VietNamNet Bridge – EU Ambassador to Vietnam Franz Jessen talks with The Saigon Times Daily on the sidelines of the Vietnam Business Forum 2013 (VBF 2013) that took place in Hanoi on Tuesday regarding the business environment. Excerpts follow.

Many problems raised by EU and international organizations had been raised ten years earlier. Does that mean not many things have been solved?

I think Vietnam right now has a good framework to make reforms. And I hope the Government would use this year to make necessary reforms. It’s now that Vietnam has a large and young population, and a big labor market. If we look back at the speed over the last ten years, we now need a faster speed.

If you are asked by a potential investor about the country as a business destination, what would you say?

I say that if the Vietnamese Government gives right economic policies, it is a good place to be.

It means not yet?

I think European investors are still nervous about the regulatory framework, where they operate out of rules. They are worried about issues like corruption, administrative procedures and so on.

An EU investor complained at VBF that when their working license expired, their bank accounts would be blocked. What do you think?

This is the issue that many companies are struggling with. It is important to have a clear regulation implemented correctly. In other countries when your working license finishes, you have no issue with your bank accounts blocked or so on.

How do you think about the explanation by Vietnamese ministers regarding the issue?

I think that all ministers are aware of the issue and they are doing their best, but they often find it difficult to make sure that the regulation is implemented right at different levels. Many companies complain that at the central level, things are clear, but it is not at the provincial level.

Regarding the common environment in Vietnam today, what would you say?

Things are different between provinces, but overall, many EU companies are reluctant because the legal frameworks are not strong enough. Macroeconomy is less of worries. Many EU companies here are worried about the market, and the production base.

Are problems the EU businesses facing in Vietnam also found in other Asean countries that Vietnam is competing with to attract investment?

There are some similarities but there are also many differences. Asean has a great variety, from very high income countries to low income countries. But I hope Vietnam would be among the top attractive destinations. Right now, objectively, it is not at the top. I do hope the Government would make a change so that Vietnam will be the most attractive among Asean countries for EU investment.

How do you explain about the decline in FDI from the EU?

The FDI is coming in strongly, but EU investors are not coming because of low cost production like others. EU investors are not mainly looking at low-cost labor, but they look at the overall investment climate. That is regulatory consistency.

I know people in front of us today are very aware of the issues, and they are doing their best to change them. But they are not alone, there is a whole administration system they have to work with.

Why are FDI businesses concerned so much about reforms of State-owned enterprises (SOEs)?

SOEs are not the issues in themselves, but rather the rules they operate with. If SOEs operate in normal market conditions, if they have the same regulatory framework, and the same constraints to finance as the private companies have, then there’re no issues. The matter is that SOEs operate in different rules than private companies. In the competitive view that is not balanced. That affects not only private companies, but also the Vietnamese economy. SOEs now account for 40% of the economy. If you look at many cases already published in the newspapers, they do not operate in an effective manner, and somebody have to pay for that. They are taxpayers. For us it’s important that our companies can compete with SOEs equally.

Source: SGT