Vietnamese people and businesses are still struggling with administrative procedures and are being held back by an unstable business environment.
In August 2020, Mrs. Hien (name has been changed) sold her piece of land in the northern province Ha Nam. She came to the local Land Registration Office to fulfill related formalities and was shocked to know that there was another “red book” (land ownership certificate) for her plot of land besides the one that she was holding. This “red book” was issued by the local authorities but Hien, the land owner, did not know about it.
The “red book” she was holding was the old one, which was issued in 2006, and the other was issued later. The problem is the area of land certified in the new “red book” was smaller than the old one. Therefore, Hien could not complete the deal. It took Hien six months to complete the land transfer procedure, after the local authorities issued a decision to abrogate the second red book.
Mrs. M.T.T from Hanoi bought a plot of land in the city of Hoa Binh. Receiving her documents for the land ownership transfer formalities, the land registration office said it would return the results on February 5, 2021. However, it was Friday, so on Monday morning she took a bus from Hanoi to Hoa Binh to pick up her red book according to the appointment.
However, she did not receive her “red book” because “it was not completed yet” as she heard from a public servant at the land registration office, who made another appointment. Because it was the Lunar New Year holiday two days later, she received her “red book”, which was delivered by a delivery service, one week after the holiday.
“According to the law, 10 days after signing the land contract, if people do not perform land transfer procedures, they will be fined. However, there is no problem if the government agency breaks its appointment,” she said.
In 2018, the Tax Department of Lam Dong province collected tax arrears worth over VND10 billion from a local enterprise, arguing that its project was not eligible for corporate income tax incentives, although the investment incentive decision was noted in this company’s investment license.
After more than two years of making complaints to local and central agencies, even filing a lawsuit to court, in late 2020 Lam Dong tax agency agreed to cancel the tax arrears collection decision when the court intervened as the mediator. At that time, the director who issued the wrong decision retired.
These stories show that Vietnamese people and businesses are still struggling with administrative procedures, and are being held back by the unstable business environment.
When the Minister of Planning and Investment held a meeting with enterprises to listen and propose solutions to support businesses hit by the Covid-19 pandemic, only a few firms asked for support and incentives. Meanwhile, many businesses emphasized the desire for an improved business environment and open administrative procedures. That is what businesses need most, more than any “aid package”.
The chairman of a steel company said that Ministers and senior officials are always enthusiastic about dealing with difficulties for businesses, for the economy. But there is “insensitivity” in many local civil servants.
Over the years, the Government has stepped up reform of administrative procedures and business environment. Initial improvements have been noted.
According to the administrative reform index of ministries and provinces and the administrative service satisfaction index in 2019: the average administrative reform index of ministries was 85.63%, and of provinces 81.15%, which are higher than those in 2018; 62/63 localities and 16/17 ministries had an increased index. The satisfaction of people and organizations with the service of state administrative agencies reached 84.45%, the highest in the last 3 years.
Vietnam’s business environment ranking increased 12 places from 82th in 2016 to 70th in 2019 (according to the World Bank – WB). On the Global Competitiveness Index (GCI 4.0) of the World Economic Forum, Vietnam’s position increased 10 places from 77th in 2017 to 67th in 2019. Vietnam’s innovation capacity ranking also improved 12 places, currently standing at 47th out of 127 economies. These are the highest ranking achieved by Vietnam.
Vietnam’s Global Competitiveness Index in 2019 continued to increase but it is showing signs of slowing down.
The Global Innovation Index (GII) of Vietnam in 2019 increased three places compared to 2018, ranking 42nd out of 129 countries, bringing Vietnam to first place in the group of 26 low middle-income countries and 3rd in ASEAN after Singapore and Malaysia.
Meanwhile, according to the United Nations report on e-Government development from August 2017 to July 2019, Vietnam ranked 86th out of 193 countries (up 2 spots), 24th out of 47 Asian countries in terms of e-Government development. In Southeast Asia, Vietnam ranked 6th out of 11 countries. Vietnam’s combined index in this area is 0.6667, which is higher the average index of the world and the region, and belongs to the group of countries at a high level of e-Government development.
These assessments by international organizations show Vietnam’s efforts in reforming administrative procedures and improving the business investment environment. But compared to the expectations of people and businesses, this goal is still distant.
To ensure transparency and enhance efficiency of administrative procedures, and minimize bottlenecks caused by the human factor, the Government is promoting the construction and application of e-Government and e-Government platforms.
On that direction, the National Public Service Portal has been launched, connecting all localities and ministries on a unified national database. On that basis, ministries, branches and localities have strengthened the restructuring of administrative procedures to integrate into the National Public Service Portal; and promoted connection and online payment to facilitate people and businesses.
The development of e-government and digital government is a fundamental change in quality. Accordingly, all Government activities are safe in the digital environment; able to provide quality services, make faster and more timely decisions, issue better policies, effectively solve major issues in socio-economic development and then provide high-quality public services to the people; mobilize the participation of people and businesses widely; operate state agencies optimally based on digital technology; and effectively solve major problems in socio-economic development.
Phuc Long tea chain to open first US store
Phuc Long beverage chain will open its first store in the U.S. next month, following in the footsteps of other Vietnamese coffee brands that have branched out to other markets.
The store will be located in Garden Grove, California, the company said in a Facebook post.
Phuc Long has over 80 stores in Vietnam. It had recently signed a deal with conglomerate Masan Group to establish Phuc Long kiosks in over 2,200 VinMart+ conveniences stores.
Last month, TNI King Coffee chain opened its first store inside a mall in California.
Other Vietnamese coffee chains that have branched out to foreign markets include Cong Ca Phe with six stores in South Korea and two in Malaysia, and Trung Nguyen E-Coffee with a store in Laos.
Private enterprises lack internal strength and driving force to develop
How will Vietnam overcome challenges to realize its development plans? Nguyen Dinh Cung, former head of Central Institute for Economic Management (CIEM), shares his perspective with VietNamNet.
One of the great successes of economic reform in Vietnam since doi moi (renovation) is the establishment of a community of businesses from different economic sectors with many ownership modes. Vietnamese enterprises are operating under similar legal forms as in other market economies.
High in quantity, small in scale
In terms of quantity, enterprises in the private sector account for the overwhelming proportion, 97 percent, while SOEs (state owned enterprises) account for 0.38 percent and FIEs the remaining.
The enterprises employ 16 million workers. The workers in SOEs account for 7 percent, private enterprises nearly 60 percent and 33 percent in FIEs (foreign invested enterprises).
In terms of total assets, SOEs account for 28 percent, private enterprises 53 percent and FIEs 29 percent.
In terms of stockholder equity, SOEs account for 20 percent, non-state owned enterprises 56 percent and FIEs 24 percent.
In terms of net revenue, SOEs account for 14.5 percent, non-state owned 57 percent and FIEs 28.5 percent.
In terms of pre-tax profit, SOEs account for 21 percent. The figures are 36 percent for non-state owned enterprises and 43 percent for FIEs.
If considering financial efficiency, the ROE (return on equity) is 9 percent for SOEs, 4.5 percent for non-state owned enterprises and 15 percent for FIEs. Meanwhile, the profit to sale ratio is 5.6 percent for SOEs and FIEs, while it is just 2.4 percent for non-state enterprises.
The figures show that while private enterprises account for the overwhelming proportion, they mostly have small and micro scale, with very few enterprises having medium scale. They have low technology and low competitiveness.
Lacking inner strength and driving force to develop
This is attributed to several reasons:
First, the ratio of profit to revenue and to assets is too low. Stockholder equity is not high enough for re-investment and development. Therefore, most private enterprises have to rely on working capital from relatives and friends. Only a small part of the enterprises can access bank loans.
Most private enterprises lack capability to innovate and receive technology transfer, and lack the driving force to research, develop and renovate technology. In other words, private enterprises lack inner strength and motivation for development.
Second, one part of private enterprises doesn’t want to expand investment to become large enterprises.
This is attributed to unclear and overlapping laws which can be understood and implemented in different ways by different state management agencies. The bigger that enterprises become and the more business fields they cover, the higher legal risks they face, which may cause big losses or loss of all of their assets that had been created over decades.
|While private enterprises account for the overwhelming proportion, they mostly have small and micro scale, with very few enterprises having medium scale. They have low technology and low competitiveness.|
In this situation, there is no reliable and effective tool and institution, especially independent courts, capable of protecting their rights and benefits.
Third, another part of private enterprises wants to grow but cannot, because they cannot access resources for investment and development. Surveys have found that capital costs are too high. The inability to get enough capital and access land are the big barriers for private enterprises in this group.
Fourth, some of the hundreds of thousands of private enterprises are crony enterprises. The number of these enterprises is not high if compared with the total number of operating enterprises, but they appropriate significant resources and deprive business opportunities from authentic investors and businesses.
The enterprises of this kind contribute to creating an unfair business environment which lacks transparency; distort the allocation of national resources; and distort the value and constrict the business motivation of genuine businesses.
It is the enterprises of this kind that make it difficult for other enterprises to access resources and business opportunities. This is a major obstacle for the development of private enterprises.
Large private groups vulnerable
Vietnam now has some large-scale private enterprises, called economic groups. There are some similarities and differences between the economic groups and groups in some Asian economies prior to 1979 as follows:
The similarities include investment in multi business fields; reliance on bank loans; lack of transparency in administration and business; and relatively friendly relations with the government. They are big if compared with the size of the economies, and so they are not allowed to collapse.
Regarding differences, some foreign economic groups specialized in manufacturing, developed strong R&D (research and development), and expanded their business across the region and the world. They have had specific products and strong brands. Meanwhile, Vietnamese private economic groups mostly target the domestic market, focusing on real estate and consumer services. They still cannot develop and master technologies in their fields and don’t have global competitiveness.
It is obvious that Vietnam’s private economic groups are not as powerful as Asian private economic groups before 1979, and they are vulnerable. If the businesses collapse, it will take a longer time to recover them and the collapse may cause bigger losses to the national economy.
Therefore, developing the private sector, including economic groups, in a balanced, effective and sustainable manner must be a top priority task in the coming time.
It is necessary to amend unreasonable policies to help private enterprises increase their strength and overcome obstacles so they can feel secure to expand investment for development.
The 13th Party Congress Resolution has set specific goals for Vietnam’s socio-economic development.
By 2025, Vietnam would become a developing country with industry going towards modernization and income surpassing the lower average level.
By 2030, Vietnam would become a developing country with a modern industry and higher than average income.
By 2045, it would become a developed country with high income.
Nguyen Dinh Cung
Excited but anxious: Hanoi business owners reopen
Though they eagerly reopen after being closed for 27 days due to the Covid-19 outbreak, many Hanoi businesses are also worried about changing consumer behaviors.
Closed restaurants inside a shopping mall in Ha Dong District, Hanoi, June 20. Photo by VnExpress/Duc Minh.
After Hanoi authorities announced that indoor dining and hairdressing can resume on Tuesday, Bui Quang Hung, co-founder of barber shop chain 30Shine, showed his excitement with a post on social media saying, “see you Hanoians on Tuesday morning.”
He said the shops would open from 7.30 a.m. until late night to clear a backlog of almost a month.
“Men have to visit the barber once every three weeks on average because they feel irritated if their hair is one to two centimeters too long.”
There would be two or three times the usual number of customers for two weeks, he said based on his experience from previous waves.
But some other businesses are less hopeful.
Trieu Nguyen Quan, owner of the Goofoo Gelato chain of ice cream shops, does not expect many customers for 10 days after reopening since people are afraid of the pandemic.
Hoang Tung, CEO of fast-food restaurant chain Pizza Home, said the outbreak could cause him to lose a number of customers since people have adopted a new habit of eating at home.
To survive the stop-start nature of their business amid the pandemic, many have sought to improve their business model. Tung said Pizza Home has closed some stores that were not doing well but has expanded into home delivery and apps.
“The restaurants have to operate both online and offline, and must be prepared for the worst, which is closure, amid the pandemic.”
Goofoo Gelato too has managed to pull on thanks to online sales.
Quan said he plans to increase the number of outlets but only after vaccination. He said vaccination is the only way to make him feel secure and the ultimate solution for businesses to open and the economy to revive.
Around 2 percent of the population has received the first shot, and 0.1 percent has received both.
Vietnam has received delivery of around three million vaccine doses so far, and is expected to get over 120 million this year.
It seeks around 150 million in all to cover 70 percent of its population.
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