Improving the business environment to revitalize HCMC’s economy

Provincial Competitiveness Index (PCI) 2022 report published by the Vietnam Federation of Commerce and Industry (VCCI) revealed the significant drop in HCMC’s ranking, which fell 13 notches from 14th place in 2021 to 27th place in 2022. Its proactive index was 6.02 which was also low. Foreign experts say the business environment needs improvement.

The PCI is a good guide on overall business and governance health but does need to be interpreted well, according to Mr. Troy Griffiths, Deputy General Director, Deputy Managing Director at Savills Vietnam. Whilst HCMC’s ranking has fallen, it’s more a result of other provinces increasing their standing, rather than HCMC’s place falling. The leaders in the PCI are relatively small administrations that score easily. The 10 sub-indices that make up the PCI are often difficult for larger administrations to score well.

However, the PCI results show that the business environment in the city has not met businesses’ expectations during hardship experts say and they suggest more proactive support from the city’s administration to improve HCMC competitiveness, which will also revitalize the city’s business in slumps, particularly improving administrative procedures, removing blockages for public investment to increase funding for the city are emphasized by experts as the best ways to support businesses this time.

Mr. Federico Vasoli, Vice President of the Italian Chamber of Commerce in Vietnam (ICHAM), says that it is necessary to simplify administrative procedures, rendering them consistent to eliminate unreasonable bureaucracy. Another trajectory is to allow most if not all procedures to be performed online on a single platform, like SingPass for individuals and CorpPass for legal entities in Singapore. 

“There should be constant training, including in terms of foreign languages, and KPI checks for officers, so that they carry out their functions truly at the service of the people and also of the private sector. More competition and higher salaries would also be beneficial to attract excellent talents within the ranks of the public administration.”, Mr Vasoli thinks this would help the officers working in favor of private businesses to accelerate the growth of the economy. He also suggests that there should be effective coordination among the state departments to avoid implementing contractionary policies and so that procedures are user-friendly. He also suggested that public administrations should invite and visit their peers in other countries to learn from best practices should also be favored.

HCMC proposed 12 solutions to be implemented in the second quarter of 2023 to promote socio-economic development. “HCMC needs to increase public investment. There must be a plan and a specific time schedule for each project. For key projects, all levels of committees and heads must have direction related to public investment disbursement, compensation clearance, site clearance to  speed up progress.”, Secretary of the HCMC Party Committee Nguyen Van Nen said at the meeting of the Executive Committee of the HCMC Party Committee. 

“To optimize the local market, the city needs to support policies for vocational training, renewable energy and sustainable business environment and take measures for the bottlenecks in the real estate market.”, Mr. Michele D’ercole, the President of ICHAM in Vietnam says.

To improve the city’s proactiveness to attract more investment and to improve business growth rate, Mr. D’ercole suggests focusing on promoting urban infrastructure construction, planning and managing land use, and improving the investment environment. There is a need to overcome the bottlenecks in the administrative system and the limitations in new growth drivers and space and to increment the directions for key regional and inter-regional transport projects in the locality, as well as medical equipment for city hospitals. Solving the issue of electronic work permits for foreign workers in line with the digital transformation strategy would add more foreign funds to the city.

Real estate market is an important component of the economy, but it is also facing major challenges recently, especially cash flow and legal bottlenecks that are reducing customers’ confidence. In particular, the stagnation of the real estate market recently has created legal problems, accounting for 70 percent of the hindrances, according to information from the Ministry of Construction. At the moment, three main problems are hindering the real estate market’s development namely legal issues, supply and demand, and prices. In Mr. D’ercole’s opinion, if the legal process is favorable, projects are available, and the prices are reasonable, the demand will come back.

A single national authority across real estate seems to be a logical move towards more effective decision making. It’s not just private businesses but internally, the government is also held back. The best example being the raft of infrastructure projects held up with allocated funds still not disbursed, according to Mr. Griffiths. The answer to improvement for the real estate market is a complicated process requiring strong resolve, as there are many vested interests in land reform. The government is aware of the challenges and has more recently been active in promoting a super ministry and a multitude of policy change. The foundation is the land value framework that is preventing development from proceeding, thereby holding back economic growth.

Changing the valuation framework before the building blocks are in place will not create a system that is accurate, and therefore cannot work sufficiently to be trusted. Several key criteria need to be addressed prior to an effective framework can be developed such as Provincial Plans need to be regulated to ensure land use zonings are ratified, land use transfers need to be public, and at best digitized, a methodology must be considered that is appropriate for the Vietnamese context, sufficient high integrity data needs to be gathered, for a regulated revaluation program and an appeal, objection or review process needs to be implemented for errors in the system. 

There have been recent great achievements, most notably all 63 provinces have now submitted their masterplans. The next step is to digitize the Vietnam cadaster, then to register openly all transactions and dealings. From there the land price framework can be developed, that will rapidly progress land reform

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Source: Vietnam Insider