Vietnam Economic Development: Improved but Ineffective

Throughout the publication, European businesses recognised the Vietnamese Government’s achievements and praised the Government’s strong relationship and collaboration with EuroCham.

 

Accordingly, even as the economy continues to face a number of challenges, the Government of Vietnam has made efforts to implement policies to restore macroeconomic stability. Inflation has been kept at a moderate rate, the exchange rate has been stabilised, foreign exchange reserves have more than doubled in the past two years, and national risk (measured by the difference in G-bond coupon rates and credit risk swap contracts) is at the lowest level since the advent of the global economic crisis. In the next two years, the current account surplus is expected to remain at a high level and foreign direct investment attraction will remain strong.

 

The 2014 Whitebook recognises that Vietnamese authorities have set in motion a number of positive developments in areas like tax incentives and human resources. The introduction of the Law on Pricing is also a welcomed step.

 

Vietnam has made some progress in infrastructure, ports and airfields.

 

This year’s Whitebook’s structure is a reflection of EuroCham’s wish to work alongside the Vietnamese Government towards achieving common goals: facilitating and increasing foreign investment in Vietnam, boosting economic growth, providing new job opportunities for the local population and enacting positive socio-environmental changes, amongst others.

 

However, Whitebook 2014 points out some existing problems, including coordinated enforcement of laws and administrative procedure requirements, intellectual property rights protection, market access, Vietnam - EU Free Trade Agreement, education and training, tax, alignment with international standards and fair pricing.

 

EuroCham Chairman Preben Hjortlund said although some sectors in Vietnam have adequate legal frameworks, the slowness in introducing instructive documents for law enforcement and different law interpretation and application of local governments results in a declining attractiveness of the Vietnamese business environment

 

The Whitebook 2014 says Vietnam's adoption of protection measures following its entry to the World Trade Organisation (WTO) has reduced FDI sources. To compete with other countries, the Vietnamese Government needs to compile specific regulations on foreigners' stake acquisitions at Vietnamese companies.

 

Specifically, when foreign investors acquire 49 percent of equity or less of a Vietnamese business, it should still be regarded as a Vietnamese business and it only needs to have the business registration changed, rather than the investment certification granted. Conversely, if foreign investors buy more than 49 percent of stake, that business must have a new investment certification.

 

In addition, the Whitebook emphasises the need for a mechanism to ensure the effective enforcement of intellectual property rights and a more aggressive coordination in prosecution of violations. EuroCham will hold a roundtable dialogue with related ministries to present its recommendations, to give the Vietnamese Government a clearer overview of how different issues impact not only the European business community, but also how, - if resolved - these issues could influence the potential growth of the Vietnamese economy.