Opportunity costs create heavy burden for firms: Expert
Opportunity and informal costs place a financial burden on local enterprises, said Phan Duc Hieu, vice president of the Central Institute for Economic Management (CIEM), at a workshop in HCMC on Tuesday.
Held by the Ministry of Justice, the workshop was aimed at seeking solutions to reduce regulatory compliance costs.
Hieu of CIEM pointed out five different types of costs arising from regulations: administrative procedure costs, investment costs, fees and charges, opportunity costs and informal costs.
He then highlighted opportunity and informal costs, which are difficult to calculate, noting that they place a heavy burden on many local firms.
According to Hieu, business opportunity plays a vital role in enterprises’ activities. However, lengthy procedures, or their delays, create the risk of missing out on business opportunities for enterprises.
Meanwhile, enterprises have paid toward capital costs, such as interest and income, pending the completion of procedures and other regulatory requirements.
He said that due to the fear of losing business opportunities and the desire to penetrate the market quickly, enterprises have no other choice but to offer items considered informal costs to officials in charge of certain procedures.
Foreign-invested enterprises in the country have also voiced concern over the slow decision-making process, which can lead to the loss of business opportunities, said Pham Ngoc Thach, deputy head of the Legal Department at the Vietnam Chamber of Commerce and Industry.
Practical and effective measures need to be adopted to cut down on the five types of costs to reduce the burden on local firms facing fierce competition, according to Hieu of CIEM.
Compared with neighboring firms in the Association of Southeast Asian Nations, such as those in Thailand, Vietnamese enterprises suffer disadvantages in terms of expenses, owing to their legal compliance, he said.
According to Hieu, when drafting regulations, State agencies should keep in mind that laws are costly since a written word can cost local businesses and other social stakeholders billions of Vietnamese dong.
He raised two questions: “Is there a cheaper way that still achieves management goals?” and “Is there a faster method of implementation that is less expensive?”
A representative of NH Quang & Associates, a local law firm engaged in legal practice and development consulting, attached great significance to the frequent review of administrative procedures and business conditions to remove unnecessary ones that cause difficulties for enterprises.
Deputy Minister of Justice Dang Hoang Oanh urged ministries, central agencies and local governments to ensure the reduction of regulatory costs for enterprises, point out arising difficulties and obstacles, and present fresh solutions to her ministry.