The Research has conducted survey, case studies and analysis of economic data and found evidences for some tangible positive impacts of Vietnam's WTO-membership on FDI and business environment: Vietnam's WTO-membership opened new opportunities for investors to get access to international market, equal legal position on trade disputes, opening the Vietnam's services sector (GATS), especially banking sector, retail trade, commitments on TRIMS, providing National Treatment for foreign direct-invested companies, lifting of export requirement, local content, transparency and openness etc. The Enterprise-Law 2005 and the Investment-Law 2005 improved the market entry and the corporate governance for the private sector. The Government confirms its readiness for dialogue and cooperation with the business community for further reforms. Various governments’ agencies have improved their transparency and cooperation with the business community. The Government agencies have applied information technology. The increasingly tougher competition requires from the managers of companies more efforts on structural adjustment, technology transfer and investment into human capital.
The business environment for FDI has been improved in various aspects: Foreign Direct-invested companies enjoy the same legal status as Vietnamese legal entities. Foreign investors appreciated these opportunities, combined with the strengths of the Vietnam's economy as high economic growth, macroeconomic and social-political stability, and young and fast learning labor forces and poured a record-high inflow of FDI into Vietnam. Big projects with more sophisticated technologies, equally distributed geographically to North-South and Central Vietnam have been committed. The domestic private sector responded to the positive development with high growth on registration of new companies, increasing investment and business expansion.
To another side the studies have recognized some serious challenges. Under-developed infrastructure (highway, seaport etc.), shortage on power supply, acute shortage on trained, qualified labor forces are serious constraints for the business community in general and for the absorption of committed foreign direct investment. The implementation of some WTO-commitments has been delayed (e.g. licensing 100% foreign-owned subsidiaries over due from April 1 2007)) or restricted compliance with WTO-commitment in distribution and trade (as Circular No.9 of the previous MOT).Despite certain progress the implementation of Intellectual property Protection in the practice has to be more effective. There are further many cumbersome, unclear and overlapping regulations, especially on land accession, construction permits, and environmental regulations. Several governments’ regulations have been enforced without consultation with the business community. Some regulations on taxation and import tariff have been changing abruptly in unpredictable way; some other regulations have introduced deductibility cap and retroactive enforcement for the period before the release of the regulation.
There are hopes that the Government continues its efforts for further improvement of the business environment.
Recommendations for the further implementation of WTO-commitments
- The Government should intensify and deepening institutional and structural reform, increase transparency and openness, introduce RIA (Regulatory Impacts Assessments) as a compulsory procedure for regulatory reform. The business community expects that the Government continue to streamline the administrative services, avoiding overlapping and doubling of administrative services and regulations, especially in access to land, construction permits.
- The Government should continue to comply and implement on time its WTO-commitments.
- The Investment-Law should be amended on investment license and other regulations to ease and simply fly its implementation.
- The implementation of IPR should be intensified in cooperation with business association, including foreign directed companies.
- Effectiveness and enforcement of judicial system, protection of investors should be enhanced.
- The market exit and insolvency regulations should be amended and more efficiently implemented.
- The legal framework for the business association has to be improved; the Law on Business Association and Civil Society should be promulgated in the time to come.
- An equal footing for all enterprises should include state-owned enterprises, including state-owned conglomerates, to allow fair competition.
- The supporting industries and services have to be developed, particularly in industrial parks and centers.
- The Government should encourage the participation of Vietnamese companies in international supply-chain and value-chain by providing the appropriate legal framework and economic incentives.
- The financial sector, including banking, Securities Market and Insurance has to be further developed to meet rapidly increasing demand.
- Technical infrastructure development needs to be accelerated by opening this sector for more private participation, applying BOT, BT and other appropriate forms.
- A rapid development of the electricity supply is strongly desirable and could be realized by allowing an active participation of foreign direct investment as well as domestic private sector. The effectiveness of the Electricity Regulatory Agency should improve in close cooperation with business association.
- Education and training system, from university to vocational training, should be reformed and developed in close cooperation with business community to improve the supply of qualified human capital in both quantity and quality.
Vietnam Business Forum and other forms of dialogue between the central and local government should be further developed to improve its efficiency. More regular meeting, monthly exchange of views between government agencies at provincial level and related companies could be helpful for more timing removing of emerging obstacles and bottlenecks.