Vietnam - Firms still suffering from a crisis in confidence

The business community remains pessimistic about Vietnam’s economic prospects over the coming six months.

The Ministry of Planning and Investment’s National Centre for Socio-Economic Information and Forecast released a survey on “Business Confidence in Vietnam” conducted in 2012’s third quarter involving 901 local and foreign firms in Hanoi, Ho Chi Minh City, central Danang city and northern Bac Giang province.

The survey found that 44.1 per cent of firms said declined consumption was the biggest concern as it would badly affect their investment and business plans in 2013’s first half. Meanwhile, 17.2 per cent said they had no profit to invest in new projects and 14.9 per cent said high costs from loans would prevent them from continuing their business over the next six months.

Moreover, 60 per cent of the surveyed firms said they expected Vietnam’s economic situation to worsen in 2013’s first half than now. Forty-six per cent said they did not see any recovery prospects for the whole 2013, and 35.8 per cent held that the economic picture would become worse than it is now.

Vietnam Chamber of Commerce and Industry (VCCI) chairman Vu Tien Loc said in VCCI’s recent Provincial Competitive Index 2012 (PCI) conducted over nearly 8,200 local private firms and 1,500 foreign firms in 63 cities and provinces, enterprises’ optimism about the economic situation had reduced to 33 per cent, the lowest level since 2005 when VCCI begun conducting PCI. The rate was 47 per cent last year and over 70 per cent in the previous years.

“To win back enterprises’ confidence, it is recommended that the Vietnamese government reduce the corporate income tax from the common level of 25 to 20 per cent. Also, enterprises’ land rentals also need to be trimmed down,” Loc said.

Australian ambassador to Vietnam Hugh Borrowman said Vietnam’s economic development had over the past two years slowed down due to problems related to macroeconomic instabilities, affecting investors’ confidence.

“To win such confidence back, the Vietnamese government should soon remove investors’ growing concerns over prevalent corruption, weak banking system, inefficient state-owned enterprises, state-owned management agencies’ transparency and accountability,” Borrowman said.

Kim Jung In, general director of investment consulting firm Sein I&D Vietnam and chairman of Korea Chamber of Business in Vietnam, stressed that the speed of administrative procedures in Vietnam was extremely slow.

“Quick processing of administrative procedures not only offers better services to foreign investors but also to citizens of Vietnam, as well as improving their satisfaction on administrative services,” In said.

European Chamber of Commerce chairman Preben Hjortlund said the Vietnamese government should focus on pricing, the role of the state sector and intellectual property right.

“If this is not done, it creates uncertainty for investors and foreign direct investment will remain limited as compared to its potential,” he said.

Nguyen Thanh | vir.com.vn

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