Policy review crucial to set up for new funding wave

Vietnam Investment Review

Policy review crucial to set up for new funding wave ( illustration photo / source Shutterstock)

Aside from strong determination, Vietnam needs to make great strides before it can grow into a trustworthy venue for foreign investors, especially in the context that fresh opportunities are on the horizon, promising a new wave of investment.

With that, the Politburo’s Resolution No.50/NQ-TW on orientations to perfect institutions and policies, as well as raise quality and efficiency of co-operation through 2030, has attested to the strong commitment of the Party and the entire political system in building a wholesome and lucrative business climate to attract foreign investment flows.

At the first-ever Vietnam Investment Forum in 1991, with the presence of late Party General Secretary Nguyen Van Linh, the Vietnamese Party and state sent a substantial message to the overseas investor community that the country is renovating, opening the doors, and pushing up foreign investment attraction to motivate economic development.

Nearly three decades later, the Politburo for the first time gave birth to a specific resolution on foreign investment attraction – last year’s Resolution 50. This indicates that Vietnam acknowledges foreign investment as an important part of the local economy and will be making further endeavours to push up foreign investment attraction to drive socio-economic development.

At the annual Vietnam Business Forum held in January, Minister of Planning and Investment Nguyen Chi Dung reviewed the laudable achievements of foreign-invested enterprises (FIEs) as the total disbursed foreign direct investment touched $20.4 billion, the highest-ever recorded, while the committed capital volume surpassed $38 billion, setting a 10-year record.

At the event, the business associations of many countries based in Vietnam such as the United States, South Korea, Japan, the United Kingdom, Australia, and India confirmed their commitments for long-term development in Vietnam, and trying their best to push up the country’s development in the regulatory environment and infrastructure as well as human resources development, for a more innovative and sustainable growth for the country.

Since the start of 2020, the coronavirus has left a sweeping impact on the global economy. Most forecasts point to a gloomy picture with negative growth for many world powers. According to a first-quarter report on global development perspectives by the International Monetary Fund, the global economy would contract by 3 per cent this year in the wake of COVID-19 implications, even more serious than what was seen with the financial turmoil in 2008.

Notwithstanding, the pandemic has brought valuable lessons of experience to many countries and global conglomerates. One of the lessons is the necessity to diversify supply sources, avoiding reliance on a single economy to mitigate supply chain disruptions.

This provides rare opportunities to up-and-coming developing nations like Vietnam. The country’s success in pandemic containment and its active policies for development reconstruction has secured appeal from international investors and global companies. Does Vietnam stand ready to hail a new wave of investment capital?

Aside from having eminent advantages compared to regional peers such as political stability, a vast consumer market, innovative government, and an abundant workforce at a competitive cost, investors doing business in Vietnam are facing concerns over unstable policies and lack of clarity and transparency in the regulatory system, causing difficulties for them.

Other hindrances involve unsynchronised development of logistics services or limited workforce of professional expertise. Some challenges are objective, demanding time and financial resources, while some others are subjective that can be radically tackled if having in place a close co-operation and strong commitment from the part of authorised agencies and FIEs.

For instance, financiers are uneasy about the stability of tax policies, compliance of Vietnamese accounting standards over international standards, and transparency in implementing regulations on tax and accounting, as well as funding safeguard measures.

At the annual government-business community policy dialogue Vietnam Business Forum last year, Takahisa Onose, representative of the Tax and Customs Working Group, said investors need to trust that Vietnam’s tax authorities will apply fair and reasonable policy based on the application of core principles in tax and accounting.

“The principle of the right to an independent appeal of tax assessments, initially outside of the courts, is fundamental to nearly all tax jurisdictions and should be developed in Vietnam, and the timing and severity of destructive enforcement measures like freezing bank accounts should occur only after all reasonable remedies have been explored and only after such appeals process has run its course,” he said.

Onose also stressed the need to have in place a mechanism for dispute settlement in the interpretation and enforcement of the law, as well as in the inspection process at businesses.

Businesses almost have no opportunities to lodge claims against decisions or conclusions of tax inspectors before local tax authorities apply coercive measures such as blocking accounts or neutralising VAT invoices. Major FIEs such as Unilever or Sabeco had once cried for help to the prime minister for halting coercive measures from tax or auditing authorities to avoid facing detrimental impacts on their business operations.

The right to lodge claims and having their claims settled with engagement of independent professional agencies and having opportunities to communicate with relevant management agencies at different level must be regarded a legitimate right of businesses, helping to secure the trust of investors and businesses into a wholesome and transparent investment environment in Vietnam and the accountability of local authorised agencies.

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