High costs and new taxes burden Vietnamese business enterprises
HANOI - According to the World Bank’s 2017 World Business Environment Survey, the costs of running a business in Vietnam are much higher than those in its regional neighbours.
Private Vietnamese businesses are bearing the burden of high business expenses and struggling with increased pressure from new taxes and fees already adopted or being planned by authorities, which hinder competitiveness and reduce business efficiency.
During an online talkshow themed "Reducing cost burdens, boosting private business development" hosted by the Government Web Portal, participants agreed that barriers and pressure related to business expenses and rising taxes and fees, as well as overlapping and cumbersome administrative procedures, are negatively affecting the competitiveness of Vietnamese enterprises, especially in the private sector.
According to the World Bank’s 2017 World Business Environment Survey, the costs of running a business in Vietnam are much higher than those in its regional neighbours.
The survey said Vietnamese enterprises have to pay taxes at 31.9 per cent of profit, two times higher than in Singapore. In addition, export-import costs in Vietnam are four times higher than in Singapore and three times higher than in the Philippines.
Vietnam’s electricity access cost was 49 times higher than in the Philippines, the survey said. Attending the talkshow, Vice Chairman of the Vietnam Private Business Association, Ngo Van Diem, said the increasing input costs, including the price of material, electricity, fuel, labour and capital have all made the burden on enterprises heavier.
“High input costs not only negatively affect the competitiveness of the country but also weaken the capacity of enterprises,” Diem said, adding that this generated low profits and stopped them from raising incomes and mobilising capital to reinvest in production.
In addition, high input costs also led to hikes in sale prices, affecting the living conditions and lives of people, especially the poor, Diem said.
According to Deputy Director of the Central Institute for Economic Management Phan Duc Hieu, input costs are difficult to quantify.
Hieu said input costs are not always in the form of concrete numbers such as taxes and fees.
“In some cases, there are many other types of expenses that can’t be visualised and calculated exactly such as the time cost and opportunity cost, which are possibly much larger than the costs listed on paper,” Hieu said.
The talkshow raised the concerns of speakers by giving an example of overlapping procedures leading to increased business costs.
During a working session held in Hanoi on Monday between the Minister and Chairman of the Government Office Mai Tien Dung and 11 related ministries and other agencies, the Minister revealed that local enterprises have to spend 28.6 million working days and a total of VND14.3 trillion (US$629.2 million) a year on completing administrative procedures related to specialised inspections of 100,000 imported and exported goods.
However, manual inspections, slow information connections and a lack of risk management have resulted in a high number of special inspections but very low discovery of violations (0.1 per cent).
This proved that there remains a monopoly in the assessment of imports and exports, resulting in higher transportation costs and other unnecessary costs for enterprises.
Participants agreed that in addition to calling for enterprises to improve their creativity, production capacity and competitiveness, it is necessary to create a more favorable environment for enterprises through stronger institutional reforms, relaxing bureaucratic scrutiny on doing business, while securing fair competition by improving access to land, capital, information and other production factors for private firms.
Dang Huy Dong, Deputy Minister of Planning and Investment, said that in order to encourage the private sector to play a larger role in the economy, businesses must have a healthy business investment environment with reduced unreasonable costs.
The greater the contribution of the private sector, the larger the amount of the state budget, he said, adding that this helped the government mobilise capital to invest in infrastructure for the whole economy, including the business community, Dong said.
He said the government should pave the way for the private sector in the process of deeper integration into the global value chain and international trade, turning the private sector into an important impetus of the economy.
The business community should also be proactive in linking together to create synergies and enhancing collaboration.