Favourable climate heads reform agenda

Processing and manufacturing are on the rise, but it is possible to give businesses even more of a foot up, Photo: Le Toan

At the government’s cabinet meeting to review the economy’s 4-month performance more than a week ago, Prime Minister Pham Minh Chinh underlined that despite positive changes in administrative reforms, businesses in Vietnam are still bogged down in difficulties caused by complicated procedures.

“I have met with many local and foreign companies and investors, and they are still complaining about our cumbersome administrative procedures,” he said. “Enterprises are one of the key backbones of the economy. If they are ill, the economy will be ill. With the pandemic controlled, we have to create a more favourable climate for all enterprises.”

Over the past few years, the Vietnam-Taiwan joint venture Wenshing Agricultural Trading Co., Ltd. specialised in agricultural exports has been finding it more favourable to do business thanks to the government’s policies on improving the domestic business and investment environment and promoting national competitiveness.

“The time it has taken us to conduct import and export procedures was trimmed down by around 30 per cent, but we currently still have to spend much time conducting not only those procedures but also many others,” said the company’s vice director Pham Ngoc Chinh.

Like numerous other enterprises in Vietnam, Wenshing is now irked by a number of customs procedures. “We have completed all e-customs procedures, but we are still required to send many types of paper-based documents directly signed by the company’s leader,” Chinh said.

In another case, Chinh added, it takes the company nearly eight months to enjoy tax refunds, due to some complicated procedures.

The prime minister ordered that ministries and localities must continue enacting sturdy solutions to remove all obstructions regarding policies and mechanisms.

“If there are any issues failing to be solved by ministries and localities, they must be reported to the government and the prime minister immediately so that enterprises can find it favourable to perform,” PM Chinh said. “All legal documents must be reviewed so that all impediments facing enterprises’ business and production activities can be removed as soon as possible. This will help make it easier to unleash and mobilise all resources in each enterprise, each citizen, and the whole economy. One of the best solutions now is to quicken the reduction and simplification of all administrative procedures and improve the quality of the domestic business and investment climate.”

State officials are also requested to advance concrete and feasible solutions to amend the regulations and documents in a bid to “remove all difficulties and contribute to mobilising all resources of the society for investment and business for the public and enterprises,” the PM said.

Expectations remain

Working and living in Vietnam for years, Alain Cany, chairman of the European Chamber of Commerce in Vietnam (EuroCham), sees that the country has a dynamic investment environment and fast economic growth and showed a remarkable transformation over the past decade.

“European business leaders are showing increasingly improving attitudes towards the prospective growth of Vietnam’s economy,” Cany said. “With recent developments and with Vietnam’s re-emergence as an international economic power centre, the economy has the chance to attract a new wave of high-quality, green foreign direct investment from European investors looking for a safe and competitive investment destination.”

The American Chamber of Commerce (AmCham) in Hanoi also highly appreciates Vietnam’s efforts in administrative reforms and also expect more improved policies for the business community as this would help Vietnam attract more foreign investment and further strengthen investors’ confidence.

AmCham Hanoi suggested that it is necessary to accelerate the use of e-government, e-commerce, e-banking, fintech, cloud computing, and the overall reduction of paper and cash for all businesses. Replacing Vietnam’s local cloud technical standards in state agencies with internationally recognised cloud and compliance mechanisms and adopting cloud-first policies would enable the government to choose the best technologies, strengthen digital resilience, and develop a robust e-government technology ecosystem.

“We also need to ensure a favourable climate for existing investors and appreciate that the government has prioritised administrative reform to improve the ease of doing business. It is critical that all businesses and investors encounter a fair, transparent, predictable, and streamlined regulatory environment that values innovation – not only to attract new investment but also to maintain and grow the investment that is already here,” AmCham Hanoi stated.

Echoing this view, a large American company operating producing animal feed in the southern region told VIR that many groups like it highly appreciated the government’s positive moves in boosting administrative reforms over the past few years.

“However, currently we are facing some problems. For example, the discrepancies in the implementation of policies and coordination among some state agencies are confusing businesses,” said the company which has invested $160 million in Vietnam. “Some regulations have a rushed execution roadmap that makes it really hard for businesses to adapt their operations to the changes. This creates difficulties for well-complying businesses while creating a loophole for non-conforming ones.”

Strengthened confidence

It is expected that under the fresh order of the prime minister, state officials will take drastic action in reviewing and amending unnecessary regulations in favour of the business community.

For example, according to EuroCham’s Business Climate Index (BCI) conducted with over 1,200 member companies in Q1/2022, the BCI climbed to 73. This is a 12-point increase compared to the fourth quarter of 2021, in addition to nearly 58 points of growth compared to the third quarter, with business leaders now more upbeat after the relaxation of Vietnam’s pandemic-related restrictions and the continued acceleration of its economic development.

EuroCham’s Cany said, “Once again, European business leaders have given their wholehearted endorsement of Vietnam’s investment environment. The BCI is likely to sustain this upward trend next quarter, with a more optimistic business outlook from business leaders anticipated. Vietnam’s economic recovery is rapidly moving forward, with the country remaining one of the best performing and most exciting investment destinations in the world.”

According to the General Statistics Office (GSO), in the first four months of 2022, the economy saw 49,600 newly-established enterprises with the total registered capital of over $27.62 billion, employing almost 350,000 new labourers – up 12.3 per cent in the number of enterprises, 1.2 per cent in capital, and 2.3 per cent in the number of labourers as compared to those in the same period of last year.

If an additional $58.7 billion registered by 17,100 operational enterprises is included, the total registered capital inserted into the economy in the period amounts to up to $86 billion, up 39.4 per cent on-year.

Furthermore, the first four months also saw 30,900 enterprises resume operations, up 60.6 per cent on-year.

“These results show that the socioeconomic recovery and development policies by the National Assembly and the government have been implemented effectively, further strengthening the confidence of people and enterprises,” said a GSO report on the economy’s 4-month performance.

Chinh of Wenshing said the company is planning to expand production this year and that he hopes that the government’s programmes on simplifying business regulations under the country’s programme on socioeconomic recovery and development will be implemented soon.

“We have heard about this programme in which the government has ordered further simplification and removal of administrative procedures. However, many companies like ours are now still suffering from complicated procedures,” Chinh said.

“It costs us much money to obtain conformity certificates for our products, while normally these certificates need to be obtained only once for each product. Enterprises like us want to see further administrative reforms so that we can find it easier to operate in the market,” she said.