66 percent of Vietnamese businesses pay informal charges: report
66 percent of Vietnamese businesses pay informal charges: report
According to a recently published PCI report, as many as 66 percent of firms in Vietnam paid informal fees in 2015, an increase from 50 percent in 2013 and 64.5 percent in 2014.
The Vietnam Provincial Competitiveness Index 2015 (PCI) is an annual report administered by the Vietnam Chamber of Commerce and Industry (VCCI) and the U.S. Agency for International Development (USAID).
Initiated in 2005, the PCI uses an annual business survey to assess and rank the economic governance quality of provincial authorities in creating a favorable business environment for the private sector.
This year marks the 11th edition of the report, and the third consecutive year the survey has been entirely administered by VCCI and USAID.
The PCI 2015 survey indicated a worrisome inability of the government to crack down on informal charges, with over 11 percent of firms admitting to having spent over ten percent of revenue on these charges, while 65 percent of respondents noted that government officials commonly cause troubles when processing procedures for businesses.
The report also showed that 39 percent of respondents faced difficulties with the favoritism of provincial authorities towards state-own corporations, 49 percent agreed that their local authorities prioritized FDI attraction over private sector development, and 56.5 percent said that the favoritism of provincial authorities towards large firms (both state and private) caused difficulties to their business.
The PCI 2015 was not all negative. The report showed many positive trends in governance reform, such as the decrease in wait time to register a business from ten days in 2014 to eight days in 2015, while the wait time to re-register a business saw a similar drop from seven days in 2014 to only five days as of last year.
There has also been a sharp increase in the percentage of private firms accessing provinces’ websites and electronic portals to look for planning documents, from roughly 51 percent in 2013 to 72 percent in 2015.
Dau Anh Tuan, general director of VCCI’s legal department, asserted that the figure was positive, and that the provision of information on business and investment environments would improve the transparency of administrative procedures.
Fifty-one percent of PCI 2015 respondents said paperwork was more streamlined, 61 percent did not have to take many trips to obtain stamps and signatures, 67 percent agreed that government officials are effective, and 59 percent said the officials are friendly and enthusiastic.
In addition, the PCI 2015 also assessed the business environment in Vietnam through small- and medium-d businesses (SMEs).
SMEs account for 97.6 percent of enterprises in Vietnam, according to the White Book on Vietnam’s SMEs published by the Ministry of Planning and Investment in 2014.
Among the 8,335 domestic private enterprises responding to the PCI 2015 survey, 97.3 percent are SMEs.
The survey showed that 65 percent of SMEs had to pay informal charges to gain access to governmental support, while 75 percent of SMEs needed relationships to get official documents and information.
SMEs’ awareness of business incentive policies offered by central and local offices is between 51 and 61 percent, while only 20 to 30 percent acknowledged actually using these services.
According to the report, the majority of SMEs rely only on the domestic market, with only three percent of micro-d, four percent of small-d, and nine percent of medium-d firms have customers that are foreign individuals or enterprises.
Vietnamese SMEs also recorded a relatively poor performance last year, with 32 percent of micro-d, 17 percent of small-d, and 16 percent of medium-d enterprises reporting losses.
One of the primary findings of the PCI 2015 is that many SMEs are reluctant to expand their business for fear that “the bigger the firm is, the heavier the burden of inspection gets.”
Specifically, the percentage of firms receiving at least three inspections last year was 18 percent, 24 percent, 43 percent, and 50 percent for micro, small, medium-d, and large firms respectively.
