Improving business environment to promote growth

The recovery of the business community is predicted to face many challenges in 2024 as the recovery of the world economy will be slower than expected. Solutions on taxes, credit, and improvements to the business environment are anticipated to help the business community overcome difficulties, thereby positively contributing to economic growth.

Increasing pressure for reform

Looking back at 2023, Ly Kim Chi, Chairwoman of the Ho Chi Minh City Food Association, said that perhaps businesses have never encountered such difficulties. For the first time, Ho Chi Minh City’s food industry experienced a negative growth rate in the first three quarters of the year because of a sharp drop in consumption demand.

Chi also expressed concerned about many barriers in administrative procedures. For example, the regulation of adding iodine to salt used for direct consumption and for food processing took effect on March 15, 2017. After five years with many proposals for abolition, the Government issued a resolution in 2023 directing the Ministry of Health to abolish the above regulation, and food processing enterprises are now only encouraged to use iodine. However, so far, food businesses are still struggling to find consensus with state management agencies on this issue. The delay in addressing the needs of businesses creates even more difficulties for enterprises, Chi noted.

Nguyen Quoc Hiep, Chairman of the Vietnam Association of Construction Contractors, emphasised that regulations on fire prevention and fighting are hindering operation of enterprises. According to him, Vietnam is a developing country, but the standards related to fire prevention are higher than those in the most developed countries in the world. Construction and real estate enterprises have not yet had time to approach old standards, but new standards have been created. “Many constructions and projects have been finished, but just because they have not completed fire prevention regulations, they can be delayed by up to a year in coming into operation. This causes huge damages for businesses.”

Dr. Nguyen Minh Thao said that, after nine years of promulgating the resolution on improving the business environment, Vietnam has made many efforts and achieved progress in terms of business environment reform, with many business requirements being reduced and simplified in the first phase. However, in the past three years, the process of improving the business environment has stagnated. Many new requirements and barriers are arising, causing difficulties for the business community. According to Dr. Nguyen Minh Thao: “The slowdown in the improvement to the business environment is clearly seen in the delay in resolving problems related to administrative regulations. Although business conditions have been reduced in quantity, the implementation method remains very complicated as there are still many sub-licenses.”

The business community is encountering many difficulties with the number of businesses withdrawing from the market remaining at a high level. According to the General Statistics Office, this number was 172,600 in 2023, an increase of 20.5% compared to 2022. On average, 14,400 businesses withdrew from the market each month, which was higher than the number of newly established enterprises.

According to To Hoai Nam, Permanent Vice Chairman and General Secretary of the Vietnam Association of Small and Medium Enterprises (VINASME), these numbers only partly reflect the business picture in 2023. With persistent difficulties from the market, in addition to the costs incurred in complying with regulations and administrative procedures, most small and medium-sized enterprises are in a state with little chance of recovery.

Dr. Nguyen Minh Thao shared: “Enterprises urgently need institutional changes and reforms to give them confidence that the Government will accompany them amid difficulties. Therefore, they can boldly and creatively seek business opportunities to overcome difficulties. Businesses are looking forward to the Government’s policy responses and reforms to deploy new business activities.”

Restoring confidence in business environment

Seafood businesses must make great efforts to secure export orders. But even when there are orders, businesses still encounter many difficulties in completing all the documents and procedures in the domestic market. Nguyen Hoai Nam, Deputy Secretary General of the Vietnam Association of Seafood Exporters and Producers, said that over the past ten years, the Government has been very drastic in reforming, but Vietnam’s legalisation process is very slow. While exporting businesses have met many strict conditions from abroad, they still face difficulty in satisfying domestic regulations.

Obstacles in the business and investment process in Vietnam have been proposed to the Government and related agencies. But the delay in addressing such obstacles has frustrated many businesses. Many experts believe that if Vietnam does not drastically promote reform during this period, the country may lose the opportunity to recover and compete in attracting investment.

According to Deputy Minister of Planning and Investment Tran Duy Dong, in the previous period, when business requirements were cut by about 50%, many ministries, sectors and localities were satisfied with the result. But in reality, after the period of focusing on fighting the COVID-19 pandemic, the spirit of reform and improvement of the business environment needs to be boosted more strongly. “New emerging conditions require relevant agencies to continuously review and make amendments to create the optimal conditions for people and businesses, thereby promoting production and business efficiency and contributing to economic growth,” Dong added.

Economic expert Le Duy Binh said: “The business environment is an important factor to maintain the confidence of businesses. If this confidence, along with the improvements to other factors such as infrastructure and human resources, is well maintained, Vietnam will soon have a chance to return to a high growth trajectory.” He added that, instead of just exhorting, businesses wait for practical and drastic actions from state management agencies in removing existing problems that are putting pressure on businesses.

Businesses are forecast to continue to face difficulties in 2024 as the market will recover slowly. Therefore, solutions to promote improvement to the business environment will be important to foster economic growth.