Economy to change trajectory

Stronger reforms will help Vietnam lure more foreign direct investment

The World Bank last week released its “Doing Business 2013: Smarter Regulations for Small and Medium-Size” report, in which Vietnam’s business environment is ranked 99th out of 183 nations surveyed from June 2011 to June 2012. This rank was the lowest of Vietnam since 2009, when the country’s rank was 93rd out of 183 nations surveyed.

Under the 10 categories used for valuing the business climate, Vietnam saw its two categories improve from 2011, namely “making it easy to start a business” thanks to the country’s allowing companies to use self-printed value added tax invoices, and “making it easy to trade across borders” thanks to its using risk-based inspections.

But in many other sectors, Vietnam lagged behind the world. For instance, Vietnam was ranked 138th among the nations slowest in tax payment, with the country-based businesses having to spend 872 hours per year to pay tax. In another case, Vietnam ranked 169th in  “protecting investors” and 149th about “resolving insolvency.”

Under the report, Vietnam has implemented a total of 18 institutional or regulatory reforms, in eight of 10 areas of business regulation measured by the annual Doing Business report over the past eight years.

“The most recent reform made starting a business easier by allowing Vietnamese companies to use self-printed value added tax invoices.

“Vietnam has implemented various reforms over the years to improve the business environment. However, the report findings also imply that more needs to be done to bring Vietnam to the level of other economies in the region,” said Victoria Kwakwa, the World Bank country director for Vietnam.

However, the International Monetary Fund’s (IMF) resident representative for Vietnam Sanjay Kalra said many foreign investors remained upbeat about Vietnam’s business climate.

Kalra told a business conference in Ho Chi Minh City last wek that although Vietnam’s economy remained vulnerable, the country’s public debt and budget deficit were “acceptable”.

The Ministry of Planning and Investment reported Vietnam’s budget deficit in this year’s first nine months was VND145 trillion ($6.97 billion). The National Assembly Economic Committee reported that Vietnam’s total public debt was equal to 58.7 per cent of its gross domestic product (GDP) by 2011.

Kalra said the value of the dong was stable and Vietnam boasted young and diligent population. This could establish investors’ confidence. But to win their bigger confidence, he highlighted, Vietnam should focus on taming inflation as high inflation could recur if the government improperly loosened its monetary measure.

Hyun-Hoon Lee, an Asia-Pacific Economic Cooperation Secretariat senior analyst from South Korea, said despite their optimism, foreign investors were waiting for the government’s new actions to reform the local banking system and investment climate, in order to strengthen their confidence when doing business in Vietnam.