Thursday, May 31, 2007

Vietnam is getting a better investment climate

(31-05-2007)
Business leaders and officials gather at the Viet Nam Business Forum in Ha Noi yesterday. — VNA/VNS Photo Hong Ky

Ha Noi — Viet Nam has sent a clear message that it is determined to increase the attractiveness of the domestic investment environment in order to satiate the needs of foreign investors into the country.

Addressing the Viet Nam Business Forum 2007, which opened in Ha Noi yesterday, Minister of Planning and Investment Vo Hong Phuc said, " Viet Nam has been hard at work in preparing conditions to welcome a new wave of foreign investment, including implementing its bilateral and multilateral commitments."

The minister told delegates in attendance that the country was highlighting areas such as the fine tuning of the market mechanism, reform in administrative procedures and financial and banking systems, developing human resources, infrastructure development and establishing needed auxiliary industries.

According to a Ministry of Planning and Investment (MPI) report, the GDP growth rate in the past five months hovered close to 7.9 per cent and was the highest recorded rate for the last several years.

Over the period, 19,300 new businesses registered for licenses with a total invested capital of VND134 trillion (8.4 billion USD), an year-on-year increase of 140 per cent.

Sin Foong Wong, Viet Nam Director of the International Financial Organisation (IFC), said Viet Nam had with the Enterprise Law and Investment Law shown its readiness to form an equal playground for all businesses.

However, the IFC Viet Nam leader, who co-chaired the forum, urged Viet Nam to further improve its investment environment in order to promote its image on the world arena.

Executives at the forum said economic expansion was being curbed by poor infrastructure and slow legal reform.

Infrastructure shortfall

"Infrastructure constraints threaten FDI in manufacturing and export," said a senior American Chamber of Commerce official. "Private sector participation in infrastructure development, finance and management is needed urgently, especially in electric power and deep water seaports."

A big concern for companies is that poor or under-developed infrastructure directly impacts cost factors and could force the final price of goods and services higher.

To ship a 20-foot container from Can Tho to HCM City could cost as much as VND4.5 million ($281), equivalent to what it costs to transport the same container from HCM City to Kaoshung, Taiwan.

"Local businesses have to deal with high [transportation] costs, which push up product prices and reduce competitiveness," said General Secretary of the Can Tho Business Association Nguyen My Thuan.

Development has, admittedly, been slow. The Government’s initial forecasts on infrastructure, on which they based their development plans through 2030, were grossly inaccurate, leaving VBF delegates yesterday urging officials to not only solve current weaknesses but also create a better model for anticipating future demand.

In addition, construction on key projects has been slow. The Phu My bridge and No2 Ring road, which were aimed at alleviating cargo traffic around HCM City and provide access to the new Hiep Phuoc port, were supposed to be completed this year. Their opening has been pushed back to December 2009.

Senior Ministry of Transportation officials confessed mounting demand has put a physical burden on current infrastructure – a situation which they say may not abate for the next few years – underpinning the need to speed up construction.

The ministry yesterday proposed better communication with companies in publishing quarterly port statistics, creating greater transparency in infrastructure planning, and managing projects.

Regulations pending

Just as big a stumbling block has been legal reform and the lack of clarity on certain legal issues.

"With speedy legal reform comes the risk of weak or opaque legislation," said Alain Cany, chairman of the European Chamber of Commerce.

As an example, Cany sited the Notarisation Law, which forms the basis for real estate and securities transactions.

"Although the law has been in effect since late 2006, the relevant guidelines are yet to be issued, resulting in the role of public notaries being left unclear, leading in delays to transactions and uncertainty in some cases as to the enforceability of transactions that are entered into," he said.

Help wanted

Another major issues discussed at yesterday’s meeting was the shortage of skilled labour, and the need to encourage in-house training programmes and innovate retention strategies.

The Government should further contribute to solving labour market problems by developing targeted vocational training programmes in line with industry needs, argued VBF delegates.

Australian Chamber of Commerce members added that Decree 93/2005/ND-CP, which puts a 3 per cent cap on the number of foreign employees a company can hire, also needed to be revised in light of skilled labour shortages. They argued the law also restricts the transfer of new technology and skill sets from abroad.

The Viet Nam Business Forum is an annual event within the Consultative Group Conference of donors to Viet Nam framework and was organised by the MPI, IFC and World Bank. —VNS