Vietnam Business Forum, an annual event prior to the opening of Consultative Group, draws the participation of hundreds of Vietnamese and foreign companies. After one year joining the WTO, the Vietnamese economy and business climate have been significantly improved. However, Vietnam has to tackle many barriers for development.
Business environment: Acceptable
According to the report of the Vietnam Business Forum, both Vietnamese and foreign-led companies said the Vietnamese business climate in Vietnam is acceptable in 2007. Mr. Sin Foong Wong, Country Director of International Finance Corporation (IFC) in Vietnam, said the Secretariat of Vietnam Business Forum conducted a poll on Vietnamese business environment in 234 companies, a sharp increase from 96 companies in 2005 and 202 companies in 2006. Of the sum, 70 per cent are Vietnamese-invested and 30 per cent are foreign-invested.
Interviewees rated the Vietnamese business environment with 13 criteria with rated from 1 to 4, in which 1 is very good, 2 good, 3 poor and 4 very poor. Most companies said land access and foreign currency access had certain improvements with respective scores of 2.26 and 2.28. This was also proven in the Business Report 2008 in which Vietnam jumped 35 placements in “Credit Access.”
40 per cent of enterprises said significant improvements were seen in “Equitable treatment between domestic and foreign enterprises,” “Financial access” and “institutional reform.” Especially, foreign-invested companies spoke high of Vietnam’s effort in bettering laws and regulations to match international practices and rules. 42 per cent of foreign companies agreed that Vietnam had improvement in the “Increase in compliance with international regulations and practices.”
“In general, most interviewed companies agreed that the business environment in the next three years will be better than that in the past two years. Findings showed that private companies in Vietnam, in any form of ownership and from any country, believed and thought the domestic market will be better,” Sin said.
High barriers: Labour source and infrastructure
According to the report of Vietnam Business Forum, worst areas, according to interviewees, are infrastructure, intellectual property protection, administrative service efficiency, tax system and tax management, the supply of skilled labour sources and legal environment. Vietnam needs to improve these if it wants to become a country with competitive environment. Especially, the shortage of skilled labourers and the weakness of infrastructure system are core reasons for the hesitance of enterprises to expand business operations.
For the first time, the labour shortage becomes the first barrier for the expansion of business operations. Companies encounter increasing difficulty in recruiting and employing employees with high skills. According to reports of Vietnamworks, in the past 12 months, the employment demand rose over 100 per cent while the supply was only 60 per cent. Remarkably, it is a hard-nut-to-crack issue in seeking technical, professional and managerial workers. “This needs immediate settlement if Vietnam wants to maintain its competitiveness, especially after it joined the WTO, when foreign investment increased quickly. As a result, the demand for human resources is on the rise,” said Mr. Sin.
Mr. Paul Fairhead, Chairman of Australian Chamber of Commerce in Hanoi, said the inadequate and overloaded infrastructure is a main barrier to the continued growth of Vietnam. Communication and infrastructure, especially electricity and transport, take more costs of Vietnamese and foreign companies. “The Government has planned and invested in upgrading infrastructure and buying more electricity to the national power grid, increasing seaport capacity and upgrading other transport works. However, these plans have not been promoted to an expected pace. Besides, the Government was unable to give infrastructure to investors as promised,” Paul said.
JBIC’s surveys showed Vietnam was ranked the third in the growth of Japanese investment. However, the underdeveloped infrastructure, especially transport and electricity, is a high barrier to Japanese investors.
WTO entry for companies to expand business
In spite of facing up with barriers, up to 90 per cent of companies are willing to overcome them to expand business operations. “With a view to prospects in several years to come, most interviewed enterprises planned to expand operations in three years to come. Very few companies said they keep business unchanged,” Mr. Sin said.
The rationale for the business expansion in the coming years is resulted from favourable economic prospects, the opening of market and reform of Vietnam after WTO entry, and domestic market development. These three core factors are agreed by 43 per cent of enterprises.
Like in 2006 and 2005, attributably favourable factors in Vietnam such as low labour cost and export opportunities are now no longer attractive.
Only some 16 per cent of enterprises admitted that labour cost was attractive and 25 per cent considered export opportunity the top reason.
Ideas of the participants:
Mr. Seck Yee Chung, Vice Chairman of Singapore Business Association: “Unclear land auctioning”
Singapore continues the top investor and commercial partner of Vietnam. Moreover, our members believed in the growth of Vietnam as well as Vietnamese enterprises. However, in real estate, Vietnam has several unclear stages in auctioning 20 “golden land” plots in Ho Chi Minh City. For example, the auction of several land plots held by Vietnamese auctioneers is not in line with bidding procedures and is not publicised.
Information on auctioning regulations and procedures is not clearly and transparently sent to the public. Even, we did not receive any reply or instruction for the next step of procedures from authorities.
Mr. Alain Cany, Chairman of Eurocham: “Punishments on intellectual property violations”
Eurocham appreciates the growth and spirit of Vietnam in implementing WTO entry commitments in the past 11 months. However, Vietnam needs to settle existing shortcomings. The intellectual property protection is the core issue, not only for international firms but also Vietnamese designing industry. I have urged the Vietnamese Government to issue statutes to subject heavy punishments on piracy.
Mr. Dang Duc Dung, Vice Chairman of Hanoi Young Business Association: “Slow introduction of legal documents”
Vietnam has not introduced instructive documents for the implementation of the Real Estate Trading Law although it took effect from January 1, 2007. Subsequently, thousands of companies cannot register for this business and they suffered the loss of business opportunities. Many companies acquired idle small real estate businesses at high cost. The main purpose was to obtain business licences. However, not all companies could find out to buy. Many even jumped into the real estate trading without licence although they were aware of risks. Many conflicts took place because of no business licences needed for contract signing.
Reported by Lan Anh
Vietnamese
