Costs not controlled will cause damage to enterprises

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Formal and informal costs are still burdens on enterprises. Photo: Danh Lam

Currently, despite changes in thinking from message of the facilitating government, the fact that according to enterprises, formal and informal costs are big problems which that have existed for a long time and still remained the burden on enterprises.

Sharing the issue, Mr. Ngo Van Diem, Vice Chairman of Vietnam private business association stated that high input costs negatively affect not only national competitiveness but also business capacity of enterprises. Because high costs means low profits, it is difficult for enterprises to expand their business and production. At the same time, high costs will badly affect the living costs of people, thereby it is hard to promote their life.

Deputy Minister Dang Huy Dong said that if both of these costs were not controlled, they would harm both the people and enterprises. And Phan Duc Hieu, Deputy Director of the Central Institute for Economic Management (CIEM), also emphasized that for informal costs, we did not have an exact number and we were trying to quantify it. But, there are also significant information. For example, in 2016, according to a survey by the Vietnam Chamber of Commerce and Industry with a question that ‘ Do you have to pay the informal costs?”, more than 60% of enterprises answered “yes”. According to Hieu, this rate is very high.

Regarding formal costs, Mr. Hieu noted that sometimes the society looks at numbers in visual manner, such as taxes and fees, but both are just part of the formal costs. A formal cost that is difficult to figure is the cost of time and opportunity and this number, according to Hieu, is far greater than the formal number that can be calculated.

This expert said a example: if the implementation of administrative procedures takes 10 days and each company sends one person to carry out that procedures, then multiplying 200,000 VND by a person per day, so the costs of 500,000 enterprises to implement one administrative procedure are up to hundreds of billions. Thus, this formal cost that is rarely quantified is a big number

“Besides costs of time, when implementing a administrative procedure, enterprise also does not know it is successful or not. Thus, this may cause the loss of a business opportunity for an enterprise and opportunity of a certain number of employees”. said by Mr. Hieu

Deputy Minister Dang Huy Dong said that the Secretary General has ever called “informal cost” as “petty corruption”, but their consequences are not less than big corruption, even more terrible, affecting the country’s socio-economic development”.

In order to deal with "petty corruption", Deputy Minister Dong said that it is necessary to reduce the direct communication between people and people in administrative activities to comply with the law of enterprises. Specifically, the government has a strong policy, but also need to further promote the development of e-government and the supply of online public services. The more the procedures are processed via internet, the less the corruption and informal costs are reduced. As for the formal costs, there are many ways that state management agencies can reduce.

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"In my view, formal and informal costs must be handled strongly and drastically, state agencies must hold talkshows with each other, do not elude, must be for common benefit and must publicize. We have mentioned problems, but if we do not spend enough time discussing, finding solutions, every problems we mentioned will be never solved" said by Mr. Dong.