VCCI survey confirms need for further reform to attract more FDI

Despite the many improvements, Vietnam still needs to focus on reforming troublesome administrative procedures, creating more favorable conditions for enterprises in carrying out procedures for implementing investment projects with construction works, and promoting the fight against corruption, according to a survey of foreign-invested enterprises (FIEs) conducted in 2021 by the Vietnam Chamber of Commerce and Industry (VCCI).

FIEs appreciate the positive improvements seen in Vietnam’s investment environment, such as the burden of inspections and examinations being eased and positive changes made in administrative procedure reform.

However, the country needs to continue its efforts to improve its business investment environment to continue to be an attractive destination for FDI.
In terms of the cost of following government directions, according to the survey, in 2021, the burden of inspections and examinations on FIEs eased, with the median number falling to zero, while in 2020 it was one and in 2019 two. However, the government applying pandemic control measures impacted business activities, for example, which has a cost.

In addition to the many areas of administrative procedures that have been improved, a number of others have increased in the proportion of businesses affected, revealing that there remain many ongoing issues, especially relating to building permits, the appraisal and approval of firefighting and prevention efforts, environmental impact assessments or confirmation of environmental protection plans, and decisions on investment policies.

The burden of informal costs has, however, fallen, but 1.7 per cent of enterprises spent more than 10 per cent of their revenue on such costs, up from 1.2 per cent in 2020. The report showed that the most common informal costs incurred by foreign enterprises relate to import and export procedures, at 38.9 per cent, and inspections, at 25.4 per cent. Notably, 21.1 per cent of FIEs have had to pay informal costs when carrying out land procedures; a sharp increase compared to 10.3 per cent in 2020. Another difficulty that foreign enterprises face is that the quality of workers is still low.

“Vietnam needs more effective policies to help domestic enterprises integrate into the global value chain and take advantage of opportunities to connect with FDI enterprises to benefit from modern technology and governance measures,” said Mr. Dau Anh Tuan, Director General of the Legal Department at VCCI.