Dec 5, 2012

Vietnam - Private business confidence undermined

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HANOI – With their confidence in Vietnam’s business environment badly damaged, private entrepreneurs urged the Government to carry out reforms while ensuring macroeconomic stability in order to overcome the current difficult situation.

This was a view shared by representatives of business associations at the Vietnam Business Forum 2012 (VBF) in Hanoi on Monday.

SOEs: a great concern

Vu Tien Loc, president of the Vietnam Chamber of Commerce and Industry (VCCI), said: “We recommend the Government to prioritize institutional reform and accelerate economic restructuring. Determination in macroeconomic stabilization and consistency in institutional reform are prerequisites for business confidence and proper orientation for long-term investment.”

Restructuring of State-owned enterprises (SOEs) in recent years has suffered setbacks, he noted.

The Government should let SOEs compete on a level-plying field with businesses in other sectors, boost equitization, publicize information and separate State management from State ownership, said Loc.

Kim Jung In, chairman of the Korea Chamber of Business, said the resources of Vietnam had been mainly allocated to the State economic sector. For instance, 70% of land, 60% of credits and 70% of ODA have been given to businesses in this sector.

“We propose the Government radically restructure SOEs,” he said.

On behalf of the Government, Deputy Prime Minister Vu Van Ninh replied the Government is resolute in SOE restructuring. “We will retain a few SOEs, the others will be equitized by 2020,” he committed.

Falling confidence

Business confidence has plunged to the lowest level since 2005, said Loc, citing the data VCCI collected for the provincial competitiveness report.

Specifically, only 33% of the surveyed enterprises were optimistic about the business outlook in 2012, versus 47% in 2011 and the average percentage of 70% in the years before that.

Preben Hjortlund, chairman of the European Chamber of Commerce in Vietnam (EuroCham), added that confidence among 800 EuroCham members had hit the bottom, falling to 45 points from 75 points in the fourth quarter of 2010.

“We are more concerned about current business situation, future outlook, impacts of tax and penalty increase and supervision of State agencies,” he said.

Meanwhile, Christopher Twomey, chairman of the Amercian Chamber of Commerce in Vietnam (AmCham), stressed the Government wanted to take control of many things, such as which items can be imported, who can work in Vietnam or which programs can be broadcast on TV. All of these make foreign investors feel that they are not welcomed in Vietnam.

“The Government’s effort to manage business activities is the reason why many investors give a second thought to doing business and expanding operations in Vietnam,” said Twomey.

“Vietnam must strengthen competitiveness in foreign investment attraction,” he underscored.

He said the Government would soon recognize local businesses and SOEs could not raise salary by 20-30% every year, suggesting a pay hike of 15% per year in the next three years.

Government’s commitment

Deputy Prime Minister Vu Van Ninh said many business associations had submitted petitions saying that they could only afford a salary increase of 18% per year, not 22-25% as proposed by the Government.

The Government has accepted this rate, said Ninh, adding that the extra salary sums account for less than 1% of business cost.

He vowed to suggest corporate income tax reduction to the National Assembly in 2013.

In the middle and long term, the Government will focus on economic restructuring and mobilize all resources for rapid and sustainable growth. In the short term, the Government prioritizes inflation restraint and macroeconomic stabilization, said the deputy prime minister.

“We consider difficulties and successes of enterprises as our own difficulties and successes,” he stated.

Tu Hoang - The Saigon Times Daily

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