Supporting businesses in cost reduction

VCN - To continue enhancing the competitiveness of the business environment and supporting business development, Dau Anh Tuan (photo), Deputy secretary general, Head of the Legal department, Vietnam Chamber of Commerce and Industry (VCCI), suggested focusing on solutions to reduce business costs and making further efforts in improving the quality of legal regulations and law enforcement.
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Mr. Dau Anh Tuan
Mr. Dau Anh Tuan

For the business community, what advantages did 2023 bring from the macroeconomic perspective?

Perhaps the most significant and crucial success in 2023 was maintaining a stable macroeconomic environment. The growth rate was quite favorable, low inflation, and well-controlled exchange rates, ensuring the macroeconomic balance of the economy while the world was experiencing a lot of turbulence. This has created confidence among the business community and investors, both domestic and foreign, in the positive business prospects of Vietnam in the medium and long term.

Moreover, 2023 was also a year of diplomatic breakthroughs for Vietnam with major countries such as the US, China, elevating relationships to a Comprehensive Strategic Partnership with the US and further enhancing cooperation with China. Vietnam has also signed and is implementing 16 Free Trade Agreements (FTAs), providing strong support and numerous opportunities for import-export activities of businesses.

What are the existing challenges for the business community?

2023 was also a year with a high rate of businesses exiting the market, reduced import-export activities, and a tendency of decreasing industrial production. Despite being very successful in attracting foreign investment, there were also many worrying signals. An example was the power shortage in May-June 2023 in northern Vietnam, causing significant damage to businesses, especially manufacturing, and raising concerns among investors, particularly foreign investors.

Furthermore, delays in provincial planning, especially in major cities and economic centers, and many other important planning issues have created numerous obstacles, causing stagnation for investment projects in reality. Businesses especially reflected that the current business costs in Vietnam were high and tended to increase in four main groups: labor-related costs, financial costs for State taxes, capital costs, and transportation and logistics costs.

The barrier of business costs diminished the competitiveness and capital accumulation capabilities of Vietnam's economy compared to countries in the region, especially in terms of attracting investment and creating employment opportunities. These high costs posed a risk of Vietnamese businesses losing orders to other countries. High capital costs couls also lead to businesses lacking resources for new investments, resulting in a situation where companies have to increase layoffs. Additionally, there was a situation where ministries and sectors, when assigned to take charge of drafting legal regulations for their respective domains, attempted to supplement various fees and revenues into funds they managed.

The transportation and logistics costs in Vietnam remained high due to the lack of synchronized and complete transportation infrastructure, and the level of traffic connectivity was not optimal. The implementation of major and focal transportation projects faced many obstacles and was often delayed. Although the government was making significant efforts to improve the national transportation infrastructure, the issue of high transportation costs was expected to persist for many years, especially in the southern region.

How do you assess the quality of reforms in legal regulations related to business and enterprise activities in 2023?

In 2023, like in previous years, improving the institutional framework and enhancing the quality of legal normative documents was an issue that the National Assembly and the Government were deeply concerned about. However, a recent issue has emerged regarding the abuse of issuing circulars and technical standards. Businesses have reported that the quality of many technical standards in Vietnam was relatively low, with requirements higher than those of developed countries or standards that entail very high compliance costs.

Moreover, legal quality was crucial, but it must be accompanied by ensuring law enforcement. The annual survey of businesses on the Provincial Competitiveness Index (PCI) by the VCCI showed that the stability and predictability of Vietnam's legal enforcement were relatively low, both in the period of issuing laws and enforcing laws. The smaller the business, the lower the ability to predict changes in the law and its application.

A notable trend in the past period was the tendency of officials at all levels to be afraid of making mistakes, afraid of responsibility, and unwilling to make decisions or avoid work. Therefore, in the coming time, it is necessary to eliminate this mindset to enhance responsibility, contributing to promoting the production and business activities of enterprises.

Given these issues, how should improvements be made to better support businesses?

In addition to business support policies, to create strong development momentum and continue to increase the competitiveness of the business environment in Vietnam, functional agencies need to implement many solutions, such as continuing to improve infrastructure quality, workforce quality, and promoting domestic industrial production... Among them, there should be a focus on two main groups of solutions: solutions to reduce business costs, along with reforms in the quality of legal regulations and law enforcement.

To improve the quality of laws and predictability, businesses have suggested increasing consultation, soliciting opinions, especially for circulars, planning, and plans. The principle of non-retroactivity should be applied more widely, especially for investment projects and construction works that have started before the new regulations. Moreover, regulations that increase the obligations of businesses should have a longer implementation timeline, instead of the current 45 days as stipulated by the Law on Promulgation of Legal Normative Documents. Gradually abolishing regulations on the deadlines for types of sub-licenses because if businesses violate, there are measures to revoke licenses. Simultaneously, risk management should be applied in inspection and examination of businesses to reduce arbitrariness in law enforcement.

Thank you, sir!

By Binh Nam (recorded)/ Ha Thanh

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