This article is written based on the viewpoint of foreign investors in Vietnam, about the things that need to be improved in Vietnam’s business environment. We would like to invite our reader to contribute your opinions to.
In late 2011, foreign institutions released their concerns over Vietnam’s investment climate and foreign investors’ trust on this market.
The World Bank, for example, demoted Vietnam by eight grades in business environment.
In its press release on the issuance of the White Book 2012 on trade, investment and recommendations, the European Chamber of Commerce (Eurocham) said that European businesses’ trust on Vietnam’s business environment has regularly reduced since early 2011.
A survey by Grant Thornton about investment in M&A (mergers and acquisition) in the fourth quarter of 2011 showed pessimistic figures: 51 percent of interviewees were pessimistic in Vietnam’s economic development prospect in 2012, 30 percent higher than the number in May. Only 38 percent of the interviewees said that Vietnam is an attractive destination for investment, a fall by 16 percent.
Why?
Vietnam can become the second Singapore or a fish out of water? It depends on the country’s policy and workforce.
In fact, Vietnamese law changes very quickly and comprehensively so businessmen could not timely turn their hand. The latest example is the plan to amend 16 basic laws on civil and commercial fields though most of the laws were issued in the last 5-6 years. Regulations on import-export, forex management or credit can be change anytime.
In addition, some legal documents are dead right at the time they are issued, for example Decree 01/2010/NĐ-CP dated January 4, 2010, on offering for sale shares individually. Businesses do not know how to implement this decree just because of the shortage of an instruction document.
Legal documents related to business, rights and duties of enterprises are issued late or not be issued while documents on management, operation and report are available a lot. For example, documents that guide the implementation of Vietnam’s service-related commitments to the World Trade Organization (WTO), on contributing capital by intellectual property, on using houses on papers as mortgages are not available while circulars and decisions asking foreign-invested businesses to make reports on monthly, quarterly and annually basis are issued.
Not mentioning the effectiveness of these reports, many foreign investors complain that they may have to hire one or two employees just to make these reports.
The inconsistence of legal documents or guidance documents that annual legal documents is very popular.
Vietnamese law always stipulates on the deadline for state agencies to complete a licensing procedure but in fact, they break the deadline in most cases.
A project normally gets license in six months or longer, even up to one year for complicated cases. Meanwhile, three days is the longest time for establishing a company in Singapore.
In 2008, the Ministry of Construction made a list of procedures for a construction project, with 33 steps (requiring around three years to complete) and suggestions to cut down unnecessary formalities. Now, the procedures are still the same, even being added with planning license under the Urban License Law 2009.
The explanation and application of law by state agencies is sometimes are not based on (or even being contrary) from the law.
For example, if a foreign investor purchases share/capital at a Vietnamese firm, the firm previously only needed to adjust its business license if the investor buys less than 49 percent of shares, but now some provincial Department of Planning and Investment ask the firm to make an investment project to become a foreign-invested firm.
In addition, the qualification of employees at state agencies who deal with business files is also a problem. Many foreign investors expect that these people must be at least law bachelors (to be able to understand and explain the law), or more ideally, to have certain experience in licensing.
Vietnam has opened its door to the world and accepted the common rules of game, so it must behave as a responsible member. In the other words, it should not make it as an exception. Actually, some ways of interpretation and solutions of Vietnam are incomprehensible.
For example, in a commitment on trade and services with WTO, 51 percent is considered the necessary rate in joint venture firms that were established before Vietnam joined the WTO. However, it is interpreted that such committed rate is only applied for joint venture firms; wholly foreign-owned firms still uses the rates of 65-75 percent under the Enterprise Law 2005.
In another example, the Investment Law allows stipulates projects with duration of up to 50 or 70 years but many investment licenses of foreign-invested firms note the duration of just five years or even shorter. Many investors complain that how can they do business with licenses of only five years?
Some people think that foreign investment and foreign-invested firms cause trade deficit, price transfer and they abuse Vietnam’s credit and land resources. However, it is undeniable that Vietnam’s current development is partly contributed by foreign investment. Everything has two sides and it is important that how your ability to restrict the black side.
Those who participated in the annual meeting of the Vietnam Enterprise Forum in December 2011 in Hanoi may still remember the metaphoric example by Dominic Scriven, CEO of Dragon Capital, that Vietnam’s last Javan rhino was dead and Vietnam has only several tens of tigers and elephants. For that reason, Vietnam needs to attach importance to sustainable development; otherwise the remaining tigers and elephants will die too.
Dr. Ngyen Quoc Vinh
Business & Investment Opportunities
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