Export-import costs in Vietnam four times higher than in Singapore

High business expenses and excessive inspections were among issues with the business environment in Vietnam

A ship unloads at Nam Hai Seaport in Hai Phong City in northern Vietnam.

High business expenses and excessive inspections were among issues with the business environment in Vietnam raised by entrepreneurs at a meeting on Wednesday with Vietnamese PM Nguyen Xuan Phuc.

The event, attended by some 2,000 local and foreign entrepreneurs, senior officials, and representatives from financial institutions and professional associations, was the largest pro-business meeting of its kind ever held between a Vietnamese head of government and the country’s business community.

Themed ‘Siding with Businesses,’ the meeting was only the latest in a series of demonstrations by the prime minister proving his continued pledge to advance his notion of a ‘constructive government’ where individuals feel at ease to start long-term investments with positive growth outlooks.

High business expenses

According to the Vietnam Chamber of Commerce and Industry (VCCI), citing data from the World Bank’s World Business Environment Survey, the costs of running a business in Vietnam are much higher than those in its regional neighbors.

Export-import costs in Vietnam, for example, are four times higher than in Singapore and three times higher than in the Philippines, VCCI said.

The cost to have a shipping container transported 100 kilometers from Hai Phong City to Hanoi in northern Vietnam, or vice versa, is currently three times higher than expenditures for shipping the same container from China or South Korea to Vietnam.

Additional costs, such as administrative fees, road tolls, overdue fines, increased gas prices, and sea shipment surcharges also factor into overall expenses.

According to a Hanoi-based textile company which exports around 3,000 containers and imports approximately 2,000 containers per year, mostly through Hai Phong Seaport, it has to pay US$1,879 for every container to be exported or imported.

The administration of Hai Phong recently imposed an additional ‘infrastructure fee’ of VND500,000 ($22) per container, which the company called unacceptable, as the so-called fee is already included in other administrative charges.

Businesspeople and government officials attend the 'Siding with Business' meeting chaired by PM Nguyen Xuan Phuc in Hanoi on May 17, 2017. Photo: VGP

Excessive inspections

According to the Vietnam Association of Geological and Mineral Enterprises, businesses in Vietnam also face inspections from multiple delegations across all levels of government every year, a direct contradiction to a government directive that says businesses are not to be inspected more than once a year.

Dau Anh Tuan, head of legal affairs at VCCI, said there is a ‘saddening’ trend in Vietnam of growing enterprises being subject to additional inspections the larger they become.

The trend is absurd in economic terms, he said, since larger businesses typically have a better understanding of regulations and administrative procedures and therefore are less likely to have violations.

A VCCI survey even pointed out a worrying statistic that states 13.8 percent of enterprises in Vietnam were inspected at least four times a year in 2016.

Over half of those inspected at least twice yearly admitted that the content of each inspection was quite similar.

Vietnamese PM Nguyen Xuan Phuc (L) meets with foreign entrepreneurs at the 'Siding with Business' meeting in Hanoi on May 17, 2017. Photo: VGP

A wind of change

At Wednesday’s meeting, Vietnamese PM Phuc signed a directive dictating that a business must not be inspected or audited more than once a year by public authorities.

An exception is to be made only in the event that there are grounded suspicions of wrongdoing or violations in a business’ operations.

“I want to talk about the spirit of backing up our words with actions,” the premier said. “Businesses in Vietnam have been complaining about excessive inspections, so I have ordered the drafting of a directive… It was signed at 1:00 pm on May 17.”

The 11-page directive, detailing over 60 steps taken toward ridding enterprises of the constant worry of receiving inspectors, was officially issued at the premier’s meeting with provincial leaders and ministers that followed the event.

Fourteen ministries and the administrations of 53 provinces and cities across Vietnam are set to implement the directive.

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