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Business Forum

Last updated: Thursday, July 27, 2017

 

Midterm VBF 2017: Dialogue for More Substantial Linkage

Posted: Friday, June 30, 2017


The objective of the Vietnam Business Forum 2017 is strengthening the linkage between FDI and domestic businesses to boost sustainable development and enhancing Vietnam’s economic quality.

Themed “Strengthening the linkage between FDI and domestic businesses in the new global context,” the Midterm VBF 2017 discussed solutions on supporting small and medium-sized enterprises (SMEs) to link with FDI businesses, join regional and global production chains, and move forward to remove national boundaries in production.

Deputy Prime Minister Vuong Dinh Hue said, Vietnam views FDI businesses as an important element of the economy and the success of FDI businesses as the success of the Government of Vietnam and hopes they will consider the success of domestic businesses as their own success.

In the coming time, Vietnam will continue to attract more FDI but selectively give priority to FDI firms engaged in industries that fit the process of Vietnam’s economic restructuring, have modern environment-friendly technology, have available value chains, have good governance and stand ready to connect with Vietnamese partners.

Deputy Prime Minister Hue said that international economic integration is the consistent policy of Vietnam. The country signed many new free trade agreements of very high standards. Besides, Vietnam strives to improve domestic economic institutions and enhance national competitiveness, capacity and products for international economic integration irrespective of having free trade agreements like TPP or not.

In order to create favourable conditions for companies, including State-owned companies, private companies, FDI companies and business households, the Government of Vietnam is building and perfecting a transparent business and investment environment for all types of business. The Government is resolutely enforcing its Resolution 19/NQ-CP and Resolution 35/NQ-CP and will soon issue more decrees and circulars to guide the execution of the Law on SME Support. The Government has also recently consolidated the National Trade Facilitation Committee, which aims to bring 80 per cent of administrative procedures to the National Single Window (NSW) and the ASEAN Single Window (ASW). The Government is reviewing 73 specialised customs procedures to facilitate domestic and foreign businesses investing in Vietnam.

The Government also focused on removing difficulties and bottlenecks, strongly perfecting and developing the markets deemed necessary and sufficient to business development. At the same time, it accelerated economic restructuring and changing economic growth model while attaching importance to growth quality.

Dr Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI), said, FDI enterprises are receiving more investment incentives while being less impacted by institutions than Vietnamese enterprises. Thus, FDI firms have outgrown. However, they have not created a ripple effect and made comparable contributions to economic development in relation to incentives they got.

According to VCCI surveys, FDI firms tend to vertically import products. Marketing, delivering connectivity information and developing supporting industries have yet to meet expectations because three major reasons that create the gap between domestic and FDI companies, i.e. human resource quality, technological level and geographical distance.

Therefore, in order to improve human resources quality from policies and institutions, it is necessary to invest in human resources training in vocational schools according to actual needs of specific industries, he said. It will create and mobilise private funds into human resources training.

In addition, VCCI recommended issuing plans for establishment of industrial zones and institutions for Vietnamese businesses, and realising support policies.

Vital to enrich its industrial environment
Mr Hiroshi Karashima, Chairman of Japan Business Association in Vietnam (JBAV)
In order to enhance Vietnam’s attractiveness as a country of manufacturing, it is extremely vital for Vietnam to enrich its industrial environment to create added values in addition to labour cost competitiveness. Based on this perspective, I assume that it is essential to form supporting industries by developing small and medium-sized enterprises (SMEs) immediately. The new proposal of “Draft Bill to support SMEs” put forward at the National Assembly shows Vietnamese strong awareness of this issue. To develop supporting industries, it is necessary for Japanese enterprises which have their own strengths and superior know-hows (for instance, mold manufacturers) to be encouraged for the technological transfers to Vietnam by collaborating with local SMEs.

At present, several Japanese manufacturing companies plan to transfer their manufacturing facilities to Vietnam from Japan and third countries. If those enterprises can easily move their manufacturing facilities to Vietnam, this movement will greatly contribute to the formation of the supporting industries and as well as the development of Vietnam’s SMEs. However, there is one barrier for Japanese enterprise’s movement to Vietnam. This lies in regulations to import used machines and devices. Circular 23 promulgated by Ministry of Sciences and Technology in 2015, in principle, allows the import of those machines and devices used less than 10 years, but at the same time, there should be some room for importing those machines and devices, used over 10 years. I would suggest it would be more effective on formation of supporting industries in Vietnam and local SMEs, if those enterprises who import used machines and devices as their own fixed assets, are allowed to bring the used machines regardless of numbers of used years. Then those enterprises with their own strengths may further be encouraged to move to Vietnam. Moreover, we also expect Vietnam to make further efforts in making it easy to grant Work Permits to experts engaged by the enterprises. This ease of Work Permits will contribute to further development of supporting industries, not only from the perspective of manufacturing capabilities improvement, but also from human resources’ enhancement.

Focus on sustainable development and infrastructure
Mr Tomaso Andreatta, Vice Chairman of EuroCham
EuroCham is waiting for the final approval and implementation of the European Union-Vietnam Free Trade Agreement (EVFTA) as an important moment in the development of trade and the improvement of the competitiveness of Vietnam. If properly implemented, this agreement will facilitate trade through the gradual removal of tariffs but, more importantly, it should also help Vietnam to align its procedures, safety and quality standards with those in Europe and other Western countries. We have worked with the EU delegation on the roadmap for the implementation of the agreement and we strongly believe that it would be good for Vietnam if several rules and procedures were amended even before the legal enactment of the treaty. There are five issues that need to be addressed to substantially enhance Vietnam’s sustainability and competitiveness in global trade, and benefit the European business community in this country:

1. Sustainable growth and energy policy. As Vietnam moves into more capital intensive industries to increase local content, the government can focus its industrial policy of completing the supply chain with processes that are environmentally friendly and have adequate recycling facilities. EuroCham offers to the Vietnamese Government the example and support of the European experience and technology in energy conservation and efficiency, in renewable energy, in clean production.

2. Financing investment in infrastructure. Economic growth and urbanisation are increasing demands for public infrastructure for goods and services. However, the State budget is only able to meet a small part of Vietnam's infrastructure needs and declining ODA funds are not sufficient to complement the shortfall. The balance has to come from private investment, through better public-private partnerships (PPP) that balance the risks and are bankable for international companies, with public bids that are transparent, timely and fair, and through the full privatisation of the market.

3. Improve legal environment. The strong protection of intellectual property rights (IPRs) is essential to encourage foreign investment in Vietnam. Even though Vietnam has improved its legal framework and the enforcement of IPR, the enforcement of IPR laws remain a concern for European and Vietnamese businesses alike. EuroCham therefore calls on the Vietnamese Government to ensure that trademark and copyright infringers face strongly dissuasive legal sanctions for IPR infringements, including when operating though internet, and that Cease and Desist Decisions are immediately enforceable.

4. The Fourth Industrial Revolution. If Vietnam wants to catch up to the present and move to the future, it has to make clear choices to openly push for what will become the industries of the future. It has to allow the private sector to run its own bets since some will succeed and some not, but the country as a whole will benefit.

5. Coordinate with provinces to ensure uniform application of laws and policies. Provinces are competing for investment and they should be as open and transparent as possible, and coordinate with the central government to ensure that investors with projects in different provinces are treated consistently.

Necessary to remove nontariff trade barriers
Mr Jonathan Moreno, Chairman of AmCham
Among other new cooperation directions, we support a path leading to a free trade agreement (FTA) between our two countries. For an FTA to move forward, it will need to be viewed as beneficial and fair by all parties. The American business community in Vietnam stands ready to do our part to make this goal a reality. The first step was the signing of a memorandum of understanding (MOU) with VCCI in April 2017 to create a US-Vietnam Business Leadership Committee that will advocate for an FTA. In the meantime, the Trade and Investment Framework Agreement (TIFA) is a vehicle that can be used to resolve issues important to the business community. AmCham also supports ongoing efforts by the Vietnamese Government to improve the business environment for all by reducing costs and enhancing efficiency.

It is necessary to remove nontariff trade barriers. To sustain and grow our bilateral trade and investment relationship, trade must be free and fair. Importing products into Vietnam remains costlier and complicated then it should be, and, given Vietnam’s US$34 billion trade surplus with the United States, it is particularly important for Vietnam to be seen as seriously addressing the numerous nontariff technical barriers to trade mostly encountered at the border, and the so-called behind the border barriers which restrict the activities of companies and hamper the flow of US exports into Vietnam.

In addition, Vietnam needs to improve the general operating environment for businesses. Removing barriers to trade and improving market access will attract new investors to Vietnam. More importantly, decreasing the cost and complication of doing business will benefit Vietnamese-owned businesses, many of which are SME’s, and will spur entrepreneurship, which will, in turn, ensure Vietnam’s future competitiveness and growth. To continue attracting investment and to upgrade the skills of its workforce, the government should take further action to modernise and upgrade its national education system, particularly at the vocational and university levels. Modernising education will ensure that Vietnam has a skilled workforce of managers, engineers, and manufacturing technicians that can move up the value chain as the economy grows.

Lack of information, incentive policies are major barriers
Mr Ryu Hang Ha, Chairman of Korcham
According to the survey into Korean companies, which invested in Vietnam, at the end of last year, 46.1 per cent of the respondents said they would increase their investment while 44.7 per cent of the respondents said they would remain at the current level for their investment. In addition, 71 per cent of the respondents said they are satisfied with their business management in Vietnam.

According to the survey, the difficulties, which Korean companies experienced in the early stages of investment, are lack of information, language communication and lack of investment incentives. However, after entering the Vietnamese market, the companies experienced difficulties, such as lack of a legal system, inconsistent law enforcement, and cultural differences.

Some legal issues under the current law which causes difficulties for Korean investors, For example, exemption of the export duties on aluminium products. In the past, the Law on Export and Import Tax and enforcement decrees stipulated that “The export duties shall not be imposed on the manufactured products of which raw materials were imported for the purpose of export.” However, the Law on Export and Import Tax (Clause 7, Article 16, Law 107/2016/QH13) was revised on April 6, 2017, and enforcement decrees (Article 12, Decree 134/2016/NDCP) became effective on September 1, 2016. And, the phrase “the export tax shall not be imposed” was deleted. Therefore, the relevant government agencies are interpreting this as imposition of export duties. As of now, export duties are imposed on products.

Potential for Australian investors in agriculture, energy and education
Mr Giles Cooper, Director of Auscham Vietnam
While the Trans-Pacific Partnership (TPP) has not moved forward as hoped, Australian and Vietnamese businesses benefit from the existing ASEAN-Australia-New Zealand Free Trade Agreement and Vietnam’s commitment to further improving trade and investment opportunities by participating in new international trade agreements. Vietnam is now Australia’s 15th largest trading partner, with two-way trade exceeding US$10 billion and Australian investment in Vietnam growing strongly. We see tremendous potential for Australian investors in sectors such as agriculture, energy, financial services, education, tourism and health. The productivity of the labour force in Vietnam needs to significantly increase. The education and training of Vietnamese people to provide “work ready” graduates will help close skills gaps and also provide the necessary manpower where there are currently skills shortages. In the short term, foreign expertise can help in this regard. Therefore, fostering partnership between domestic and foreign enterprises for harmonious development of the Vietnamese economy is a theme that our education and training members fully support.

To achieve international standards education in Vietnam needs to improve the standard of education of Vietnamese institution and, in addition, needs an infusion of foreign capital, ideas and expertise. It also needs flexibility and adaptability, especially in the vocational training sector.

Quynh Chi








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