Vietnam needs further efforts to cut costs for businesses

Wednesday, 2017-12-20 10:22:55
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NDO - The government, ministries and local authorities have undertaken many reforms in the past year to remove obstacles facing businesses to help them cut costs, but more efforts are needed next year as enterprises are still facing numerous hurdles.

At a dialogue between Prime Minister Nguyen Xuan Phuc and the business community in May, the government leader announced that 2017 would be a year to cut costs for businesses. During monthly cabinet meetings, the government always discussed and gave directions on abolishing and simplifying business regulations to create a more favourable business environment.

The spirit of a facilitative and action-oriented government has gradually spread to ministries and local authorities. In September, the Ministry of Industry and Trade pioneered in the abolishing of 675 business regulations under its jurisdiction. The Ministry of Agriculture and Rural Development has proposed removing 65 business regulations and simplifying another 53. Other ministries have also followed suit with the Ministry of Finance reforming tax and customs procedures, the State Bank improving the credit information system, the Ministry of Construction reducing the time to grant construction permits and the Ministry of Planning and Investment shortening the time needed to complete business registration procedures.

Such efforts have helped improve Vietnam’s business environment significantly. According to the World Bank, Vietnam jumped 14 places to rank number 68 among 190 economies concerning the ease of doing business. The government’s efforts are also recognised by domestic enterprises. Chairman of Hung Yen Garment Company (Hugaco) Nguyen Xuan Duong said that in the past the authorities only met enterprises once a year but in 2017, there were three meetings for them to voice their administrative reform proposals.

Many hurdles remain

Despite early encouraging results, businesses, especially small and medium ones and private enterprises are still facing many difficulties and have to bear unreasonably high business costs.

According to a report from the Private Sector Development Research Group, although many administrative procedures have been reformed, they remain complicated and cumbersome. In addition, there are many failings in policy implementation, which do not comply with the government’s instructions, thereby increasing the burden on businesses.

Economist Pham Chi Lan stated that Vietnam’s improved business climate in the past two years is a clear evidence of the government’s significant reform efforts, but there remains a big gap between central and local governments. Many local authorities still wish to stick to the old way of management and do not want to change or are making slow changes.

A representative of the Association of Electronics Businesses complained that it would take three months to clear imports of WiFi-enabled TV sets while chairman of Thuan Phuoc Seafood Company Tran Van Linh said that inspection and quality assessment costs remain high.

Continuing efforts to facilitate business

The goal of cutting costs for businesses is still a long and bumpy road ahead. Nguyen Dinh Cung, director of the Central Institute of Economic Management, proposed a number of a measures including slashing lending rates, decreasing logistics and transport costs and reducing congestion at sea ports and airports. He said that next year the government’s efforts should include continuing the application of international standards and practices in designing, supervising and measuring the efficiency of institutional reform. All institutional reform should ensure a fair business environment and encourage competition in order to drive economic growth. In addition, it is necessary to create a more liberalised, conducive and safer business environment with lower risks and costs.

Hugaco Chairman Nguyen Xuan Duong recommended that ministries and local authorities conduct research and propose to the government special mechanisms and support policies in terms of finance and land use. The existence of obstacles stems from obscure regulations, which are capitalised by civil servants to cause trouble to businesses. Therefore it is necessary to make bolder administrative reforms which minimise general regulations. According to Vice Chairman of the Vietnam Textile Association Truong Van Cam, the government, ministries and competent agencies should consider adjusting wage and insurance policies, simplifying administrative procedures and reducing inspections to ease the difficulties for enterprises.

2017, the year of cutting costs for businesses is coming to a close with early encouraging results. The business community is looking to 2018 with expectations of a year with bolder efforts from the central to local authorities to improve the business environment so that domestic enterprises are more confident to compete with international rivals and integrate with the world successfully.