Vietnam ranked 91st out of 178 economies covered in Doing Business 2008, which assessed the ease of doing business in a country based on 10 indicators.

The report, by the World Bank and the International Finance Corporation, was announced in Hanoi last week.

Though Vietnam was 13 places better than last year's 104 ranking, economic experts have said that the overall ranking should not be the focus when studying the report.

The government should instead focus on improving policies concerning its low-ranked indicators, according to experts.

Dr. Nguyen Quang A, 3C Company Board Chairman, urged the government to “look at the indicators and root problems as well as measures to tackle them” instead of just comparing the overall ranks with other economies.

The report is “a necessary catalyst for Vietnam to change,” Le Dang Doanh, a senior economic expert, told Thoi Bao Kinh Te Saigon (Saigon Economic Times).

Vietnam expanded access to credit by broadening the scope of assets that can be used as collateral, the report noted.

However, Vietnam has room to improve in a number of areas.

The country's lowest rankings fall into three areas: protecting investors (165), closing a business (121), and paying taxes (128).

The country ranked 97th in terms of “ease of starting a business,” seven spots worse than last year.

These indicators “show real shortcomings in Vietnam's policies and weaknesses in its business environment,” A said.

The report also found that Vietnamese businesses are among those who spend the largest amount of time fulfilling tax requirements.

On average they spend 1,050 hours – 130 staff days or about five times more than the Asia-Pacific average – to complete tax procedures every year.

In fact, it takes some Vietnamese businesses up to 1,990 hours annually to complete tax procedures, Doanh said.

He said Vietnam could improve its rank if the tax bureau made efforts to streamline and simplify corporate tax processes.

On the other hand, businesses must understand tax regulations to save themselves time, Doanh said, pointing out that “some newly-formed businesses don't know what kind of taxes they have to pay.”

According to Doing Business 2008, Vietnam remains among the countries with the lowest protection for investors against directors' misuse of corporate assets.

The report says that although the new securities and enterprise laws introduce fiduciary duties for directors, they fail to provide a way to enforce those duties.

Additionally, the report said it is still difficult to close a business in Vietnam.

The current mechanism for dealing with bankruptcy in Vietnam can often be difficult and time consuming, according to the report.

For example, filing bankruptcy in Vietnam takes 5 years on average with a recovery rate of only 18 percent.

As a result, very few enterprises terminate their business using official regulations and procedures.

In a recent seminar in Hanoi before the report announcement, the report co-authors, Justin Yap and Sylvia Solf, suggested that Vietnam's overall rank could be 58th next year if the government furthered reforms in three categories: “Starting a business”, “Dealing with licenses”, and “Getting credit”.

Some economists at the seminar argued that the report was not up to date on business licensing procedure changes introduced by the new Enterprise Law and Investment Law, which jeopardized Vietnam's “Starting a business” indicator.

Yap said the report was just a “snapshot” of the Vietnamese business environment at a certain period of time.

The rankings were meant to change, he added.

Source: TBKTSG