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Vietnam reduces taxes to push up demand: govt

world Updated: Apr 18, 2009 11:47 IST

Vietnam will reduce some tariffs on goods and services to push up demand in the face of an economic slowdown, according to a decision signed by the prime minister.

Value-added tax (VAT) on garment and textile products, cement, and motorbikes will be reduced by 50 percent between May 1 and December 31, said the ruling signed on Thursday.

Registration fees for cars with fewer than 10 seats will also be reduced by half, while garment and footwear enterprises will benefit from a 30 percent cut in corporate income tax for the fourth quarter of last year, it said.

The cuts were to "stimulate demand and consumption" and prevent an economic downturn, the government said in a statement.

A separate government announcement said farmers, who are suffering the most from the slowdown, will from May get concessionary interest rates for bank credits to buy Vietnamese-made farming tools and processing equipment. The credits will be interest free or reduced by four percent depending on the amount involved.

The majority of fast-developing Vietnam's people remain farmers. The moves are part of broad stimulus measures earlier announced by the communist government.

On Wednesday, Prime Minister Nguyen Tan Dung told visiting Singaporean Minister Mentor Lee Kuan Yew that the country's economic growth would pick up and could reach between five and 5.5 percent this year. In the first quarter of 2009, Vietnam recorded 3.1 percent growth, the lowest level on record.

The World Bank has projected the country would expand by 5.5 percent this year, while the Asian Development Bank said Vietnam could achieve 4.5 percent, still leaving it in better shape than most Asian economies despite a global downturn.