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SATURDAY, October 01, 2022
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Minister admits companies bear high costs

Minister admits companies bear high costs

THURSDAY, August 24, 2017
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VIETNAMESE businesses are bearing the burden of high expenses and struggling with increased pressure from new taxes and fees, which are hindering their competitiveness and reducing their efficiency.

During an online talk show staged by the government with the theme ‘Reducing cost burdens, boosting private business development’, participants agreed rising taxes and fees, plus 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 cost of running a business in Vietnam is much higher than for those in its regional neighbours. The survey said Vietnamese companies pay tax equivalent to 31.9 per cent of their profits, double that in Singapore. 
In addition, their export-import costs are four times higher than in Singapore and triple those in the Philippines, while electricity bills for Vietnamese businesses were 49 times higher than in the Philippines, the survey said. Attending the talk show, vice chairman of the Vietnam Private Business Association, Ngo Van Diem, said rising costs, including the price of materials, electricity, fuel, labour and capital have all placed a heavy burden on companies.
“High input costs not only negatively affect the competitiveness of the country but also weaken the capacity of enterprises,” Diem said, adding that this resulted in low profits and stopped companies from increasing workers’ incomes and mobilising capital to reinvest in production.
In addition, high costs also led to higher prices to customers, which affected people’s living conditions, especially the poor, Diem said.
However, the deputy director of the Central Institute for Economic Management, Phan Duc Hieu, said costs were difficult to quantify and were 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 cost in time and opportunity, which are possibly much larger than the costs listed on paper,” Hieu said.
The talk show raised the concerns of speakers by giving an example of overlapping procedures leading to increased business costs.
The Minister and Chairman of the Government Office, Mai Tien Dung, told 11 related ministries and other agencies in Hanoi that local businesses spent 28.6 million working days and a total of 14.3 trillion Vietnamese dong (Bt20.9 billion) a year on 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 resulted in 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, he said.
Participants agreed that while businesses needed to improve their creativity, production capacity and competitiveness, it was also necessary for the government to create a more favourable environment for them. This should be through stronger institutional reforms, a relaxation of bureaucratic scrutiny and securing fair competition by improving access to land, capital, information and other production factors for private firms.