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Cablegate: National Assembly's Economic Agenda Pursues Transparency

VZCZCXRO1801
PP RUEHCHI RUEHDT RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHNH RUEHPB
DE RUEHHI #0746/01 1760938
ZNR UUUUU ZZH
P 240938Z JUN 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 8061
INFO RUEHHM/AMCONSUL HO CHI MINH 4884
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

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

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