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7 features of  Vietnam’s business environment

7 features of Vietnam’s business environment

Wednesday 14, 07 2021
Vietnam's business environment has improved significantly, and its competitiveness has been enhanced. However, there is still much room for institutional reform in the coming time.

According to the Vietnam Provincial Competitiveness Index Report by the Vietnam Chamber of Commerce and Industry (VCCI), measures to improve the business environment and support businesses are have been well implemented. However, the improvement rate tends  to slow down.

Features of Vietnam’s business environment

1. More equality among businesses

In general, equality in Vietnam’s business environment has been more appreciated. The share of businesses that believe local governments offer favoritism to SOEs, which causes difficulties for private enterprises decreased from 37.9% in 2016 to 24.7% in 2020.

More equality among businesses

However, the figure of private enterprises that said that incentives for large companies (both public and private) were an obstacle to their business operations in 2020 remained at 53.9%, showing that local governments need to make more efforts in creating a fair business environment for private enterprises.

2. Improved legal proceedings

The quality legal proceedings were improved in 2020 while the security of business operations and property has experienced positive changes.

The confidence of businesses in courts increased, which is evidenced by the fact that the percentage of enterprises willing to use the court to resolve economic disputes increased from 35.8% in 2016 to 56.8% in 2020.

3. Informal costs continued to fall

The business community in Vietnam has placed more faith in the effectiveness of the fight against corruption of the Government. The proportion of companies reporting that they have to pay informal expenses fell to 44.9%, from 66% in 2016. The informal cost burden has decreased over time, with 84.4% of businesses saying that informal costs were at an acceptable level.

Informal costs continued to fall

In some fields, the prevalence of informal costs has shown signs of abating. However, in some respects, extra efforts are still needed. For example, the proportion of enterprises that pay informal fees to speed up land procedures was 32% while the percentage of enterprises that believed corruption when handling procedures for businesses is common was 54.1% in 2020.

4. Provincial authories are more proactive

In 2020, 81% of surveyed businesses agreed that local authorities have been flexible (within the legal framework) to create a favorable business environment for private enterprises.

  • 72.3% of enterprises found that “provincial/city People's Committees are dynamic and creative in solving newly arising problems”, the highest level ever.
  • About 50.5% of enterprises recorded the government's positive attitude towards the private sector.
  • 80% of businesses were satisfied with the response and resolution of the authorities to their problems and difficulties, significantly higher than 76.7% in 2017.

5. Efficiency and effectiveness of local enforcement should be promoted

Although the business environment in Vietnam has changed positively in recent times, the quality of enforcement at district and departmental levels is still problematic. Up to 73.5% of businesses agreed that there are good initiatives at the provincial level but they are not well implemented at the department level. Similarly, 60% of enterprises said that “provincial leaders have the right guidelines and policies, but they are not well implemented at the district level".

Efficiency and effectiveness of local enforcement should be promoted

6. Administrative procedures made progress

In general, the quality of administrative procedures has been improved considerably.

  • 66.5% of enterprises said that "procedures and papers have been more simple", while in 2016, it was only 49.5%;
  • 76% of enterprises found that "the time to carry out administrative procedures is shorter than prescribed" in the 2020 survey, while in 2017 (the first year this indicator was included), it was 67%;
  • 84% of enterprises said that “state officials solve problems effectively” in 2020, a significant increase from 58% in 2016.
  • 80% of enterprises rated state officials as friendly when processing administrative procedures.

7. Transparency needs to be enhanced

Access to important information, including planning documents, has improved, but there is still room for local governments to further facilitate private businesses to access such information.

On a scale of 5 (1. Impossible - 5. Very easy), access to planning documents and legal documents at the provincial level achieved 2.54 points and 3.03 points, respectively, which shows no significant improvement compared to previous years.

The quality of information on provincial government websites in 2020 achieved only 34.5 points on a 50-point scale, up slightly from 31 points in 2016. There were still 57.4% of enterprises saying that “it is very hard to obtain local documents”.

Transparency needs to be enhanced

Enterprises have the most difficulty accessing the following types of information: maps, land use planning (51%), public investment plans (50%), budget documents (48%), industry planning (47%), plans to build new infrastructure (45%), investment incentives (40%).

Source: VCCI

Compiled by VietnamCredit

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