Economic Sector

Last updated: Wednesday, January 23, 2019


Government and Enterprises Jointly Improving Business Environment

Posted: Tuesday, December 19, 2017

Last year was another tireless journey for the Government and the business community to work together to improve the business environment to make Vietnam a world-class friendly destination. This is also an important milestone in the effort to create a conducive business environment to develop enterprises and constitute a government of action, facilitation and integrity to serve business development.

In the Doing Business 2018 Report titled “Reforming to Create Jobs”, the 15th edition in the report series released by the World Bank (WB), Vietnam continued to climb 14 places in ease of doing business to No. 68 out of 190 economies, scoring 67.93 points on a 100-point scale. In 2017, the country was ranked No. 82 with a score of 63.83, an increase of nine places over 2016.

Dr Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI), said, last year, thousands of suggestions from entrepreneurs were collected and considered by government agencies and commitments and recommendations of the Prime Minister and other government agencies made businesses more confident and have long-term visions for their business investment projects.

Based on resolutions of the Party and the National Assembly, the Government issued Resolutions 19, Resolutions 35 and other action programmes to promote business development and improve the business and investment environment. In particular, the Government ordered subordinates not to carry out overlapping inspections and examinations, not criminalise civil economic relations, deploy e-government, reduce at least 30-50 per cent of business conditions and administrative procedures. It has also accelerated reforms with the aim of making Vietnam one of three ASEAN economies with best institutional quality and ease of doing business and heading for OECD standards to build up the confidence of the business community. The improvement of Vietnam's rankings announced by the World Bank, the World Economic Forum, the World Intellectual Property Organisation as well as the engagement of people and enterprises in business development are evidenced by a total of more than 120,000 new business start-ups in 2017.

However, according to Dr Loc, despite positive changes and the spreading heat of reforms, Vietnamese businesses are facing numerous difficulties and they have to go a long, rough way to complete business environment reform, Dr Loc said. Nearly 60 per cent of businesses do not make a profit. In the first 11 months of 2017, up to 65,000 companies went bankrupt or suspended operations. The gap in institutional quality and business environment between Vietnam and three leading ASEAN economies is still far. Many types of business expenses in Vietnam are still high and tend to increase. Complicated business conditions, specialised inspections and export and import administrative procedures still upset the business community.

Domestic private firms still yield to State-owned enterprises (SOEs) and foreign direct investment (FDI) companies in scale while but they still face numerous disadvantages in access to land, credit and reasonable interest rates.

In addition, the faster minimum wage growth than performance growth in recent years have given rise to growing burdens on social insurance, health insurance funds, union dues and other mandatory fees. Although Vietnam is a big importer and exporter, its logistic costs are higher and less competitive than those in many countries.

“From the above situation, VCCI asked the Government, ministries, branches and localities to accelerate the pace of reforms. Party resolutions on perfecting the market economy mechanism and the private economic development should be concretised by the Government’s quantitative targets,” he said.

In addition, VCCI asked the Government to study and promulgate mechanisms and policies in a bid to strengthen the cooperation between FDI companies and local firms in improving human resources quality, transferring technologies, supporting industry development, and forming value chains to create an environment where domestic companies and foreign businesses are win-win partners in the Vietnamese economy. It should also generate robust growth momentum and internationalise micro, small and medium enterprises - dynamic owners of the digital economy. “It must be the most important policy of all economies, including Vietnam,” he said.

The government also needs to take specific steps to ensure that the minimum wage hike is not faster than the increase in labour productivity in the coming years so as to help businesses to reduce costs, pile up accumulations and investments, and create more jobs. This is very important when small and medium enterprises are seriously short of capital and hardly accessible to land and reasonable credits.

Quynh Chi

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