Improving Soft Infrastructure

Business confidence and prospects in Vietnam are rated better by foreign investors. At the Midyear Vietnam Business Forum 2013, Minister of Planning and Investment Bui Quang Vinh said that Vietnam still placing priority on business and investment environment improvement and macroeconomic stability to attract both domestic and foreign investment capital.

Vietnam is integrating more deeply into the global economy. After joining the World Trade Organisation (WTO), Vietnam has more opportunities to attract big investors with advanced technologies from the United States, Japan and other nations. Opening goods and services markets, particularly with large export markets with easier conditions, has raised the competitiveness for Vietnamese goods and services when they enter the world market. Together with that, Vietnam has become a compelling investment destination for international capital flows.

Speaking of the investment environment in Vietnam, Ms Wendy Werner, Investment Climate Advisory Services Manager for East Asia and the Pacific at the International Financial Corporation (IFC), a member of the World Bank Group, said: “Vietnam has undertaken important reforms during the past nine years to strengthen its business environment, but much work still needs to be done to sustain its competitiveness, especially in adopting international best practices in regulating businesses.”

According to the World Bank’s Doing Business 2014 report, Vietnam is improving the business environment for domestic investors and enterprises, but much work still needs to be done. According to this report, since 2005, Vietnam has implemented 21 reforms – the highest number in East Asia. The latest WB report on Vietnam, based on assessments of 11 fields, finds that some fields have been much improved.

Sectors with notable progress include construction permitting (ranked 29th), access to credit (ranked 42nd), and contract enforcement (ranked 46th). Particularly, Vietnam has strong reforms in credit lending and investor protection. Specifically, the Government has built a legal framework for the operation of information centres and the formation of the first-ever private credit information centre. Vietnam has strengthened investor protection by introducing greater disclosure requirements for listed companies in cases of related-party transactions.

However, Vietnam’s problems in business environment ranking have existed for years. Its investor protection has been the lowest among 10 ranking areas and was ranked 157th out of 189 countries. In the tax field, companies spend more time dealing with tax related procedures.

The Vietnamese Government is determined to accelerate reforms and improve the business and investment climate in order to promote economic development. Investors can feel the clearly changing atmosphere in Vietnam and many of them are successful in investing and doing business here. A growing number of Japanese investors have decided to stay in Vietnam for the long term, while more are coming to explore new opportunities in the country. Mr Motonobu Sato, Chairman of Japan Business Association, said Japanese investors are expanding into other Asian countries. Vietnam needs to make clear its investment strategies to make itself more competitive and attractive than other countries in the region.

He proposed three solutions to improve the Vietnamese investment environment, including upgrading the business environment (soft infrastructure and hard infrastructure); reinforcing the process of building, issuing, enforcing laws and judicial systems; and exempting visas for short term visitors in Vietnam – an action to help increase new FDI flows into Vietnam. The business community also hopes Vietnam will have more robust reform in pricing policy, State-owned enterprise roles, intellectual property and administrative procedures.

Now, countries around the world are focusing more on improving their business and investment environments in order to develop their economies, develop domestic resources and attract foreign investors. Some economies, especially in Southeast Asia, have made rapid improvement. This requires the Government of Vietnam to enforce decisions to make the investment environment better and more competitive. In the race for business environment improvement with neighbouring countries, Vietnam needs to be stand out in relation to other economies, rather than simply improving itself,” said Mr Tran Dinh Thien, Director of the Vietnam Economics Institute.

Ms Wendy Werner recommended, “Vietnam needs to adopt international best practices in regulating businesses.”

Together with the Vietnamese Government’s resolution to accelerate economic development, implement reform measures to build a more favourable, and open the investment environment, Vietnam still offers unique and attractive opportunities for international investors. They themselves clearly sense the positive factors of the investment environment and policy changes in actual business activities in the country.

Bao Chau

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