Business environment reform: drastic and consistent

After several years using the World Bank Ease of Doing Business report as a measurement, Vietnam's business environment has made great strides.

Business environment reform: drastic and consistent

On March 18, 2014, Resolution 19/NQ-CP was issued by the Government. The Resolution requires effective implementation of three strategic breakthroughs (improving institutions, developing infrastructure and raising the quality of human resources) in order to improve the business environment and enhance competitiveness.

The resolution set a target that by the end of 2015, a number of indicators in the World Bank Ease of Doing Business report would reach the average level of the ASEAN-6 group. World Bank Ease of Doing Business is closely related to the reform process of Vietnam's business investment environment and is one of the indicators for Vietnam to evaluate itself.

When the resolution was issued, it was praised, as it took the World Bank’s assessment as a clear standard, not just general objectives. This resolution is considered a milestone in the 7-year journey to promote the improvement of Vietnam's business environment.

In 2015, Vietnam’s ranking according to the World Bank Ease of Doing Business report rose by three places, from 93rd to 90th out of 189 economies. Compared to Southeast Asian countries, Vietnam had more reforms, resulting in a better business environment and better ranking (improving in five of 10 areas). At the same time, Malaysia, the Philippines and Thailand were downgraded, and Singapore held the leading position in the world.

From 2015 to 2018, every year, a Resolution with No. 19 was issued with the goal of reaching the top 4 in ASEAN, as affirming the continuation of the Government's consistent spirit of reforming the investment and business environment.

After several years using the World Bank Ease of Doing Business report as a measurement, Vietnam's business environment has made great strides. In the World Bank Ease of Doing Business report - the final report - Vietnam's global business environment ranking increased from 93/189 countries and territories in 2016 to 70/190 countries and territories in 2020. In Southeast Asia, Vietnam ranked 5th, behind Singapore (2), Malaysia (12), Thailand (21) and Brunei (66).

In particular, Vietnam's annual Getting Electricity index soared, achieving the highest ranking ever, standing at 27th out of 190 countries/economies (it was 135th in 2014). Vietnam has surpassed the Philippines and is currently ranked 4th in Southeast Asia in this category.

However, in general, Vietnam has not yet entered the top 4 of ASEAN in terms of Doing Business, as it is far behind Thailand, Malaysia and Singapore.

Effort and success depend on yourself

In 2019, the Resolution on improving the business environment and competitiveness was expected to be numbered 02, right after Resolution 01 of the Government, which clearly showed the guiding spirit of the Prime Minister of making the first breakthrough in institution.

 

Therefore, the Resolution on the business environment was numbered 02, instead of the old name of Resolution 19, which had been issued continuously since 2014. That resolution was followed by a series of resolutions that were also about improving the quality of the business environment and enhancing competitiveness like Resolution No. 35/NQ-CP, Resolution No. 68/NQ-CP...

The Government's 5-year socio-economic report (2016-2020) shows that every year, the Government issued a separate resolution on improving the business investment environment and enhancing national competitiveness. Up to now, 3,893/6,191 business conditions (63%), and 6,776/9,926 lists of goods subject to specialized inspection (68%) have been reduced and simplified, saving more than 18 million man-days, equivalent to more than 6.3 trillion VND/year.

However, according to the Government's assessment, there are still a lot of barriers, creating a burden of costs and risks for businesses. The quality of the business environment has improved, but it is still small and slow, while other economies have reformed more quickly and strongly. The management and specialized inspection of exported and imported goods has changed, but it is still slow.

As the author of Resolution 19 in 2014 from the very beginning, Nguyen Minh Thao, Head of the Research Department on Business Environment and Competitiveness (Central Institute for Economic Management), talked with VietNamNet about the World Bank’s discontinuation of the Ease of Doing Business report.

Thao said that Vietnam took the spirit of the World Bank Ease of Doing Business report to reform its business environment in the early period. Later on, Vietnam’s reforms in the business environment went far beyond that index.

According to Thao, the World Bank’s discontinuance of the report does not affect Vietnam’s reform process because Vietnam relied on it for the first two years only, to put pressure on reform. After that the country had a new basis to create pressure for ministries and sectors to reform.

However, Thao said he "regretted" that four indicators have improved very slowly for a long time: land, solving of disputes, bankruptcies, and business startups. She said experts will join relevant agencies to seek ways to make reforms in these fields. 

The ease of doing business index was an index created jointly by Simeon Djankov, Michael Klein, and Caralee McLiesh, three leading economists at the World Bank Group. The report was discontinued by the World Bank on September 16, 2021. 

A nation's ranking on the index was based on an average of 10 subindices:

Starting a business – Procedures, time, cost, and minimum capital to open a new business
Dealing with construction permits – Procedures, time, and cost to build a warehouse
Getting electricity – procedures, time, and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse
Registering property – Procedures, time, and cost to register commercial real estate
Getting credit – Strength of legal rights index, depth of credit information index
Protecting investors – Indices on the extent of disclosure, the extent of director liability, and ease of shareholder suits
Paying taxes – Number of taxes paid, hours per year spent preparing tax returns, and total tax payable as a share of gross profit
Trading across borders – Number of documents, cost, and time necessary to export and import
Enforcing contracts – Procedures, time, and cost to enforce a debt contract
Resolving insolvency – The time, cost, and recovery rate (%) under a bankruptcy proceeding

Luong Bang

Reform lessons from electricity sector: nothing is impossible

Reform lessons from electricity sector: nothing is impossible

Electricity access is one of 10 indicators that measure the quality of the national business environment according to the World Bank global business environment ranking.

Reform measures prepare for post-pandemic period

Reform measures prepare for post-pandemic period

When the pandemic ends, demand will increase and the economy will recover. To prepare for this, it’s necessary to carry out strong reform and create the most favorable business environment for enterprises.

 
 

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