Laws of Vietnam

In recent years the fight to curb and push back inflation has yielded some results which, however, are not really steady and the danger of the recurrence of high inflation is still latent. Therefore, to curb and control inflation remains one of the important tasks of all branches and levels in the coming period.

To efficiently curb and control inflation we need to apply in a comprehensive manner the following measures: to promote production, reduce production and circulation cost, observe strict economy in expenditure, quickly increase the reserve fund, ensure the major balances of the economy aimed at assuring the projected economic growth rate; at the same time, to step up the renewal of economic management in conformity with the market mechanism under State management in order to constantly improve and develop the positive factors of the market.

That is why, to achieve the objective in the fight against inflation already adopted by the National Assembly, the Prime Minister urges the ministries, branches and localities to urgently carry out the following measures:

1. To concentrate all sources, raise labor productivity, effect strict economization, reduce production cost in order to promote production.

The Ministry of Planning and Investment shall coordinate with the concerned ministries and services to consider supplementing and perfecting the common policy mechanisms on economic management in order to ensure quick and steady growth of the major balances of the economy, to concentrate all sources to promote production with ever higher efficiency; to maintain and readjust the system of State enterprises with a view to more efficient operation, to well arrange the network of goods circulation; to build a volume of circulation reserve strong enough, especially with regard to the essential goods, so that the State can interfere in the market, stabilize prices, create a favorable environment for the enterprises to operate in equality and take part in healthy competition and so that goods can be circulated smoothly from the places of production to the consumers.

2. Measures concerning monetary and credit operations

In 1996 the task of curbing inflation requires that we control the overall instruments of payment in a way suitable to the need of growth of the economy, to keep the maximum increase of the instruments of payment within 21%; and the increase of credit balance within 21-22%; the increase in capital mobilization within 40-45% of which domestic capital shall increase by 19-20%. We shall continue readjusting the interest rates and rates of exchange to make them compatible with the need of socio-economic development in the new period. To achieve the above objectives, the State Bank shall have to closely coordinate with the Ministry of Planning and Investment, the Ministry of Finance and the other related ministries and branches to resolutely focus on the following measures:

a/ To continue developing the market of short term capital, and strengthen the market of treasury bonds. The State Bank shall have to cooperate with the Ministry of Finance to effectively direct the operations of these markets aimed at promoting the economic growth and contribute to the control of inflation especially during the Lunar New Year Festival season.

b/ The State Bank shall closely direct the general instruments of payment as projected; retrieve the due and overdue debts, control the credit levels, control the compulsory reserve norms as prescribed by the Ordinance on Banking, eliminate the treasury bonds in the structure of the compulsory reserve and increase correspondingly the deposits in the accounts of the State Bank.

c/ The State Bank should sum up the experiences in managing the interbank foreign exchange market in order to take necessary measure of readjustment and amendment aimed at meeting the demand in buying and selling foreign currencies among the Banks and the economic organizations. The purchase of foreign exchange by the State Bank can be effected only with a relevant decision of the Prime Minister. To increase the control and inspection and step by step carry out more expeditiously the policy of "spending only Vietnamese currency on Vietnamese territory".

d/ Besides the instruments of direct management of the monetary policies, we need to quickly apply indirect instruments to regulate the market interest rates as well as the monetary circulation, and broaden the non cash payment. Right in the beginning of the year, the State Bank shall monitor and control the implementation by the Commercial Banks of the policy of reducing further interest rates of the loans from the current rates in order to work out a program for continued reduction of interest rates of loans in the second quarter of 1996.

3. Measures with regard to the State budget

a/ To strive to increase revenues, observe strict economization in order to reduce the deficit of the State budget, increase the financial reserve for the first part of the next year. To ensure steady and healthy balance of the State budget is the fundamental measure to contribute to curbing inflation. All branches and levels must consider the direction in budget revenue and expenditure to be their central task.

b/ Along with studying the reform of the tax policy, the Ministry of Finance, the General Customs Department and the People's Committees at all levels shall have to increase their management of revenues and fight against tax losses, ensure correct and adequate collection of taxes as prescribed by law; to coordinate with other branches and levels in closely managing the objects of tax payment, to fight against smuggling and all acts of illicit business and false declaration of turnover as well as all deliberate acts of delay in the payment of taxes; to organize inspection and control of the collection and payment of taxes, to improve the procedures of tax payment and to avoid too complicate procedures for the tax payers.

c/ All Ministries, branches, localities and grassroots should seriously carry out the Directive of the Party Secretariat and the Resolution of the National Assembly on observance of thrift, fight against wastefulness and corruption and smuggling; to manage and use the State budget capital for the right purposes and with high efficiency and take responsibility for any spending at variance with the regime, causing losses of property and any acts of wasteful and ostentatious spending.

Budget expenditures must be made within the limits of sure revenues and the assigned task. If the budget revenue falls short of the plan, the expenditures must be reduced correspondingly. The Ministry of Finance shall study to improve the mechanism of allocation of budget capital aimed at closely controlling all the expenditures taken from the State budget.

d/ To continue rearranging the State trading sector aimed at raising labor productivity, fighting against losses and waste of State capital and property.

The Ministry of Finance shall have to expeditiously complete the plan for renewing the mechanism of management of the State enterprises and submit it to the Prime Minister; widely apply the system of new accountancy in the State enterprises, increase control and guidance in order to bring the financial operations of the enterprises into order and under regulatory prescriptions.

4. Measures to regulate supply and demand, the market and commodities circulation

a/ To take measures to ensure smooth circulation of commodities throughout the country aimed at preventing acts of speculation, hoarding and artificial scarcity of goods or price hike which cause damage to production and the people's life. The Ministry of Trade shall preside over and together with the concerned Ministries and branches work out at an early date a program for management of the consumer market suitable to the market mechanism under the State management; to build a trading network with the participation of various economic sectors in which the State sector must take the initiative in regulating the market. The management of the market must take into account the characteristics of each region: urban areas, countryside, mountainous regions, the South, the North...

b/ Concerning the regulation of the balance of commodity supply and demand, the Ministry of Planning and Investment shall preside over and coordinate with the agency managing the lines of commodities to balance the overall supply and demand according to the annual plan. The Ministries and agencies managing the commodity lines shall coordinate with the specialized agencies to monitor the evolution of supply and demand of commodities under their management, detect and settle in time the imbalances arising in the process of their regulation. The Ministry of Trade shall have to regulate the commodities on a national scale, especially with regard to the important commodities in order to remedy the local imbalances in each specific region.

With regard to the important commodities for production and life (food, sugar, petrol and oils, cement, iron and steel, fertilizer, paper...), the balancing of supply and demand must be conducted every quarter and every month. For these commodities, there must be a circulation reserve force which is an indispensable instrument to regulate the market. The Ministries and the agencies managing the commodities, the Managing Boards of the Corporations managing these commodities should work out and submit soon to the Prime Minister a program on the mechanism of circulation reserve to ensure the necessary level of reserve strong enough to influence the market when an imbalance arises.

c/ The Ministry of Trade shall urgently organize the implementation of Decision No.864-TTg of December 30, 1995 of the Prime Minister on the commodity policy and regulate the import and export operations in 1996. It shall coordinate with the concerned Ministries and branches in taking measures to ensure balance between the volume of commodities and services and the total purchasing power of society. It should guide and urge the import-export enterprises to take home the majority of the imports right in the first months of the year in order to meet in time the need of production and balance the supply and demand of commodities in the country; to improve the import and export activities through the reorganization of the import and export agencies in a rational way, especially in the export of rice. To organize the orderly purchase of goods for export and avoid the state of competition in this purchase which results in hiking the prices. To study the creation of a fund in support of import and export in order to have the necessary fund for handling the risks in business.

d/ In order to prevent right from the outset signs leading to the sudden fluctuation of prices, the Government Pricing Commission must closely follow the evolution of the market prices, and get in time the necessary information about the situation of production, import and export, and circulation of commodities and currencies on the market in order to propose to the Prime Minister necessary measures to stabilize prices in the whole year and to help the Ministries and the branches managing production and business to set specific price levels along the direction of the State.

To prevent the usual price hikes in the early months of the year, the Ministries and branches should seriously carry out the requests of the Prime Minister in Directive No.855-TTg of December 29, 1995 on the preparation of the forces and the organization of the goods circulation and the stabilization of prices during the Binh Ty Lunar New Year Festival (1996). The Ministry of Labor, War Invalids and Social Affairs shall preside over and coordinate with the concerned Ministries and services (the Ministry of Finance, the Ministry of Planning and Investment, the Government Pricing Commission...) to organize a survey on wages, labor productivity, production and circulation cost, and the formation of prices in a number of production and business units typical of the national economy in order to propose the appropriate policy and measures to settle the question of wages in its relations with the labor productivity in the production and business sector.

5. On the guidance of implementation:

a/ The Ministry of Planning and Investment shall preside over and coordinate with the Ministry of Finance, the State Bank, the Ministry of Trade, the Government Pricing Commission, the General Customs Department, the General Department of Statistics... to organize monthly briefings in order to have a firm grasp of the evolution of the movement of the commodities, currencies, market and the goods-money balance through which to detect the weak points in the directional work and propose timely remedial measures to the Government.

b/ The Price Consultancy Group headed by the Head of the Government Pricing Commission should be supplied with the necessary information on the evolution of prices in the whole country as well as abroad and discover problems in the regulation of commodities and report the situation to the concerned Ministries and services for timely settlement.

c/ The business Corporations, especially those dealing in important and essential goods must periodically report on the situation of production and consumption of products turned out by their Corporations to the managing agency of the higher level as well as to the specialized managing agencies and shall take responsibility before the specialized managing Ministry for the situation of the prices of the commodities under their management. The specialized managing Ministry shall take responsibility before the Government for any sudden rise of the prices of the commodities under their management.

On the basis of the responsibilities and tasks assigned above, the Ministers, the Heads of the ministerial level agencies, the Heads of the agencies attached to the Government and the Presidents of the People's Committees of the provinces and cities directly under the Central Government shall direct the units to seriously implement this Directive.

For the Prime Minister

Deputy Prime Minister

PHAN VAN KHAI