Business Environment Should be Transparent

After around two decades’ of reform, the business licence system in Vietnam has witnessed a significant change for the better to protect the rights to business of the Vietnamese people. However, Vietnam should promote the improvement of its business environment in a more transparent, predictable and reliable manner to achieve a target of having 500,000 enterprises in 2010 and becoming an industrialised country in 2020 during a period of fierce international competition, the recent report of the Prime Minister’s Research Commission on Business Licences and Conditions warns.

 

In the report, the more than 300 surveyed licences is just an illustration of many licences which have appeared and are appearing. These licences are issued by many State management agencies with unclear reasons and criteria, while supervision mechanisms are not strong enough. The report states that the right of the people to ask for the removal of any rules, which violate the Constitution or the law, or abuse their right to do business has not been performed effectively yet. This has produced negative impacts on the investment and business environment, resulting in an increase in costs and a widespread corruption.

 

Pham Duy Nghia, head of the group which produces the report, said that so far, the procedures for business licence application had been simplified. However, other administrative procedures on stamps, tax codes, and the application of advertisement and conditioned businesses still remain very complicated. A significant part of money and time of enterprises has been used to observe these importunate administrative regulations. Nghia said that administrative procedures should be loosened and the right of the people to do business should be protected more effectively.

 

In a context where Vietnam’s competitiveness remains poor in comparison with both the region and the world, Vietnam ranks 81^st among 117 countries, down by 17 ranks against 2004 and four ranks against 2005, the effectiveness and capability of State management agencies have produced a direct impact on the business environment. At present, no agencies have answered exactly how many business licences there are in Vietnam and fields and criteria for their granting.

 

The report states an example that in an effort to prevent the setting up of spikes on the trans-Asian highway, in September 2005, the People’s Committee of Ho Chi Minh City issued a decision that all inner tube repairing establishments have to be registered. They should have their own signs and codes to avoid any fraud. The decision has forced thousands of poor people who make their living by inner tube repairing services to register their business and pay more costs and expend a great deal of time and energy.

 

Criteria for authorised agencies to grant or refuse to grant licences are unclear. For example, to apply for a licence for a mining business, enterprises have to get the approvals of many agencies and complete many procedures. To get such a licence, enterprises have to get approvals from defence and tourism authorised agencies, negotiate with the People’s Committees of communes, ask for the approvals of districts, the departments of natural resources and environment, and the People’s Committees of provinces or the Ministry of Natural Resources and Environment. Total costs for the application is put at VND 20 million and it takes enterprises around one year to complete all procedures.

 

Pham Chi Lan, member of the Prime Minister’s Research Commission, said that administrative reform may help reduce business costs by around three per cent of GDP. This implies that each year in Vietnam, around US$1.2 billion people may be added to investment, equal to total annual ODA capital for Vietnam. This will become more urgent when Vietnam joins WTO in the coming time.