Vietnam is making progress in doing business and has proved that it is heading the right way, says Sin Foong Wong, country manager of the International Finance Corporation (IFC) at the launch of “Doing Business 2008” report in Hanoi on September 26.
Doing Business 2008, the fifth annual report issued by the World Bank and IFC, assesses the ease of doing business in a country based on 10 factors: starting a business, dealing with licences, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, and closing a business.
In the report, Vietnam ranks 91 st among 178 economies, a jump from the 104 th position in last year’s report. Singapore tops the most business-friendly economy for the second year, Thailand ranks 15 th, Malaysia 24 th, Taiwan 50 th and China 83 rd. The rank has showed that Vietnam is narrowing gaps with leading countries in East Asia and Pacific region in terms of the ease of doing business.
Vietnam, together with China, Egypt, India, Indonesia and Turkey, are considered fast reformers in the large emerging economies. The country strengthened investor protections, with a new enterprise law and securities act. A secured transactions decree allows businesses to use a wider range of assets as collateral, easing access to credit.
However, there are a number of areas that Vietnam should improve. They include protecting investors, closing down a business and paying taxes.
Vietnam remains among the countries with the lowest protection for investors against directors’ misuse of corporate assets. The report says that although the new securities and enterprise laws introduce duties for directors, they fail to provide a way to enforce those duties.
Secondly, it is still difficult to close down a business in Vietnam. According to the report, the current mechanism for dealing with bankruptcy in Vietnam can often be difficult and time consuming. For example, a case of bankruptcy in Vietnam will take more than five years with a recovery rate of only 18 percent. As a result, very few enterprises terminate their business using official regulations and procedures.
In terms of paying taxes, the report finds Vietnamese businesses are among those who spend the largest amount of time to fulfil tax requirements.
The report finds that Egypt is the top reformer for 2006/07, improving 5 of the 10 indicators studied. Two hundred reforms in 98 economies were introduced between April 2006 and June 2007. Reformers simplified business regulations, strengthened property rights, eased tax burdens, increased access to credit and reduced the cost of exporting and importing.
The report also finds that women benefit from the ease of doing business. It shows that countries with higher scores on the ease of doing business have larger shares of women in the ranks of both entrepreneurs and workers. The increase in first-time business owners was 33 percent higher for women than men.
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