Vietnam's Business Doing Ease not High

Vietnam has changed some important regulations to create a favourable business environment but still needs to accelerate its reform to become more competitive in Asia-Pacific, states the 2007 Business Doing Environment Report by the International Finance Corporation (IFC) and World Bank, which was released in Hanoi on September 6.

 

Themed ‘How to reform' the report emphasised that Vietnam had reduced the documents and the time required to obtain building permits and allowed employers to use fixed-term contracts for any type of task, thereby making hiring easier. However, during the reported period from January 1, 2005 to March 31, 2006, Vietnam was only ranked 104^th out of 175 in terms of the ease of doing business, a four-rank reduction compared to the previous period.

 

Vietnam has reduced the time for licence granting and facilitated labour recruitment, but is still left behind in protecting minor shareholders before power abuse of directors. In these terms, Vietnam ranked only 170^th.

 

Also, the dissolution of enterprises in Vietnam remains difficult as it takes five years to complete bankruptcy procedures while the asset recovery rate is just 18 per cent. In the term, Vietnam ranked 116^th. In tax payment, Vietnam ranked only 120^th. It often takes Vietnamese 1,050 hours or 130 working days to compete procedures relating to tax payment. The report the official tax rate enterprises have to pay is 41.6 per cent, much higher than the official corporate income tax rate of 28 per cent.

 

Despite being thought of as a country with a challenging business environment, according to experts, Vietnam still has a foundation to hope for an improvement in its rank in the coming time with new laws. The Common Investment Law and the Unified Enterprise Law with decrees providing guidelines on the implementation of the laws, expected to be issued in the final half of this year, will help reduce time for business establishment and improve information disclosure, a factor for investor protection. Also, some codes and laws, which were approved in 2005 and took effect in 2006 such as the Import and Export Tax Law, the amended Customs Law and the new Civil Code have tended to create more favourable conditions for improving the Vietnamese business and investment environment.

 

Released annually by IFC and WB, the Doing Business Report review the ease of business environment of a country based on ten factors: starting a business, dealing with licences, hiring and firing, registering property, getting credit, protecting investors, trading across borders, paying taxes, enforcing contracts, and closing a business.