JICA Points out Concerns about Vietnam’s Business Environment

Tuan Minh

09:16 24/10/2016

BizLIVE - Mr. MASUDA Chikahiro, senior representative of the JICA Vietnam Office, shared with BizLIVE his assessment of Vietnam’s business environment as well as JICA’s efforts to aid the Vietnamese government in improving it.

JICA Points out Concerns about Vietnam’s Business Environment

Mr. MASUDA Chikahiro, senior representative of the JICA Vietnam Office. Photo courtesy: JICA Vietnam

How do you assess the Vietnamese government’s recently-announced measures to better the investment climate and lift the country’s economic competitiveness?  
After the announcement that Vietnam basically agreed to conclude the negotiations to participate in the Trans-Pacific Partnership (TPP) free-trade pact, a number of foreign companies have decided to invest in Vietnam, which is a signal for that many investors regard the investment climate in Vietnam as positive.
In order to maintain and fully enjoy this trend, Vietnam is expected to strengthen its industrial competitiveness better than now, so as to enable its entrance into the international supply chain which is expected to bring a lot of benefits.
Regarding Resolution No.19 which aims at enhancing the business environment through decreasing time-consuming tax administrative procedures and providing favorable measures, though it has shown its effectiveness, it would have brought about bigger business environment improvement if those measures had been realized as scheduled.
Regarding the issuance of investment license procedures, authority delegated from the Ministry of Planning and Investment (MPI) to departments of Planning and Investment (DPIs) of each province is considered beneficial to the private sector.
We recognize that some provinces pay much attention to speeding up the internal paper work and see that DPIs have advantage to closely communicate with each individual company and thus to provide timely guidance and support whenever necessary.
We highly appreciate those efforts trying to attract and facilitate the investors to run their business smoothly and effectively.
However, what is important to maximize the efforts mentioned above is whether the Government of Vietnam (GOV) could implement and monitor those measures efficiently and appropriately in the actual business field.
Through some of the monitoring and reporting meetings together with routine communication with Vietnamese counterparts, we find that Vietnamese officials in charge are frequently changed and it seems they cannot appropriately grasp overall picture therefore cannot be reported of the real progress in details.
There is also gap in information sharing between the responsible organization and other stakeholders.
What recommendations do you have for the Vietnamese government to make Vietnam more attractive to foreign investors, and encourage the startup movement as well as the private sector?
Business and investment climate shall be considered at least from two aspects, which are (1) infrastructure facilities and (2) soft components, including legal framework and human resources.
Regarding the infrastructure facilities, JICA has identified infrastructure improvement as one of the top priorities to the country’s socio-economic development in general and to its business environment improvement in particular.
For example, since 2015, Hanoi has inaugurated Terminal 2 of the Noi Bai International Airport, Nhat Tan Bridge and the road connecting the bridge to the airport. This helps dramatically improve the arterial transportation route from the international gate to the center of the city, making not only Hanoi but also its neighboring provinces attractive investment destinations.
A view of  T2 Terminal of the Noi Bai International Airport, built with Japanese ODA. Photo: Vietnam+
Vietnam, however, is still on the way to the expected situation which fully attracts private companies to newly create a job and/or to keep enough motivation for on-going operations. In general, Vietnam needs to invest more in other infrastructure facilities such as ring-roads for smooth transits, and MRT (mass rapid transit) networks for modal shift to provide the best conditions for normal business transactions.
Here, we have to raise the biggest concern about the business and investment climate in Vietnam, which is the delay in project implementation. Once a project faces severe delays, it will not only cause cost overruns but also face the huge loss of economic profit. This situation remarkably confuses private companies’ business strategy.
JICA has been preparing to establish and will apply soon the Project Web-monitoring System through which the progress of procurement of contract packages and implementation for all projects financed with Japanese ODA can be monitored.
As the next step, in cooperation with the Ministry of Finance and MPI, it is planned to upgrade the system to cover all public investment projects in Vietnam in order to enhance projects’ efficiency and transparency. JICA expects that through this system, information about causes of delay and the governmental agencies which cause delay in their decision-making process will be disclosed to the mass media and the public. This will, therefore, help reduce the delay in project implementation.
In this context, GOV is expected to introduce the system in Vietnam so as to reduce the delay and support the approvals and licenses requested to enterprises, thus, to help improve the investment climate in Vietnam.  
Regarding the soft components, a recent survey by JETRO showed 64% of Japanese enterprises are planning to expand their activities within two years in Vietnam. This is the third highest figure among Asian countries (lower than Cambodia, Myanmar, but higher than the Philippines, Indonesia, Thailand and Malaysia). The main reasons for investment expansion are relaxation of regulations, possibility to hire the labor force and future market volume increase.
On the other hand, procedure complexity, raw materials, the local procurement of parts and wage increases of employees and quality of the employees are main issues for the enterprises to consider.
Regarding procedure complexity, JICA recommends GOV to concentrate more on the policy implementation rather than issue new conceptual regulations.
Central authorities have made great efforts in setting up new regulations or revising existing ones but many of them are not realized on schedule while some are confusing or ambiguous. This leads to the fact that people get used to the understanding that GOV’s policies are mostly impractical and thus the policy enforcement will be weakened.
JICA, therefore, recommends GOV to evaluate capacity of the government system including human resource, budget situation, and related environment etc. so as to make practical and implementable decisions.  
GOV needs to improve the coordination and collaboration among relevant central authorities to encourage enterprises’ willingness to improve the productivity to join the international supply chain.
Many institutions under MPI, the Ministry of Industry and Trade, Ministry of Science and Technology and other ministries are independently supporting enterprises to enhance their productivity. Regrettably, coordination among relevant institutions has been so weak that the expansion of the best practices has not been fully utilized.
We would like to emphasize that the effective cooperation among concerned stakeholders is the most effective way for further improving the investment climate in Vietnam. We expect the strong and proactive initiative and continuous efforts of the Government of Vietnam would be big encouragement and development motivation for the business environment of Vietnam.
Thank you very much!

TUAN MINH

Từ khóa: JICA, ODA, TPP, JETRO, Hanoi