POLICY CHANGES POSE OBSTACLES FOR FOREIGN INVESTORS
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| Participants share opinions on the effect of policy changes on foreign investors. |
Although foreign direct investment (FDI) has played an important
role in boosting Vietnam’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 Vietnam”, co-organized
by AmCham, the Vietnam Chamber of Commerce and Industry (VCCI) and the Ministry
of Planning and Foreign Investment Agency in Hanoi on Thursday.
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 total 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 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 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 materialize 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 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.
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, Vietnam 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, Le Net, AmCham Healthcare Committee
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 Vietnam, 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.
Net 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 Vietnam.
“Source: Vietnamnews ”
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