From Stabilisation to Revitalisation

Addressing the opening speech, Vietnamese Minister of Planning and Investment Bui Quang Vinh said the forum is a structured and ongoing policy dialogue between the Vietnamese Government and the local and the foreign business community for a favourable business environment that attracts private sector investment and stimulates sustainable economic growth in Vietnam.

 

Starting from 2012, the International Finance Corporation (IFC) handed over the secretariat of the Vietnam Business Forum to the private sector. Fourteen local and international business associations and chambers of commerce collectively took over IFC’s role in managing the Forum’s day-to-day function. This marked the maturity of private sector. While Vietnam is accelerating economic restructuring, the Forum helped the Government recognise existing difficulties.

 

Deputy Prime Minister Vu Van Ninh said Vietnam still faced numerous difficulties and challenges in 2012. Before this reality, the Government issued the Resolution 01 on primary measures to restore socioeconomic stability, curb inflation, restructure economy, improve the quality and competitiveness. Vietnam’s key tasks in 2012 are to control inflation growth at a single-digit rate, maintain reasonable growth at 6 percent, keep budget deficit at 4.8 percent of GDP and ensure social welfare objectives. Inflation was curbed in the first five months of 2012. In the first quarter, economic growth reached 4 percent, exports expanded strongly, trade deficit shrank, and foreign exchange reserves increased.

 

However, he admitted that the economic growth was lower than in the same period of 2011; interest rates have been reduced but remained high; credit growth plunged; capital access and absorption of businesses were limited; some fields showed signs of stagnation; inventories piled up; bankruptcies surged. Businesses associated with construction and real estate fields were hard-hit.

 

“The Government of Vietnam always appreciates opinions from donors, domestic and foreign investors. Thanks to contributions of the business community, the Government has made appropriate solutions to improve the investment and business environment in Vietnam. At this forum, the Government of Vietnam hopes to receive more recommendations and ideas from the business community to gradually improve policies and put forth effective solutions.”

 

Victoria Kwakwa, Country Director of the World Bank for Vietnam, said the Government’s introduction and enforcement of the Resolution 11 and economic restructuring scheme are important elements for restoring and enhancing the competitiveness of Vietnam and creating a favourable environment for domestic and foreign investors.

 

Mr Vu Tien Loc, President of Vietnam Chamber of Commerce and Industry (VCCI) and Co-chairman of VBF, said: In 2011 and specially in early 2012, indicators of production and business activities of enterprises tended to worsen, particularly in profitability ratio, sales, inventories, equipment productivity and employment. He noted that hardest difficulties against businesses are now high capital costs, shrinking markets and growing inventories. Business optimism declined.

 

However, he pointed out that the business community highly agreed on solutions to SOE restructuring, banking system restructuring and public investment supervision as well as other important restructuring contents.

There is an urgent need for immediate economical, financial and educational reforms if Vietnam wants to follow an international competitive sustainable economic growth model. In particular, EuroCham believes that to attract more and better-quality foreign investment, the Vietnamese Government should focus its efforts in 2012 on removing all unnecessary restrictions to market access that affect the freedom of trade. It should also continue tackling red-tape and corruption, and reducing and simplifying administrative burdens on all levels. The Government should also allow foreign companies to employ both Vietnamese and foreigners alike at their own discretion. The protection of intellectual property rights (IPR) and efficient enforcement in cases of IPR violations remains of key importance to attract high-quality investment.

 

I recommend against the implementation of new laws, decrees and procedures without careful discussion and consideration. There have been examples in recent years, some of which are cited above, where Government departments have rushed to publish new rules, decrees and guidelines merely to achieve a deadline set for them in a rigid central plan. Such an approach limits the possibility for discussion with affected parties and for mature reflection, and risks creating more problems rather than improving the situation. We request carefully thought out legislation which considers all the consequences; followed up by systematic and consistent implementation.

 

Nobody will be surprised to hear that Vietnam needs to focus on emerging challenges, especially the restructuring of State-owned enterprises (SOEs), and the public investment programme.

 

In the longer run, Vietnam’s ambition to maintain high growth into the next decade will require as bold a set of reforms as the one adopted with doi moi (reform). Vietnam needs a level-playing field to maximize its potential. As people become more educated and production becomes more sophisticated, civil society’s demands for predictability, trust and a level playing field with “competitive neutrality” will grow. Transparency is a critical element in this. Concentration of economic power in a small number of large firms undermines efforts at economic and social development. Large firms and industries that circumvent rules to their advantage are promoting corruption, and undermining efficiency, which damages the country’s potential. The governance challenges are complex, but Vietnam’s medium-term outlook will be much better if they are addressed sooner rather than later." And “There needs to be a greater emphasis on efficiency of public investment, restructuring of SOEs, and other structural reforms even if this means some moderation in short-term growth.

Many of our member companies are still experiencing great problems due to increased transport and logistics cost as a result of inefficient port operations and lack of handling capacity in the major Vietnamese ports. In order for Vietnam to remain competitive compared with its neighbouring countries it is important to reduce the current logistic cost and in particular for the exported goods.

 

Many of our member companies have invested in port and logistic facilities now in operation in Vietnam. We would however like to see more flexibility on the limitation of foreign investors in this sector, which is today at only 49 percent. The participation of more foreign partners with international experience, both in the investment, management and as users of the ports, would also ensure the cost efficient use of these facilities, this would also benefit the Vietnamese partners.