Business Optimism on the Rise in Vietnam

July 2, 2014 Posted by Vietnam Briefing Reading Time: 3 minutes

HANOI – According to the World Bank, new reforms for employing workers, increasing access to credit and investor protection measures have made it easier to do business in the country.

Circulars concerning transfer-pricing policy, as well as Circular 128 on customs procedures and Circular 22/2014 on e-customs procedures have also contributed to simplifying business operations and improving market information and technology in Vietnam.

The country strengthened investor protections by introducing greater disclosure requirements for publicly held companies in cases of related-party transactions and improved its credit information system through a decree setting up a legal framework for the establishment of private credit bureaus. Vietnam also abolished priority rules for redundancy dismissals or layoffs and increased the minimum wage.

The overall business situation for Vietnamese enterprises has improved in the first half of 2014, but they did continue to struggle with some difficulties. Many of the companies agreed that business conditions have improved due to simpler procedures and easier access to relatively low-interest bank loans, as well as market information and technology, according to the Vietnam Chamber of Commerce and Industry’s (VCCI) Business Insight Survey.

The Survey’s business movement index went from minus 21 points in 2013 to minus five points for the first half of 2014. The index is calculated by taking the number of firms who declared that “the business situation is improving” minus the number of firms who asserted that “the business situation is getting worse.”

Despite this increase in optimism, the latest survey also revealed that only 22 percent of questioned enterprises reached their sales targets in the first five months and 4.2 percent of the 800 company-respondents said they had to suspend their operations for 1.5 months during the first half of this year.

These enterprises blamed the situation on difficulties faced in finding customers and covering high input costs, said VCCI representative Doan Thi Quyen.

In 2013, as many as 7.6 percent of surveyed firms halted their business for 2.5 months, Doan added.

To help remedy this situation, Nguyen Thi Hai Binh with Vietnam’s National Institute for Finance stressed the government’s continued role in helping enterprises find customers and also encouraged businesses to consider restructuring their operations to cut unnecessary costs.

As the government works to implement new reforms, European businesses remain confident in the Vietnamese market, according to EuroCham’s 15^th Business Climate Index (BCI). This is a result of trade negotiations that were taking place, such as the Europe-Vietnam free trade agreement and the formation of the ASEAN Economic Community by 2015. According to European businesses, the competitive advantage of Vietnam over other Asian countries in the near future would continue to be the country’s availability of low-cost labor.

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