What to do to develop Vietnam s automobile industry when implementing FTAs

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Overview of the discussion. Photo: Quang Hung
Overview of the discussion. Photo: Quang Hung

Attending the discussion were speakers and guests: Dr. Le Huy Khoi, Deputy Director of the Institute for Industry and Trade Strategy and Policy Research (Ministry of Industry and Trade); Mr. Duong Ba Hai, Deputy Head of Export Tax and Import Tax Division, Department of Tax, Fee and Charge Policy Supervision and Management (Ministry of Finance); Ms. Truong Binh An, Deputy Director of Hai Phong Customs Department.

The discussion also had the participation of representatives of departments and agencies under the General Department of Customs; Customs Departments of provinces and cities: Customs Departments of Hanoi, Ho Chi Minh City, Bac Ninh, Ha Nam Ninh; representatives of the Vietnam Automobile Manufacturers Association (VAMA) and about 100 production and business enterprises in the field of automobile industry.

Speaking at the opening of the seminar, Editor-in-Chief of Customs Magazine Vu Thi Anh Hong said that in recent years, Vietnam has made efforts to build an automobile industry with the goal that production replaces import and gradually moving towards export. During the development process, Vietnam’s young automobile industry faces many difficulties and challenges, especially when implementing FTAs ​​that Vietnam participates in and commits to.

With the determination to remove bottlenecks for Vietnam’s auto industry, the Government issued many preferential policies on taxes, fees and charges to encourage the development of the auto industry and auto support industry as well as effectively implement commitments in FTAs ​​that Vietnam has participated in.

Specifically, regarding import tax policy, according to the Automobile Components Import Tax Incentive Program: In case the enterprise meets the conditions of minimum output and other conditions (on components, car models, emission standards, incentive review periods, documents, procedures), the preferential import tax rate of 0% will be applied to components imported for domestic automobile production and assembly. This tariff incentive program is applied for 5 years (from 2018 to the end of 2022), then extended by the Government until 2027.

Regarding the Tax Incentive Program for the automobile support industry in the period 2020-2024: raw materials, supplies and components that cannot be produced domestically can be imported to produce products in the list of Supporting product industries which are prioritized to develop for the automobile manufacturing and assembly industry to supply components and spare parts for automobile manufacturing and assembly enterprises that are eligible for 0% preferential import tax.

Regarding special consumption tax (SCT) policy, the National Assembly has passed the Law amending and supplementing a number of Laws, including the Law on Special Consumption Tax dated January 11, 2022, reducing the SCT tax rate for battery-powered vehicles compared to gasoline and diesel vehicles; Extending the deadline for paying special consumption tax for domestically produced and assembled cars, applicable until the end of 2023.

In addition, there is a policy of reducing 50% of registration fees for domestically produced and assembled cars in several stages in 2020, 2021, 2022, 2023 and is being considered for 2024.

In addition, there are other preferential policies on corporate income tax, land use for the automobile industry, etc.

Editor-in-Chief of Customs Magazine Vu Thi Anh Hong spoke at the opening of the seminar. Photo: Quang Hung
Editor-in-Chief of Customs Magazine Vu Thi Anh Hong spoke at the opening of the seminar. Photo: Quang Hung

“On the Customs side, along with promoting reform of administrative procedures to modernize customs, create favorable conditions for import and export activities in general, for businesses importing components, raw materials and supplies to produce and assemble cars and automotive supporting industry products under the Tax Incentive Program and the Auto Supporting Industry Tax Incentive Program, the General Department of Customs always closely monitors and directs the Departments, Specialized Departments, and local Customs Departments quickly deploy and handle related procedures such as: procedures for registering to participate in the Program, procedures for checking production facility conditions, and customs declaration procedures, customs, tax refund procedures, etc. This makes an important contribution to reducing time, procedures, and actively supporting production and business activities of the above-mentioned automobile enterprises…”, Ms. Vu Thi Anh Hong emphasized.

The above policies are considered one of the strong solutions to promote Vietnam’s automobile industry in recent times. Many automobile manufacturing enterprises have developed quite rapidly in recent years, initially affirming their position in the domestic automobile market.

However, according to many experts, the development of the automobile industry, in addition to taxes and fees, also needs many other related solutions and policies such as: credit, a list of industrial products supporting automobiles, level of technology, technical content, technology transfer, copyright costs, quality, environmental protection. And especially the internal resources of automobile businesses in Vietnam.

Vietnam’s automobile industry developed later than other countries in the region like Thailand, Indonesia or China, with the advantage of being first-mover countries, with technology and labor developed at a higher level, taking advantage of economic advantages that lead to lower production costs, they successfully dominate the Vietnamese market under the conditions of implementing FTAs, which always create great pressure if Vietnam is not determined to develop the auto industry in a sustainable way, and does not have appropriate solutions to develop this industry in the future.

Speakers, guests, and businesses attended the discussion. Photo: Quang Hung
Speakers, guests, and businesses attended the discussion. Photo: Quang Hung

Facing opportunities and challenges, Vietnam has had long-term strategic solutions for the automobile industry through the “Strategy for developing Vietnam’s automobile industry to 2025, vision to 2035” (approved in Decision No. 1168/QD-TTg dated July 16, 2014 of the Prime Minister); Decision No. 229/QD-TTg dated February 4, 2016 of the Prime Minister regulating mechanisms and policies to implement the Vietnam Automobile Industry Development Strategy; Decree No. 116/2017/ND-CP dated October 17, 2017 regulating conditions for production, assembly, import and business of automobile warranty and maintenance services, etc.

Implementing the tariff reduction roadmap under FTAs ​​(EVFTA, CPTPP), etc how will Vietnamese automobile industry be affected? Do the policies of the Government, relevant ministries and branches create favorable conditions and provide timely support? What are the efforts of domestic automobile manufacturing and assembly enterprises?

To answer those questions, the discussion focuses on exchange and interaction between guests who are experts, managers, businesses operating in the fields of import, automobile manufacturing and assembly, and enterprises of industrial support around the issues: Assessing the current status of Vietnam’s automobile industry development strategy in the context of implementing free trade agreements (EVFTA, CPTPP, etc), advantages and disadvantages; Identify bottlenecks and find solutions to promote the development of Vietnam’s automobile industry to implement free trade agreements (EVFTA, CPTPP, etc); Tax and fee policies as leverage to develop Vietnam’s automobile industry; The role of Customs in facilitating trade and fair competition; Prevent and combat commercial fraud in automobile import activities.

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