompass the current capital city plus more than 219,000 hectares of Ha Tay, Vinh Phuc, and Hoa Binh provinces. With the added territory, Hanoi's population will increase from 3.5 million to over 6.2 million. During NA sessions televised live across Vietnam, several deputies took the Government to task for not doing more groundwork and feasibility studies on the project beforehand and for insufficient consultation with people who will be affected by the move. In the end, however, an overwhelming majority of deputies voted in favor of expanding the capital. According to Prime Minister Nguyen Tan Dung, the adjustment will allow Hanoi to improve urban planning and administration. FOR THE NEXT SESSION -------------- ¶13. (U) The National Assembly also discussed seven other draft laws to be considered during the next session, in October, including laws on Biodiversity (to deal with genetically modified products), Citizenship (to allow dual citizenship),Health Insurance, Road Transportation, High Technology, Execution of Civil Rulings, Government Civil Officials and on the Special Consumption (luxury) Tax (Ref C). ALOISI