VietNamNet Bridge – Vietnam is striving to build up a transparent investment environment in order to create a leveling playing field for all enterprises. However, it seems that the more Vietnam strives to renovate, the worse the investment environment becomes. Underground fees remain a “nightmare” for investors.
The Prime Minister has urged the Ministry of Planning and Investment to complete the reforms to submit to the government for approval. This could be seen as an important move in the reform process which aims to gradually erase the images about a distorted investment environment controlled by “under the table” money and complicated relations.
Ironically, when the government continuously calls upon institutions to carry out reform and renovation, a recent survey conducted by the Vietnam Chamber of Commerce and Industry VCCI on thousands of enterprises on the provincial competitiveness index showed that the transparency level in localities has degraded. This is for the second consecutive year the survey showed decreases in the transparency index. Not only small provinces, where the local economies develop slowly, but the transparency index is also decreasing in big provinces and cities, which were once recognized as the typical examples for renovation.
As a result, enterprises are increasingly complaining about the difficulties in accessing information about the state’s policies, programming, or accessing resources and the opportunities of doing business with the state. And in order to exist, businesses have to use “relations” with senior state officials who have the power to make decisions, and use “under the table” money in order to keep their business run smoothly. Especially, even foreign invested enterprises, which are thought to enjoy many preferences in Vietnam’s plight for foreign direct investment, have also expressed their deep anxieties about the “lubricating fees” and “the way of doing business through relations” in Vietnam.
Edmund Malesky from USAID, Head of the provincial competitiveness index research team, stressed that not only domestic enterprises, but foreign investors have also complained that unofficial costs are a serious problem in Vietnam. Twenty percent of foreign invested enterprises said they had to pay underground fee when registering their business, 40 percent of enterprises had to pay “commissions” when joining bids for public procurement projects, while 70 percent of enterprises had to pay additional fees in order to get customs clearance.
Virginia Foot, representative from the US Chamber of Commerce in Vietnam (Amcham), said that many US businesses once arrived in Vietnam to learn about investment opportunities, but they have not returned to the country. She said that once Vietnam opens its doors, it needs to settle the disorder indoors first before inviting people to come in.
While central agencies are accepting a loss of power in a decentralization program, local authorities are getting more power and the reform process is going more slowly. It seems that many provinces have are tired of reform and now they do not care much about the transparency indexes or the calls of enterprises for more transparency.
A paradox exists that the more the government calls for renovation, the lower the transparency. Though local authorities still report great achievements in the reform process, enterprises keep complaining that they face difficulties in doing business; business costs get higher due to the lack of the transparency of the business climate.
When local authorities do not do the things they promise, and the reports do not truly reflect the reality, enterprises lose confidence on authorities’ management and promises. They have to do everything they can to protect their benefits. As a result, relations with government’s officials and “under the table” money have been used as an effective tool to reach their goals.
Singaporean businesses recently also have complained that Vietnamese laws can be translated in hundreds of ways. Every ministry, branch or locality has its own way of understanding and way of treating enterprises.