Business Forum

Last updated: Thursday, February 21, 2019


Business Environment Improvement: Big Gap between Expectation and Reality

Posted: Tuesday, April 11, 2017

“I give seven points to legal aspect but only five to reality aspect,” Dr Nguyen Minh Phong, an economist, commented on recent changes in the business environment at the online seminar themed “Improving effective investment and business environment and solutions.”

A discussion was held recently by the Business Forum Newspaper in Hanoi with the aim of figuring out current realities, positive aspects and constraints to seek and apply solutions to better the investment and business environment in Vietnam.

Biggest challenge is made right and enough
Mr Dau Anh Tuan, Director of the Legal Department under VCCI, said, a new blow of wind is embracing the construction of a favourable business environment as well as business development measures. There is a trend of seeking out solutions for a better investment and business climate and institutional reform. There are big changes in thorny issues such as adjusting land limits and abolishing business conditions. Many localities have also taken new measures to attract more enterprises.

However, Mr Phan Duc Hieu, Vice Chairman of the Central Institute for Economic Management (CIEM), said, after three years exercising Resolutions 19 and one year applying Resolution 35, the biggest challenge is how to carry out it right. For the time being, the execution has seen no major progress. Until 2017, Vietnam has managed to change its perception while outcomes remain limited, with a distant gap from expectations of enterprises and social community.

Dr Nguyen Minh Phong pointed out that enforcement staffs are still the same, even in quality; group interests still in existence; and no major changes have seen in salary reform. Even, new Government resolutions are transcribed into local action programmes, not into specific projects, plans, targets and solutions for implementation.

"For example, in Hanoi, the movement is uneven from place to place. As for bodies directly exposed to enterprises, they are more likely to be complained because they have more hard issues to be solved. Some agencies have little progress even no change because they have no direct exposure to businesses and have no complains, he explained.

In addition, the quality of legal documents is not high. Worse, facilitation costs and bribery are serious, with over 80 per cent of businesses being forced to give facilitation money. Vietnam is currently ranked second in corruption in Asia only after India, according to the Transparency International (TI).

Linking business associations
To find solutions for a better investment and business environment in Vietnam, Resolution 19 stipulates review of business conditions for abolition or simplification, Hieu said. At present, active localities are dealing with this issue in a very mechanical way. Speaking in another way, to achieve an objective, they order their affiliates that objective to be achieved in the fastest manner. This work is very stressful and labour-intensive. Therefore, in the long run, the State must withdraw and empower the society, especially business associations.

Besides, he added that many localities organised government-business dialogues on the surface only. Many proposals and recommendations are still kept not processed. The organisation of dialogues should be authorised to an independent body. This agency is responsible for researching and compiling recommendations from businesses and updating government solutions. Every business proposal is resolved equally.

For inactive localities, they need to create a transparent and fair working environment in assessing the performance of public servants. This work will draw the mind of civil servants to work and avoid wrong installations.

“Currently, only VCCI has 1-2 indicators created to assess and monitor the enforcement process. This number is too few and there is a need for strengthening social roles in increasing social criticism.

In foreign countries, business propositions are often very constructive and appropriate for tackling groups of matters. Therefore, business associations and localities should gather together and behave professionally to increase pressures on the State. By doing so, business proposals will be more likely solved and the local business environment is ultimately improved,” Hieu said.

Besides, according to Mr Phong, all levels, related agencies and VCCI should actively review integration documents to facilitate businesses. The Government needs to meet periodically and resolution contents must be introduced in support of business. Moreover, the role of the leader (Prime Minister, National Assembly, Minister, etc.) must be better established to have really strong deterrents, place pressures on enforcement staffs and inspire even lowest-ranked employees. And, only when the resolution reaches every staff is the issue settled. At the same time, it is necessary to build an accessible and shareable information system where information, complaints and solicitations of enterprises are transmitted directly to right places. Then, matters will be resolved very quickly.

In addition, the roles of press agencies, inspectorates, associations and the masses are very important. Generally, there are three works needed to be done: (1) building national benchmark values for ministries, branches and enterprises to create the right gauge to identify wrongs to be removed; (2), establishing good mechanisms for protection of national interests and public interests; and (3) having good staff.

Mr Nguyen Van Thoi, Chairman of Thai Nguyen Business Association
Resolution 19 and Resolution 35 sound interesting but they still lack sanctions. Resolutions do not mention sanctions since makers by default think that they are already specified in other legal documents. If there is no sanction, there is no measure to gauge and assess the performance of a business and a locality. Compilers should add measures to assess ministries and branches. The Government and the Party should use such measures to assess leaders. At the provincial level, the Provincial People's Council takes it to assess departments and branches.

To engage the entire political system, there is a need for a resolution with strict mandate that the superior orders, the inferior must follow. In summary, sanctions in issued documents need to be increased to work.

At present, barriers to SMEs still stand in the way: The current application of the Tax Law on SMEs is unreasonable. Moreover, business registration is already gone online but it will be better to have unified process and software. Some companies do not understand about electronic business registration; thus, some do it electronically while others do it manually. For that reason, authorities need to introduce a mandate on compulsory electronic business registration, then it will be mandatory to all companies to obey.

In addition, the single-window mechanism starts from the promulgation of policies but there is no specific regulation. For example, at business meetings, department leaders do not attend the meeting but authorise their secretaries to go instead and the secretaries forward the meeting minutes to absent leaders for consideration. This takes longer time for proposals to reach decision-makers. And, a sanction to punish bad performers is necessary for this case.

Mr Nguyen Nhan Phuong, Chairman of Bac Ninh Business Association
The delivery of services is already done well and businesses are allowed to get engaged. However, there are still existing difficulties in supporting industry development because it is very difficult for companies to meet men of power in foreign companies and most of them can communicate through Vietnamese representatives who usually already have business connections with others. As a result, it is very hard for enterprises in the province to take part in and for them to form business ties with foreign partners.

In addition, local enterprises trouble with administrative procedures. They must go a long way to reach the finish of procedures. Among administrative procedures, the hardest for businesses is still land issue. If the State stands out to support them to deal with land clearance, things will be much simpler. However, the State gives this job to enterprises which never find it easy to work with the commons. Without land, how can we develop enterprises as we want? If each of company applies for land rent in the province, rented land will be fragmented and environmental treatment in production process will be extremely difficult. In some cases, companies fail to carry on their projects since they get stuck in land compensation and clearance. For that reason, we hope that the Government will have business support policies in order to realise the target of having one million enterprises by 2020 as requested by the Prime Minister.

In addition, we hope that after filing the application, in at least 3 months, the district government may make a decision for us. If there is a unit to support enterprises to deal with procedures, business development will be faster. Administrative procedures are a chain that drags on the project progress.

Mr Hoang Tran Hieu, Chairman of the Board of Vietnam Global Company
Resolution 35 of the Government has handed advantages to young enterprises. However, investing in clean food business, we confront some problems with supply and demand. For our part, to be allowed to supply clean food, we have to invest in production and invest in business. For consumers, they can spend money on clean food but they have no bases to know whether that food is clean and farmers cannot confident enough to assure long-term clean food supply since organic farming requires huge investment.

To solve this matter, the Government needs to play a role in directing and supporting enterprises, farmers or producers to carry out large-scaled production. To do this, interest, morale and law are three indispensable elements at the same time. At present, administrative procedures have changed and gone down to earth. But, the State will manage at the macro level while the specific implementation requires associations and consumer organisations.

Quynh Anh

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