Enhancing Support and Cooperation for FDI Businesses

FDI Manufacturers Gathering Day Forum will update and discuss macroeconomic situations, investment environment and FDI attraction orientations of Vietnam in the upcoming period as well as methods to strengthen cooperation between FDI firms and multinational corporations. Particularly, the forum will also provide an opportunity for FDI firms to have face-to-face dialogues with government officials, leaders of ministries and branches, and local authorities. This is an opportunity to the Government of Vietnam to express its strong commitments to providing maximum supports to FDI companies in Vietnam.

 

Invited attendants are government officials, leaders of ministries and central agencies, and leaders of provinces and cities across the country, officials from embassies, international organisations, foreign business associations, and about 200 executives of FDI firms from Hanoi, Bac Ninh, Bac Giang, Hai Phong, Vinh Phuc, Phu Tho, Thai Nguyen, Ha Nam, Hung Yen, Hai Duong and other localities.

 

This event will help manufacturers and assemblers, particularly multinational corporations, to meet and exchange information with parts and inputs suppliers.

 

According to data released by the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment, the value of FDI capital into Vietnam continued to decline in the first nine months of 2014 (as of September 20). Vietnam attracted US$11.18 billion of FDI in the nine-month period, down 25.5 percent year on year. Specifically, the country licensed 1,152 new projects with a total registered capital of US$7.63 billion, down 17.8 percent year on year, and allowed 418 existing projects to add US$3.54 billion to their registered capital base, down 37.9 percent against the same period of 2013.

 

The manufacturing and processing industry drew more than US$7.7 billion, accounting for nearly 69 percent of the country’s total FDI capital in the reporting period. The real estate sector pulled over US$1.3 billion, representing a year on year increase of 108 percent and accounting for 11 percent of total FDI. Only these two sectors drew more than US$1 billion of FDI capital in the first three quarters. The FDI amount for 10 key industries dropped 25 percent from a year ago. However, al 10 sectors still saw an increase from August.

 

Capital from last year’s top investors, Japan and Singapore, fell more than 70 percent from the same period in 2013 while South Korea and Hong Kong jumped to the top places. The Top 10 had some new faces which were in Top 20 or even Top 30 last year like British Virgin Islands, Canada and the United States. European and American investors like British Virgin Islands and the United States gave more attention to Vietnam, evidenced by a strong rise in registered FDI value. The US has continuously increased its investment capital into Vietnam although the value was very modest in relation to its worldwide investment. It invested nearly US$224 million into Vietnam in the first nine months of 2014, up more than 33 percent from the previous month and 128 percent over the same period of 2013. Another North American country, Canada, also stepped up investment in Vietnam with eight new projects and one expanded project. Among these eight projects, Vietnam - Canada Dai An International Hospital was invested US$225 million by Triple Eye Infrastructure Corporation (Canada). The following 10 investors accounted for 89 percent for FDI capital in Vietnam in the year till September 20, 2014.

 

Foreign investors disbursed US$8.9 billion in the nine months, up 3.2 percent from a year earlier and equal to nearly 80 percent of total FDI capital in the period.

Vietnamese companies invested US$894 million overseas in the first seven months of this year. As of July 2014, Vietnam had 890 investment projects with a combined registered capital of US$19 billion in 63 countries and territories around the world.

 

Rapid-growing labour costs, complicated administrative procedures and incomplete legal system affected the sense of investors. In the long term, this may harm Vietnam’s overall FDI attraction.

 

Vietnam ranked 149^th in tax payment index. Each year, a company must spend 872 hours for this work while the bottom-ranking country only needs some 300 hours. Regarding cross-border trade index, a company spends 21 days a year to perform export procedures and 21 days to fulfil import procedures. With respect to access to electricity, the company must fulfil six procedures and need 115 days to get the work done. Besides, Vietnam has so many identifying numbers. A company has business registration number, tax registration number and social security number while an individual has tax identification number, identity card, social security number and others. Dealing with many indentifying numbers will be easier to commit mistakes and errors. Besides, authorities will see more difficulties when working with such many identity numbers.

 

Many Japanese companies, like many other foreign investors, complain about electricity infrastructure because they usually suffer from blackouts. Besides, technical workers graduated from technical schools fail to meet their requirements. Foreign investors also suggest loosening regulations on foreign exchange because only companies with foreign-currency incomes and guaranteed solvency can borrow loans in foreign currency, according to the laws.

 

To improve the business environment, authorities must change their perception and approach with appropriate solutions. Otherwise, it is very hard to achieve the objective. Tax and customs procedures must be simplified. The time required for resolving complaints and questions from enterprises must be reduced.

 

One of major objectives of the Government's Resolution 19 is to raising the competitiveness index of Vietnam to the average level of six original ASEAN countries. According to the roadmap, authorities will reduce administrative procedures and expenses for enterprises in three indices included in the “Doing Business” Report of the World Bank: cross-border trade, tax and power access. The Ministry of Finance is determined to reduce 200 hours of tax payment time this year and shorten the time for doing export and import procedures from 21 days, each, to 14 days for export and 13 days for import as in ASEAN-6 countries. The Electricity of Vietnam (EVN) also pledged to shorten the electricity access time to 70 days.

 

Specially, Vietnam also needs to improve the regulatory system, policies and coordination mechanisms for State agencies among others.

 

Besides, the country must deal with corruption challenges and encourage businesses to work together to detect corruption.

 

After nine editions, PCI has become the driving force for provinces and cities to step up reform, address shortcomings and facilitate enterprises to do business to attract investment capital and compete with other localities in this index. With PCI reports, local governments will know their weaknesses and shortcomings to remove.

Under the request of the Government and Ministry of Finance, the PCI Board under VCCI will work with the General Department of Taxation and the General Department of Customs to assess business satisfaction in tax and customs services. These two fields are very important and authoritative as they affect all businesses at any time. Customs and tax services, either good or bad, will affect the competitiveness of enterprises to a certain extent, thus affecting the entire economy.

 

In 2012 and 2013, VCCI collaborated with the General Department of Customs to conduct a survey on business satisfaction with customs services. Nearly 6,000 exporters and importers joined to answer questions about time, corruption, bureaucracy, modernisation, paperwork and other aspects when they work with customs offices. The survey has helped the customs sector gradually improve its services to reduce time and expenses for customs service.

 

In the coming time, VCCI will carry out surveys in customs and tax fields and will announce the results to the public. The surveys will provide the General Department of Taxation and the General Department of Vietnam Customs with an objective and accurate view on their services for enterprises, thus enabling them to have appropriate measures to speed up reform and modernisation of the services for enterprises.