Businesses Fail to Benefit from VJEPA

Vietnam-Japan Economic Partnership Agreement (VJEPA) has opened the door for Vietnamese businesses to enter Japanese market with tax reduction in 10 years for 92 percent of commodities or nearly 10,000 tax rates. However, a year after the enforcement, Vietnamese businesses still fail to benefit fully from VJEPA.

No breakthrough in export

VJEPA benefit can be seen in tax reduction for industrial products down from 0.58 percent in 2008 to 0.5 percent in 2009 and 0.4 percent in 2019. Meanwhile, garment with 1978 tax rates reduced from 7 to 0 percent, and leather and footwear down to 0 percent in 5-10 years. Similar tax reduction is also applied to wood based products, machines, chemicals.

According to Ministry of Industry and Trade, the two-way trade value between Vietnam and Japan in 2009 was approximately US$16 billion. However, it falls short of the expectation when 86 percent of commodities can enjoy VJEPA tax reduction .

Mr. Le Quang Lan, Deputy Director of Department for Multilateral Trade Policy, Ministry of Industry and Trade, explained that the insignificant increase in two-way trade value is due to the fact that tax reduction has not been applied to Vietnamese agricultural products as Japan continue the protection on these commodities. It will take longer time for tax reduction, for instances, 5-7 years for fruit and 15 years for tea and coffee to get 0 percent tax rate.

Furthermore, Japan also applies high standard and food safety barrier to agricultual products, the main exports of Vietnam.

While tax reduction is applied to garment, footwear, aquatic products from December2008, only importers and not exporters can enjoy 0 percent tax rate.

Mr. Lan also disclosed that VJEPA tax rates are equal or even higher than that of AJCEP (ASEAN-Japan Economic Partnership) enforced earlier. For examples, VJEPA gives 0 percent tax rate only to exported garment with complete certificate of origin of materials.

Regarding this problem, Mr. Le Tien Truong, Deputy Director General of Vinatex said that Vietnamese exporters have to go to Japan and find correct suppliers in the tax reduction list. It is most complicated when 70 percent of materials are imported from Taiwan, Japan, ASEAN and especially China.

No real reduced prices

Though tax reduction is applied to equipment and consumers’ goods such as machines, electronic parts, steel, automobile, gament materials, Vietnamese consumers get little from the tax reduction. Mr. Lan said that VJEPA tax rate to be applied in March 31, 2010 is even higher than those applied to Japanese exports to China and ASEAN by 1-4 percent. While Vietnam can import the same products from China with tax rate of 5 percent less. Therefore, instead of importing directly from Japan, Vietnamese businesses import those products from ASEAN and China. Mr. Lan believes that Japanese exports to Vietnam can only be competitive in 2012 when tax rates are equal with other countries in the region.

In spite of continued promotion campaigns and “Golden sale days” in big cities, Japanese electronic equipment is rarely on display in supermarkets and commercial centres. Mr. Hoang Ngoc Hai, Director of Pico Plaza, said that as tax reduction on Japanese electronic equipment is insignificant or non-existent, Vietnamese businesses could not import them in big quantity when the prices are higher than customers’ budget.

The prices of automobiles and other De luxe products remain unchanged and continued high tax rates keep down the purchasing power.

Posted by VBN on Jan 17 2010. Filed under Int'l Cooperation. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry