Doing Business in 2008: Vietnam Improves Ease of Doing Business, Narrows Gap With Leading Countries in East Asia and Pacific
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In Washington DC
Hanoi, September 26, 2007 – Vietnam has implemented a number of important regulatory changes over the past year which have improved its business environment and the ease of doing business, according to a new report by IFC and the World Bank.
Published annually by IFC and the World Bank, Doing Business assess the ease of doing business in a country based on 10 factors: starting a business, dealing with licenses, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, and closing a business. One of the focuses of this year’s report – which covers 178 countries - is to identify which reforms are most effective, where and why. Since 2003 Doing Business has inspired or informed more than 113 reforms around the world.
The report found Vietnam made it easier for business to access credit by broadening the scope of assets that can be used as collateral. The 2005 Civil Code and Decree 163/2006 allow businesses to use all movable assets to secure debt – present and future, tangible and intangible – by allowing the general description of assets and obligations in collateral agreements. Vietnam also adopted a new securities law that established a securities exchange and trading center. In addition, the country strengthened investor protection through a new enterprise law, which requires investor involvement in major company actions, increases disclosure requirements for related-party transactions and introduces fiduciary duties for company directors.
However, Vietnam has room to improve in a number of areas. The country’s lowest rankings fall into three areas: protecting investors, closing a business, and paying taxes.
It is still difficult to close a business in Vietnam. According to the report, the current mechanism for dealing with bankruptcy in Vietnam can often be difficult and time consuming. For example, a case of bankruptcy in Vietnam will take more than 5 years with a recovery rate of only 18%. As a result, very few enterprises terminate their business using official regulations and procedures.
With regards to the ease of paying taxes, the report finds Vietnamese businesses are among those who spend the largest amount of time to fulfill tax requirements. On average they spend 1050 hours, equivalent to 130 staff days, to complete procedures relating to paying taxes.
Regionally, the report found that in East Asia and the Pacific the most popular reform was to ease access to credit, with improvement in China, Indonesia, Micronesia and Vietnam. The second most popular was to simplify business start-up, with action in Lao PDR, Malaysia and Timor-Leste.
According to the report, this year, East Asia dropped in rankings on pace of reform, ranked second-to-last among regions on business reform. However, China was a standout in regulatory reform in this period, bucking the region trend. By introducing far-reaching protection of private property right and a new bankruptcy law, it became a star reformer and is among the top 10 reformers in the world. Singapore, for the second year running, tops the aggregate rankings of 178 economies on the ease of doing business. The runner-up economy in the region is Hong Kong (China) (4), followed by Thailand (15), Malaysia (24), Taiwan (China) (50), Mongolia (52), China (83), Vietnam (91), Indonesia (123), Philippines (133), and Cambodia (145). Lao PDR (164) and Timor-Leste (168) are ranked lowest in the region.
“The report finds that equity returns are highest in countries that are reforming the most,” said Michael Klein, World Bank/IFC Vice President for Financial and Private Sector Development. “Investors are looking for upside potential, and they find it in economies that are reforming – regardless of their starting point” he added. Many of these fast reformers are large emerging markets such as China, Egypt, India, Indonesia, Turkey, and Vietnam.
About Doing Business Report
The Doing Business project is based on the efforts of more than 5,000 local experts – business consultants, lawyers, accountants, government officials, and leading academics around the world, who provided methodological support and review. The data, methodology, and names of contributors are publicly available online at http://www.doingbusiness.org. The rankings do not reflect such areas as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions and crime rates.
For more information about the World Bank program in Vietnam, visit http://www.worldbank.org/vn
For more information about the IFC program in Vietnam, please click here
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