AusCham President, Chau Ta, has spoken at the Vietnam Economic Forum 2017 held in Hanoi this morning, 27 June 2017. Ms Ta travelled from Hanoi as a guest of the organisers of this event.

Below is a copy of the paper she presented.

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VIETNAM ECONOMIC FORUM 2017

“Unleashing internal strengths for sustainable economic development”

Panel Discussion 2: Binding Constraints to economic development and policy proposals

Question: Concerns of FDI firms investing in Vietnam (in your case, Australian firms) and any policy proposals to improve the current condition or anything that the policy makers should consider to enhance the business environment in Vietnam

Firstly, AusCham is pleased and excited to see the progress that has been made thus far and congratulate the government on its constant efforts to improve the business environment and Vietnam’s competitiveness. The government and its various ministries’ commitment to continuous dialogue with the private sector, business chambers and associations, like ours, are instrumental in facilitating on-going constructive dialogue with a view to assisting Vietnam’s current and future economic impetus following the signing of many recent trade agreements.

For FDIs (Foreign Direct Investors), they have already done their research. They would already know that Vietnam boasts the second youngest population in Asia and most economic indicators show resilience in spite of what is happening in the rest of the region. Vietnam is a glaring choice.

The various business groups would have provided their submissions via the VBF and other dialogues on how the government can assist to ensure the various sectors, such as education, automotive, agribusiness etc. maintain a competitive edge so we will not go into such details here.

Specifically, we propose to address the question: how do we help FDIs decide to take that first step and invest into Vietnam? And once they do invest, how can we make it attractive to invest further capital? By making their entry into Vietnam as smooth as possible, as simplified as possible. Or put it another way: what is holding things back?

We therefore focused on three broad topics that we see as “barriers” or “concerns” to entry.

  1. Starting a business/establishment

There are at least 10 procedures to undertake when starting a business in Vietnam, and for an FDI, it needs to obtain an investment registration certificate (IRC), an enterprise registration certificate (ERC) and for those engaging in distribution for example, a trading licence is also required. Each of these procedures/licences are performed at various departments/offices and there is some overlap in terms of documentation and requirements. Although we have seen tremendous improvements on the duration and quality of public services for licencing and providing establishment permits, first steps into Vietnam are still amongst the most complex start up environments in the world.

We would strongly support the establishment of an organisation across ministries – a “one stop shop” – (as has recently been adopted by various provinces such as Bac Lieu and Nghe An) which has the authorised power to make decisions, issue licences, and where needed, to request/order /push for replies/clarification from relevant ministries so that applications can be considered, and if needed  receive a response in a timely manner. That is, one central body  responsible and accountable to businesses/FDIs, where they can engage in order to set up a business. This would ease the stress for new investors, providing certainty and demonstrating to those businesses the government’s commitment as well as accountability.

  1. Review of foreign ownership caps

It would be worthwhile for the Government to review the current caps on foreign ownership. We recognise that these caps may be in place in certain sectors due to national security or sovereignty. However, there are a number of sectors that would benefit from increased foreign capital given a review of existing caps.  Lifting the foreign ownership cap would allow an influx and flow not only of capital but also foreign expertise which over time will raise standards and make Vietnam, and its labour force more competitive. There is a ready pool of capital waiting to be invested if the regulatory restrictions were reviewed.

Second and related, is to revisit laws and to provide clarification or confirmation of what is considered a “foreign invested enterprise” such that one definition applies for all sectors/businesses. Preferably, unless 51 per cent or more of an entity is foreign owned, such enterprise should be treated as a domestic enterprise.

And finally, when possible, to remove any difference in treatment between foreign invested enterprise and domestic enterprises to ensure a fair and level playing field and promote competition that will ultimately benefit consumers.

  1. Enhancing legal enforcement

Vietnamese courts to be more rigorous in applying Vietnamese law and to observe and promote the application/adherence of the 1958 New York Convention (The Convention of the Recognition and Enforcement of Foreign Arbitral Awards). That is, to exercise its powers with the view to promote and ensure the recognition and enforcement of foreign arbitral awards unless not in accordance with Vietnamese laws.

Along the same line, to push strongly for amendments to the Intellectual Property Rights Law, to raise fines for infringements so that it is a deterrent rather than punishment, and providing other sanctions, award of monetary damages for those committing an infringement of IP rights.  Establishing a judicial body that has the authority to rule and adjudicate on such infringement cases.

Further, ensuring uniform application of laws and policies with regards to tax, customs approvals etc.

In terms of process and procedures, an example of where change would be welcomed and make FDI less nervous in an event of dispute relates to the current treatment of  shareholders disputes.

An example is where a FDI wishes to change the general director of a Vietnamese subsidiary/joint venture company where it was agreed in such shareholders’ agreement that in event of poor performance or other reasons, a shareholder can change the general director. The current process requires the notarisation and legalisation of resolutions and directors registers of the holding company if there is a change of director. This process can take up to three weeks. No one in Vietnam will recognise the removal of power of the general director or the authority of the newly appointed general director until the investment registration certificate, the business registration certificate and the charter has been amended. And in the meantime, the “old” general director can exercise all his powers – and often to the detriment of the company and the shareholders. There has to be mechanism where by upon notification of change, and until the formal recognition of such change through change of IRC, BRC and charter, that the current general director cannot abuse his/her rights, the seal of the company with all legal and financial records to be held in escrow by the authorities.

In conclusion, in order to further promote and support the trade relationship between the two countries and benefit from Australia’s strength and extensive experience in agriculture, energy, financial services, education, tourism and health, AusCham requests the government to consider the items outlined in this submission.

 

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