Vietnam could rank higher

According to WB specialists, Vietnam has made improvements. Its business environment ranks 91^st among 178 countries and territories (Last year the country ranked 104^th/175 countries). Of the ten standards, five are improved, one is unchanged and one down.

However, the report says that for activating new businesses, it didn’t fully consider adjustments under the new Enterprise Law. The number of 11 formalities for business activation is of 2000. According to new rules, there are six formalities, but in fact, businesses have to conduct five only, said Nguyen Dinh Cung of the Central Institute for Economic Management (CIEM).

Mr. Cung said that if the information was updated and the above change was included, Vietnam’s business activation index could be 30, not 97 as in the report.

Experts say that Vietnam is now moving in the right direction and among countries with the fastest and firmest speed of reforms so its business environment will be improved.

Experts noted that Vietnam had to pay attention to two points: licence and administrative burden in performing tax duties. The seal tax when acquiring construction licence accounts for 3% of the asset value and is equivalent to 373% of per capita GDP of Vietnam. This is a very high number, even compared to countries in the region.

As for administrative burden in performing tax duties, Vietnamese companies must take half of a month to fulfil those things, compared to 226 hours in countries of the same level of development.

Justin Yap, the WB’s expert in the US, said that if Vietnam can cut down licencing time to the same level of Thailand and the time for performing tax duties equivalent to that of Indonesia, its business environment index could be 66^th, not 91^st.

He emphasised that by adjusting its administrative formalities, Vietnam could improve the ranking of its business environment index.

High administrative cost: major hindrance

According to the WB’s report on business environment announced on September 26, administrative formalities are still the largest hindrance for the business environment of Vietnam, though they are much improved.

Administrative formalities hinder all aspects of business, ranging from time to money and the competitiveness of the Vietnamese economy.

In construction licencing, Vietnamese businesses have to complete 13 formalities within 194 days with expenditures of 373.6% of per capita income to get a licence.

In performing tax duties, a medium-sized enterprise in Vietnam needs 1,050 hours, equivalent to 130 working days to complete tax payment formalities. Companies have to pay 32 times, with a total tax payment accounting for 41.1% of pre-paid profit.

In realising contracts, Vietnamese companies have to fulfill 34 formalities in 295 days, with expenditures accounting for 31% of contract value to claim back overdue debt or to solve international disputes.

For performing bankruptcy, an enterprise will need over five years and cost 15% of asset value if they follow the official procedures. That’s why few companies obey formal regulations when they want to close down their business.

In international trade, though Vietnam ranks 63^rd/168 countries, the time and money for import-export formalities are still high compared to China, Malaysia and Singapore.

To export a batch of goods, a company will have to complete six kinds of documents in 24 days, at a cost of $669 for a container. The numbers are eight documents, 23 days and $881 for an imported container. Those of China are half of Vietnam’s.

Source: VietnamNet.