Further Improving Business Environment, Enhancing Competitiveness

3:44:50 PM | 1/10/2023

Reforming the business environment and creating more favorable conditions for the business community and investors is always the goal that the Government has strived to achieve. However, there are still barriers that prevent businesses from obtaining what they want.

Positive changes

In recent years, Vietnam's global rankings have kept going up. The Index of Economic Freedom, which measures the degree of economic freedom in the world's nations, climbed up six places to the 84th position from the 90th. Tourism and travel development (as announced by the World Economic Forum in May 2022) looked up eight places over 2019 to No. 52 position from No. 60. Vietnam was rated by the World Economic Forum as a leading economy in terms of performance improvement in this index. The United Nations e-Government Development Index saw Vietnam’s position unchanged at the 86th position but its score higher.

Domestically, the Provincial Competitiveness Index (PCI) 2021 released by the Vietnam Chamber of Commerce and Industry (VCCI) also showed that the quality of the business environment made progress. According to VCCI President Pham Tan Cong, the business community highly appreciated governments of many provinces and cities for their dynamism, active response, responsible attitude and ability to effectively solve new, sophisticated problems. Burdens of informal and inspection costs continued to trend down. Labor quality and infrastructure also improved markedly over time.

In particular, according to data from the Ministry of Planning and Investment, administrative procedure reform made strong strides. In 2021 and the first eight months of 2022, 1,758 out of 17,687 business-related regulations were reduced and simplified (reaching 10%) in 143 legal documents. The Prime Minister also approved a plan to reduce and simplify 1,107 business regulations and a plan to decentralize authority to handle 699 out of 5187 administrative procedures in 100 areas (accounting for 13.47%), thereby helping reduce hierarchical, intermediate stages and shorten the time to solve administrative procedures.

In addition, the country established 11,700 single-window divisions at all levels to receive and handle administrative procedures, with 56 out of 63 provinces and cities having provincial public administration service centers, 53 out of 63 localities integrating their public service portals and ministerial and provincial electronic single-window information systems into a single administrative procedure settlement information system, and many localities upgrading the system to meet digitization requirements. The National Public Service Portal connected and integrated with information systems for handling administrative procedures filed to central and local agencies, provided 3,805 online public services, synchronized more than 129.6 million records (more than 1.8 times higher than the same period in 2021), and more than 2.7 million online payment transactions (more than 16 times higher than in 2021).

Along with the above reforms, confidence in recovery prospects was expressed in corporate establishments. In the first 11 months of 2022, the country had 194,700 companies to be established or resumed operation, up 33.2% year on year. On average, 17,700 companies were founded or resumed normal operations a month.

Barriers to businesses remain

Despite positive achievements, the business community still faced numerous difficulties due to many unfavorable business procedures. Many current legal documents are not consistent, proper and feasible (especially regarding investment, land, construction, housing and environment). This is also a key reason that generates a lot of costs for businesses, leading to difficulties for localities to handle investment and business procedures. In addition to heavy cost pressures such as increased fuel and input prices, companies are bearing a lot of other cost burdens such as compliance cost and infrastructure service charges. Furthermore, online public services are not always smooth and interconnection between state management agencies is not adequate.

In the face of unpredictable volatility in the world triggered by high input costs and a serious market contraction, according to Deputy Minister of Planning and Investment Tran Duy Dong, many companies had to cut production and staff. More companies suspended operations, giving rise to various social consequences. However, while companies desperately need help from institutional reform packages and the improved business environment, concerns of some ministries, agencies and localities seem to be slowed down. Many goals, tasks and solutions have not met requirements as directed by the Government and expected by the business community.

“In some areas, barriers are even worse, not only difficult for businesses but also to enforcement officers. Therefore, business confidence in institutional reform and business environment improvement is still fragile," he said.

Besides, according to the Provincial Competitiveness Index (PCI) Report 2021 released by the Vietnam Chamber of Commerce and Industry (VCCI), there are some matters that need to be further improved to make the business environment more favorable: Reforming procedures for granting business licenses; improving access to land and business premises or implementing more effectively and substantively the Law on SME Support.

Improving the business environment - a key and priority task

To make more positive changes in business climate and competitiveness, according to the Ministry of Planning and Investment, central and local agencies need to regard companies as the heart of institutional reform and assign business environment improvement and competitiveness enhancement as a key priority task. Central and local agencies need to focus on resolutely reducing and simplifying administrative procedures more strongly and diminishing compliance costs in all areas; and link administrative procedure reform with e-Government construction. They need to regularly inspect and supervise regulatory enforcement to ensure effectiveness and consistency. It is necessary to have a mechanism to create motivations to encourage creativity and ensure safety so that all public employees can feel assured in performing their official duties.

In addition, they will continue to effectively implement solutions to support people and companies to restore production and business operations; strengthen the capacity of business support agency systems such as business development service systems, business incubators, startup support centers, and mentoring and legal support agencies for businesses. Dialogues and exchanges with people and businesses need to be more substantive and working to emerging matters for businesses. They also need to complete policies and improve effectiveness of guidance and support for businesses to take advantage of opportunities from free trade agreements.

In particular, efforts should be made to restore market confidence and investor confidence, and strengthen market management and regulation with market solutions, not with administrative orders and sudden changes in laws and policies that may easily result in market disruptions.

Current efforts to better the investment and business environment not only help Vietnam increase opportunities to attract investors but also sharpen corporate and economic competitiveness in the face of global uncertainties, accompanied by risks of an economic recession. This can be considered a driving force and a key for growth in 2023 and beyond.

By Quynh Anh, Vietnam Business Forum