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Vietnam left behind by regional countries in terms of business-friendliness: World Bank

Vietnam left behind by regional countries in terms of business-friendliness: World Bank

Thursday, October 30, 2014, 12:02 GMT+7

Vietnam is falling behind regional countries such as Malaysia and Thailand in the list of business-friendly economies globally, a new World Bank Group report released on Wednesday found.

The country cannot compare to another Southeast Asian country, Singapore, which tops the list, according to the World Bank Group’s flagship 'Doing Business' report, which measures the ease of doing business in 189 economies.

The World Bank Group is a family of five international organizations, namely the International Bank for Reconstruction and Development, the International Finance Corporation, the International Development Association, the International Center for Settlement of Investment Disputes, and the Multilateral Investment Guarantee Agency, which provide leveraged loans to poor countries.

The 12th annual report, titled “Doing Business 2015: Going Beyond Efficiency,” indicates that Vietnam only ranks 78th, falling six places from last year’s report, in the ease of doing business, way below Malaysia (18th) and Thailand (26th).

“For policy makers, knowing where their economy stands in the aggregate ranking on the ease of doing business is useful,” the World Bank Group said in the report, adding that it is also useful to know how it ranks relative to comparative economies and the regional average.

The average rank of East Asian and Pacific countries is 92, according to the report.

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“Budding local entrepreneurs in East Asia and the Pacific continue to see improvements in the business environment, as the region’s economies implemented 24 regulatory reforms,” the report reads.

The World Bank Group said the report measures the ease of doing business in 189 economies based on 11 business-related regulations, including business start-up, getting credit, getting electricity, paying taxes and trading across borders.

In terms of ease in paying taxes, Vietnam ranks 173 out of 189 economies, down two notches from the 2013 rankings, according to the report.

It takes businesses in Vietnam 872 hours a year to make 32 tax payments, while the respective average figures for the East Asia and Pacific regions are 25.9 instances of tax payment and 204 hours.

The total tax rate in Vietnam accounts for 40.8 percent of profit, whereas it is only 34.4 in the region.

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Nguyen Minh Thao, deputy head of business environment and competiveness with the Central Institute for Economic Management, said Vietnam still saw its ranking drop despite many recent reforms because “other countries possibly also launched reforms and Vietnam is restructuring at a slower pace.”

Thao added that some of the data used in the report is not updated, and there are also some reforms that are not recognized by the World Bank Group.

“The report takes into account feedback by businesses, but there are some good policies that they cannot enjoy,” she said.

The ten economies with the most business-friendly regulatory environments are Singapore, New Zealand, Hong Kong, Denmark, South Korea, Norway, the United States, the United Kingdom, Finland, and Australia.

Rita Ramalho, manager of the 'Doing Business' project, said the gap between the best- and worst-performing countries continues to narrow as countries improve their business climates.

“It’s easier to do business this year than it was last year, than it was two years ago or 10 years ago,” she said. “We see that the economies that score the lowest are reforming more intensely, so they are converging toward the economies that do the best.”

This year’s report uses new data and methodology in three areas: resolving insolvency, protecting minority investors, and getting credit, according to the World Bank.

The World Bank Group states clearly in its report that while the ranking tells a lot about the business environment in an economy, it “does not tell the whole story.”

“The ranking on the ease of doing business and the underlying indicators do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy,” the report reads.

“Still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business.”

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