“Restoring Economic Dynamism”

VBF 2012 marked a new development step and received more positive feedback from the domestic and foreign business communities for the formation of a new Automotive and Motorcycle Working Group in addition to seven existing working groups: Banking Working Group, Capital Market Working Group, Investment & Trade Working Group, Infrastructure Working Group, Education Working Group, Tourism Working Group, and Mining Working Group with the aim of contributing ideas and recommendations to lawmaking and policymaking of the government.

 

Since the IFC officially transferred the coordination function of the VBF Secretariat to a consortium of 14 foreign and local chambers of commerce and business associations (VBF Consortium) in February 2012, the VBF Consortium has welcomed its 15th member - the Swiss Business Association. The VBF Consortium is managed by a VBF Management Board, which is led by two co-chairmen representing the foreign and local business community. For the 2012 cycle, the two co-chairmen are EuroCham’s Immediate Past Chairman Alain Cany and VCCI President Vu Tien Loc.

 

With the official transfer of coordination role of VBF Secretariat to the consortium of foreign and local chambers of commerce and business associations, VBF is expected to bring more frequent, effective and direct dialogues between the business community and the Government of Vietnam.

 

Remarkably, the business community invited the Government to the dialogue in 2012 while the Government did this role in previous years. VBF 2012 was also the first time in 15 years the leading coordination role of the Vietnamese side was transferred from the Ministry of Planning and Investment to the Vietnam Chamber of Commerce and Industry (VCCI). With this transformation, the organisers expect Vietnamese enterprises would have a more active voice in this important forum. After VBF meeting wrapped up, VBF’s report was sent to the Meeting of Consultative Group for Vietnam (CG), which was scheduled to take place on December 10.

 

Addressing the forum, Deputy Prime Minister Vu Van Ninh said Vietnam’s economy still faces many challenges and the primary missions in 2012 are to attain single-digit inflation, sustain reasonable growth at 5.2 per cent, reduce budget deficit, lower lending interest rates, improve banking liquidity, and curb dollarization and gold dominance.

 

Given these difficulties and challenges, the Government has instructed competent agencies to accelerate the restructuring of commercial banks, especially weak banks, the restructuring of State-owned enterprises with the focus on core business lines with suitable scope to market, governance and financial capacity.

 

Dr Vu Tien Loc, Co-chairman of VBF Consortium and President of VCCI, said 2012 is seen as a tough year for the Vietnamese business community fraught with stagnated business activities and rising bad debts. In 2011 and 2012, as many as 100,000 companies went bankrupt, equal to a half of bankrupt companies in the past 20 years. He said, according to VCCI surveys, most enterprises in 63 provinces are faced with difficulties and stagnation. Business confidence hit the lowest level since VCCI started with this survey in eight years ago.

 

To address these problems, the Government has taken a number of measures to remove difficulties against enterprises like tax break and capital access support for four groups of priority enterprises.

 

"In addition to measures to reforming institution, stabilising macro economy, creating a favourable business environment and urgent short-term solutions to reduce costs and facilitate businesses to access credit capital sources, measures to enhancing corporate governance are given emphasis. Governance improvement is first of all the responsibility of every business, business associations and business support institutions. But, the direction and support of the Government are necessary. I suggest adding resources and enhancing collaboration and improving the effectiveness of SME support programmes, existing trade and investment promotion programmes,” said Loc.

 

EuroCham’s Immediate Past Chairman Alain Cany, Co-chairman of VBF Consortium, said, after nearly 30 years of doi moi (renovation) while productivity has improved, administrative capacity of many Vietnamese enterprises still does not make a significant progress. They pay little attention to technological innovation and governance while laying more emphasis on "relationships".

Many AmCham members are finding it more difficult to conduct business in Vietnam than in past years. Government efforts to “manage” business activity have caused numerous investors to rethink their business and expansion plans in Vietnam. Decisions on which items can be imported, how products can be priced, who can work in Vietnam, which programming can be broadcast on television, who can provide health care, and much more have contributed to a perception that investors are not welcome in Vietnam and need to consider doing business somewhere else.

 

Given the current state of the economy, Vietnam should make every effort to entice foreign investment and resources. Instead, actions such as ending the successful visa waiver pilot project and raising visa fees will deter free-spending foreign visitors that create jobs and wealth in Vietnam.

 

Current construction laws are divided by sections into separate laws (Land Law, Housing Law, Real Estate Business Law, Investment Law, etc.). Several laws must be applied simultaneously in conducting a project. However, it is extremely difficult for foreigners to understand such laws (higher and lower laws system). Furthermore, interpretation of laws differs depending on each authority, and the ability of lawyers and public officers in charge. A systematic device must be prepared to prevent such discordance in interpretation of the laws and unify related laws.

 

To prevent differing interpretation of laws by authorities related to construction investment projects, and to give the foreign investors a consistent guideline, a systematic device is required. We encourage the Vietnamese government to integrate all closely related laws as a single law for easier access by investors.

 

Commercial banks are established and supervised with criteria that are different from those of the international market. This has decreased the trust of depositors. The highly publicised real estate bubble is just the tip of the iceberg, but the deposit race between banks has caused asset bubble and freezes the system. Banks that have cross-shareholdings with “backyard” businesses in many important industries have weakened the risk management system.

 

Meanwhile, SMEs’ manufacturing is reliant on bank loans. Business owners, their clients, and their employees, therefore, are affected by weak banks. The business community recommends the State Bank of Vietnam categorises, delineates and helps fix commercial banks one more time to prevent a domino effect and filter the capital sources for businesses’ development. This can create jobs, technology advancement, and help recover local and foreign market shares.

 

Many of our member companies are still experiencing great problems due to increased transport and logistics costs as a result of port congestion 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 improve cargo handling capacity and cost.

 

Present ports need to be improved and new ports need to be built, this applies both to container terminals and bulk-steel cargoes, however the current cap on foreign shareholding is often limited to 49 per cent only. We recommend that in order to accelerate investment in this important sector, the policy is eased to allow at least 70 per cent or 100 per cent foreign shareholding in transport and port investment projects.

 

We are pleased to see that new and efficient ports have now been opened in Ba Ria -Vung Tau Province. However the construction of road access is far behind schedule and cannot meet the current need. This is now preventing the utilisation of the real potential of these ports. We recommend that high priority is given to completing these road constructions, so that both time and cost can be reduced to a normal competitive level.

 

We would also recommend that the relocation of main ports out of Ho Chi Minh City’s centre is accelerated, transferring the cargo flow to more transport-accessible and cost efficient deep sea ports in Ba Ria - Vung Tau province.