Business leaders discuss investment environment

They made an appeal at the Vietnam Business Forum, discussing the challenges and opportunities for investment in the country.

According to Christopher Twomey, chairman of the American Chamber of Commerce (AnCham), Vietnam has faced challenges creating macroeconomic stability at a time of unacceptably high inflation, causing tension in the foreign exchange market and high interest rates.

“Many AmCham members found it more difficult to conduct business here than in past years”, he said, pointing out that the Government’s unsuccessful efforts to sufficiently manage business activity is one of the things discouraging numerous investors.

The Chairman of the European Chamber of Commerce in Vietnam, Preben Hjortlund, said the favourable treatment offered to State enterprises through loans, access to land and more limited profit targets is hampering the growth of the economy.

“The Government should boost equitisation to obtain a more competitive market in which the market mechanism can do its works,” he said.

Twomey added that little progress has been made since the Government launched anti-corruption efforts in 2004, citing a recent Amcham survey that revealed over 80 percent of respondents listed corruption as one of their top concerns in Vietnam. “Corruption is getting worse in every factor of doing business here”.

“Urgent reforms are strongly needed,” he stressed, adding that focus should be placed on addressing the real issues of the banking system and reform of SOEs to head for sound sustainable economic growth.

To improve the situation, the Chairman of the Korea Chamber of Business, Kim Jung In, said Vietnam should do more to restructure State-owned enterprises and improve the competitiveness of the private sector in leading the future economy.

The Hanoi Young Business Association proposed that the laws and regulations system should be more consistent in order to better encourage investment and create favourable conditions for doing business.

The VBFs infrastructure group suggested that acceptable returns and legal security should be promised to foreign investors and lenders to attract more financing in infrastructure.

Deputy Prime Minister Vu Van Ninh said the Government will introduce policies to create favourable conditions for the development of enterprises, including making capital access easier.

He also said that the minimum wage of Vietnam remained low in comparison with other countries in the region, and agreed with business proposals to increase the level by 17-18 percent from next year.

Financial problems

“Vietnam’s fragile financial system is one of the country’s biggest economic problems,” said Twomey, adding that resolving bad debt needs to be dealt with without delay because the problem not only affects the banking system, but also the whole economy.

According to the VBF’s banking Working Group, the implementation of the Government’s banking system restructuring plan has been slower than expected and less comprehensive in tackling problems such as non-performing loans, cross shareholdings and an over-reliance on real estate collateral for loans.

The group also emphasised the need to return to an agenda of market-based structural reform of the banking industry as soon as possible to enable this industry to efficiently help the economy develop.

In response, the SBV’s Deputy Governor Dang Thanh Binh said that concentrated efforts have already been made to resolve bad debts, and the increasing rate of these debts in credit institutions has slowed down since the second quarter. He announced that the ratio would be reduced to 5 percent by the end of 2015.

Binh added that mergers and acquisitions would be put under close watch while the SBV would enhance inspections of share transfers among credit institutions.

Tax issues were also discussed at the forum, with Vu Thu Huong from the Investment and Trade Working Group proposing that the Government have a more consistent tax system, and calling for the removal of the advertising and promotion cap.

The VBF is held ahead of the Consultative Group for Vietnam’s annual meeting, which will take place on December 10 with overarching theme “laying the Foundation for Sustainable Growth.”