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Last updated: Monday, September 25, 2017

 

Easing Cost Burdens for Private Business Development

Posted: Thursday, August 31, 2017


Costs, both official and unofficial, are still considered to be a heavy burden for Vietnamese businesses. To provide an insight into this matter, on August 23, 2017, the Government Electronic Portal held an online workshop titled "Easing cost burdens, promoting private business development" with distinguished guests being Mr Dang Huy Dong, Deputy Minister of Planning and Investment; Mr Phan Duc Hieu, Vice President of the Central Institute for Economic Management (CIEM) ; and Mr Ngo Van Diem, Vice Chairman of Vietnam Association of Private Entrepreneurs.

High official costs
Among official costs reported by enterprises, tax currently accounts for the biggest share of the overall business costs, standing at 39.1 per cent of profit and twice as much as Singapore (according to the World Bank's Doing Business Report 2017). Also according to this report, among input costs, the cost of compliance with export documents of Vietnamese enterprises is the highest, almost four times that of Singapore and more than three times that of the Philippines. The cost of accessing electricity is 49 times higher than that of the Philippines, accounting for about 10 per cent of total business costs.

For importers, import control cost is also not a small amount. According to a report at a meeting on reform of specialised inspection of imports and exports on August 21, there are now 5,917 business conditions imposed by ministries at border gates and 100,000 items must undergo specialised inspection. Each year, enterprises must spend 28.6 million working days at a total cost of VND14,300 billion to complete these procedures.

Mr Ngo Van Diem, Vice Chairman of Vietnam Association of Private Entrepreneurs, said, Procedure overlapping upsets people and causes costs to rise. Currently, 58 per cent of goods undergo 2 - 3 inspections, with 54 per cent being checked twice and the rest checked three times. This is a very high rate. Typically, a chocolate time requires 13 licences; 12 ingredients require 12 licences; and the last is the confirmation of finished product.

For transport companies, the National Highway alone has 40 toll stations. A sedan needs to pay VND1.3 million of traffic tolls on this key road while a truck pays 10-20 times more than that. In addition, there are also logistics costs and environmental costs.

Unofficial fees: Hard to count
Apart from official expenses, unofficial costs have recently been publicly disclosed in some of reports and forums. In 2016, according to a survey by the Vietnam Chamber of Commerce and Industry (VCCI) with the question "Do you have to pay unofficial expenses?" more than 60 per cent of respondents said yes.

Unofficial payments are not just a “cost of facilitation” but also costs of time and opportunities when administrative procedures are prolonged, with a lack of integrity in some places and by some public officials. According to analysis of Mr Phan Duc Hieu, if administrative procedures take 10 days and each company has one person to deal with related procedures, with the pay of VND200,000 a day, the cost for about 500,000 businesses for administrative procedure is worth up to hundreds of billions of Vietnamese dong. At the same time, when dealing with an administrative procedure, they are unsure of whether it is successful or not, but they may lose business opportunities, which means losing working opportunities of a certain number of employees.

How will this burden be reduced?
According to Deputy Minister Dang Huy Dong, the Government has recently focused on cutting charges and fees, reducing time as well as costs of administrative procedures through Resolutions 19 and 35. According to the World Bank's report, some of Vietnam’s indexes have jumped 12 places over the previous year. Practically, the investment attractiveness index has become better, along with an increase in the number of businesses, which means that our business investment environment has improved. However, that result is the comparison of own performances. Compared with other countries in the region, they are all moving forward. So, our target is moving from ASEAN 6 to ASEAN 4. If we compare our result to the time we started, we may achieve it. This means that we are now on par with ASEAN 4 of four years ago.

He added that what we have achieved is still far from objectives set in Resolution 19 and Resolution 35. For example, the rules assign ministries to self-review their own policies and procedures without having clear definition of responsibility, without having a relevant agency which monitoring and deciding on review results. The current approach is not appropriate and it needs to be changed.

Mr Dang Huy Dong: The ethics of public employees is a major concern. Their attitude and service are being rectified. Corporate culture is decisive to any company. So is the administration.

Mr Phan Duc Hieu: The environment can change behaviours. If we have a good environment, reform our institutions, reduce State interventions in business to a minimum, and let consumers and markets judge, which will force the business to change their behaviours to stay on. And, the State must change first.

Nguyen Thanh








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