Vietnam Business Forum 2006: More Improvement Needed

According to Mr Sin Foong Wong, Director of Regional Financial Organization, 202 businesses under the survey (local and foreign) are quite pleased with business environment in 2006. However, the mark they gave in 2006 is 2.25/4 (from 1 for very displeased to 4 very pleased) a little lower than 2.35 of last year. The survey shows no significant change in business environment in 2006.

According to the survey, 40 per cent of businesses saw progress in removing hurdles in market participation and infrastructure development. Positive change was also recorded in administrative formalities (30 per cent of businesses believed that administrative formalities are simplified and information is more accessible). 

However, no significant improvement has been made in capital access, license, business expenses and law enforcement. Local businesses see bigger progress than foreign counterparts. In particular, the index of "administrative service efficiency" increased from 1.8 to 2.55/4 and got out of the list of five most unsatisfactory areas found businesses in 2005.

 

89 per cent of businesses surveyed plan business expansion in the next three years. Few businesses (11per cent) are without expansion plan, reduce or shut down business operation.

However, businesses are not very optimistic about the prospect of the business environment in the coming years. With WTO membership, many new laws will be promulgated and law enforcement will be slow as often happened. Furthermore, new laws will not be immediately understood and implemented causing misunderstanding and confusion. For instance, new Investment Law and Enterprise Law were approved in late 2005 and effective in July 2006, decrees for the implementation of those laws have not been issued causing some controversy.

Mr Sin Foong Wong also said that with WTO accession, businesses are exposed to international competition. Many foreign invested businesses will be deprived of preferential treatment.

The least satisfactory areas to business community this year are the protection of intellectual property, regional competition, legal framework, law enforcement and infrastructure. Violation of intellectual property is not only a problem to big companies but also local companies with the low mark of 1.2/4 in the survey.

In spite of great efforts made in infrastructure development, it remains a hot issue preventing business expansion and failing to meet the demand of high economic growth due to shortage of capital resources, said Mr. Klaus Rohland, WB representative in Vietnam.

Law enforcement and the tribunal system are rated very low due to complicated formalities and high fees. Law enforcement takes longer time and causes delays to project implementation in Vietnam. As a result, few businesses seek dispute settlement by law and official procedures, in most cases they negotiated among themselves.

 

 

Vietnam law is often without guidance for implementation. For instance, Decree 72 issued in July 2006 allowing the establishment of commercial branches. However, until now, there is no guidance for the establishment of commercial branches. No one knows for sure whether they can be established or how far they can operate. WTO protocol approved by Vietnam contains no commitment on commercial branches though Decree 72 mentions it in clear term.

Eurocham stands ready to support related Vietnamese authorities to establish commercial branches in Vietnam. We propose to set up a special committee to draft necessary regulations.

Infrastructure development is crucial for the future of Vietnam. The high growth rates cause strong pressure to infrastructure and it may jeopardize the efforts to attract FDI for production and export.

The participation of private sector is essential in the development of infrastructure , finance and management, especially in energy and seaport. Amcham has submitted draft projects on energy and seaport. We request the government to tackle issues on infrastructure, allowing and encouraging private sector to participate in the development of infrastructure and finance.

To meet the goal of 300,000 more businesses by 2010 with millions of managers, technicians and skilled workers, the government and businesses should join efforts in the development of human resources reforming radically the national education and training system. Universities, colleges and vocational schools must conform the unified national education system. The existing vocational training system fails to meet the demand of modern industrial development in both quantity and quality.

We think there must be information centres of national standard providing information on each sector with analysis and forecast. Information can be sold to businesses to cover the expenses of the centres.

We need a law on establishment and operation of associations so that we can have a channel to make recommendations to the government. And the government should also decide which areas the associations can made recommendations on behalf of the business community.

Corruption is our first concern. A recent Auscham survey shows that the most important action of the government to improve the business environment is to control and check the corruption.

In the past 18 months, we follow with great interest corruption cases discovered and made public on mass media, especially PMU 18 case. However, we are not clear whether those cases have been dealt with properly or remain unsolved.

 

In the long term, the government should let the judicial system and the press to investigate thoroughly corruption cases. International experiences show that strong and independent judicial system and press can be effective weapons to put an end to corruption. Investigation body should be independent of the government, for example, the successful model of anti-corruption committee in Hong Kong.
Lan Anh