Toward Sustainable Business Environment

The business environment in Vietnam is always the top concern of foreign investors. Although the nation has greatly improved infrastructure, administrative reform, human resource development, there seems to be still many shortcomings in the Vietnamese business environment. To build a sustainable business environment, Vietnam has many things to do.

 

Vietnam Business Forum excerpted the viewpoints of several foreign business associations on this matter.

For many foreign companies, the complexity of administrative procedures and the sometimes uncoordinated and inconsistent implementation of laws and regulations between different authorities can present a serious hindrance to running a successful business in Vietnam. EuroCham, therefore, strongly welcomes the Advisory Council for Administrative Procedure Reform (ACAPR) initiative to identify a list of administrative procedures that are causing difficulties and obstacles to do business in Vietnam (Project 30), which is currently being carried out comprehensively at all levels, engaging all state administrative agencies, citizens and businesses.

 

However, there is strong feedback from not only our members but also from the business community that the approval process for setting up business in Vietnam still takes pains. The obligation for the investor to approach in sequence a number of government agencies renders the process unduly time consuming. We therefore recommend that Vietnam move to a “one-stop shop” approval. It would then be the responsibility of the relevant ministry to coordinate with other government bodies where necessary. In most developing countries this mechanism has proved extremely useful and effective.

 

Customs issues have recently troubled many European companies, like for example long processing times at customs due to lacking pre-arrival clearance, equal treatment of all goods regardless of their customs value, uneven import duties on disassembled parts of a product as compared to the import of the finished product, or the problem of damaged goods in customs procedures. EuroCham welcomes the openness and the willingness of the Vietnamese Government in general and the General Department of Customs in particular to enter into a constructive dialogue and solicit feedback on all administrative procedures and overall customs issues that the foreign businesses in Vietnam encounter. Improving customs laws and regulations does not require huge capital investments but can improve drastically the investment climate in Vietnam.

The lack of high-quality physical infrastructure, especially roads/ports, is a continuing and growing concern. Many prospective U.S. investors point to infrastructure deficiencies and inadequate logistics as a major negative factor. And AmCham has mentioned this critical issue in every VBF meeting since at least May 2006. Infrastructure constraints in Vietnam threaten current and future FDI for export and manufacturing. Private sector participation in infrastructure development, finance, and management is needed urgently, especially in electric power generation and deep-water seaports.

 

Today, there are still deficiencies and delays in development of key infrastructure, especially inter-provincial roads, bridges, including approach roads, electric power, strategically located seaports and their related land-side infrastructure and intra-city public transportation such as light rail.

 

The World Bank, the Asian Development Bank, and Japan’s International Cooperation Agency (JICA) and Bank for International Cooperation (JBIC) have contributed substantial loans to develop transport infrastructure. However, the effective use of these funds has been constrained by inefficiencies and corruption. Foreign business associations are representatives not only of the FDI companies here in Vietnam, but also, in a way, representatives of the citizens and taxpayers of the U.S., Europe, Japan, Australia and other countries, whose taxes provide the bulk of these ODA funds, we encourage the donors to be more effective in managing their fiduciary responsibilities.

A recent paper published by the Ash Institute of the Harvard Kennedy School found that over 50 % of Vietnamese graduates are unable to find employment in their chosen field of study, evidence of the disconnect between the existing education system and the needs of the business community. Our members often note that newly recruited staff often need retraining as they lack the work-ready skills required to succeed in a modern business environment. Accordingly, challenges in attracting and retaining skilled workers remain at the forefront of our members’ concerns.

 

In order to address the human resource challenges, we believe that the Government will need to implement major reform in the education sector. Proper accreditation of courses and institutions supported by internationally recognised standards is fundamental to establishing a modern education system. Such initiatives should be complemented by the development of leadership and managerial expertise at the institutional level. Quality assurance programs and modern information systems are also needed to facilitate objective measurement of quality and performance and the implementation of necessary improvements. We encourage the Government to work with institutions (particularly experienced foreign education and vocational training institutions) to put in place the frameworks necessary to improve and sustain quality and performance throughout the Vietnam education system.

Our members have expressed concerns about the lack of efficient solutions to resolve business disputes in Vietnam. We ask the Ministry of Justice and the Supreme Court of Vietnam to allocate more resources for the efficient resolution of commercial litigation cases. More specifically, the court system needs to increase its capacity to hear cases and render decisions including emergency and interim measures that can be enforced in an efficient and cost effective manner. There is an urgent and immediate need to improve the ability, qualifications and competence of judges in specialized courts including the economic courts under the jurisdiction of the provincial People’s Court.

 

Foreign direct investment is critical to economic development, especially in the wake of the global financial crisis. We believe that a robust Foreign Investment Promotion and Protection Agreement (FIPA) between Canada and Vietnam would send a positive signal to investors about the commitment of both governments to create the winning conditions for foreign direct investments through the establishment of a framework of legally binding rights and obligations. Cancham continues to follow the FIPA negotiations with great interest and Cancham is confident that both governments will be able to resolve outstanding issues and conclude the FIPA as soon as possible.