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Foreign investors spell out “big five” problems
Vietnam’s business environment, in the eyes of foreign investors, still has five problems, including poor infrastructure, unclear law implementation, finding good managers, labor cost increases and the general legal framework.
The conclusion was made in a report surveying Japanese businesses operating abroad conducted by the Japanese Bank of International Cooperation (JBIC). It has been released on the threshold of the Consultative Group (CG) Meeting to be held in Vietnam this week.
Vietnam maintains its third position in the list of the most attractive investment destinations for Japanese investors for the next three years. However, the percentage of Japanese businesses choosing Vietnam decreased slightly with votes down from 152/471 in the 2008’s survey to 149/480 this year.
Having been affected by the global economic crisis, Japanese investors have not geared up for expanding operations yet. Only 69.7 percent of 178 Japanese businesses now operating in Vietnam, have decided to expand.
Of note in the report is that 60.4 percent of the businesses which chose Vietnam as a destination made the choice because they can see high potential of the domestic market. Meanwhile, cheap labor costs, which were once the biggest advantage, is a reason for 57.7 percent of businesses, while 21.5 percent chose Vietnam because of the quality of the labor force. Meanwhile 14.8 percent pointed at the capability of the supporting industries as a reason for investing.
European investors, through EuroCham, have also asked the Government to consider improving the business environment. They have suggested the Government needs to remove the ceiling interest rate scheme stipulated in the Civil Code, and give more power to the State Bank of Vietnam in defining interest rates.
EuroChaim Chairman Alain Cany said in order to ensure economic development, Vietnam needs to mobilize long term capital from foreign sources. However, there are barriers – including the withholding tax on interest to be paid to foreign lenders. The taxation has made Vietnamese businesses reluctant to access the foreign capital market and has forced them to rely on unreasonable short term loans from the domestic market instead.
Foreign investors have also expressed impatience about tardiness in the equitization process of telecom companies.
State owned telecom companies are yet to really opened to strategic investors, while there has been no clear timetable for this, said Cany.
Foreign investors have called for a review of the implementation of commitments made when Vietnam joined the WTO.
Vietnam still lacks the documents to guide the implementation of WTO commitments, which has caused difficulties to agencies and local authorities during implementation.
VietNamNet, DTCK
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