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Vietnam Business Administrative Reform, Why Is It Necessary?

    Tron Le on Unsplash
    Tron Le on Unsplash

    Vietnam – The government, under the instruction of Prime Minister Pham Minh Chinh, officially signed Official Dispatch No.470/CD-TTg on May 26, 2023, focusing heavily on socio-economic planning. It is in line with the PM’s promise after his swearing-in ceremony on April 5, 2021, aimed at the continued reformation of various sectors, including support of market autonomy.

    Georgios Domouchtsidis on Unsplash
    Georgios Domouchtsidis on Unsplash

    General View on Official Dispatch No.470/CD-TTg

    The document states a dynamic and unpredictable economic situation can only be tackled by removing difficulties for business sectors and aiming for socio-economic development in 2023. One of the most essential steps is to eliminate unnecessary administrative processes through simplification. It aims for production and business activity, investment, and public interest. It is recorded that the number of administrative procedures as of May 2023 was 376 less than the same period in 2020.

    Lowering lending interest rates for businesses will push them to innovate and increase their activeness in the field, which becomes another focus of the document. However, PM Chinh noted that the rates are still high despite the lowering effort by The State Bank of Vietnam (SBV) and need to be revised to meet appropriate criteria. The SBV is also tasked to keep up with credit packages disbursement with more transparent and acceptable lending conditions.

    The PM also considered the importance of products and markets diversity and is pushing for the signing of incoming Free Trade Agreements (FTAs) with other states such as the United Arab Emirates, Israel, and MERCOSUR of South America, as well as further implementation of existing FTAs. This step emphasizes a diverse supply chain for Vietnam products.

    Other important points include digital transformation, in which the role in the business sector becomes more apparent, and empowerment of innovations among people. In order to ensure all of these instructions are implemented properly, thorough and careful monitoring of the government office and prompt report to the PM by the government office are mandatory. 

    A textile worker at a Hong Kong-invested factory in Tay Ninh Province in southern Vietnam (VnExpress/An Phuong)
    A textile worker at a Hong Kong-invested factory in Tay Ninh Province in Southern Vietnam (VnExpress/An Phuong)

    While COVID-19 disturbed economic and business sectors, enterprises and consumers alike showed growing numbers after lockdown regulation was loosened. Conversely, some industries such as textile and footwear are mentioned in the document, both of which are Vietnam vanguards of manufacturing industries. Up to September 2022, Statista recorded that textile exports reached 27,6% growth compared to the same period of 2021. On the other hand, Adidas and Nike have chosen the country as a major footwear production base. Vietnam earned USD 22 billion of footwear exports up to November 2022. Having been affected by the COVID-19 pandemic, Vietnam’s Ministry of Industry and Trade is now focusing on recovering and strengthening both sectors.

    Hence, easing administrative processes would encourage businesses to undergo the same without wasting too much time – thus making more room for innovations and at the same time helping with industry recovery post-pandemic. Both factors would result in faster national economic growth.

    Alongside the Official Dispatch No.470/CD-TTg is a foreign direct investment (FDI) significancy in Nghe An Province. Since the beginning of May 2023, the province had 57 new FDI projects, ranking 9th out of 63 provinces and centrally-run cities in Vietnam with the most FDI projects. Vietnam significantly attracts more investors due to various factors, including the labor force with an average percentage of 76,9% nationally.

    The labor force in Vietnam is not without flaws, as approximately only 11% of domestic laborers are considered skilled. To deal with this issue, the government has been increasing vocational and technical certifications, as well as education and literacy, by forming partnerships with various educational institutions and organizations. During the process, usage of digital media and technology is highly encouraged, as it is not only technically required for most of the hard skills but also for the labor force to be more technologically literate. Highly-skilled labor forces will surely support business development, further bringing larger economic development for Vietnam.

    Official Dispatch No.470/CD-TTg brings hope and more opportunities for business sectors to contribute to the national and even international market battlefields. Not only would this benefit them and open up more employment opportunities, but it would also help in realizing the ultimate goal to make Vietnam a key player in the world economy.

    Article by: Madda Asyafa Putra

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