The countryside is home to the majority of poor Vietnamese people. However, the countryside receives the least investment in the country.
All assessments for the investment environment, up til now, have been mainly based on the statistics collected in urban areas. Vietnam's largest investment environment assessment in 2005 only took urban zone-located enterprises with over 10 employees and limited production scopes into account. However, there are reasons why investors should pay attention to rural areas. It is here where the majority of the poor are living, and creating jobs for them and paying salaries to them would be a major way to help them escape from poverty. In addition, there are a lot of various difficulties hindering the development of enterprises. Population density rate in the countryside is far lower than in urban areas, pushing up the infrastructure maintenance costs and other service expenses.
For small-sized enterprises, mostly family-owned models, marketing activity is less developed, while exchange cost is higher. Some seasonal factors also affect the production process, job, service and immigration.
There is a shortage of experience in investment environment research in rural areas. In Vietnam, the General Statistics Department, Vietnam Science and Society Institution, and the World Bank have conducted a survey in Ha Tay and Vinh Phuc provinces in 2005 in order to study all the investment activities. The survey was applied to 100 enterprises with official business licenses, half of them are manufacturers and the remaining are service enterprises. Many of these firms have less than 10 workers. The survey was also made on 200 business households without official business licenses and 100 households without any business activities, which is aimed to find any obstacles to their activities. The research was focused on some specific areas indicated by the General Statistics Department.
The survey shows that the hindrance ranking is different between rural and urban areas. In comparison with the Investment Climate Survey, the capability of accessing, unclear policies and violations are the main hindrances to enterprises in rural areas. For instance, more than two fifths of enterprises, which have electric generators, have to run in power-off condition. On the other hand, enterprises in urban areas find it easy to access financial resources, customs and trade procedures, and labor forces.
However, this is only a simple comparison. Households said that the biggest hindrance is a lack of capital. Half of the households surveyed have faced difficulties in accessing financial resources. One third of business households get loans from one financial institution, compared with two thirds of official borrowers.
To be able to receive loans, households have to use their houses and land for deposits, which have a value of one to three times higher than the loans. The loans are short-term and are often used to buy input materials and equipment. Most of the households, who did not borrow loans, said that they had not asked for loans. The difficult requirements necessary for securing deposits and loan terms may be the main reasons preventing households in rural areas from accessing loans.
Trade and service enterprises said that access to land is their top obstacle. 28% of them consider it the serious hindrance while one seventh of them said they have to wait for 18 months to get approval for construction licenses.
P.V
Vietnamese
