Reforms raise local ranking

Ease of doing business in Vietnam has increased, according to the World Bank report

The World Bank last week issued its high-profile “Doing Business 2018” report, which stated that Vietnam has “implemented the most reforms in the past 15 years, with 39 reforms. Today, an entrepreneur in Ho Chi Minh City spends 22 days and 6.5 per cent income per capita registering a new company, compared to 61 days and 31.9 per cent in 2003.”

Under the report, Vietnam’s business climate index rose to the 68th position out of 190 economies surveyed, from 82nd out of 190 economies last year.

“This is the highest climb in Vietnam’s World Bank rank index over the past decade,” said Nguyen Minh Thao, deputy chief of the Central Institute of Economic Management’s Business Climate Division.

WB has used 10 categories to assess all the economies, including starting a business, getting credit, trading across borders, dealing with construction permits, protecting minority investors, getting electricity, enforcing contracts, paying taxes, registering property, and resolving insolvency.

Of these categories, seven have seen a rise in the ranks and scores for Vietnam, including paying taxes (up 81 ranks and 14.78 points); getting electricity (up 32 ranks and 6.46 points); getting credit (up three ranks and five points); dealing with construction permits (up four ranks and 0.4 points); protecting minority investors (up six ranks); trading across borders (94th place, up 0.91 points); and enforcing contracts (up three ranks and 0.93 points).

Another two categories of Vietnam also witnessed a climb in scores, including starting a business (up 2.85 points), and resolving insolvency (up 0.08 points).

“Vietnam’s business climate improvements recognised by WB have resulted from a series of solutions applied by the government to improve the business climate,” Thao said.

Specific factors included things like ‘Getting electricity’. The government has increased the reliability of the power supply by rolling out a supervisory control and data acquisition automatic energy management system for the monitoring of outages and the restoration of service. Regarding ‘Getting credit’, Vietnam strengthened access to credit by adopting a new civil code that broadens the scope of assets that can be used as collateral. Also, for ‘Paying taxes’, Vietnam made paying taxes easier by abolishing the 12-month mandatory carry forward period for value-added tax credit and by introducing an online platform for filing social security contributions.

In another case, concerning ‘Trading across borders’, Vietnam made exporting and importing easier by upgrading the automated cargo clearance system and extending the operating hours of the customs department. And in terms of ‘Enforcing contracts’, Vietnam made enforcing contracts easier by adopting a new code of civil procedure and by introducing a consolidated law on voluntary mediation.

Commenting on Vietnam’s business climate competitiveness, Raymond Mallon, an Australian senior economist who has spent decades studying Vietnam’s economic situation, told VIR that the key factors that matter to investors considering long-term sustainable investments in Vietnam are long-term profitability and risk.

“Reform efforts should continue to focus on reducing administrative bottlenecks in Vietnam, improving public infrastructure and services, and strengthening skills and the institutional foundations for productivity growth while also ensuring macro-economic and social stability,” Mallon said.

“Promoting equitable development is also important as it will help promote stability and increased domestic demand. It is critically important that the government continues to reduce the obstacles to the emergence of a dynamic domestic private sector, as many foreign firms are looking to build relationships with dynamic and potentially lower-cost private firms,” he added.