Saturday, 16 Dec 2017

Red tape cut to support SMEs

Updated at Friday, 06 Oct 2017, 14:32
The Hanoitimes - Vietnam`s Ministry of Industry and Trade decided to cut business and investment red tape in half in an effort to simplify the administrative process, especially for private, small and medium enterprises.
According to Minister of Industry and Trade Tran Tuan Anh, business conditions removal and support enterprises are the focus of the reform of administrative procedures, improving business environment toward socio-economic development. In addition to administrative reform, removing and simplifying business conditions, Ministry of Industry & Trade will implement Decree No.19/NQ-CP of the government to create maximum convenience for enterprises.

The move, which will halve the 1,200 conditions currently imposed on business and investment, was described as a historical change in Vietnam's administrative environment. Vietnam's Prime Minister Nguyen Xuan Phuc said the move would be a breakthrough that exceeded his expectations. Analysts and businesses often complain that the many conditions and regulations on businesses in Vietnam do not meet international regulations, such as the requirements on minimum or legal capital or human resources rules.

A survey released by the Vietnam Private Sector Forum showed that 44% of enterprises said they had missed market opportunities because of legal barriers and restrictions. The cuts, which are part of the ministry's ongoing institutional reforms, promise to alleviate the administrative burden on businesses. The Ministry of Industry & Trade manages 27 sectors that are subject to 1,220 sub-licenses. There are more than 5,700 business conditions in Vietnam.

It worth mentioning that in this review, there are 60 additional conditions to be removed, which is higher than the expected number of 612 conditions, contributing to 55.5% of the total business conditions, instead of the original estimation of 50.3%.

As such, after reduction, the remaining business conditions are 541, instead of 752. This is the first time in history of the industry & trade sector, that there are such a high number of business conditions to be removed. In the part, as of October 2016, the Ministry of Industry & Trade has implemented the reduction of business conditions based on the Decision No. 4846, including: removing 15 administrative procedures, simplifying 108 administrative procedures in the total of 443 procedures, equivalent to 27.8% of the total current administrative procedures of the Ministry.

Recently, several Vietnamese startups have reportedly registered their businesses in Singapore instead of Vietnam, benefiting from the island nation's faster and more supportive administrative process. It is also easier for Vietnamese startups to raise investment funds from overseas sources rather than at home.

Vietnam has been lagging behind its Southeast Asian peers in the World Bank's Doing Business index. The institution suggested that the country needed to do better at supporting early-stage businesses, particularly in areas such as dealing with construction permits, getting access to credit, registering property and enforcing contracts. Vietnam ranked 82 out of 190 economies, according to the latest Doing Business report, lagging behind neighbors including Singapore (which came in second place), Malaysia (23rd), Thailand (46th) and Brunei (72nd). The country's business environment has been gradually changing as the government seeks to develop the private sector. However, the results are neither meeting the expectations of enterprises, nor government targets.

Since 2016, Vietnam's government has tried to improve the country's business environment, with the aim of gradually moving from state-owned business to encouraging private sources to grow the economy. The Prime Minister has held a series of meetings, dialogs and conferences with local enterprises this year, promising to create a better business environment for the private sector and SMEs. The Central Institute for Economic Management (CIEM) under the Ministry of Planning and Investment was assigned to review some 4,000 business conditions and regulations, based on the market principles of the Organization for Economic Cooperation and Development in order to abolish restrictions to competition.

Its review found that some 50% of conditions on business should be removed as they are unreasonable and cause difficulties for enterprises, including creating risk, restricting market entry, limiting creativity and creating unfair competition. The review also found that some rules overlapped, meaning SMEs were subject to the same conditions as large enterprises, according to Phan Duc Hieu, deputy director of CIEM.
Ngoc Thuy
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