Vietnam Lagging behind in Fair Competitiveness Environment

CIEM President Nguyen Dinh Cung said that Vietnam is building a modern and integrating market economy. The core element of a market economy is competition, which must be fair and square. Therefore, the development of a legal institution and competitive market rules is essential to have a complete market economy.

 

He said that Vietnam’s economy has attained a lot of remarkable achievements after 30 years of reform but, with growing integration and international relationships, it has shown a lot of shortcomings and gaps on the world level. In 2011-2015, Vietnam implemented many measures to transition into the market economy like giving priority to macroeconomic stability, restructuring the economy and changing growth pattern. Although the economy has first positive development steps, the macro-economy is unstable, economic growth is lower than expected, and economic restructuring and growth remodelling are still lower than planned.

 

Economist Pham Chi Lan said competition is a very broad concept of economics. For example, the competitiveness of Vietnam is almost the lowest among all members of the Trans-Pacific Partnership (TPP). 25 years after Vietnam joined ASEAN, it still stood at No. 7. Even lower-ranked countries such as Laos, Cambodia and Myanmar still have certain aspects better than Vietnam and they are changing institutions to challenge Vietnam. She added that Vietnam still keeps old-style thinking, that is to say, only respecting State-owned enterprises and foreign-invested enterprises. Whereas the private business sector is always pinched by those two forces, they thus lack fair and equitable competition for development.

 

Dr Dang Quang Vinh, Director of the Business Environment and Competitiveness Committee, CIEM, said Vietnam currently has a lot of competition limitations, evidenced by the four following points: Limited number of suppliers expressed by sole business authorisation to only one supplier; limited competitiveness of suppliers; weakened competing motivations of suppliers by means of generating self-regulating and joint-regulating mechanism (e.g. all are State-owned) like the way the Vietnam Food Association self-allocates rice export orders without any competition; and limited choice or information for consumers.

 

Even, he cited typical cases of unfair competition that ruined opportunities and restricted production and business rights of enterprises and localities. For example, the rise in market entry costs raised difficulties to enterprises and forced them to retreat. To engage in passenger transportation, a company in a centrally governed city must have at least 20 vehicles. Or, geographical barriers are erected against the provision of services, labour or investment. For instance, the relocation of public notary office in the territory of the province must be approved by the Provincial People’s Committee (Article 24, Law on Public Notary 2014). Or, the imposition of product standards benefits only some units. For instance, driver/rider training establishments must have at least 10 internet-connected computers with installed traffic law software delivered by the Road Administration of Vietnam. This obviously advantages acquainted companies but limits the rights of choice or consumer information and restricts the choice of sellers. For example, equipment used for driver licence theory testing must include two servers running Windows Server 2008 SP2 or later, 10 workstations using Intel Core 2 Duo chip and running Windows 7 or later (Circular 79/2015/TT-BGTVT on national technical standards for motorised driver examination centres dated October 12, 2015).

 

Dr Nguyen Dinh Cung, CIEM President Vietnam cannot let ministries perform three functions at the same time: Planning policies, regulating the market and exercising ownership, but must separate them. Ministries separate and merge corresponding components to avoid conflict of interest in State management.

Vinh said the above typical cases exist because our bureaucracy lacks market oriented thinking for competition. Anticompetitive management measures appear everywhere. Institutional systems disrespect competition and market rules.

 

Professor Michael Wood, former Vice Chairman of the National Competition Council of Australia, affirmed that unreasonable policies of the government may become burdens and hinder competition, for example, specific regulations on what to produce, how many to produce, how to produce and how good to produce. Or, policies also create additional burdens because of rising administrative and compliance fees, distort market prices, and reduce efficiency of allocation decisions of enterprises. Therefore, in the context of rapid and fierce global competition, the government should not do anything but simply ensure competition and create a level playing field for enterprises.

 

He said that policymakers must introduce guiding policies beneficiary to consumers and protect the interests of companies with a flexible and fair competition mechanism, not safeguard individual companies. That means ensuring a fair business environment, not ensuring any individual business. Therefore, to move toward a market economy, Vietnam needs to have an overall review of current policies to assess and reduce unnecessary regulation.

 

He said Vietnam's current economic management model is very similar to that of France 10 years ago. However, that model has long been cancelled. Therefore, Professor Micheal Wood recommended Vietnam separate roles of the Competition Council and the Vietnam Competition Authority. Members of the Competition Council must be independent of the government, have a mechanism for feedback and complaint information and eliminate unfair competition. Operations of the Vietnam Competition Authority (VCA) should be reviewed for improvement.

Anh Phuong