Rising business costs to upset foreign investment inflow to Vietnam

Update: 20:53 | 17/12/2018
The government has so far also planned to cut costs for businesses to make the country’s investment environment more attractive.
TIN LIÊN QUAN
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Vietnam needs to curb the rising business cost  as soon as possible because it will be  hindering foreign investors to pour into the country in the time to come, experts warned.

According to Vu Tien Loc, chairman of the Vietnam Chamber of Commerce and Industry (VCCI), Vietnam would be less appealing as an investment destination if the rise of business costs is not halted.

The country’s business costs are increasing faster than labor productivity, Loc said, adding besides investment costs, administrative expenses are also on an upward trend.

rising business costs to upset foreign investment inflow to vietnam
Vu Tien Loc, chairman of the Vietnam Chamber of Commerce and Industry (VCCI).

In fact, the costs of land, labor and building materials in Vietnam has increased significantly. As for land lease rate, for example, in the Giang Dien Industrial Park in the southern province of Dong Nai, about 70km away from Ho Chi Minh City, the 50-year industrial land lease rate currently increases to US$90 per square meter, compared with US$60-70 last year.

The rise is also seen in the short-term industrial land lease rate. Vincy Nguyen from industrial park management and construction company BW Industrial Development, said that monthly land lease rate in industrial parks near Ho Chi Minh City costs US$4 per square meter, up against US$3 last year.

According to Gao Jian, co-founder of Business Services and Consulting Company Vnocean, it will cost some US$1 million to set up a small electronics factory with about 300 workers in industrial zones near Ho Chi Minh City.

As Vietnam expects to receive an investment wave from China-based investors, who may relocate their new production facilities in the country to avoid impacts from the US-China trade war, experts said that Vietnam should resolve the increasing business cost problem to channel off the inflow.

Improved plans on the cards

The government has so far also planned to cut costs for businesses to make the country’s investment environment more attractive.

Under a draft governmental resolution on the action program to reduce compliance costs for businesses prepared by the Ministry of Planning and Investment (MPI), Vietnam will cut or simplify at least half of business conditions and lessen requirements in the areas of investment, land, construction, tax payment and social insurance so as to reach a mark equaling the average level of ASEAN-4 countries in the World Bank’s Doing Business survey by 2020.

As per the draft, the government will pursue the objective of slashing unreasonable compliance costs, considerably cutting unofficial costs for businesses, creating a business environment with low, stable and predictable costs, and encouraging investment, market entry and competition.

rising business costs to upset foreign investment inflow to vietnam
Land lease rate in industrial parks in Vietnam’s big cities has increased. (Photo: Hanoi Times)

The cabinet will also strive for the target that by 2020, the rate of businesses having to pay unofficial costs will reduce by 50 percent, information on inspections and examinations and the results thereof will be published on websites of competent agencies, and tax and social insurance costs of business will be cut to the average level of ASEAN-4 countries.

In order to achieve the above goals, the draft resolution requires ministries and sectors to strictly cut and simplify half of business investment conditions, reviewing and revising technical regulations along the line of abolishing provisions imposing business conditions such as requirements on personnel or physical foundations.

The MPI would, in coordination with other ministries and sectors, revise the Investment Law, clarifying the concept and connotation of the term ‘business condition’ so as to create grounds for evaluation and monitoring of regulations on conditional business lines.

Provincial administrations would consider reducing charges and fees concerning land use and natural resource exploitation and, at the same time, make public all information on grounds for charge and fee calculation.

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(Source: Hanoi Times)