Vietnam May Raise Auto Import Duties to Decrease Traffic Jams

Sales of imported cars rose 421% last year.

As traffic is choking up the streets of Hanoi and Ho Chi Minh City, the government is considering raising import taxes on both imported cars and spare parts, the state-run Vietnam News Agency reported. Worsening traffic congestion is being fuelled by surging sales of both imported and locally-assembled cars.

Prime Minister Nguyen Tan Dung has asked government ministries to draw up suitable tax policies aimed at reducing traffic jams, the report said, with proposals ranging as high as a 70% import duty rate.

Customers who have heard about the possible tax increases are rushing to buy cars in anticipation of higher prices, said the report.

Sales of vehicles assembled in Vietnam rose 156% to over 12,000 units in January year-on-year, the Vietnam Automobile Manufacturers' Association said, pointing to a 350% increase in the commercial vehicle sector.

The imports of completely built units shot up by an even steeper 421% year-on-year, with about 3,000 units worth almost $50 million imported into Vietnam in January, said the Industry and Trade Ministry.

Vietnam, an emerging economy with 8.5% growth last year, moved from mainly bicycles to motorcycles in the 1990s and is now witnessing a rapid rise in car ownership, especially in the biggest cities.

Vietnam, a country of 86 million people, last year cut car import duties several times, from 90% before it joined the World Trade Organization in January 2007 to a current level of 60%, said the report.

Copyright Agence France-Presse, 2008

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