The Viet Nam Business Forum entitled "New phase of economic reform: from agenda to action" held in Ha Noi yesterday to discuss ways for Viet Nam to enhance business climate.—VNS Photo

HA NOI (Biz Hub)— Viet Nam should improve its business environment and accelerate economic reforms to avoid lagging behind other southeast Asian countries.

This was the view of attendants at the Viet Nam Business Forum entitled "New phase of economic reform: from agenda to action" held in Ha Noi yesterday to discuss ways for Viet Nam to enhance business climate.

The European Chamber of Commerce in Viet Nam (EuroCham) recently announced its Viet Nam Business Climate Index (BCI), showing that business confidence and outlooks among European businesses in Viet Nam continues to improve.

EuroCham Executive Director Paul Jewell said the BCI has experienced incremental improvements across the indicators, demonstrating that European companies have slowly regained trust in the Vietnamese market.

He warned this was only the half-way point, adding that the BCI needed to significantly improve if Viet Nam wanted to remain competitive within ASEAN.

Speaking at the meeting, minister of Planning and Investment Bui Quang Vinh said despite positive signs, the economy continued to face difficulties including low FDI inflows, high inventories, poor competitive capacity and a large number of dissolved businesses.

"This is the reason businesses should share difficulties with the Government in the reform process to overcome challenges," Vinh said.

David Whitehead, chairman of the Australian Business Society in Viet Nam (Auscham) said Viet Nam had been coping with fierce competition from other countries in Southeast Asia such as Indonesia, Thailand, Cambodia and Myanmar, which have emerged as attractive investment destinations.

He added that a better investment climate would make it easier for the country to attract foreign direct investment in the context of the global economic slowdown.

Despite the global headwinds, foreign direct investment (FDI) had increased considerably in recent times. If Viet Nam did not create a better investment climate, its FDI would continue to fall, he warned.

Mr Motonobu, chairman of the Japan Business Association in Viet Nam (JBA) agreed, saying that Japanese companies had invested US$4.2 billion into the country, making it the top international investor, accounting for 40 per cent of the country's FDI inflows last year.

However, he said Japan had extended its FDI to other Asian countries as well.

"It is important for Viet Nam to have a point of view on how you can attract investment bearing in mind the competition from other countries," he added.

He suggested three key points to eliminate bottle necks and attract more investment in Viet Nam, including developing the business environment, rule making process, implementation and judicial system and visa exemptions.

Vu Tien Loc, President of the Viet Nam Chamber of Commerce and Industry (VCCI) proposed that the Government should continue to stabilise the macro economy, controlling inflation and achieving steady economic growth.

Deputy Prime Minister Vu Van Ninh (R) appreciated the executives' and donors' frank opinions.—Photo vov

"It is indispensable for Viet Nam to speed up restructure, primarily for State-owned enterprises (SOEs), increasing transparency and creating a fertile environment for all economic sectors," Loc said.

He said the Government should lower corporate income tax to 20 per cent and remove the interest rate ceiling.

Delegates at the event also confirmed the role of the private sector in the country's development.

Preben Hjortlund, President of the European Chamber of Commerce in Viet Nam (EuroCham) said SOEs, which accounted for 40 per cent of the economy, had not developed as effectively as expected.

He said the Government should accelerate SOE equitisation to create a healthier competitive environment.

Mark Gillin, President of the American Chamber of Commerce in Viet Nam (AmCham) added that the Vietnamese government should establish a competitive playing field for private businesses to develop equally with other economic sectors.

Talking about the Government's recent move to set up a national debt trading company (VAMC), Alain Cany, VBF's co-chairperson said the establishment of VAMC would help ease banks' bad debt burden and helped reiterate the government's commitment to solving problems in the banking sector.

However, he said investors felt frustrated after the State Bank of Viet Nam (SBV) decided to postpone the application of new debt classification regulations by one year.

According to a report by the working group, Viet Nam's banks have long ceased to report the true extent of their bad debts. One reason for this was the previous regulations on bad loans which allowed banks to enjoy flexibility in classifying the same debts into standard or bad categories.

"The delay of Circular 02 may setback transparency, an essential factor in solving problems in the banking sector quickly," the report said.

The working group noted that Circular 02 would ensure banks produce more realistic reports on provisioning and would increase investors' confidence in the transparency of the banking system.

In a speech delivered at the forum, Deputy Prime Minister Vu Van Ninh appreciated the executives' and donors' frank opinions.

He said the Government would study them to come up with appropriate solutions.

He also asked businesses to restructure themselves to improve their operational efficiency.

The mid-term gathering was jointly held by VBF, the MPI, the International Finance Corporation (IFC), and the World Bank (WB). — VNS