Business environment suffers from non-competitive attitude
  • By Manh Quan | dtinews.vn | April 12, 2016 10:11 AM

Even though the number of bankrupted firms is high, government agencies have continued to say that there was nothing to worry about.

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Since 2011, the number of shutdown and bankrupted firms has increased sharply. But at all seminars or press conferences, spokespeople from the General Statistics Office and even heads of the Ministry of Planning and Investment have said this is normal. They have often quoted the number of bankrupted firms in Australia, France, the US or Indonesia as facts to prove that everything is quite normal.

However, it's probably harder to make the normal claim now as statistics for the first quarter were released. While 23,767 new firms were established, more than 20,000 businesses shut their doors, an increase of 23.9 percent on last year.

Nguyen Dinh Cung from the Central Institute for Economic Management (CIEM) said, "Saying that it's normal is just a way of offering consoling words and is frankly irresponsible. These numbers aren’t normal."

He is probably the first economist to make such a strong statement.

The reports from the Vietnam Chamber of Commerce and Industry from the last three years have shown that the number of medium, small, very small and extremely small scale businesses has shot up. Big firms often faced difficulties and have downsized in scale. Other surveys and assessments by foreign organisations provide similar results.

According to the World Bank, 40.8 percent of a firm's revenue is spent on taxes and fees in Vietnam, especially in recent years when the government is trying to balancing the state budget by increasing fees on the environment, transportation or excise tax. There have been no cuts to give firms some breathing space.

In addition to this rampant corruption. CIEM evaluate that since the implementation of government Resolution 19 about improving the business environment in 2014 and 2015 the situation has actually become worse. Bribery has actually increased.

Pham Chi Lan, member of the Advisory Group of the Vietnam National Assembly’s Economic Commission, cited statistics from the World Bank that stated that if a firm generated one Vietnamese dong then they would lose VND0.72 or even VND1.02 to bribery.

"How can firms expand and develop?" she said.

Soldiers are the pillar of a country during war times and businesses are the heart of a country in peacetime. That is because firms play an important role and make the most contribution to the country's development.

It's admittedly normal to see firms go bankrupt and shut down when facing such challenges, when taxes and fees are increasing and the business environment becomes challenging and corruption is rampant.

But because this is seen as ‘normal’, many economists have reached the conclusion that Vietnam has refused to improve. There's abundant FDI and ODA yet Vietnam's ranking on global competitiveness chart has actually fallen.

Samir Dixit, Managing Director of Brand Finance Asia-Pacific, said at the ninth forum on Vietnam National Branding that the value of Vietnam's national brand was only higher than Cambodia's. In 2015, Vietnam's national brand was valued at USD140bn with Cambodia ranked at USD16bn.

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