Car imports still face red light after Vietnam refuses to budge on legislation

By Bui Hong Nhung   July 4, 2016 | 11:37 pm PT
Car imports still face red light after Vietnam refuses to budge on legislation
Photo by Hau Pham
A five-year-old law has marginalized the majority of local car importers.

Business requirements that make it difficult for local traders to import cars from foreign manufacturers are unlikely to be removed despite a recent review.

In 2011, the Ministry of Industry and Trade introduced Circular 20 that included two conditions local firms need to fulfill to import cars.

One of the conditions specifies that Vietnamese firms are required to have either a proxy or a contract with car producers so that they can bring into Vietnam.

However, it’s impossible for most Vietnamese firms to follow as each manufacturer selects only one representative in Vietnam to distribute their vehicles. As a consequence, many firms face a dilemma when an order is made and money is paid, and many have gone bankrupt or changed to another line of business.

New draft about business conditions: nothing new

At present, the Ministry of Industry and Trade has completed a new draft law to boost the development of private businesses. However, it hasn't cut the provisions that involve proxies and contracts for car traders.

The government news portal quoted Tran Thanh Hai, deputy head of the Import and Export Department under the ministry, saying that removing the requirements in Circular 20 will hold back the domestic car manufacturing industry, which has a specific development plan approved by the then Prime Minister Nguyen Tan Dung.

Hai added that in 2018, tariffs on imported cars among Southeast Asian members will be abolished. Should the ministry loosen conditions for car traders, there will be a surge in car imports, which could exacerbate the already serious problems of pollution and traffic congestion.

At the same time, the increase of car imports will drive the country into a trade deficit, and cars are not listed as a top import priority.

“The ministry really wants to help Vietnamese companies resolve their dilemma. However, we can’t just cancel Circular 20 because it would will lead to chaos on the car market,” Hai said.

Local firms cry out

In response to the new draft by the ministry, the Vietnam Chamber of Commerce and Industry claimed that the provisions in Circular 20 have created an unfair advantage for some car importers.

These people often act as middlemen, buying for other firms that wish to import cars into Vietnam. This has distorted the car market and forced customers to pay more for cars.

The Ministry of Justice has also sent a document to the government, voting against Circular 20.

Since the circular came into effect five years ago, the Ministry of Industry and Trade has continued to issue papers allowing car traders to import cars under contracts signed before 2011.

However, one business said that it still has a $6-7 billion deposit “stuck” in the hands of overseas manufacturers. Another complained that authorities only allow them to import the models outlined in contracts signed more than five years ago, which are either no longer in production or outdated. The company added that the ministry, in fact, hasn't helped them at all.

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