[Vnbiz] raising import taxes correlated with USD strength? [SEC=UNCLASSIFIED]

[Tran Dinh Hoanh]

Dear brother Quang Anh,

That is a very good question.  Why do we import a lot of unnecessary things,
like fancy cell phones?

This is the phenomenon that people around the world have been griping about
for years--consumerism.  Most advanced economy, with the US leading the
pack, build their strength on consumerism--the more consumers want, the more
companies produce, the stronger the economy.  It all works out very well,
both in theory and practice.

Except that consumerism has been pushed over its limits and has been doing a
lot of damage.  Two harmful features of consumerism have been wrecking a lot
of havoc.  (1)  Unreasonable spending on borrow money:  Companies make
credit cards available to everyone very easily and encourage people to spend
on their credit cards.  So we have consumers burdened with credit card debts
to the degree that they can'tt pay back.  And the spending on loans went
further to bigger items like cars (through car loans) and houses. The
current mortgage crisis in the US is the result of inflated mortgages, which
was a big "open conspiracy" of the mortgage and real estate companies in the
US to inflate the value of the homes and make mortgage too easy for
homebuyers (to the degree that there was not really good security for the
mortgages).

Please note: I said "unreasonable spending on borrow money," because
reasonable borrowing is good.

2.  Consumers are not really driving the demand, but are manipulated by
marketer into buying frenzy.  The easiest place to see is in electronic
items--all these IT companies keep coming up with new computer hardware and
software and electronic gadgets constantly.  Consumers didn't have any idea
about these gadgets in order to create demand.  The marketers market these
gadgets into the consumers' minds (though all  kinds of sophisticated
marketing) in order for the consumers to feel the demand in their heads.
Even worse, consumers are often made into captive buyers.  Look at
computers, 3 years and your PC become obsolete.

Consumerism starts out with the premise that the consumers are supreme, but
today consumers are just a bunch of manipulated sheep, with no choice in the
matter.

That consumerism is abundant in Vietnam.  People spend just because it feels
good to spend, not because of its real usefulness.  Spending for trend,
fashion, status, to look updated, to be modern, to be cool... all these
junks that marketers have been putting into their heads.

And in a free economy, government tends to leave the market alone. If the
consumers want them, importers will import them, and that is Ok with the
government.

But this inflation crisis is a good wake-up lesson.  The government, at the
least, needs to keep an eye on the trade balance, making sure that we have a
trade surplus, or at least a trade balance and no deficit.  With that
responsibility, the government will have to determine what import is really
necessary and what is not, and use the import tax scheme to encourage the
necessities and discourage the non-essential items.

At a deeper level, we Vietnamese need to tell each other to uphold our
traditional values such as hardworking, saving, caring for the poor and the
needy, caring for our community (rather than for our Self), etc.  We also
need to tell each other not to fall into the trap of modern consumerism, in
which every individual works themselves to death (or to debt) just to buy a
lot of junk to show everyone around them that they are cool.  Why?

Don't underestimate modern consumerism.  It is a global culture that is
destroying many traditional cultures and their economies.  The only winners
are multinational companies who are the masters of modern consumerism.

Have a great day!

Hoanh
__________________
On Mon, Jun 23, 2008 at 5:43 AM, <QuangAnh.Nguyen at dfat.gov.au> wrote:

> [ Vietnam Business Forum ]
>
>
>
> Dear brother Hoanh
>
> Thank you so much for a quick lesson on this matter. Very clear and
> easy-understanding, indeed.
>
> Can I approach this matter in a different angle: why Vietnam imports so
> many things? And more importanly, whether those are necessary for the
> development of the country?
>
> To my perspective, not all of the imported things are to serve the national
> development. And this is some areas that we should learnt from other
> countries, esp. Eastern Asian. What have we imported: luxury cars,
> motorbike, cloths, mobile phones, etc. Our country, with an average GDP per
> capita of <800USD, has had a flood of top brand cars such as Roll Royce,
> Bentley and Lamborgini or newly-launch stylish device like Apple's iPhone. I
> remembered when I was in Australia last Mar, seeing a launch of Audi Q7 .
> Just one month later, I was surprise to see it iddly swimming among hundred
> of bikes on Hang Bong street in Hanoi. This time last year, when iPhone was
> launched, there were a fashion exciting wave of Vietnamese (not only the
> young) to buy and "crack" this phone. To own something new in the world,
> bringing those to show on our "village" street, it is wondered that a way to
> show we are standing in the same level of development with other countries?
>
> I can't forget a meeting with the Chief Rep of JETRO, a Japanese government
> trade promotion agency, in HCMC some years ago. At that time, he said that,
> he can't understand, a country in which the people earn less than 400USD at
> that time, injured from a fierce war, receiving a mass of ODA, could afford
> to buy so many Honda @ (priced at 8000USD at earlier 2000s). I could not
> explained.
>
> It is noted that those things are paid in USD and the USD has definitely
> been flowing outside. Is that because Vietnamese people are so trendy and
> love (?) to consume goods with a good appearance? Are we trying to make us
> different from Japanese and Korean people, who are said that consumption of
> their domestic-made products become a habit, a priority, and in a way, a
> proud.
>
> I think the policy to increase import tax is a right policy, at least at
> this moment. However, this is a short term solution. It should be noted that
> Vietnam committed a roadmap to reduce taxes in accordance with WTO
> agreements that Vietnam entered last year. With the increase of tax
> applicable for a numbers of import goods, it also mean that the Government
> shortened the roadmap to decrease such taxes. In theory, it should be easier
> to manage the roadmap if the taxes being cut down gradually.
>
> In this scenario, when import goods become more expensive, it is a good
> chance for domestic products to take over the market. In other word, this is
> a good opportunity for local enterprises to improve their business
> competitiveness, which is always considered weak, to prepare for a longer
> race...when the import tax would be lowered to..ZERO some day.
>
> Have a good week
> *----------------------------------------------*
> *Nguyen Quang ANH*
>
>
> --
> Tran Dinh Hoanh, Esq., LLB, JD
> Washington DC
>
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