View of arbitrators

Policy changes pose obstacles for foreign investors

14/12/2017 14:49
 

Participants share opinions on the effect of policy changes on foreign investors. — VNS Photo Linh Anh

Although foreign direct investment (FDI) has played an important role in boosting Việt Nam’s economic growth, recent changes in policies and regulations, which are not consistent with 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 Việt Nam”, co-organised by AmCham, the Việt Nam Chamber of Commerce and Industry (VCCI) and the Ministry of Planning and Investment’s Foreign Investment Agency in Hà Nội on Thursday.

Nguyễn Mại, chairman of Việt Nam Foreign Investment Enterprises (VAFIE) said the economic statistics in Việt Nam clearly show the importance of foreign investment in the economy, adding that so far Việt Nam 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, Mại said.

However, Mại 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 licenses 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 Việt Nam, Mại said.

According to Sitkoff, American companies operate across the spectrum of economic activity here, including in efforts to help Việt Nam 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/NĐ-CP guiding the implementation of the Law on Pharmacy and amendments to the Law on Tax Management.

Herbert Cochran, director of the Việt Nam Trade Facilitation Alliance, said at the workshop that frequent regulatory changes make Việt Nam 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.

Citing the draft law amending and supplementing five tax laws including the addition of sweetened beverages to the group of objects subjected to SCT, Cochran shared international practices showing that such an imposition would harm the industry, indicating that small and medium enterprises (SMEs) will be hurt the most and may even be eliminated.

If tax is applied, Việt Nam will be among 2.2 per cent of the population in the Asia-Pacific region that have to pay for this tax, said Cochran.

He highly recommended that the Government take into serious consideration the potential socio-economic impacts of the changes in tax policy, which have a major effect on society and industries which have contributed to the State budget, whereas the effectiveness hasn’t been proven.

At the workshop, Lê Nết, AmCham Healthcare Committee, VIAC Arbitrtor representative spoke of the situation and challenges faced by investors in the pharmaceutical industry.

Although the Law on Pharmacy has some advanced provisions and offers an opportunity to promote pharmaceutical business development, some documents such as Decree 54/2017/NĐ-CP guiding the implementation of the Law on Pharmacy includes provisions that are inconsistent with the law and WTO commitments, he said.

According to this decree, foreign importers must have a proper location in Việt Nam, and run their own drug storage, storage equipment and transportation, creating unnecessary costs, which in turn will escalate drug prices due to higher operation costs of foreign importers.

Nết said such enforcement, which leads to the shutting down of current foreign investors who acquired their licenses or forces them to change their business model, would have a negative impact on the reputation and investment environment in Việt Nam. — VNS

Read more at http://vietnamnews.vn/economy/419034/policy-changes-pose-obstacles-for-foreign-investors.html#9DVKBGwoqh52xOVE.99

Share Post
SOME OTHER NEWS
  • Farm produce needs improved quality to unlock EU market 23/08/2018 11:46

    Vietnam is one of the important suppliers of farm produce to the EU, ranking 12th among all exporting nations and meeting 2.2% of the demand, above Thailand, New Zealand, Malaysia and Canada. However, the EU has paid due attention to food value, quality, safety and hygiene and has issued stringent regulations on antibiotics, pesticides and tracing product origin.

  • US-China trade war evolves into battle for power 10/08/2018 11:18

    Last week, international media reported that the Trump administration was considering slapping a 25 per cent tariff on US$200 billion of imported Chinese goods, 10 per cent higher than its initial proposal, in a bid to pressure Beijing to make trade concessions.

  • Concerns about Multiple Sublicenses from National Competition Committee Model 17/05/2018 13:46

    The National Competition Committee should be an independent governmental body rather than a ministerial affiliate, said at a Consultative Workshop on Revised Law on Competition, raising concerns about the birth of multiple sublicenses, monopolistic behaviours and power abuse in the public service. 

  • Forgiving tax debts must be done transparently 06/04/2018 14:08

    Tax losses caused by enterprises that have received contracts to be paid from the State budget, but haven’t yet paid their taxes, are also under consideration for tax clearance. The amount of tax arrears is estimated at over VNĐ542 billion (roughly $24 million).

  • Tough odds for VN market upgrade 19/03/2018 09:43

    Việt Nam’s securities market has a 25 per cent chance of being upgraded to the “emerging market” status from its current “frontier market” level by 2021, according to Võ Trí Thành, senior economist at the Central Institute for Economic Management (CIEM) cum VIAC arbitrator.

  • Mine declines: Good news for sustainability 07/03/2018 10:54

    Statistics from the General Statistics Office of Việt Nam (GSO) showed that the mining industry has posted a record slump since 2011, with the growth rate dropping by 7.1 per cent in 2017 and 4 per cent in 2016. This could be a small disappointment amid lots of bright spots in the country’s wider socio-economic picture last year. But this could also lead to an alarming conclusion – the mining industry will be unable to return to growth, and so the growth pattern must be transformed. 

  • Insurance books should not be used as collateral 06/03/2018 17:09

    Lawmakers, lawyers and leaders from Vietnam Social Security (VSS), a State agency in charge of the country’s social insurance programme, have all advised against the practice of using social insurance books as collateral by banks, credit institutions and small loan businesses at a conference last week on the subject.  

  • Five Vietnamese think tanks have been ranked in the top 100 06/03/2018 17:07

    The five think tanks are Việt Nam’s Institute of World Economics and Politics (30th), the Diplomatic Academy of Việt Nam (40th), the Việt Nam Institute of Economics (42nd), the Việt Nam Institute for Economic and Policy Research (VEPR - 56th), and the Việt Nam’s Institute for American Studies (97th).

    REGISTER EMAIL WITH VIAC