REPORT ON

Results of implementation of the Government's Resolution No. 35 / NQ-CP on businesses support and development to 2020 and the Prime Minister's Directive No. 26 / CT-Ttg  dated June 6, 2017 about continuously effective carrying out the Resolution No. 35 / NQ-CP in the sense that the Government accompany enterprises in 2017

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The Resolution 35 and Direction 26 assigned VCCI 06 groups of tasks and a number of coordination tasks. Up to the present, VCCI has implemented 6/6 assigned tasks and coordinated with other ministries, localities, business associations and the business community to implement solutions proposed in the resolution.

1. Summary of difficulties, problems and recommendations of enterprises:

1.1 The results of gathering recommendations of enterprises, business associations and monitoring the settlement of ministries, branches and localities

From January 2017 to November 30, 2017, there were 1,152 submissions from the business community that received and transferred to state agencies, including 954 recommendations processed, resolved and responded, reached the rate of 82.4%. Recommendations have not been considered concentrating on the administrative procedure reform, the amendment of laws, mechanisms and policies that being continued study by ministries and localities. Details are as follows:

- Recommendations gathered by VCCI: From January 1, 2017 to November 30, 2017, VCCI collected 261 recommendations to ministries, sectors and localities for settlement. So far, there have been 219 recommendations (83.9%) that have been resolved, 42 remaining recommendations have been processed (16.1%), in which many of them have just been submitted to Ministries, branches and localities, so they have not yet settled. The results of the settlement are as follows:

 + In preparation for the meeting of the Government’s Prime Minister meeting businesses in 2017 and reviewing the 1 year implementation of Resolution 35 / NQ-CP, from February 2017 to the Conference, VCCI collected 188 recommendations from enterprises and business associations and transferred to the ministries, localities for settlement. So far, businesses have withdrawn 3 recommendations, the ministries have resolved, responded 166 recommendations and informed the VCCI (reaching the settlement rate of 89.73%),  19 recommendations have not been responded, mainly are recommendations with general contents that are only nature of proposing aspirations, solutions on the business environment, reform of administrative procedures, amendments to laws and policy mechanism, have determined  the jurisdiction of the ministries, branches or localities, have only recognized and studied in the process of policy development and legislation.

+ In addition to gathering recommendations on the threshold of the meeting, the Government’s Prime Minister has met with businesses, every month VCCI gathers recommendations from businesses and business association and send to ministries and localities for settlement. Specifically, VCCI has submitted to ministries, sectors and localities 76 recommendations. By November 30, 2017, 53 recommendations were resolved. There are remaining 23 recommendations in which, some recommendations have just transferred to ministries, branches and localities and not yet timely responsed.

- Recommendations have been gathered by the Government’s Office: The system for receiving handling feedback and recommendations of businesses on the Government Electronic Portal operated by the Government’s Office (www.doanhnghiep.chinhphu.vn) From January 1, 2017 to November 30, 2017 the Government’s Office received and transferred to ministries and localities 891 recommendations which were from enterprises and business association, in which, 735 recommendations were processed, resolved and responded (reaching the rate of 82.49%). There have been still 211 recommendations falling under the jurisdiction of the Government’s Prime Minister or resolved according to the complaints and denunciations process, which were submitted to the Government’s Prime Minister for settlement and handling according to complaints and denunciations process as regulated.

- The main contents of the business community are focused on the following issues:

+ Regarding administrative reform, creating favorable conditions for businesses: To focus on improving tax procedures, customs, access to land, inspection, examination, environment; The spirit and attitude of the civil servants working in the above fields; to require state agencies to comply with the law and be equal to businesses. The content of the recommendations were the specialized inspection work of ministries and sectors. While the administrative procedures of the customs sector have been remarkably improved, the specialized sector inspection work has been slowly improved, many of the specialized inspections were unnecessary or prolonged and caused wastes, time and money for businesses. Moreover, the legislation on specialized management of Vietnam is not a single legal system but rather a set of regulations related to the management of imports and exports in many specialized different legal systems. There are approximately 300 documents (including legal documents and, in some cases, other documents such as official letters, instructions, notices, etc.) have been drafted, promulgated and / or implemented by at least 10 specialized ministries (Industry and Trade, Science and Technology, Health, Agriculture and Rural Development, Transportation, Defense, Information and Communications, culture, sports and tourism, natural resources and environment, labor, war invalids and social affairs). Therefore, in order to rapidly simplify the specialized examination procedures, the removal of unnecessary examination procedures requires the drastic and regular examination and supervision of the Government’s Prime Minister and the Prime Minister to ministries and branches..

+ Regarding creating a favorable environment to support enterprises for innovation: To focus on promoting the efficiency of national scientific and technological development funds; The National Technology Innovation Funds, the Small and Medium Enterprise Development Assistance Funds ...; It is necessary to continue conducting regular review and evaluation of conditional lines of business in order to precisely identify conditional lines of business in line with objectives set out in Clause 1, Article 7 of the Investment Law 2014, while ensuring the management of the State and the realization of business freedom of enterprises. This is in line with the provisions of Investment Law 2014 and Decree 118/2015 / ND-CP.

+ Regarding ensuring rights of business and equal access to resources and business opportunities of businesses: Recommendations are related to proposing serious implementation of consultations with affected parties and consultations of experts in the process of formulating and implementing laws and policies; Strengthening the quality and involvement of law enforcement officers in line ministries; conflict, overlap between regulations of Laws.

+ Regarding Reduction of business costs for enterprises: To focus on ensuring appropriate interest rates; reducing the contribution rates of the employer; reducing land rent, reducing fees in some BOT projects and some other fees. Visible recommendations regards to reduce costs of using works, infrastructure, service works and public facilities in Hai Phong seaport under Resolution No. 148/2016 / NQ-HDND of the People's Council Hai Phong and proposed reduction of fees at some BOT projects across the country. In addition, logistics costs account for a very high proportion of the business costs of enterprises (20% of GDP according to the World Bank), mainly causes are due to customs clearance (customs and specialized inspections) that be complicated; Industrial zones and clusters have not well linked with transport infrastructure planning; Infrastructure of warehouse services is not sufficient and weak.

+ Regarding protection of the legitimate rights and interests of businesses: Recommendations address issues related to the protection of enterprises' interests when carrying out enterprise bankruptcy procedures; execution of civil judgments, especially when disputes arisen between enterprises and farmers; have strong sanctions to deter unfair competition, IPR infringement; protecting businesses in labor relations; inspecting and checking in contravention of regulations

1.2. A number of remarks on the results of resolving recommendation of ministries, branches and localities:

In general, the settlement of recommendations of enterprises and business associations of ministries, branches and localities in 2017 are more timely and sufficient than those of 2016. Especially after the government’s Prime Minister issued the Directive 26 / CT-Ttg dated June 6, 2017 on the effective implementation of the Resolution No. 35 / NQ-CP in the sense that the Government accompany enterprises in 2017.

Through monitoring results of resolving recommendations by ministries, sectors and localities, the VCCI has recognized that the Ministry of Finance, the State Bank of Vietnam, the Ministry of Construction, the Ministry of Transport and the Ministry of Planning and Investment, Ministry of Industry and Trade, Hanoi People's Committee, Provincial People's Committee of Thua Thien Hue... Which were ministries, branches and localities responding to the recommendations of businesses by the Government’s Office and VCCI gathered quite timely and sufficient. Responses to recommendations of some ministries, localities, especially, recommendations of localities are quite slow.

Some recommendations were responded by the ministries and branches, but the answers were more legal interpretation and did not address completely the recommendations of enterprises such as the General Department of Taxation, Ministry of Finance responded the export enterprises of construction materials of Nghe An Province in the implementation of the Circular 130/2016 / TT-BTC dated August 12, 2016 in Official Letter 2972 ​​/ TCT-CS dated July 6, 2017.  However, responses only focused on legal explanations but not directly replied to recommendations and proposals of the business that after 10 months from the effective date of this circular, new businesses have just accessed to information on policies. During this time, businesses still applied the VAT law, Circular 26-2015 / TT-BTC dated May 27, 2015 for implementation. When completing procedures at the Tax Department of Nghe An Province to refund the VAT to the business, the tax department must comply with Circular 130/2016, this leaded a result of a very slow refund of tax, the business suffered losses; The Ministry of Transportation repeatedly responded to the recommendations of the Viet Nam-Czech Company for the registration of cannels (code-H30 and H38 of Vietnam-Czech Technology Joint Stock Company) with capacity of over 12 people, but still confused to work out definitively solutions for the business in order to encourage the application of new technologies and materials in the manufacture of cannons.

1.3. Some measures of intensifying the quality of aggregate work of businesses’ recommendations

- Established and implemented activities of the specialized committees of the Executive Committee of the VCCI in key sectors and fields (similar to the VBF model) in order to further improve the quality of proposals and recommendations.

- Coordinated more effectively with the Government’s Office, ministries, branches and localities in monitoring and urging the enterprises' proposals.

- Conducted surveys and assess the feedback of the enterprises on the results of recommendation fileds by the ministries, branches and localities (for recommendations brought by the VCCI and transferred to functional agencies).

2. Summarized on implementation of commitments with the provincial / municipal People's Committees on the business environment:

 By monitoring the implementation of commitments of VCCI and reports of People's Committees of provinces and cities have shown some outstanding results and limitations as follows:

1.2.1. Outstanding results

- The implementation of the Resolution 35 / NQ-CP has created a positive change in the thought and awareness of officials and employees at all levels of local administration, especially in terms of manners and service attitude. Business development work, investment attraction have been interested in localities. Business activities such as training, trade promotion, credit guarantee, business incubation ... have been implemented and received a positive response from the business community.

- The implementation of the Resolution No. 35 / NQ-CP, Directive 26 / CT-TTg, People's Committees of provinces and cities that be directly under central government have developed a number of action programs with the following main tasks: Has continued reforming administrative procedures that focusing on the simplification of dossiers and procedures, shortening the time for work settlement, reducing the number of trips and saving costs for investors; concentrating on perfection of the institution, raising the quality of infrastructure, technological renewal, access to credit, security and solutions to raise the competitiveness and capacity for innovation; intensifing the application of information technology in activities of state administrative agencies, publicity and transparency of information for enterprises and implementation of e-government; enhancing the management and raising the responsibility of cadres, civil servants and employees in performance of their jobs.

- The reform of administrative procedures in many localities has achieved good results, some administrative procedures in excess of targets set by the Resolution 19 / NQ-CP and commitments signed with VCCI such as: Time for establishment of a business: Most provinces are 2 days (1 day reduction compared to commitments). There are some provinces that be only 1.5 - 1.84 days such as Dong Nai (1.84 days), Lai Chau (1.5 days), Hau Giang (1.5), Ha Tinh (1.66); Clearance period: Most of the provinces that have met the Resolution 19 and the commitments are as follows: less than 10 days for border crossing of export goods; For import goods are less than 12 days, including many provinces are reached the optimal time as Quang Ninh Province 21 hours 34 minutes 12 seconds for export goods and 39 hours 45 minutes 12 seconds for imported goods; Ha Tinh Province: 4 days: 12 hours for imported goods and 1 day, 12 hours and 52 minutes for export goods; ...

- The model of public administrative center has been organized by many provinces to minimize travel time and troubles for people and enterprises. Some provinces such as Quang Ninh Province built a public administrative center to the district level. In addition, all localities have implemented the one-stop-shop and interconnection one-stop-shop in handling administrative procedures for people and enterprises.

- According to data reported by provinces and cities, the number of enterprises registered electronically in 2017 has increased in comparison to 2016.

- Provinces and cities have  actively implemented electronic tax declarations (mostly reaching from 96-100%), especially in Dong Nai, Quang Tri and Gia Lai provinces (100% ), Binh Thuan (99.84%), Ho Chi Minh City (99.37%), Can Tho (99.51%), Hung Yen (99.6%) and Ha Tinh (99%).

- Organizing dialogues between different levels of government and enterprises is  a great interest to the localities. Dialogue activities and business meetings (an important indicator was given in the Resolution 35) has been regularly implemented in provinces and cities throughout the country. According to the VCCI survey, 57% of enterprises said that the provinces and cities where the enterprises operate has got meetings and public dialogues with enterprises, 58% has opened the hotline, online questions and answers on the portal to receive feedback, guidance and answers for businesses.

Many localities have had a lot of creativity in organizing dialogues with enterprises such as organizing dialogues by type of enterprises (small enterprises, FDI enterprises by country), dialogues on television ... Special the model of "businessmen coffee" has been organized by many provinces to create a friendly atmosphere between the government and enterprises in dialogue and solve in time problems and obstacles for enterprises.

1.2.2. Exists and limitations

-  The reform of administrative procedures, though it has been well implemented, it has not yet met requirements of enterprises and investors. A part of cadres, civil servants and public servants who work in solving administrative procedures for enterprises and investors with limited qualifications and capacities; the situation is troublesome, the noise have been still happened, has been caused annoyance for businesses.

- Some provincial People's Committees have not yet ensured the organization of dialogues with enterprises at least twice a year.

- The localities have paid more attention to the consultation of legal documents under the jurisdiction of the locality. However, new forms of consultation on the websites of provinces, have not diversifed forms of soliciting opinions of enterprises.

- Businesses have complained that administrative procedures have been slow, caused difficulties and troubles for enterprises. Many localities have not met the requirements of inspection and inspection once a year as the Resolution 35 set out. Each year, businesses have to meet 6-7 inspection and auditing teams, which are not included the informal inspections. VCCI's survey showed that 37% of surveyed businesses were inspected in 2016. However, there were still 13.8% of businesses were examined and inspected 4 or more time in 2016. In the number of businesses that had two or more inspections upwards, there were 52.4% of businesses thought that contents of the inspections were the same. Notably that specialized inspections, especially for food processing businesses have been becoming burdensome due to the supervision of many ministries, ministry of health, Ministry of Industry and Trade and local governments. Therefore, in the coming time, it will be needed to strengthen the inheritance of inspection results between agencies to reduce the overlap in the inspection’s contents.

- Although the law has stipulated that businesses have got the right to freely do business in business lines that are not prohibited by law and business conditions are only stipulated in documents issued from the level of the Government’s Decree upwards, However, it still has the situation that localities have granted business registrations, but have limited conditions of business lines and business locations according to the decision of the People's Committee.

- Regarding achievement the target of 1 million effective  business enterprises by 2020, some provinces have been still confused the ratio of enterprises doing business effectively with the target of registering the establishment of new enterprises. Many localities in the area have met difficulties and embarrassment towards the target of doubling the number of businesses operating in the area. Especially provinces have geographic location that be unfavorable conditions. In these provinces the number of these enterprises is low, the population is sparse and the attractiveness of investment is not favorable, the level of civil servants is still weak, so they are confused in promoting and supporting enterprises .

- The application of information technology at levels 3 and 4 in solving administrative procedures in some fields related to enterprises is still slow. The number of administrative procedures provided online level 3, 4 is very small.

- The business of reforming the settlement of civil, business and commercial disputes related to the business of the courts at all levels has been slow and prolonged which has made enterprises less selecttion in solving cases when there are disputes. The court's resolution of business bankruptcy is not much and generally the work of civil judgment is very necessary to continue to improve the implementation time and efficiency.

- Associations and enterprises have had many practical activities to implement the  Resolution 35 / NQ-CP and gained positive results. However, due to responses and settlements of of the businesses’ recommendations in some authorities  have been slow, or not satisfactory. Therefore, some enterprises still have been used to dealing with difficulties and obstacles in the informal way based on relationships.

3. Implementation of surveys, statistics and synthesis of formal and informal expenses for enterprises, in comparison them to regional and international enterprises and proposing measures on reducing expenses for enterprises:

In implementation of Resolution No. 35 / NQ-CP issued on May 16, 2016 on support and development of enterprises by 2020, the Government directly assigned “the Vietnam Chamber of Commerce and Industry organizing investigations, statistics and summary of formal andinformal businesses’ costs,  compared with regional and international businesses, and proposed cost reduction solutions for businesses ". In order to carrying out this task, starting from 2017, VCCI has implemented the project "Study of business costs toward Vietnamese businesses in comparation to other enterprises in the region and in the world”.

In the context of the project implementation, VCCI has organized two workshops to collect business ideas on business cost research methodology and some business cost issues. VCCI has conducted research on a wide range of topics related to the study of business costs, types of business costs and how to conduct surveys of 500 enterprises. Some main results are as follows:

Throughout the research process, in order to provide solutions to reduce business costs, VCCI divided business costs into three groups for the survey and research as follows:

- The first group includes compliance costs: This includes formal costs (in amount) that an enterprise must spend to implement state management regulations in the business cycle, including taxes, charges and fees falling within the scope of the law, charges and fees and other formal expenses related to the procedures for granting investment and construction permits ... In addition, expenses also include intangible costs (time, opportunity costs, effort, morale, etc.) to enforce these types of administrative procedures. These intangible costs are fairly comprehensive in business reports of the World Bank. If taxes, fees and charges are easily assessed, intangible expenses are difficult to visualize. For example, if the implementation of administrative procedures takes 10 days and each company has 1 person to go for doing these procedures,  the estimated cost is about 200,000 per person per day, so the costs for about 500,000 businesses for an administrative procedure up to VND hundreds of billion. That is not to mention costs of business opportunities that businesses are lost when carrying out administrative procedures. These types of formal costs can be directly intervened through policies that cut costs or simplify administrative procedures.

- The second group includes formal costs incurred in the course of business are costs associated with inputs of the business to its business operations (such as face-to-face costs), cost of materials, labor cost, capital cost, logisstics cost, etc.) and calculated into product costs. The evaluation of input prices help reducing costs and enhancing the competitiveness of enterprises. In fact, these types of costs are highly dependent on the volatility of the market. However, with some special commodity markets such as the land market and the labor market, the role of state’s regulations is very important. The adjustments to reducing these costs is strongly dependent on the improvement of microfinance institutions, facilitating smooth transactions, enabling businesses to quickly access resources for effective business. For example, costs are incurred during the conversion of land use purposes are often very high and take a long time, miss the business opportunity of enterprises. Costs of training human resources in businesses are also high because sanctions on labor contracts are not strong enough to ensure that employees are trained by enterprises, they must commit to work for a long time with enterprises. .

- The third group includes the informal costs (costs of lubrication) that businesses have to pay in order to have better access to inputs or business opportunities, or to lessen the burden. in compliance with administrative procedures in the business process. These costs can be reduced by reducing regulatory requirements on business conditions, transparency of policies and simplification of administrative procedures.

VCCI has conducted a survey of 500 businesses to assess business costs and develop a report. Currently the survey is completed, VCCI is analyzing and processing survey’s results. Based on the survey data, combined with secondary data from the World Bank and general Statistic of Vietnam’s surveys, VCCI is developing a report on business costs of Vietnamese enterprises and comparing them with countries in the world as required by Resolution No. 35 / NQ-CP. Some results that VCCI has studied in detail costs of business in the Appendix attached to the report.

4. Developing feasible programs and measures to further improvement of the quality of activities, well performing roles of political and social-professional organizations of the business community, the businessmen and employers.

In 2017, VCCI has continued to improve the quality of its operations, and fulfill its rolse as a political, social and professional organization of the business community, businessmen and employers. The average growth rate for quantitative activities has achieved 9.5% compared to 2016. The quality of activities has continued improving and achieved comprehensive results. A number of major activities have been successfully organized. The role and position of VCCI has been enhanced, VCCI has been trusted by the Party and State to deliver important tasks. The highlights of the working groups are as follows:

4.1. Successfully organized events in APEC 2017.

- During the APEC 2017 Summit, VCCI initiated the Vietnam Business Summit (VBS) in the framework of the APEC 2017 senior year presided over by the VCCI Chairman and APEC CEO SUMMIT Vu Tien Loc; The attendance and direction of the Government’s Prime Minister Nguyen Xuan Phuc; The attendance of Executive Director of World Economic Forum Philip Rosler and Victoria Kwakwa - Vice President of the World Bank in East Asia and Pacific with nearly 2,000 top corporate leaders in the country and international, including 1100 foreign delegates, 900 delegates in the country. The conference provided opportunities for Vietnamese enterprises to participate in direct contact and conduct investment promotion activities with top regional leaders and business executives. Meanwhile, assisted international investor finding out the potential of investment and business cooperation in Vietnam. Under the theme "Vietnam - Trusted Business Partners", VBS focused on business opportunities in Vietnam. VBS consists of 3 sessions with the theme "Vietnam - Comprehensive Innovation for Sustainable Development"; "Vietnam - Friendly Business Destination" and thematic workshops, with topics including Sustainable Agriculture, Development Finance, Health and Education, Infrastructure, Special Economic Zone tourism potential, startup and innovation. This has been the first business summit of Vietnam and also the largest conference ever.

- Chaired and coordinated with the APEC National Secretariat, to organized the APEC CEO Summit that be held during November 8-10. This was the most important event of enterprises in the APEC 2017 Summit. Attending the conference were President Tran Dai Quang, leaders of ministries, sectors and localities; Leaders of major international organizations such as the World Bank (WB), World Economic Forum (WEF) and more than 2,100 delegates, including 1200 foreign delegates and 900 delegates. This has been the largest conference in the history of APEC CEO Summit (1500 delegates from APEC CEO Summit in China in 2014, 1000 delegates in Japan (2010), 1000 delegates in 700 delegates in Russia (2012), 1000 delegates in Indonesia (2013), 800 delegates in the Philippines (2015) and most recently in Peru (2016)  with 1200 delegates. Speaking at the opening ceremony, President Tran Dai Quang affirmed that APEC is the most effective cooperation mechanism in promoting the role of enterprises, making Asia - Pacific becomed the engine of growth and inter - globally and a nursery of new ideas for the future. In addition, many leaders of the world's leading economies also spoke to the APEC business community, including the President of United States, the President of the People's Republic of China, the Prime Minister of Australia, the Prime Minister of Malaysia, the Prime Minister of New Zealand..... With the theme of "creating new momentum and working together for a common future", the Conference focused on discussing challenges posed to governments and enterprises in the context of globalization, roles of government and companies in ensuring that workers were properly trained and capable of undertaking future jobs. Delegates also discussed various approaches to addressing the relationship between automation and job security across the global. The conference also proposed solutions: Training and education should reflect needs of the economy; the Governments needed to develop a social security system for unemployment workers; encouraged business reforms to protect workers from the rapid development of the automation process.

Together with the main conference program, VCCI intensified the meetings between representatives of the Government and business leaders, supporting bilateral business contacts. Specifically, the VCCI held bilateral meetings between the Government’s Prime Minister and large delegations including leading corporations from the United States, China (November 7) ; A meeting between President Tran Dai Quang and APEC Business Alliance (November 8); Supported localities to meet with international organizations, big business delegations of the region. The activities of the APEC senior business week took place in a vibrant and highly effective manner. Over this period, 121 agreements with worth of more than $ 20 billion were signed between Vietnamese businesses and international partners.

Also in APEC 2017, VCCI co-organized a number of other important activities:

- Organized the APEC 2017 Startup Forum with the theme of developing innovative eco-systems to help small and medium enterprises entering the global supply chain from September 11th to September 12th in Ho Chi Minh City.. This was the initiative of VCCI with the cooperation of Microsoft Corporation, Phu My Hung Development Company Limited, Asia Pacific Fund (Canada) ... to create opportunities for APEC economies to divide. Experiences, proposals for initiatives to build APEC shared the common interest, sustainable development. The APEC 2017 Debate Forum focused on supporting and developing micro, small and medium enterprises, especially start-ups such as facilitating MSMEs for innovation, developing opportunities for regional and international integration, accessing the global value chain immediately from the starting up; promoting economic and social growth in a sustainable and in friendly manner with environment

- In the framework of the events of the APEC Women and Economic Forum (APEC) 2017, VCCI co-organized "Public-Private Partnership on Women and Economy in APEC - Women Entrepreneurs Forum: Women Entrepreneur "attracted nearly 600 participants. Through the forum, women entrepreneurs participated in discussions with leaders of economies and international organizations on solutions to empower women's economic empowerment and promote and support women entrepreneurs to integrate and fully participate in the global market,, on the basis of policy recommendations and the replication of successful models and experiences aimed at sustainable economic development and growth covering the Asia Pacific region.

4.2. A number of important achievements has been made in the formulation of policy legislation, has created a favorable business environment for businesses in the spirit of the Resolutions 19 and 35, and Directive No. 26 of the VCCI..

In general, VCCI's legal policy development has been enthusiastically and positively evaluated by enterprises. At the same time, VCCI has clearly shown its roles and position as a  representative organization of the business community, having a convincing voice to the Party and State agencies. VCCI has contributed to develop many important legal policies for socio-economic development and enterprises such as: 3 Resolutions of the 5th plenum of the 7th Session on perfection of the socialist-oriented market economy; Private economic development has become an important driving force of the economy and restructuring, renovation and improvement of state-owned enterprises. The Law on Small and Medium Enterprise Support adopted by the National Assembly on June 12, 2017 was considered as pillars to support SMEs’ development, while encouraging individual business households transforming into enterprises, contributing to the achievement of the target of 1 million operating enterprises by 2020; Active participation in drafting the Directive No. 26 / CT-TTg dated June 6, 2017 of the Government’s Prime Minister on the effective implementation of the Resolution No. 35 / NQ-CP dated May 16, 2016 in the spirit that government  accompany with businesses

In addition, many legal regulations after the VCCI's comments have been adjusted in a positive way, there are many important changes in the direction that be more favorable for businesses, have remove many barriers to market access, has distinguished the size of enterprises, have removed the business conditions, administrative unreasonable procedures. For example: the decree on gas trading, the decree on rice export, the guiding decree on food safety law, the decree on printing activities, the decree on conditions of automobile transportation business ...

Through advocacy activities on formulating policies and laws; compiling the recommendations of the business community and monitoring the settlement situation of the central and local authorities; monitoring the creation of favorable business environment for enterprises of localities; chairing or cooperating organizaction of  dialogue activities of leaders of the Government, ministries, branches and leaders of the localities with the business community such as meeting with the Prime Minister and enterprises; Vietnam Business Forum (VBF); Conversation between leaders of provinces and businesses; Business dialogue with tax authorities - Customs at central and provincial level, increasingly affirming the roles and position of VCCI are the national organization representing the business community, businessmen and employers in Vietnam.

Monitored the creation of favorable business environment for enterprises of localities; chaired or cooperated organizing dialogue activities of the leaders of the Government, ministries, branches and leaders of the localities with the business community such as meeting with the Government’s Prime Minister; meeting with enterprises; Vietnam Business Forum (VBF); Conversation between leaders of provinces and businesses; Business dialogue with tax authorities - Customs at central and provincial level,has increasingly affirmed the roles and position of VCCI is the national organization representing the business community, businessman and employers in Vietnam.

In particular, after a lengthy period of study on the application of trade facilitation mechanisms, VCCI and the Ministry of Finance co-ordinated and on 20 September 2017, at the Standing Committee's The 14th Congress of the Standing Committee of the Standing Committee adopted the Government's declaration on Vietnam's adherence to the Istanbul Convention, implementing the ATA temporary detention mechanism for goods temporarily imported for re-export and temporarily exported for re-import. ATA booklets are issued to replace the customs declaration documents when carrying out import or export procedures in Vietnam or in the countries participating in the Convention. The Government will assign the Vietnam Chamber of Commerce and Industry (VCCI) as the guarantor, issuing the ATA temporary book.

Research, study and publication activities of economic and business reports have continued improving quality and prestige, have becomed an important reference channel of state agencies, experts, enterprises and such as annual competitiveness report of provincial level, annual business report; research report on "assessment of customs administrative reform: Satisfaction level in 2016"; Reported on business costs of enterprises with six topics related to labor, access to infrastructure, logistics; reporting, proposing and recommending solutions of supporting the promotion of enterprises for implemention of business integrity.

4.3. Trade promotion, investment; training and development of enterprises, honoring enterprises, supporting enterprises in international integration which have been continued being promoted:

There have been 570 seminars, conferences, workshops, business meetings with the participation of 52,000 enterprises in order to find partners and opportunities for business cooperation - investment with businesses in and out of the country; have organized nearly 1,620 training courses for more than 82,000 enterprises. Main contents are basic and advanced corporate management; management skills; marketing; e-commerce, international payment; Commercial law of Vietnam and international ...

The activities of honoring and rewarding enterprises have been strengthened with diversified activities in order to implement important policies of the Party and the State such as the Resolution 09 on developing and promoting roles of businessmen. The three resolutions of the 5th plenum of the XIIth session on perfection of the socialist-oriented market economy; private sector development has become an important engine of the economy; on restructuring, renovation and improvement of the efficiency of state-owned enterprises .... Continued to maintain the organization of awards that affirmed the prestige of the VCCI such as Vietnam outstanding businesswomen – the Gold Rose Cup; Top 100 sustainable development enterprises of Vietnam in 2017

In 2017, although VCCI has not been supported by the state budget for the last two years, VCCI has still continued maintaining and promoting the activities of the Forum / Business Councils such as: Vietnam - EU, Vietnam - Latin America, Vietnam - India, Vietnam - China, Vietnam - Africa - Middle East ... on the foundation that has been built in recent years, has contributied to expand the relationship,  cooperation between the business community of Vietnam and the business community in the world in many fields: trade, investment, science, technology, tourism and culture.

Has well represented the role of a focal point guiding the business community in international trade issues, especially free trade agreements, assisting enterprises in trade defense regarded issues regarding 16 domestic and foreign trade remediation investigations. At the same time, guidance and advice hundreds of enterprises on issues related to this content. At the same time provide information, training, consultancy and other support on integration

4.4. Representation of employers:

In 2017, VCCI has continued participating in the process of developing policies to improve the organizational apparatus of the employe’s  representative office in Vietnam. At the same time, has contributed to the development of many other relevant labor laws. Has engaged in the work of the National Labor Relations Board as the representative body of the employer. Participated in the activities of the National Wage Council as Vice President of the National Wages Council, hold an exchange, met a technical group and agreed on a general plan for adjusting the wages. regional minimum wage in 2017, has planed to increase minimum wage in 2018. In general, the salary increase plan agreed after the negotiation has received a relatively high consensus of the business community and representatives of workers .

Has continued participating in the studies, comments and submits to the Government on approval fordecrees and information guiding the implementation of the Labor Code of Vietnam and a number of international conventions. Has strengthened coordinations with international agencies and organizations as representatives for employers such as the Joint Program with NHO, MOLISA, and VGCL ... to implement a cooperation program to strengthen the capacity of business to build a harmonious working relationship in the workplace...

4.5. Organizational development and ensuring the operation of the agency:

At the same time, under a close direction of the steering committee, the dynamism and creativity of the units, the task of developing the 2017’s plan has continued being improved towards improving quality and feasibility of programs and projects. Most of the units completed the plan and exceeded the financial plan. Units that exceeded the plan are units have a lot of research, creativity and effective implementation of the activities using self-balancing funds.

General work and internal information have been maintained regularly and improved in quality. Organiziational and staffing work as well as caring for the material and spiritual life of cadres and civil servants - ensuring the correct performance of standards and regimes.

In 2017, VCCI has secured a balance of revenues and expenditures to meet the demand for procurement, renovation of fixed assets and capital construction.

5. Developing and organizing the implementation of programs and projects to supporting the capacity building of competitiveness of enterprises, programs on improving the capacity building of business associations.

 5.1. Training and business development activities

Nearly 1620 training courses have held for more than 82,000 enterprises. Main contents are basic and advanced corporate management; management skills; marketing; e-commerce, international payment; Vietnam and international Commerce laws... At the same time, have combined information and advice for businesses as well as individual requirements on business registration, international law, product introduction, markets, partners ...

Supporting activities for start-up 2017 have continued being promoted with many practical content:

The 2017 Launch Event - an important event of the annual entrepreneurial entrepreneurship initiative program was held on January 6, 2017 in Hanoi to honor and promote the movement of entrepreneurship in the youths and students. At the 2017’s Startup Festival, the awards were presented to six outstanding projects of the 2016 Startup Competition; Organized the Launching Ceremony of the 2017 Startup Program; Side-by-side activities such as displaying the actual implementation of startup projects. In particular, the 2017 Startup Festival has created favorable conditions for the projects participating in the winning program to offer investment opportunities for their projects. This was a great opportunity for investors to find projects on demand and also the opportunity for young people to realize their ideas.

Collaborated with Microsoft Vietnam to organize 4 "Career Opportunity Forums, Career Development and Business Promotion" and the Entrepreneurial Entrepreneurship 2017 - 21st Century Professional Skills. This event marked the next step in the youth work program "Youthspark Career Readiness - enhancing work skills, starting a business for youth and connecting with small and medium enterprises." The project aimed to provide young people with an access to the labor market, young people who lacked of opportunities to be trained through training in working skills, information technology skills, computer science and business skills to develop careers. In 2017, VCCI organized 27 training courses with nearly 700 participants, the project’s website has updated 1,120 jobs and 120 news reports, attracting 352,447 visitors.

About small and medium enterprises (SMEs)’s support:

Actively contributed comments on the draft Law on supporting small and medium enterprises and at the same time implemented programs and projects to support small and medium enterprises to improve their competitiveness. Project: "SME support for development sectoral clusters in the rural forestry vocation value chain, "the program" popularized the business, support individual business to develop into enterprises, quickly increase the number of medium and large enterprises "... with many activities such as seminars, training, consultancy on business planning, business transformation into business, supported enterprises to promote product development, expand the market, enhance management capacity, capacity planning and competitiveness. In particular, the "Business Connectivity Day" aimed to develop linkage clusters in the value chain of rural agriculture, while also helping enterprises find partners for joining and developping their network of partnerships. more than 300 small and medium-sized enterprises attended the event, and some enterprises have accessed to appropriate financial solutions.

On supporting businesses on sustainability development:

Successfully organized the third term of the Vietnam Business Council for Sustainable Development (VBCSD) and elected an Executive Board for the new term. The Council has made important contributions to the sustainable development movement through diverse activities. In particular, VBCSD has created forums for businesses to learn, has shared information, knowledge and expanded the opportunities for investment and business cooperation. The Council has actively participated in the development and implementation of the Resolution 19 of the Government. At the same time, there have been important contributions in the national action plan on green growth.

Organized the 4th Vietnam Business Sustainability Forum (VCSF) with the theme " Replication of Business Models to address challenges to sustainable development" with the participation of about 350 delegates. Government agencies, ministries, industries, enterprises, business associations, research institutions, embassies, international organizations, research institutes, as well as news, and press agencies in and out of the country. The Forum focused on: The need for the promotion and replication of innovative business models / solutions for the successful implementation of the sustainable development goals in Agenda 2030; Mobilized effective private sector participation in implementing the commitments of the Paris Agreement on climate change,   shared the experience of replication of sustainable business models ... The forum was also an opportunity for business executives to directly interact with government leaders, thereby increasing support from the government for sustainable development of enterprises. At the forum, VCCI affirmed the implementation of the VCCE program to encourage businesses to contribute to the development of a waste-free economy. employment in the labor market, enhancing the competitiveness of the private sector in Vietnam, as well as the acquisition of business opportunities worth nearly US $ 5 billion by the recession economy. At the same time, VCCI will also cooperate with the International Trade Center to apply the Sustainability Map, a set of standards system to support sustainable agricultural development in Vietnam.

Coordinated with the Ministry of Labor, War Invalids and Social Affairs, the Ministry of Industry and Trade, the Ministry of Natural Resources and Environment, the Vietnam General Confederation of Labor and the State Securities Commission to organize a launching ceremony a class of sustainable business 2017. The sustainable business rating program 2017 aimed to honor sustainable business development and to raise awareness of the importance and benefits of sustainable business. At the same time, it contributed raising awareness about the importance and benefits of sustainable development of enterprises of the community as well as of the society.  By that, promoted sustainable business and promoted sustainable development among stakeholders in Vietnam included the business community, state management agencies and civil organizations. After the program was launched in Hanoi, the program will continue to be launched in Da Nang and Ho Chi Minh Cities.

Organized a CSR Forum with the theme "Why Do Businesses Love Forest" in Ha Noi and Ho Chi Minh Cities, with the aim of highlighting the need for building a cooperative relationship between the state agencies and the private sector in fostering sustainable forest development and support activities. At the same time, raising awareness of the business community about roles of forest in business activities with a view that forest is closely related to all activities of enterprises. At this forum, the business community of Vietnam joined the UN’s commitment through the reduced Emissions from deforestation and Forest Degradation (UN - REDD) Program.

5.2. Supporting international integration enterprises

Have supported enterprises on free trade agreements: as a representative, the focal point guiding the business community in international trade issues, especially free trade agreements under Decision 06 In 2012, the WTO Center and Integration Center of VCCI has continued being the focal point of information and consultation for businesses on the WTO and important trade agreements. Vietnam has engaged with the following outstanding activities: (i) formulated 02 policies’ recommendations as "TPP scenarios after the United States withdrew from the TPP and the appropriate direction of actions in Vietnam"; proposed a negotiation plan for TPP11 for preparation of the APEC’s negotiation  round in Da Nang; (ii) prepared three sets of analysis and dissemination documents on the EVFTA commitments in the relevant chapters; (iii) published 04 publications on " review of Vietnam law with commitments of the Vietnam-EU Free Trade Area (EVFTA) / Transpacific Partnership Agreement (TPP)" investment, intellectual property, specialized inspection of import and export goods, opened services for foreign investment; (iv) implementation of 08 comments on integration.

Have supported businesses in trade defense issues: This is an area of business support that addresses the legal issues related to economic integration, particularly the use of measures. anti-dumping, anti-subsidiary and self-guard in Vietnam in order to protect interests of domestic industries before foreign imports. In 2017, WTO and Integration Center provided assistance to Vietnamese business associations and enterprises in relation to 16 domestic and foreign trade remediation investigations. At the same time, guided and adviced for hundreds of enterprises on issues related to this content..

Have provided information, training, consultancy and other integration assistance: 03 portals providing legal information on the largest integration in Vietnam for associations and enterprises that have got total over 46 million hits, with an average of 10 news articles are posted daily; In 2017, VCCI has compiled and published 18 publications for business integration; have done dozens of business consultations via phone, email....

5.3. Capacity building activities for business associations

Aiming promotion of cooperation activities with business associations for improvement of cooperation, information and recommendations on the business situation of enterprises, held 4 sessions of handing over the businesses association in the north of the Central, the Central of Highlands, Central Southern and the Southern region to evaluate the results of one year implementation of the Resolution 35 / NQ-CP on business support and development, The opinions and questions of business associations and enterprises prepared for the Prime Minister's conference with enterprises in 2017. At the conferences, representatives of associations and enterprises concentrated on evaluating results of the implementation of the Resolution 35 from the perspective of the business and reflected many difficulties and problems proposed to the Government and authorities at all levels to support and handle. At the same time, it contributed a lot of ideas on reforming a mechanism of policies, administrative procedures, loan interest rates ... and suggested that VCCI and its associations should have a stronger voice to convey  thoughts and  desires of businesses to the Government and the authorities at all levels.

Organized training courses for regional business associations in Central Vietnam and Central Highlands on how to develop district and provincial competency assessment indicators (DDCI), and share best practice in implementation of DDCI in some localities with the participation of representatives of some provincial leaders and business associations of Lam Dong, Dong Nai, Binh Thuan, Binh Phuoc and Gia Lai provinces. The workshop heard and focused on assessing and analyzing DDCI assessment practices in Quang Ninh, Bac Giang, Bac Ninh, Vinh Phuc and Tuyen Quang Provinces, in which some enterprises were evaluated by the business association such as Vinh Phuc and Tuyen Quang Provinces; There were some Provinces implemented by a grassroots unit such as: Bac Ninh, Bac Giang and Quang Ninh Provinces. Most of the provinces were directly involved in the survey and evaluation, but there were provinces that hired independent consultants to conduct surveys and develop reports such as Quang Ninh Province. Although there was a differency in the model of implementation of DDCI evaluation, but general results in provinces implemented DDCI’s assessment are the Provincial Competitiveness Index (PCI) has improved significantly. Suppored enterprises to carry out investment, business and quality of business activities of the functional agencies is stepped up every year. Since then, the business environment in general in these provinces were improved in line with the spirit set out in Government Resolution 35 / NQ-CP dated 16 May 2016 on support and development by the year 2020 and Directive No. 26 / CT-TTg dated June 6, 2017 of the Government’s Prime Minister on the effective implementation of the Resolution No. 35 / NQ-CP dated May 16, 2016 in the sense that the Government accompany businesses.

Organized a workshop on "Roles and methods of reviews and comments on legal issues for associations" to strengthen roles of Vietnamese’ enterprises in developing and improving business law’s policies. Raised roles and methods of reviewing legal opinions for associations and business associations.

6. Launching the movement "Vietnamese goods conquer the Vietnamese” and motivating businesses saying no to the negative

6.1. Motivating businesses saying no to the negative

In 2017, VCCI organized 15 workshops on "Governments and businesses working together towards the Alliance of Integrity in Vietnam", "Promoting an integrity business environment in Vietnam through collective actions "... took 15 reports on sustainable development and improving competitiveness, productivity on newspapers, magazines. Completed the kdlc.vn website to guide businesses in the implementation of the toolkit for preventing corruption, risk prevention, self-improvement of business management skills and experience share.

Investigated, surveyed, studied and developed reports, proposals and recommendations on solutions to support enterprises in implementing business integrity. The report gathered opinions from more than 1100 small and medium enterprises (SMEs) on promotion of Integrity in Business. From there, researched and synthesized a number of recommendations, including solutions to support the promotion of business integrity in business. These recommendations included: Initiating a Global Initiative for Integrity Practices (GBIA) to promote business integrity, which emphasized a corporate sector collaboration with government agencies.

6.2. Launching a movement "Vietnamese goods conquer the Vietnamese"

Over the years, VCCI has paid much attention to and constantly directed the units to speed up the propagation and promotion of enterprises to improve the quality of goods and lower prices in order to conquer the domestic market with more than 90 million people in various forms through conferences, seminars, discussions and information systems of the VCCI. In addition, every year, the VCCI continues cooperating with business associations and enterprises to promote propaganda about the campaign "Vietnamese give priority to use Vietnamese goods"

Currently, VCCI is developing a project to launch a campaign "Vietnam Goods conquer the Vietnamese" stronger in 2018 and the following years. The content of the project focuses on a number of issues:

- To raise the awareness of businesses about improving the quality and lowering the cost of products, especially research on consumption tastes of Vietnamese to develop product lines suitable to the domestic market.

- To support, establish channels of distribution of high quality Vietnamese goods to consumers, especially rural markets

1. PROPOSALS AND RECOMMENDATIONS

In order to continue implementing Resolution 35 / NQ-CP and Directive 26 / CT-Ttg in the coming time, the Vietnam Chamber of Commerce and Industry would like to propose some specific contents as follows:

1.  To need solutions to focus on increasing productivity of the economy with specific solutions which are:

- To continue perfecting macro-economic institutions so as to create favorable conditions for enterprises to access equitable resources, especially capital and land. Accordingly, it is necessary to focus on the implementation of the Law on small business assistance as well as on the Law on competition in an appropriate manner, to ensure overcoming small-scale obstacles.

- To promote the participation of the business community in the elaboration of development plannings for economic regions in order to exploit the competitive advantages of localities, together with restricting the dispersion of resources and other regimes, overcoming dispersed planning.

- To strengthen cooperation programs between large enterprises, small enterprises, FDI enterprises and domestic enterprises.

 - To focus on the development of business support services, enabling SMEs to access markets (finance, labor, science and technology, commodity markets, industrial markets), to promote SME participation in the global value chain and business linkage. This is also a concrete solution to implement the recommendations that have been proposed since 2016:

+ To implement the Decree No. 111/2015 / ND-CP on development of supporting industries. The reason is that although enterprises of the manufacturing industry have shown positive signs of recovery, however, the index of enterprises in Vietnam showed that enterprises in this area are still in a more difficult situation. To compare to many other sectors in terms of profitability per unit of product. The high rate of input materials and parts imported in the products costs due to weak supporting industries has led to this situation. Therefore, policies to support the development of domestic enterprises must be synchronized in terms of market, finance and technology.

+ To support VCCI to set up a partnership promotion center together with the development of high quality human resources to promote linkages between domestic and FDI enterprises.

+ To support Vietnamese enterprises to set up representative offices abroad, which is an effective and practical trade promotion channel and the experience of other countries in the world. While most foreign companies enter the Vietnamese market, they set up representative offices or branches in Vietnam, but Vietnamese enterprises passively wait for foreign companies coming to "ask for goods".

- To attach importance to the development of business support services, to create conditions for SMEs to further promote equitization and divestment at SOEs, thereby consolidating the legal corridor, amending, improving the legal documents of the State in accordance with the practical and practical coverage; At the same time, there should be a clear mechanism for assigning and decentralizing the implementation of rights and responsibilities.

2. To promote the equitization and divestment of SOEs in order to concentrate on perfecting the legal corridor, to amend, to supplement and to finalize the State's legal documents in a practical and coverage of practice; At the same time, there should be a clear mechanism for assigning and decentralizing the implementation of rights and responsibilities.

3. Applying measures on reducing business costs for businesses in the following two directions:

First, to reduce compliance costs through administrative reform, to reduce fees and charges; to promote the "saying no to the negative" climate, severely handle the case to occur the negative; to blame people in organizations who occur "petty corruption".

Second, to reduce the cost of inputs (land, logistics, infrastructure) through the promotion of innovation.

4. To improve developing business law, to enhance capacity building training for government officials in the formulation of corporate development policies, especially preferential policies, Tax administration, especially in the context of the 4.0 revolution with many innovative business models,

5. To increase investment in research and development, innovation and application of new technologies in enterprises.

6. To concern about the labor market development and the development of skills forworkers. To focus on the model of public-private partnership in vocational training;

To accelerate the revision of the Labor Code with a view to promoting a healthy labor law environment for the development of enterprises, be suitable to the production and business practice in Vietnam and in conformity with labor international standards.. On the other hand, 2018 is expected to be ratified by the two countries. Labor clauses in the Vietnam-EU Trade Agreement also requires that Vietnam's Labor Code must be compatible with international labor standards under the 1998 ILO Declaration.

6.2- To manage and adjust the increase of salary and labor costs in Vietnam to a reasonable level to ensure the competitiveness of Vietnamese enterprises in the context of global and regional integration.

One of the attractive foreign investments in Vietnam is the low labor cost and abundant labor force. That is one of the competitive advantages of Vietnamese enterprises. However, labor costs in Vietnam are being pushed up, lead to investment reduced in Vietnam and the competitiveness of Vietnamese products. Therefore, VCCI recommends the following solutions:

-To adjust the minimum annual wage rate accordingly.

- The base for paying social insurance premiums from 2018 is the sum of the employees' incomes leading to very high actual paying rates. It is proposed to delay the implementation of this policy until 2020 and propose a revision of this policy.

- To set up a mechanism for exemption or reduction of premiums paid into the labor safety fund for enterprises which well perform the work of occupational safety and hygiene and prevent the occurrence of occupational accidents in the previous year. Actually, this fund is getting a lot of money

- To implement the Government's proposal to reduce the unemployment insurance premium of the employer to 0.5%                                                                                                          

APPENDIX

SOME RESULTS OF STUDY ON

Actual business costs of enterprises

1. Compliance costs of enterprises

• Costs of enterprises establishment

Regarding costs of establishment of an enterprise, it can be clearly seen that within eight years, by the government's efforts and policies to promote business development, the cost of establishment of an enterprise have been cut more than half from 12.1% reported DB2011 to only 6.5% according to DB2018 report. Remarkably, if costs of establishment of an enterprise have decreased continuously in 2010-2016, down to only 4.6%, by 2017, according to the DB2018 report, these cost tend to increase to 6.5 %.

Figure 1: Costs of establishment of an enterprise in Vietnam

Source: By Doing Business reports 2011-2018

Regarding the time for registration of businesses, with the Government's efforts, the registration time of businesses has decreased sharply from 2015 to 2010-2014, from 36 days down to 20 days. However, in the following years, this improvement has not been continued, but the number of business registration days in Vietnam increased to 24 days (DB2017 report) and then decreased slightly to 22 days (according to DB2018).

Being compared with other ASEAN4’s countries, Vietnam still needs to improve its registration procedures. Vietnam has quite high costs of establishment of businesses, ranking just behind the Philippine at 15.8%. In terms of time of establishment, Vietnam is just over the Philippine and far behind Singapore and Thailand. This shows that the Government has continued making efforts to simplify the procedures for establishment of enterprises, and to withdraw the number of procedures related to the establishment of businesses (current is 9).

Table 1. Costs of establishment of an enterprise of Vietnam in comparison to ASEAN4

Source: Doing Business 2018

Costs of applying construction permit

It can be seen that with the government's efforts to cut costs for construction permit, these costs have fallen from 1.4% according to the DB2011 report to 0.7% according to the DB2018 report. However, in terms of time required for the construction permit, there seems to have been no improvement over the last few years, and businesses still have to take 166 days to complete these procedures.

Being compared to other ASEAN4’s countries, in terms of the number of procedures involved in obtaining a construction permit, Vietnam is along with Singapore that is the least requested country, with 10 procedures, much lower than in other countries such as Thailand: 18 procedures and Philippine: 23 procedures. In terms of license costs, Vietnam is also a low cost group, accounting for only 0.7% behind Thailand 0.1%, while the cost in Philippine is 2.6% and Singapore is 6.2%. However, the time to complete these procedures in Vietnam is the highest in the ASEAN4’s countries, up to 166 days, more than two times in Malaysia and three times in Singapore. Obviously, this is Vietnam's biggest constraint in facilitating businesses applying construction permits.

Figure 2: Costs of applying construction permit in Vietnam

Source: By Doing Business reports 2011-2018

Table 2. Costs of applying construction permit of Vietnam in comparison to ASEAN4

Source: Doing Business 2018

Costs of accesess to electricity

The access to electricity is an indicator that has improved significantly in terms of costs and time over the last three years. The access to electricity has been consistently declining according to the DB2011 reports to 2018, from 2984.3% to 1191.8% of the average income/person. Meanwhile, if there are no changes to the timetable for accessing electricity (at 115 days), the last three years have dropped sharply to 46 days. This shows the efforts of the electricity industry in recent years.

Figurer 3: Costs of accesse to electricity in Vietnam

Source: By Doing Business reports 2011-2018

Although there have been many improvements, compared to ASEAN4, Vietnam's access costs to electricity are still the highest in terms of procedures, time and costs. Businesses still need 5 procedures to access electricity in Vietnam while other countries only have 4 procedures. This leads to the implementation of these procedures in Vietnam up to 46 days, while the Singapore, Thailand and Malaysia only about 30-32 days, and the Philippine is only 37 days. It is notable that costs of the access to electricity in Viet Nam, although they are continuing decline, they are still very high in comparison to ASEAN4’s countries.

 Table 3. Costs of access to electricity in Vietnam in comparison to ASEAN4

Source: Doing Business 2018

Costs of paying taxes

It can be seen that, compared to other countries in the region, costs of paying taxes in Vietnam are also relatively high, as in 2012, tcosts of paying taxes in Vietnam were only high after the Philippines with 40.1% of commercial profits, while in Singapore, these costs only accounted for 27.1%. Vietnam has made a lot of efforts in the following years to limit and reduce costs of these taxes to businesses despite of not obtaining clear results. Being affected by the economic crisis and the general difficulties of the world economy, while costs of taxation of countries in general tend to be increased after six years as in Thailand increased from 34% in 2012 to 40% in 2017, Vietnam is trying to curb this to reduce or stabilize costs at nearly 39% (in 2013 and 2014, costs of paying taxes were reduced to just approximately 35%). In addition, the Government of Vietnam is constantly striving to improve the tax payment process, especially reducing the waiting time from 941 waiting hours in 2012 to only 540 waiting hours in 2017. Here is a remarkable effort to help the tax process of the business more favorable. Therefore, for the three consecutive years from 2015 to 2017, Vietnam is reported by the World Bank on business environment study to evaluate that some reforms have made process of paying tax becoming easily and less expensive than the evaluation of Vietnam's efforts as below.

Figure 6. Costs of paying taxes in Vietnam and other ASEAN4’s countries

Table 4. Costs of paying taxes in Vietnam in comparison to ASEAN4

Source: Doing Business 2018

This is an important step for Vietnam, showing the Government's attention as well as the right direction of policies to help businesses. However, if costs of paying taxes are cut further, the burdens on the business may become more lucrative, and the ranking of Vietnam in the study of business costs. In general, costs of paying taxes in particular will be much improved.

Import and export costs

It can be seen that export costs of Vietnam in the period 2012-2017 were basically high compared to other countries in the region, especially in 2013 and 2014, export costs of Vietnam were over the four remaining countries with US $ 610, while in Singapore and Malaysia, costs were approximately US $ 450. This shows difficulties of Vietnamese businesses when they want to export their products to the world market and also reduce the competitive advantage of Vietnamese businesses when they enter the market. The world where they face fierce competition in both quality and price from businesses in other countries. In 2017, Vietnam's export costs have been significantly reduced. Vietnam has improved significantly, ranking only behind Malaysia and higher than the average in Southeast Asia and Thailand and Pacific Region

Figure 8. Export costs in Vietnam and other ASEAN4’s countries

Table 1. Export costs of Vietnam compared to ASEAN4

Source: Doing Business 2018

Similar trends in export costs that have also occurred with import costs, Vietnam's import costs over the six-year period have been always high, just behind the Philippine and Thailand. The three countries have always had higher import costs than the rest of Singapore (Malaysia and Malaysia), as in 2017, import costs of Philippine are about 2.5 times higher than import costs of Singapore. High import costs have made the Vietnam’s market that have been not attractive to foreign enterprises which want to penetrate their markets. Therefore, this also hinders high-quality products of international standards that can reach Vietnam’s consumers.

It can be seen that both Vietnam's export costs and import costs during the six-year period tended to be approximately the same at approximately $ 600 regardless of the initial starting point for 2012.  In 2017, with the efforts of the Government of Vietnam to improve business costs in general and the export and import process in particular, both of these costs, especially export costs have improved significantly (downed nearly one third from 2016, equivalent to US $ 180). These efforts were also reported by the World Bank's Business Environment 2017 when they assessed that "Vietnam makes cross-border trade easier by permitting the application of the system. "This is a step forward of the Government to help businesses to save time and money, have maken exports and imports more convenient.

Table 1. Import costs of Vietnam in comparison to ASEAN4

Source: Doing Business 2018

Figure 8. Import costs in Vietnam

Table 1. Export costs of Vietnam compared with ASEAN4

Input costs of businesses

Costs of access  to production and business premises

There were many enterprises reflecting difficulties of land rental in access to land in localities. Specifically, according to the PCI 2016’s survey, there were 53% of enterprises said that they had difficulties in access or expansion of their production and business activities in provinces and cities. Among them, up to 25% said they had difficulties due to the high price of land under state regulations and the price of land in accordance with state regulations increased too fast. In addition, up to 35% of businesses said that high rents on the market are the biggest return for them when they want to access land or expand their production space.

Given above stated difficulties in accesses to land in general, businesses also face barriers to rental rates in industrial zones / clusters. In the PCI 2016’s survey, there were 48% of businesses interested in joining industrial parks, but the remaining 52% were afraid of industrial zones because of high rental rates (26%). Other reasons were identified by few companies, such as the complicated industrial zone (19%), infrastructure that did to requirements of businesses (15%), poor connection transportation road (7%) and be difficult in recruitment of workers there (3%).

Under Resolution 35 / NQ-CP / 2016, the Government assigned the Ministry of Finance to coordinate with relevant ministries and agencies to "review the land law in the direction of reducing the land rental, change the purpose of land use and other expenses of enterprises. " However, costs reduction after the implementation of this task are still unclear.

Costs of renting a business premises have been so high that they have made difficulties for small and medium-sized enterprises to make the domestic businesses’ competitiveness worse when the country has integrated more deeply. In the retail sector, most medium-sized enterprises in Vietnam are unable to afford high fees to lease premises that are in a favorable position and are underperforming their international counterparts. Reputable and experienced retailers with stronger financial strength. One of reasons leading to the chain of stores and the position of domestic retailers is less than the most foreign stores chain largely due to space charges.

Proposed solutions:

To recommend the Government to request ministries to fully implement tasks related to the review of business costs regard to land and to assess the impact of the implemented solutions; To adopt policies to reduce land rental for enterprises, especially for SMEs; At the same time, it is necessary to have appropriate policies for infrastructure developers, in order to ensure harmonized benefits for landlords, such as annual land rental, rather than advance payment of land rental for long period (40-50 years) and so on

2.2. Costs of recruitment and training of workers

The PCI’s survey shows that costs of recruitment and training for workers in total operation expenses have increased rapidly in recent times. Specifically, if costs of recruitment of workers was about 1% of costs of doing business in 2009, this number has increased gradually, to about 4.1% of operation costs of enterprises. Similarly, in 2009, costs of training workers of an enterprise usually account for about 1% of operation costs of enterprises, by 2010, labor costs in the total operation costs of enterprises have increased to 4.6%. This indicates the inefficient operation of the labor market, as well as the quality of labor training in vocational and education systems in Vietnam. Enterprises have to pay a large proportion of costs for worker’s training due to competitive pressure, but these costs need to be shared and supported by the State.

Proposed solutions:

To recommend the Government to take measures to improve the functioning of the labor market, as well as to improve the quality of the vocational and educational systems in Vietnam in order to improve the quality of labor;

The State should have policies to encourage labor-training businesses, and must be on the basis of costs-sharing as well as risks to reduce costs burden for businesses.

On the other hand, the mechanism of enforcing labor contracts, ensuring employees when they have been trained by enterprises, has a long commitment to work in enterprises is very necessary.

2.3. Wages and social insurance costs

Currently, costs of wages and social insurance premiums are also a concern of businesses. The minimum wage in the region in 2018 continues increasing to 6.5%, bringing the minimum wage from region I to region IV at 3.98 million; 3.53 million; 3.09 million and 2.76 million. Although businesses often pay employees higher wages than minimum wages, however, the increase in minimum wages will increase the wage rate, leading to the establishment of social insurance schemes increase, forcing businesses that must adjust wage restructuring by cutting down on soft costs and switching to hard costs, these lead to real earnings of workers are not rising, but be decreasing. The impact of the region's minimum wage increase will negatively affect the competitiveness of enterprises operating in labor-intensive industries such as textiles and footwear, where wages account for more than 70% in processing price of exported products.

In addition, Article 89 of the Law on Social Insurance 2014 has stipulated since January 1, 2018, the monthly salary on social insurance premiums are based will be the salary plus salary-based allowance and other amounts as prescribed in the Labor Code. It can be seen that the scope of income to pay social insurance is being expanded, making the reduction of the rate of social insurance lost meaning. This provision is unreasonable and has caused many difficulties for the enterprise as wage subsidies and other supplements will vary depending on the quality of work, labor productivity and the situation of production, business of the enterprises. This is a monthly fluctuation, so it is difficult to calculate the paying rate. The extension of income coverage to social insurance also be weak. Vietnamese enterprises in the context of Vietnam has been and will participate in the regional and global free trade agreements.

Proposed solutions:

In the immediate future, the Government should have a reasonable minimum wage plan, based on the increase in labor productivity and annual consumer price index. For the payment of social insurance, businesses proposed to consider the reimbursement of base salary payment, salary allowances and other supplement items from January 1, 2018 as stipulated in Article 89 of the Law on Commune Insurance as mentioned above, the social insurance premium of Vietnam is high compared to other countries in the region except Singapore (one of the leading prosperous Asian countries). In order to facilitate the development of the Vietnamese business community better, they should be able to reach international markets in the context of trade agreements that narrow the gap between countries, the level of social insurance premiums. The business should be adjusted to reduce pressure on the internal business.

 In the long term, costs of labors can be solved if labor productivity is improved, then the workers receive an increase in wages corresponding to labors and enterprises will not be affected by the minimum wage increase. In order to increase labor productivity, on the one hand, it is necessary to raise the skill level of workers through training and on the other hand to encourage enterprises to operate in the fields and stages of the global value chain thar have higher value added.

2.4. Costs of Logistics

Costs of  logistics account for a high proportion of the structure of business costs of Vietnamese businesses (accounting for about 20% of GDP according to the WB report), which reduces the competitiveness of enterprises. For example, costs of transporting a container from Haiphong to Hanoi or vice versa (about 100km) are three times more expensive than costs of transporting one container from China and Korea to Vietnam. . As a result, costs of products are often increased because transportation costs are not fixed and always high. One of the main causes is the problem of undeveloped infrastructure (seaport system, warehouses, connecting roads). In addition, the planning situation is not reasonable that causes businesses to spend more on both time and costs of logistic

 Another reason for costs of logistics that involved is customs. Although customs has made great efforts to implement the one-stop shop customs regime and reduced the rate of goods inspection, import-export procedures in Vietnam are still more complicated than in other countries. It also has to mention the monopoly situation of international shipping companies in imposing prices that domestic enterprises have to stand high costs and additional unreasonable surcharges. Decree 146 / ND-CP / 2016 on posting up prices and service charges at seaports have not resolved this problem.

 Finally, high costs of logistic are also due to the limited supply chain management capacity of Vietnamese enterprises, which results in wastefulness and loss in the purchase, production, storage and sale processes. The application of science and technology to form the logistics industry 4.0 is required to improve the competitiveness of domestic logistics enterprises and reduce costs of logistics in Vietnam. In addition, planning for the development of industrial clusters lacking linkage among enterprises in the supply chain is also one of the major causes for increased transportation costs, which generates many other costs.

Proposed solutions:

In the immediate future, the Government should review and take measures to control the costs associated with fees and surcharges at the seaport in the locality. The government also needs to take measures to limit the monopoly of foreign shipping companies. This monopoly costs of logistic in Vietnam, affecting the competitiveness of Vietnam's exports. There are three reasons for this monopoly. The first is that the international shipping companies are linked to become an association, thereby they are free to impose the price and surcharges. Secondly, the negotiation of capacity of Vietnamese importers and exporters are limited, often requiring the purchase of CIF FOB, thus being imposed on international shipping costs. Finally, it must be said that the capacity of domestic shipping companies is limited, thus not competing with international shipping lines. Therefore, in order to limit the monopoly of international transportation companies, on the one hand, the government should take measures to manage the imposition of prices and surcharges and needs to strengthen the capacity of export enterprises as well well as domestic logistics enterprises through the operation of business associations.

In the long term, in order to reduce logistic costs, the Government should re-plan the logistics system in Vietnam and promote the full capacity of some seaports by improving access roads. Meanwhile, the Government has solutions to economic development by sector/cluster, so that enterprises can have accesses to input materials as well as distribution of output is shortened in time and space. This will reduce the time required for transportation and storage, which will reduce logistic costs. In addition, businesses themselves need to apply science and technology to form logistics industry 4.0, to improve the competitiveness of domestic logistics enterprises and reduce logistic costs in Vietnam.

2.5. Costs of access to loans

Costs of access to loans of Vietnamese enterprises are still high, although the banking sector in recent years has been striving to gradually reduce interest rates. Average interest rates for priority sectors and for SMEs are now down to 6.5% per year. Vietnam's average interest rate is currently 7% -9% higher than many countries in the region, for example China is only 4.3%, Malaysia is 4.6%, South Korea 2-3% and Japan is only 0.95%. In addition to the interest rate, the problem of loan procedures for enterprises, especially SMEs are still difficult, not enough collateral. If being guaranteed by the Guarantee Fund, there will be additional costs. Meanwhile, the system of private equity funds has not been encouraged; Forms of capital mobilization through the stock market, financial leasing, etc, be less interested in businesses.

Proposed solutions:

In one hand, the Government has further assigned the State Bank of Vietnam (SBV) to consider adjusting interest rates for enterprises in line with the interest rates in the ASEAN region or China as enterprises of these markets are competing strongly. with Vietnamese’ businesses. Other way, there should be solutions to promote roles of credit guarantee funds, reduce guarantee fees, procedures for accesses of capital for enterprises, especially SMEs.

In the longer term, the government needs to diversify its capital markets by encouraging the development of unsecured loans, calling capital through the stock market, calling for funds from private equity funds, leasing finance and so on. There should be policies to encourage financial institutions, credit institutions to innovate, create new products and services to reduce capital costs for businesses; to speed ​​up the implementation of Fintech research project in Vietnam.

2.6. Costs of importing raw materials

Non-raw materials account for a large proportion of the product costs of Vietnamese enterprises, while many sectors of Vietnam are heavily dependent on imported raw materials. For example, the Vietnamese pharmaceutical industry is dependent on 85-90% of imported raw materials. The cost of pharmaceutical raw materials and other raw materials accounts for nearly 60% of production costs. The plastic industry also has to import more than 80% of raw materials for production. Another example is the cashew industry, although it is the largest exporter of cashew nuts in the world, but annually Vietnam imports over 1 million of the 1.4 million tons of raw cashew nut used for processing. Even the fishery, which was previously known to cultivate and exploit to serve export, recently also begain to import raw materials for processing and export. Similarly, the textile and garment sector also has to depend on imported materials. In the case of fabrics, domestic enterprises have to import up to 86% for production and export, while the quality of domestic fabrics meet requirements of the main export market of textiles.

On the one hand, Vietnamese enterprises are starting to play a more important role in the global value chain, which is tending to become a processing center of the world. However, meanwhile, dependence on imported materials, and especially costs of inputs. Prices of imported raw materials are not only influenced by selling prices of foreign exporters but also depends on exchange rate of VND, tax and import procedures. They depends heavily on imported raw materials, so when international markets fluctuate, these sectors will be disadvantageous, affecting the competitiveness of Vietnamese enterprises. In addition to high costs of raw materials continuously increasing financial pressure, many businesses also have more risks that they are difficult to control the quality of imports. It can be seen that the lack of raw materials is causing many Vietnamese enterprises are heavily dependent on foreign partners. The lack of active material will cause prices and quality of products in the country lacking obvious competitiveness.

Proposed solutions:

In the immediate future, the Government should continue to stabilize macroeconomic policies, stabilize the exchange rate to facilitate businesses can predict costs related to imported raw materials

In the long term, it is recommended that the Government give more preferential policies for the development of material areas in service of the following sectors: supporting the planning of raw material areas, adopting preferential policies on land; interest rates of enterprises involved in the development of raw material areas ...