Business Climate in Vietnam Keeps Improving

2:55:18 PM | 1/11/2019

Vietnam’s score of ease of doing business increased to 69.8 points from 68.36 points last year, to stand at No. 70 out of 190 economies in the World Bank’s 2020 Doing Business Report.

In this year’s ranking, WB values economies based on 10 criteria including starting a business, dealing with construction permits, paying taxes, getting electricity, protecting minority investors, trading across borders, enforcing contracts, registering property, getting credit, and resolving insolvency. Employing workers and contracting with the government were also studied but not used to give score.

According to the WB, Vietnam has made improvement in getting credit and paying taxes, helping increase the ease of doing business. Almost all sectors have seen improvement compared to the previous year. The highest ranking is dealing with construction permits (ranked 25th) and the lowest ranking is resolving insolvency (ranked 122nd).

In the Southeast Asia region, Vietnam’s ranking is lower than Singapore (2nd), Malaysia (12th), Thailand (21st) and Brunei (66th). New Zealand continues to hold first place this year.

Economies in the East Asia and Pacific region carried out 33 business climate-enhancing reforms during the past year, and while many economies in the region make doing business easy for small and medium-sized entrepreneurs by global standards, the overall pace of reforms slowed. At the same time, the region still underperforms in several areas, such as contract enforcement, where there is need for more widespread adoption of international best practices, including alternative dispute resolution systems and the creation of specialized commercial courts. Resolving a commercial dispute through a local first-instance court costs on average 47.2% of the claim value, twice that of the average of 21.5% among OECD economies.

Notably, according to the latest report by the World Economic Forum (WEF), Vietnam's Global Competitiveness Index (GCI) climbed 10 places to secure the 67th spot with 61.5 points, a rise of 3.5 points compared to last year. This is the first time Vietnam has made it into the first half of the list that consists of 141 economies.

The GCI report says that Vietnam improved most in the world by score and stood among the best performers in Asia and Pacific region, becoming the champion in the race to improve competitiveness standing.

Among 12 pillars, only health saw its score decrease, while the score for macroeconomic stability remained unchanged and the scores for other pillars improved compared with the previous year. In terms of ranks, the three pillars of infrastructure, health and financial system fell slightly while increases were seen in all other pillars.

Institutional reforms were the most important contributor to the improvement. Evidence included the signing of new free trade agreements and the removal and simplification of 50% of business conditions and administrative procedures. Besides, the Government advocated building electronic government and digital economy, carrying out the ASEAN National Single Window, building the innovative startup ecosystem, and raising local competitiveness index.

Notably, Vietnam's competitiveness improved significantly while many other countries in Asia or in the region witnessed declining rankings. Malaysia ranked No. 27 (2 places lower than in 2018); Thailand, No. 40 (2 places lower); the Philippines, No. 64 (8 places lower); Indonesia, No. 50 (5 places lower); India, No. 68 (10 places lower); and China, No. 28 (unchanged).

However, Vietnam is still behind six ASEAN countries, namely Singapore, Thailand, Malaysia, Indonesia, Brunei and the Philippines, and the goal of reaching the ASEAN 4 group will need more effort.

Quynh Anh