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Bribe-paying Vietnamese SMEs acknowledge the rise of unofficial costs: survey

Thursday, November 17, 2016, 17:22 GMT+7

Nearly half of all Vietnamese small- and medium-sized enterprises (SME) had to ‘bribe’ officials in order to facilitate their business in 2015, with most acknowledging that the amount of “under the table” money they are forced to pay will continue to rise in the future, a survey found.

Despite a much improved business environment in the country, Vietnamese SMEs are still pressured to pay bribes in order to operate, according to the “Characteristics of the Vietnamese Business Environment: Evidence from a SME Survey in 2015” report.

Vietnam’s Central Institute for Economic Management, one of the co-authors of the survey, held a conference in Hanoi on Wednesday to release the report findings.

Other co-authors of the survey include the Vietnamese Institute of Labor Science and Social Affairs, Denmark’s University of Copenhagen, and the United Nations University World Institute for Development Economics Research (UNU-WIDER).

The survey interviewed some 2,500 non-state manufacturing SMEs in ten cities and provinces, including three major cities – Hanoi, Hai Phong, and Ho Chi Minh City.

Of the surveyed enterprises, 72 percent are micro-firms, or those with no more than ten full-time employees.

The survey found that 42.7 percent of businesses had to pay ‘under-the-table money’ in 2015, a slight drop from 44.6 percent in the 2013.

The bribe-paying businesses said the unofficial fees allowed them to connect to public services, obtain permits and licensing, deal with tax and tax collectors, and handle customs.

Those who paid bribes to deal with tax and tax collectors accounted for as much as 24.1 percent of the total number.

The survey, however, concluded that, while there is not much change in bribe paying among Vietnamese SMEs, “[it has become] clearer that bribe-paying businesses do not have higher rates of growth than non-paying firms.”

In the meantime, 40 percent of respondents said they acknowledge that they will have to pay even bigger unofficial fees in the future.

The survey also found that access to formal credit has remained challenging for Vietnamese SMEs, while 90 percent of respondents reported they face severe competition in their industry.

“Vietnamese enterprises do not appear to be very active in foreign markets,” the report reads.

“This is not only illustrated by low export rates, but also by a low prevalence of internationally recognized standards.”

Other findings include the fact that a large proportion of SMEs do not have quality or environmental certificates. “We have even observed a negative trend in certification of both international and environmental standards,” the report notes.

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