“Preparing for New Trade Agreements”

Delivering a speech at the forum, Vietnamese Prime Minister Nguyen Tan Dung thanked representatives in attendance and appreciated their open, practical and constructive opinions. Such viewpoints will help the Government of Vietnam rethink, change and perfect legal institutions, mechanisms and policies on Government administration, thus making them closer to reality, helping domestic and foreign businesses to boost development and enabling more sustainable economic development and deeper integration.

 

He said that in 2014, Vietnam’s economy has experienced a challenging year, especially after China blatantly and illegally placed its drilling platform in Vietnamese waters, thus threatening peace and economic development of Vietnam. Before those developments, with its own tremendous efforts and valuable support of the international community, Vietnam has stabilised its macroeconomic environment, curbed inflation and revived economic growth in 2014. GDP growth was expected to reach 5.9 percent, higher than the initial target.

 

"We honestly see that the results achieved are incommensurate with the potential and below our expectations and yours as well. In fact, there are a lot of difficulties and limitations that require us to do more in a more drastic manner to ensure rapid and sustainable economic development of our country,” he said.

 

According to the cabinet chief, Vietnam is committed to carrying out more aggressive and effective solutions to boosting economic development and improving the investment climate in 2015. He underscored six key missions:

 

Firstly, Vietnam will ensure better and firmer macroeconomic stability. Exchange rate and interest rate will be controlled and inflation will be curbed at 5 percent. In 2014, inflation was lower than 3 percent and is expected to remain reined in through 2015 to ensure development. Overspending will be kept at 5 percent in 2015. Public debt will not exceed the safety threshold and repayment will be effectively settled.

 

GDP growth was estimated at 5.9 percent 2014 and 6.2 percent in 2015. GDP growth for the 2016-2020 phase was projected at 6.5 percent a year.

 

Secondly, Vietnam will continue its focus on perfecting market regime. This is a significant groundbreaking decision. The country will concentrate on reforming legal institutions, the capital market, real estate market, tax and other aspects to facilitate business development and enhance competitiveness while preventing illegal trade, counterfeiting and tax evasion, and will implement measures transparently in the spirit of market economy and legality.

 

Thirdly, Vietnam will actively deepen international economic integration. Specifically, in addition to effectively enforcing current free trade agreements (FTAs), Vietnam will sign a free trade agreement with the EU in early 2015 and conclude FTA negotiations with South Korea.

 

Vietnam is in active talks with 11 countries, including the US, Japan and Canada, to conclude TPP negotiations soon.

 

Fourthly, Vietnam will focus on three groundbreaking stages, economic restructuring and business environment reform. Priority will be given to infrastructure investment, high-quality personnel training, and competitiveness enhancement.

 

Additionally, Vietnam will step up public investment reform to enhance investment efficiency, focus on infrastructure investment, encourage domestic and foreign investment, and support high-tech and auxiliary industry development. The country will reform its banking and financial system to ensure effective banking and bring the bad debt ratio to 3 percent in 2015.

 

It will also get a move on State-owned enterprise (SOE), speed up SOE equitisation to raise corporate governance and improve operational efficiency, and treat SOEs on equal ground with other economic sectors in the market mechanism. Together with that, the government will strongly encourage the development of private businesses, small and medium-sized enterprises (SMEs), facilitate foreign enterprises to invest in the Vietnam market, and restructure effective agriculture.

 

Fifthly, the Government’s priority tasks will be anti-corruption, with two major solutions including the completion of the market economy in accordance with reforming administrative procedure, being transparent in asset and budgets, and strictly dealing with corruption.

 

Sixthly, Vietnam will ensure social progress and justice, social security, employment, and livelihoods of people in remote areas. Urban unemployment is below 4 percent.

 

Since the Mid-term Vietnam Business Forum 2014 took place in June, Vietnam has made significant progresses in a number of areas related to the business community, especially the revised Investment Law and amended Enterprise Law that were approved by the National Assembly during its eighth session, in addition to a range of tax incentives being deployed to reduce the time for tax declarations and granting work permits. The Government also gives attention to the recognition and enforcement of foreign arbitration rulings.

 

However, existing barriers still obscure the business environment. Given financial market reform, businesses want to get involved in solutions to accelerate banking reform process, with the adoption of the best international practices in banking, lending, bad debt settlement, financial market and public debt. The Government needs to support them to take advantage of benefits of prospective FTAs to which Vietnam are a signatory, and develop the workforce, education, training, wage, overtime pay and work permit. In addition, there are still some other barriers like SOE reform. Vietnam needs to quicken the equitisation progress and enforcement of Decision No.51, enhance corporate governance quality, apply international practices, and reform administrative procedures in all sectors, particularly in licensing.

 

In 2014, the Government has made policy moves to accelerate reform and support business development, especially tax and customs fields. In the first 11 months of 2014, Vietnam saw 14,000 businesses resuming operations. Companies find it hard to access planning and legal documents from governmental agencies. They also find it hard to anticipate policy changes. And only 13 percent can predict this. Central law enforcement in localities is still problematic. They also see difficulty in public administration reform although there are certain breakthroughs and they still await public service reform towards market direction - the stage considered not to be a breakthrough.

 

Therefore, we propose that the Government consider asking the National Assembly to consider amending the current legal system to avoid criminalising economic activities. Administrative procedure reform that the Government is directing the deployment needs reviewing, referring to advanced standards in ASEAN countries. Coupling with a capability building support programme for business associations and with a public service roadmap is the acceleration in judicial reform to generate a favourable and safe business environment - an increasingly important requirement.

 

AmCham members are frustrated by persistent delays in decision making on key projects and policies. Examples include delays in implementing regulations on important laws and decrees, in advancing key infrastructure projects, and in streamlining administrative procedures. They look to the Government to foster a more competitive environment where decisions are made faster and legal procedures are less complicated, rules are fairly enforced, and companies compete on their merits - including for access to capital, land and opportunities. We urge the government to implement systems that are understood to reduce opportunities for illegal payments. A significant step forward would involve actions that greatly limit the use of cash payments and increasing the use of e- commerce.

 

Our members wish to see initiatives that provide further encouragement of private enterprise, and that enable and facilitate rather than restrict business opportunities. AmCham believes that the business climate can best be helped by actions that increase productivity and reduce the costs and risks of doing business in Vietnam.

 

When FTAs go into effect, Vietnam will have to enter into a fierce competition with other countries in the region and the world because of the abolition of tariffs. Vietnam will abolish partial tariffs in 2015 (with a complete elimination set for 2018). According to the view of developed countries, a market is only appealing when it can sell many products. Hence, investment for production development may be flowed into other countries. To do with this, the Government of Vietnam needs to focus on production development by attracting foreign investment, improving national competitiveness and clarifying is industrial production development policies.

 

To prepare for the upcoming ASEAN Trade in Goods Agreement (ATIGA), Vietnam must place focus on the development of supporting industries. A decree on the development of supporting industries which being drafted by the Ministry of Industry and Trade must be practical and consistent. Particularly, a clear definition on supporting industry must be made, a process for selecting projects for tax incentives must be also introduced, and the application of these instructions must be made with already-simplified procedures.