'Secret payments' and red tape holding back Vietnamese companies

By Ngoc Tuyen, Hoai Thu, Minh Son   May 17, 2017 | 02:56 pm GMT+7
'Secret payments' and red tape holding back Vietnamese companies
A worker at the Ford automotive plant in the northern province of Hai Duong. Photo by AFP/Hoang Dinh Nam

An annual dialogue between Vietnam’s top leaders and businesses started out as expected: with a barrage of complaints.

The Vietnamese government should simplify procedures and lower taxes and fees to help companies cut operating costs and avoid red tape, business representatives said at a meeting on Wednesday.

Representatives from some 2,000 companies, 1,500 of them private firms, attended an annual meeting with Prime Minister Nguyen Xuan Phuc and cabinet members in Hanoi, while 10,000 more across the country monitored the event remotely.

The World Bank’s business environment index last year ranked Vietnam at 82nd globally, up nine places from the previous year, and many foreign business associations have also spoken positively about progress in Vietnam.

Nguyen Van Than, chairman of the Association of Small and Medium Enterprises, which represents 90 percent of businesses in Vietnam, said various taxes and fees, either official or unofficial, remain a heavy burden that hinders competition.

Than said corrupt administrative procedures remain prevalent, and many businesses have to offer “secret payments”.

Nguyen Huu De, chairman of the business association in Thanh Hoa Province, said local businesses often get held up with paperwork.

“Government officials go on holiday too often,” De said, adding that the government needs talented people to accelerate economic reforms.

Trade experts said reforms should include giving more space to private businesses.

De, chairman of a private transport and healthcare investor, said that state-owned companies should stop stepping in areas that private companies can handle.

“We should avoid creating an economy in which state firms do the easy jobs and push the difficult ones to private firms,” he said.


Prime Minister Nguyen Xuan Phuc talks with businesses at Wednesday's meeting, where he pledged to continue overhauling the business climate in Vietnam. Photo by VnExpress

Cabinet members acknowledge the existing difficulties faced by businesses.

The trade and technology ministers told the conference that their agencies have simplified many regulations over the past year. However, businesses and some leading government officials said the business environment in Vietnam is still far from ideal.

Planning and Investment Minister Nguyen Chi Dung said doing business in Vietnam involves too many unnecessary expenses.

For example, the cost of transporting a container over 125 kilometers (78 miles) from Hai Phong Port to Hanoi is three times more than from a port in China or South Korea, Dung said.

He said taxes in Vietnam are higher than in all the biggest economies in Southeast Asia. The expense takes away 39 percent of the companies’ profit, double the amount in Singapore.

Vu Tien Loc, chairman of the Vietnam Chamber of Commerce and Industry, said the costs of running a business in Vietnam are among the most expensive in the region, and procedures are far too complicated.

He said that contradictory regulations, sudden policy changes and rogue inspections need to be eliminated.

Mai Tien Dung, Chairman of the Government Office, made the example of a business in the southern province of Dong Nai that was inspected three times in one month and another from a different province that was subject to 12 inspections in a year.

“Many regulations are interfering with business operations and violating their freedom to do business,” he said.

Dung said the government office has received nearly 600 complaints and requests from businesses since it opened a communications channel last October. He said that according to those complaints, current policies and regulations are making life difficult for businesses as some of them are unnecessary or unreasonable.

He said support for small and medium enterprises in Vietnam is limited and many of them get caught in prolonged and complicated procedures regarding bank loans and land use.

Pham Hong Hai, CEO of HSBC Vietnam, said that strong reforms can turn Vietnam into “the new tiger of Asia”.

Hai said Vietnam’s economy has seen a wave of foreign investment and local businesses could be elbowed out if they keep relying on cheap labor to survive.

For sustainable competition, businesses need to invest more in technology and the government should spend more on education to raise labor productivity, which is among the lowest in the region, he said.

Prime Minister Nguyen Xuan Phuc said the government will issue "important" decisions following the meeting.

Concluding the five-hour meeting, Phuc said the government would create "a better and more competitive" business environment where all businesses will be treated equally, with no preference for state-owned enterprises.

“This is the year of cost-cutting for businesses,” he said. “Low costs and low risks as well." 

As of April 20, around 612,000 companies were officially operating in Vietnam.

More than 39,500 new firms registered in Vietnam in the first four months of this year, up 14 percent against the same period last year; and 11,500 firms resumed operations, up 1.9 percent, according to the Vietnam Chamber of Commerce and Industry.

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