Government, Party forge ahead with business environment reforms

A top ASEAN investment attractor

Nguyen Van Toan, Vice Chairman of the Vietnam’s Association of Foreign Invested Enterprises (VAFIE) said that according to the World Investment Report 2019 of the United Nations Conference on Trade and Development (UNCTAD), foreign investment capital attracted by major countries, especially the US, China and G7 and EU countries, has continuously decreased over the last three years. Meanwhile, foreign investment lured by ASEAN (Association of Southeast Asian Nations) countries has increased continuously in the same period. Vietnam surpassed Thailand to rank third among ASEAN countries in terms of foreign direct investment (FDI) attraction in 2018, with more than US$15 billion, and became a top-20 FDI attractor in the world.

The Ministry of Planning and Investment of Vietnam recently released a report saying that in the first nine months of 2019, Vietnam attracted more than US$18.4 billion of FDI. Jacques Morisset, World Bank Lead Economist and Program Leader for Vietnam said Vietnam is still an attractive destination for foreign investors and has attracted more FDI than other countries in the region.

Apart from countries such as Japan and the Republic of Korea (RoK), the US and EU, with high quality capital, have increased investment in Vietnam. As of late 2018, the US ranked 11th among countries and territories investing in Vietnam with total registered capital of more than US$9.3 billion, while registered investment capital from EU countries totaled US$25 billion plus. Germany ranked 18th among EU investors in Vietnam with registered capital of almost US$1.95 billion.

Phan Duc Hieu, Deputy Director of the Central Institute for Economic Management (CIEM) said that in 2018, Vietnam had 131,275 newly established enterprises totaling VND1,478 trillion in registered capital, up 1.75 times in numbers of companies and 3.4 times in registered capital compared to 2014 (before the Enterprise Law took effect). According to the World Bank, since 2014, Vietnam has climbed from the 125th to the 104th place among 190 countries and territories in terms of its start-up index, while regulations on shareholder and investor protection have improved significantly to reach the 89th place, up 28 grades compared to 2014 and 90 grades compared to 2013.

Policy improvement

Having acknowledged the important role of business improvement in economic development, the government has made strenuous efforts to reform the investment environment, including Government Resolution 19/NQ-CP on improving the business environment and national competitiveness, issued annually since 2014, and Government Resolution 35/NQ-CP in 2016 on business promotion to 2020, aiming to make Vietnam a top-4 ASEAN country in terms of business environment. Those resolutions abolish thousands of older business conditions and help improve import and export goods inspection and increase online public services.

According to VAFIE Vice Chairman Nguyen Van Toan, on August 20, 2019, the Politburo issued Resolution 50 on improving institutions, policies and the quality of foreign investment cooperation until 2030. This is the first politburo resolution to provide strategic guidelines on foreign investment.

Foreign investment policy and institution improvement is the key to increasing foreign investment efficiency, Toan said. In drafting a law amending a number of provisions in the Investment Law and the Enterprise Law, the drafting committee closely followed the spirit of Politburo Resolution 50 on creating a favorable legal corridor for investment attraction and business development. Deputy Minister of Planning and Investment Vu Dai Thang said Enterprise Law and Investment Law are two important laws that have profound impacts on the business environment in general and enterprises in particular. After four years of implementing these laws, the investment environment has changed significantly, and the number of newly established enterprises increased 65-70 percent over the last three years, reaching the highest level of the past two decades. There are currently about 750,000 businesses nationwide. Foreign investment attraction has also advanced. From 2016-2018, the number of registered projects and disbursed investment capital increased rapidly. In 2018 alone, disbursed capital reached almost US$20 billion.

While they have had important achievements, these laws need to be further improved to timely and fully institutionalize the Communist Party’s resolutions, “We are willing to listen to and receive frank and constructive suggestions to continue improving these two laws,” he said.