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Business climate improving: Report
Vietnamese business climate ranked fourth on the list of the world's fastest developing economies in 2010, and leaped ten places overall to the 78th out of 183 countries on the Viet Nam Business Annual Report 2010, released this week by the Viet Nam Chamber of Commerce and Industry (VCCI) and the World Bank.
World Bank Viet Nam director Victoria Kwakwa said the healthy environment for the growth of small businesses played a very important role in the improved rankings, adding that the implementation of business clusters was also on track and would be actively supported by the World Bank.
Administrative reforms were also a significant factor in this year's progress, said VCCI Chairman Vu Tien Loc. The legal system has been reinforced with important changes in regulations on market entry and corporate governance, including Decree No 43 on business registration, he said.
The number of newly registered enterprises also continued to rise last year, according to the report. By the end of 2010, the number of registering companies reached 544,394, exceeding the Government's target for the year of 500,000 new enterprises.
However, the report also revealed factors adversely affecting the business climate in 2010, including high interest rates and soaring inflation.
Notably, among the nearly 550,000 new enterprises, less than a half were actually in operation by the end of the year. State-owned enterprises (SOEs) were not seen to be peforming a leading role in the business sector, and the heavy debt loads of some SOEs were two- or three-times their equity.
"If not monitored closely, State resources will be drained away into inefficient businesses," said the deputy director of the Central Institute of Economic Management, Nguyen Dinh Cung.
In addition, although disbursement levels of foreign direct investment (FDI) showed satisfactory growth, the 2010 target for new FDI was not reached, attaining only 82 per cent of the 2009 figure. New FDI also tended to be inordinately focused on real estate development.
Many economists said that growing trade deficit and State budget deficit, along with the unco-ordinated fiscal and monetary policies, low productivity and limited forecasting capacity, were all culprits leading to the flaws in the Vietnamese business climate.
"Resolution No.11 of the Government on controlling inflation and stablising the economy needs to be properly implemented," said Cung.
"Poor infrastructure and energy shortage are also worth concerning," said Pham Thi Thu Hang, Head of the VCCI's Enterprise Development Institute. "Traffic systems may be improving, but they have not been developed in a modern way."
The report showed a fact that the private sector was tending to shift into industries demanding high-skilled workers, like media and technology. The report suggested that the economy be restructured to promote industry, construction and services.
The report applauded progress on the equitisation and reorganisation of SOEs, noted that the some 80 per cent of equitised SOEs have been successfully converted into single-member limited liability companies.
Ho Sy Hung, Director of the Ministry of Planning and Investment's Department of Small Business Development, has said that his ministry would continue to help provide training and promote trade and technological support for small- and medium-sized enterprises.
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