Streamlining Administrative Procedures to Improve Investment Climate

According to the American Chamber of Commerce in Vietnam (AmCham), the economic performance in 2023 exposed some weaknesses, including a strong dependence on foreign market trends, a vulnerable domestic private sector and red tape slowing progress. Additional progress on structural reforms in State-owned enterprises (SOEs), government administration and regulatory processes for the private sector is needed to make sure that Vietnam regains momentum and climbs the manufacturing value chain.

Complex administrative procedures, including license issuance, are identified as a tough challenge to Vietnam’s investment environment

AmCham said the most important factor for a favorable investment climate is a fair, transparent, predictable, and streamlined regulatory environment that values innovation - not only to attract new investment, but also to maintain and grow the existing investment. While some administrative procedures have been eliminated and simplified, new laws and regulations continue to introduce new administrative procedures.

"We recommend that all the new laws and regulations be reviewed and restricted on new administrative procedures. Many AmCham members face delays in approval procedures and time-consuming administrative burdens which hinder or stall their projects and impact Vietnam’s competitiveness. Timely approvals are needed: for site master plans and related permits, business licenses, investments, real estate development, visas for foreign workers - especially experts, as well as reliable and consistent use of e-government and e-approvals. In addition, although digitalization is promoted by the government, many administrative procedures such as reporting, registration and notification are still required to be submitted in paper or even in both paper and electronic forms," AmCham recommended.

According to a 2023 JETRO survey, "complicated administrative procedures such as license issuance" is listed as the biggest risk to Vietnam's investment environment for Japanese companies. Although the Administrative Procedures Reform Advisory Council of the Prime Minister has identified issues and implemented various reforms such as simplifying laws and regulations, and the digitization of administrative procedures, Japanese companies hope to see more efforts for further administrative procedure reform.

The Japanese Chamber of Commerce and Industry in Vietnam (JCCI), Vietnam is still slow to issue business licenses/various administrative permits. In digital fields such as digital transformation and innovation, although progress in the development of innovative products and services is remarkable, many JCCI member companies are concerned that they will miss business opportunities in Vietnam due to the slow issuance of business licenses for digital transformation such as e- Commerce.

"We believe that speedy issuance of business licenses will help create business using these innovative technologies," JCCI said.

In addition, in large-scale infrastructure development, such as power plant construction and urban development projects, there are cases which take more than 10 years to complete due to the delay in changing the land use purpose and issuance of related permits, which leads to delay in infrastructure projects. According to JCCI, the completion of infrastructure development projects can be accelerated by speeding up the examination and issuing required licenses.

In many cases, competent authorities require foreign investors to fulfill stricter conditions and submit additional documents beyond those stipulated by law and regulation when registering activities with relevant authorities or obtaining a business license, which leads to the delay of administrative procedures. For example, as previously identified by the Vietnam-Japan Joint Initiative, there are many unreasonable requirements for acquisition permission, investment and business registration by the Department of Planning and Investment and the Business Registration Office, as well as non-statutory conditions and document requirements for the issuance of various business licenses by the Ministry of Industry and Trade and the Department of Industry and Trade. Furthermore, the delay in VAT refund procedure due to stricter eligibility conditions imposed by tax authorities also causes financial difficulties for companies because of tight cash flow.

It is imperative to streamline business licensing, end unreasonable investor requirements, and consider FDI perspectives when altering tax laws, including VAT law and global minimum tax

Before this reality, JCCI proposed the Vietnamese government speed up the issuance of business licenses and permits; end practices requesting investors to fulfill unreasonable conditions or to submit documents that are not in accordance with laws and regulations, specially from the FDI perspective in making any changes to the tax system, such as amending the VAT law and global minimum tax (GMT).

Associate members of the Vietnam Business Forum (VBF) also proposed simplifying licensing procedures in Vietnam to significantly boost foreign investment by simplifying and streamlining procedures for obtaining and renewing business licenses, certificates and other permits.

This is particularly important for foreign investors who may be discouraged by complex bureaucratic processes. A typical example is the licensing procedure to obtain a business license under Decree 09/2018/ND-CP (Decree 09). So far, the licensing procedure and timing for foreign-invested enterprises (FIEs) to obtain business licenses for sectors including retailing, equipment leasing activities, and e-commerce from the Ministry of Industry and Trade (MOIT) is still very burdensome and time-consuming. Typically, this involves several rounds of submissions and follow-up questions with MOIT and Department of Industry and Trade (DOIT). This can take up to 12 months. Under Decree 09, the statutory timeline (depending on the specific activities and application dossier) for obtaining the business license from DOIT is 13 working days. If DOIT needs to obtain further opinion from MOIT, it takes another 28 working days for MOIT to respond. In most cases, the approval or opinion of MOIT will be required regarding activities specified under Article 5.1 and Article 8.3 of Decree 09. However, in practice, the timeline can be prolonged for up to three months for each of the internal processes between DOIT and MOIT. If there are two to three rounds of questions and/or requests for supplement of information from MOIT, then it takes up to 9-12 months to complete. Even in the oil and gas industry, it takes one year to obtain a business license for the wholesale distribution of lubricants.

Thus, VBF's associate members requested the Government to consider and enact regulations that will shorten the statutory timeline for MOIT and DOIT approvals. They also requested MOIT and DOIT to observe the current statutory timeline for the issuance of the business license, and to be clearer and more specific as to what is expected in the application dossier so as to greatly reduce the number of follow up rounds required.

By Anh Mai, Vietnam Business Forum