FRIDAY, March 29, 2024
nationthailand

Vietnam regulatory shifts worry foreign companies

Vietnam regulatory shifts worry foreign companies

ALTHOUGH foreign direct investment (FDI) has played an important role in boosting Vietnam’s economic growth, recent changes in policies and regulations that do not meet international best practices have exposed many foreign investors to considerable risks and obstacles in executing their investments.

The statement was made by Adam Sitkoff, executive director of the American Chamber of Commerce (AmCham) during a workshop on “Challenges of policy and regulatory changes for foreign investors in Vietnam”, co-organised by AmCham, the Vietnam Chamber of Commerce and Industry (VCCI) and the Ministry of Planning and Investment’s Foreign Investment Agency in Hanoi on Thursday.

$165 bn in foreign investment 
Nguyen Mai, chairman of Vietnam Foreign Investment Enterprises (VAFIE) said the economic statistics in Vietnam clearly show the importance of foreign investment in the economy, adding that so far Vietnam has attracted foreign investors from more than 100 countries and territories with investment capital pouring into the country totalling US$165 billion.
FDI enterprises contributed some 19 per cent of domestic revenue, 19 per cent of GDP and more than 70 per cent of export turnover in 2017, Mai said.
However, Mai shared Sitkoff’s view that there was a lack of consistency and transparency in the adjustment process of some state policies, causing confusion for investors and making it difficult for them to determine directions for investment and business operation.
Since 2006, the government has empowered the city-level or province-level people’s committees to decide the licences for FDI projects. However, some of them have abused this power and made decisions beyond their authority and not in line with laws, leading to unhealthy competition among localities, seriously damaging the interests of investors when investing in Vietnam, Mai said.
According to Sitkoff, American companies operate across the spectrum of economic activity here, including in efforts to help Vietnam become more productive, efficient, safer and cleaner.
“However, we often see investments that don’t materialise due to challenges dealing with corruption and an over-complicated, restricted, and unclear licensing and regulatory environment,” he said.
“Our members need greater reform efforts that help create a fairer and more competitive environment where decisions are made faster, procedures are less complicated, rules are fairly enforced, and companies compete on their merits - including for access to land and opportunities,” he added.
Notably, the workshop discussed typical regulatory changes that either have come into effect or are being drafted during the 2016-2019 period, such as the draft law amending and supplementing five tax laws including the Law on Special Consumption Tax (“SCT”), Decree 54/2017/N-CP guiding the implementation of the Law on Pharmacy and amendments to the Law on Tax Management.
Herbert Cochran, director of the Vietnam Trade Facilitation Alliance, said at the workshop that frequent regulatory changes make Vietnam a more risky destination for foreign investors.
An investor, when making decisions on investment or expansion in a country, would develop a five to ten year business plan to estimate the returns on investment. Changes in taxation will adversely impact the entire business plan, potentially causing higher costs, lower revenue and therefore a lower rate of return or longer time to get a return on their investments, he said. 
 

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