Oct 25, 2012

Vietnam - Experts doubt business environment report

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HANOI – Vietnam ranks 99th out of the 185 economies worldwide, or stands at the top of the bottom half as in previous years, according to the Doing Business Report 2013, which experts said fails to clarify problems faced by local enterprises.

The report by the World Bank (WB) and the International Finance Corporation (IFC) was released in Hanoi on Tuesday.

Nguyen Van Lan at the IFC office in Hanoi said: “Does this year’s ranking reflect the difficult situation faced by businesses? My answer is no.”

The business environment of Vietnam has similar ranks in the reports of IFC for several years, whereas local firms have been struggling over the past two years, he said. “The report captures just a small part of the Vietnam business environment picture.”

Speaking at the launch of the report in Hanoi on Tuesday, senior economist Pham Chi Lan said Vietnamese enterprises were now facing the greatest problems since the introduction more two decades ago of the economic reform policy, reflected in the large number of bankrupt companies, rising bad debt and mounting inventories.

She cited the data of the Government, saying that some 40,000 firms had been disbanded in the first nine months of 2012 and 53,000 businesses had gone bust in 2011.

“It is to say the number of bankrupt enterprises in these two years account for half of the total number of some 200,000 since the launch of economic reform,” she stressed.

Meanwhile, the firms that have survived are in trouble, as they have to cut their production capacity by 20%.

“Such a capacity reduction is just like 30% of the 450,000 remaining companies having gone bust,” she said. “Many businesses have told me that they are very anxious about the coming time.”

The Doing Business Report 2013: Smarter Regulations for Small and Medium-Size Enterprises finds that Vietnam has made only one reform this year, which is to allow local companies to print value added tax invoices on their own.

All ten ranking criteria of WB and IFC are deemed impractical by Pham Chi Lan.

For example, Vietnam ranks 28th in terms of dealing with construction permits, with 11 procedures, 110 days and cost equal to 67% of the average income per capita (US$1,260)

“I’m suspicious of this criterion as there are in fact many projects have been delayed for years, sending costs up. We live here, so we grasp the situation better than the report,” she said.

In terms of getting credit, Vietnam occupies the 40th rank. “This is not the case either, because enterprises are facing rising bad debt and lending rates,” she noted.

As for paying taxes, Vietnam takes the 138th place, with the number of payments being 38, total time being 872 hours and total tax rate standing at 34.5% of profit.

The total tax rate at 34.5% of profit, versus the corporate income tax rate of 25%, points to the corruption situation in Vietnam, said Lan.

It seems the Government’s plan for administrative reform has not produced positive results. Likewise, Resolution 11, in which the Government commits to remove difficulties for enterprises and improve the business environment, has not been as productive as expected.

“Businesses asked me for advice, but I did not know what to say. I just told them to rescue themselves first,” said the expert.

Tu Hoang - The Saigon Times Daily

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