Viet Nam's economic margin of error decreasing

Saturday, Aug 31, 2013 09:35

Representatives of foreign businesses share ideas to further attract investment at the conference. Photo

Quynh Hoa

HCM CITY (Biz Hub)— Viet Nam is at a crucial juncture where it has to take decisions with little room for error, representatives of foreign business associations said at a conference on Friday.

Nicola Connolly, vice chairwoman of Eurocham (European Chamber of Commerce), said "Viet Nam is standing at a cross-roads where every decision taken will impact the economic well-being of the country in the mid-to long term.

"Making the right decision is absolutely key, especially as ASEAN starts taking more shape."

She spoke of the fact that an estimated 40 per cent of the economy is in the hands of the State sector is not a problem in itself.

However, the preferential treatment that State-owned companies receive in some areas, including favourable access to land and credit, and having limited profit targets generates inefficiency that is hampering economic growth, she said.

She said Viet Nam is currently competing internationally based on low labour costs.

While the Government has expressed the desire and need to move away from a labour intensive economy into technology and value added areas, investors are unlikely to bring their technology to Viet Nam unless there is real protection of intellectual property rights, she added.

Furthermore, "our members are finding it difficult when laws and decrees are not implemented in the same way across Viet Nam," Connolly said.

Paik In Ki of Kocham (Korean Chamber of Commerce) hoped the Vietnamese Government will offer more support and be active in solving difficulties that foreign businesses face.

In the first seven months of this year, South Korea invested US$12 billion in Viet Nam, of which newly-invested capital was $7 billion (in 667 projects), and additional capital for existing businesses constituted the remaining $5 billion.

Kimio Yamaguchi, chairman of the Japanese Business Association in HCM City, said "the current business environment in Viet Nam has not yet reached the level we expect."

He said Japanese businesses are facing several difficulties ranging from "very fundamental issues to daily operational and administrative ones."

These include poor transport infrastructure, road safety concerns, duplication of many papers needed under the e-customs system, restrictions on overtime work and mandated minimum increases in salaries that affected companies' business plans.

"We understand that these issues are not easily solved very quickly and some of the issues may come from lack of information and understanding on our end.

"In this regard, we believe that regular dialogue on such specific issues between foreign investors and central and local government is very important and essential," Yamaguchi said.

Rational decisions

Nguyen Thi Dan, head of the labour management and wage division under the HCM City Labour, Invalids and Social Affairs Department, said the mandated increases in minimum wages were based on socio-economic figures and living standards of workers.

Before issuing a decision, the Government collected opinions from foreign associations and informed them in advance of the decision so that the latter can prepare their business plans well, he said.

And the minimum salary has only been increased by 10-15 per cent instead of the 30 per cent suggested by foreign associations.

Do Nhat Hoang, head of the Ministry of Planning and Investment's (MPI) Foreign Investment Agency, said current laws allowed overtime work not exceeding 300 hours per year.

The limit is necessary to protect the health of workers as also give them time to recover their strength, he said.

Herb Cochran, executive director of Amcham (American Chamber of Commerce), said Viet Nam was experiencing its longest spell of slow growth since the beginning of economic reforms in the late 80s.

"The World Bank and the IMF have concluded that Viet Nam is in a ‘structural growth slowdown,' because the ‘delayed and inadequate implementation of structural reforms, including … bad debts in the banks, SOEs, and public investment, are dragging down the country's long-term growth potential,'" an Amcham statement said.

It noted "a lack of Government-business coordination on structural reforms for both State-owned enterprises (SOEs) and small and medium enterprises (SMEs) to increase competitiveness and adapt to the WTO environment."

Amcham recommended that SOEs be restructured and managed with transparency, responsibility, and accountability, and that they operate on a "level playing field" with private sector enterprises, both Vietnamese and foreign invested ones. — VNS

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