Vietnam Business Forum: A Turning Point of International Integration

Themed ‘Improving Vietnam’s competitiveness during international integration,’ the 2006 Mid-term Vietnam Business Forum was held by the International Finance Company and the Ministry of Planning and Investment in Hanoi on June 5. The forum is annual activity at threshold of the Mid-term Consultative Group Meeting in Nha Trang on June 9-10.

 

Most donors said that the Vietnamese investment environment had improved significantly. According to annual survey by the Japan External Trade Organisation (Jetro), costs for business and production in Vietnam and in 2005 are lower than other countries in the region. According to Jetro, salary for workers and engineers, as well as managers in 2005 tended to increase in Vietnam, from US$120 in 2004 to US$135, but the increase was lower than other countries. International call charge reduced from the fair level in the region in 2004 (US$1.95 against US$1.66) to a lower level (US$1.65 against US$1.68). In term of electricity price, with a certain volume, Vietnam’s electricity price in 2005 was the lowest in the region. This was one fo the most competitive investment cost in Vietnam.

 

However, Vietnam remained fifth out of six ASEAN countries in terms of attracting Japanese investors, who have started to change their investment destinations. Competitive investment costs, in fact, are not enough. More importantly, the quality of support services for investors should be improved.

 

Dang Vu Dung, vice chairman of the Hanoi Association of Young Entrepreneurs, said that the accession to the World Trade Organisation (WTO) would soon or late produce impacts on the existence of thousands of enterprises and jobs of Vietnamese people. Therefore, the Vietnamese Government should focus on transparency and the participation of the private sector. Therefore, the Government should publicly announce detail plans on Vietnam’s WTO accession. Also, it is necessary to consider financially and technically the private sector’s establishment of WTO information centres, helping enterprises overcome crisis. Dung said that the private and public sectors had not been informed fully about negotiations. The positive image and role of WTO may be negatively impacted if there were sudden incidents to enterprises during the preparation and the participation in the organisation.

 

Fred Burke from the Working Group on Production and Distribution under the Vietnam Business Forum, said that the biggest challenge for Vietnam was WTO’s requirement for a removal of export tax priorities, which are considered as red light subsidies. Accordingly, priorities mechanisms should be amended immediately for textiles, garments, electronics, interiors, automobile accessories and others. Items such as housing subsidies and the 13th month salary should be recognised as business costs in accordance to their nature.

 

On the other hand, Burke stressed that the State should payable revenues, which were not collected due to the tax exemption and reduction, to public works, including roads, seaports, electricity or vocational training. Any further financial burden for manufacturers, such as the social livelihood tax, which is proposed, should be considered cautiously.

Also, the forum concentrated on other issues, such as labour, banking, the capital market, and the permission for the private sector to invest in infrastructure facilities. According to donors, these are sensitive issues that Vietnam should have reasonable reforms when it joins WTO.

The issuance of the Government’s decree on minimum wage for Vietnamese workers at foreign-invested enterprises, agencies and organisations does not help enterprises. The decree stipulates a too short time for employers to increase 40 per cent of the most important costs in production and business activities, labour cost.

 

The does not clarify whether the increase o40 per cent is for the minimum wage only or all grades. The decree seems to have violated the principle of indiscrimination mentioned in the Common Investment Law, by allowing State-owned or Vietnamese private enterprises to pay lower salary than foreign-invested enterprises. Therefore, any change in salary should be referred or announced to all related sides before being publicly announced.

 

Unclear regulations in the new investment and enterprise laws, a representative from Auscham

During international integration, business associations have to take into account their co-operation with foreign partners, especially overseas Vietnamese to attract them to get involved in economic development, and the global distribution of Vietnamese goods. Business associations should be stronger to perform their tasks. Therefore, the State should provide concrete support for associations in terms of policies and finance to help them improve their capability, so they can provide better services for members.

 

Tax rates on automobiles and motorbikes, including second hand ones, do not help boost local manufacturing. They on contrary hamper the development of the market. Sales of the goods in the first five months of 2006 fell by between 30 and 40 per cent against the same period last year. Tax on land use right change and transfer still keep rates according to old prices. This implies that tax is between six and seven folds higher than payable tax before July 1, 2004. The Government has asked ministries and agencies to survey social impacts before issuing legal documents. Unfortunately, the request has not been observed yet.