ABSTRACT

In the situation of the integrated economy, more and more foreign companies as well as domestic companies want to establish business in Viet Nam and the amount of companies increase significantly in some recent years. However, business environment plays a very important role in forming and establishing company while business environment in Viet Nam is not highly appreciated in the world. Doing Business Report was co-published by the World Bank and the International Finance Corporation in 2012. This report, with the title Doing business in a more transparent world, illustrates quantitative indicators on business regulations and the protection of property rights to make comparison among 183 countries, including Viet Nam. The report evaluates the specific issues which are considered the most important factors in the formation of the business environment in a country. Then it makes comparison in the correlation between surveyed 183 countries (economies), from Afghanistan to Zimbabwe over time.

Average index is calculated from the individual indicators reflecting the policy on the business and protection of property on the basis of 10 specific topics: - Starting a business - Dealing with construction permits - Getting electricity - Registering property - Getting credit - Protecting investors - Paying taxes - Trading across borders - Enforcing contracts - Resolving insolvency.

The purpose of this assignment, through the Doing business report and Viet Nam Law on enterprise 2005, is to evaluate the business environment in Viet Nam, point out the mistakes in limitation and recommend future solutions.

CONTENT
I. Summary of Doing business report
Before analyzing each indicator, lets see how they ranked and changed from 2011 to 2012 among 183 economies as the following table: Viet Nam in 2012 103 100 Viet Nam in 2011 -3 Best performer Change globally DB2012 New Zealand (1) 9 9 0 Canada (1)

Indicators

Starting a business Procedures (number) Time (days)

44

44

New Zealand (1)

Cost (% of income per capita) Paid in Min capital (% of income per capita) Dealing with construction permits Procedures (number) Time (days) Cost (% of income per capita) Getting electricity Procedures (number) Time (days) Cost (% of income per capita) Registering property Procedures (number) Time (days) Cost (% of

10.6

12.1

1.5

Denmark (0.0)

0.0

0.0

82 economies (0.0)

67

70

Hong Kong SAR, China (1)

10

10

Denmark (5)

200 109.0

200 124.7

0 15.7

Singapore (26) Qatar (1.1)

135

135

Iceland (1)

Germany (3)

142 1343.0

142 1536.0

0 193

Germany (17) Japan (0.0)

47

43

-4

New Zealand (3)

Portugal (1)

57 0.6

57 0.6

0 0

Portugal (1) Slovak

income per capita) Getting credit Strength of legal rights index (0-10) Depth of credit information index (0-6) Public registry coverage (% of adults) Private bureau coverage (% of adults) Protecting investors Extent of disclosure index (0-10) Extent of director liability index (0-10) Ease of shareholder suits index (010) Strength of investor protection index 3 2.7 0.3 2 2 0 1 0 1 6 6 0 166 172 6 0 0 0 29.8 26.4 3.4 5 5 0 24 8 21 8 -3 0

Republic (0.0)

UK (1) New Zealand (10)

Japna (6)

Portugal (86.2)

New Zealand (100)

New Zealand (1) France (10)*

Singapore (9)*

New Zealand (10)*

New Zealand (9.7)

(0-10) Paying taxes Payments (number per year) Time (hours per 941 year Trading across 68 borders Documents to export (number) Time to export (days) 22 22 0 Hong Kong SAR, China (5)* 6 6 0 France (2) 65 -3 941 0 Luxembourg (59) Singapore (1) 151 32 129 32 -22 0 Canada (8) Norway (4)

Cost to export (US$ per container) Documents to import (number) Time to import (days) Cost to import (US$ per container) Enforcing contracts Time (days)

580

555

25

Malaysia (450)

France (2)

21

21

Singapore (4)

670

645

30

Malaysia (435)

30

31

Luxembourg (1)

295

295

Singapore (150)

Cost (% of claim)

28.5

28.5

Bhutan (0.1)

Procedures (number) Resolving insolvency Time (years)

34

34

Ireland (21)*

142

130

-12

Japan (1) Ireland (0.4)

Cost (% of estate) 15 15 0

Singapore (1)*

Recovery rate (cents on the dollar) 16.5 18.6 2.1 Japan (92.7)

In general, most of the indicators of Viet Nam fell down in comparison with other countries, especially Paying taxes decreased 22 rank from 2011 to 2012, which is a remarkable fall. Some indicators of Vietnam are currently being rated very low in the relationship related to other countries in the region and around the world such as protection of investors (ranked 166), tax (ranked 151), and resolving insolvency (ranked 142 out of 183 national rankings). Meanwhile, there are indicators ranking quite high such as Getting credit (ranked 24) and Enforcing contracts (ranked 30). In 2012, out of 10 individual indicators which are ranked to be integrated into the overall ranking of total 183 countries, Vietnam has up to 6 indicators dropped compared to in 2011, including: (1) the establishment of enterprises (from 100 to 103), (2) registration of ownership property (from 43 to 47), (3) getting credit (from 21 to 24); (4) payment of taxes (from 129 to 151), (5) crossborder trade (from 65 to 68); (6) dissolution (from 130 to 142). In particular, there are
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many targets order relegated from the previous year as tax (22 relegated rank), bankruptcy settlement (12th grade dropped).

Evaluation for each indicator: Starting a business The indicator Starting a business has 4 factors: Procedures (number), Time (number of days), cost (% of income per capita), and paid-in Min. Capital (% of income per capita). Doing Business measures the ease of starting a business in an economy by recording all procedures that are officially required or commonly done in practice by an entrepreneur to start up and formally operate an industrial or commercial businessas well as the time and cost required to complete these procedures.

While the number of procedures (9)* and time (44 days) unchanged from the previous year 2011 and even the costs reduced (12.1 to 10.6), the index still reduced 3 ranks. This proves that in Viet Nam, procedures to establish business is still complicated and cumbersome; over a year from 2001 to 2012 there was nothing changed efficiently although the State had many policies to simplify procedures for businesses. So that the policy could not have been done thoroughly and they have not given positive result yet. *: Article 15, 16, 17 in Law on Enterprise 2005 Dealing with construction permits Doing Business records the procedures, time and cost for a business to obtain all the necessary approvals to build a simple commercial warehouse in the economys largest business city, connect it to basic utilities and register the property so that it can be used as collateral or transferred to another entity. Like the indicator Starting a business, Dealing with construction permits from 2006 to 2012 (according to Table 3.1: The ease of dealing with construction permits in Vietnam over time By Doing Business report) has Procedures and time unchanged but cost decreased quite much (from 466.1% to 109.0%).
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The number of procedures of Viet Nam in 2012 is 10 a half of the regional average (20) while the best performer in the world is Denmark with 5 procedures. Therefore, in comparison with Asian region and Denmark, procedures to get permission on construction are not too many and complicated. However, the time is very long (200 days), more than the regional average while Singapore takes only 26 days. Besides, even though the cost through 6 years reduced significantly but if compared to Qatar (1.1%), the cost is still very high. Getting electricity Doing Business records all procedures required for a local business to obtain a permanent electricity connection and supply for a standardized warehouse, as well as the time and cost to complete them.

This is the very low-ranked indicator of Viet Nam. Although the number of procedures is only 5 but it takes 142 days to complete, the cost is very high (1343.0%). Globally, Japan is the best performer with the cost equal to 0. Registering property Doing Business records the full sequence of procedures necessary for a business to purchase property from another business and transfer the property title to the buyers name. The transaction is considered complete when it is opposable to third parties and when the buyer can use the property, use it as collateral for a bank loan or resell it In 2012, registering property fell 3 ranks with 3 factors (procedures, time and cost unchanged) although it ranks high in the ranking chart (47). The number of procedures is 6 and the cost is 0.6 %, which are the good index compared to other countries but the time is still 57 days while Portugal only 1 day. Getting credit Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions
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Targets Vietnam access to credit is evaluated relative good (rank 24 out of 183 economies). Ratio % of adults have access to Credit is 29.8%, up from 2011 and higher than the average income countries (12.8%) but lower than the regional (35.6%). However, in relation to other countries in the comparison table, in 2012 this indicator was rated Vietnam's rating dropped 3 compared with 2011. Paying taxes Doing Business measures the taxes and mandatory contributions that a medium-size company must pay in a given year as well as the administrative burden of paying taxes and contributions. According to World Bank statistics, the amount of time Vietnamese enterprises for the payment of taxes is up to 941 hours / year, higher than the average of the middle-income countries (350.2 hours / year) and compared with other countries in the region (236.9 hours / years). Protecting the investors Doing Business measures the strength of minority shareholder protections against directors use of corporate assets for personal gainor self-dealing Policy and target for investor protection in Vietnam, although has improved (up 6 ranks compared with 2011), but still rated very low, ranking 166 of 183 economies, which is the lowest-ranked indicator of Viet Nam. With a scale of 0-10 points, this indicator of Vietnam is at point 2 which is lower than the average of the middleincome countries (5.5 points) and the countries in the region (6.3 points). Trading across borders Doing Business measures the time and cost (excluding tariffs) associated with exporting and importing a standard shipment of goods by ocean transport, and the number of documents necessary to complete the transaction. Index rating for "cross-border trade" was dropped 3 ranks, partly due to charge fees and import and export (in USD / public containers) increased (from 555 USD to

560 USD). Although we see it very high but in comparison with regional area and OEDC high income countries, it is still low - East Asian and Pacific: Cost to Export $ 906 Cost to Import $ 954

- OEDC high income:

Cost to Export $ 1032 Cost to Import $ 1085

Enforcing contracts Doing Business measures the efficiency of the judicial system in resolving a commercial dispute before local courts. This indicator although dropped 1 rank, is still ranked high in the ranking chart (rank 30). In the Asian region, Viet Nam belongs to the top 2, lower than Thai Land with rank 24. Resolving insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic entities. Time resolving insolvency, dissolution in Vietnam is 5 years, many times longer than the countries in the region (2, 9 years) while Ireland is 0.4 day and Singapore 0.8 day.

II. Overview of business environment in Viet Nam

We can see the attractiveness of business environment in Vietnam is decreasing. According to Doing business report 2010 of the World Bank which was surveyed in the most populous city out off 183 countries in the world by the World Bank groups assessment, Vietnam ranks fourth in the top 10 economies which have improved policies supporting the environment business in 2010. However, compared to other countries in the region, Vietnam is still ranked below Singapore (ranked

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No.1), Thailand (19th) and Malaysia (No. 21) but higher than Indonesia, Laos, Cambodia...

In 2012, however, investment and business environment in general is deteriorating, starting from the late 2011. In the previous year, BCI index was reduced from 78 down to 52 points representing a decline of confidence in Vietnam as an investment destination. "Along with the 28% decline in FDI in nine months of 2011 and the inflation rate near 20%, fair to say that European businesses are concerned about the business and investment environment in Vietnam Alain Cany principle of Europe commercial chamber - analyzed.

Rank of business environment in Vietnam has dropped eight places in the report "Doing Business 2012" by the World Bank (WB), which is also the problem that foreign investors particularly are worried about. Mr. Alain Cany said European businesses have fell the issues rising previously have been resolved fairly and slowly meanwhile some new problems arose, which reduced the trust in the business environment in Vietnam of the foreign investors. The expert even emphasized that Vietnam is "lost world" of investment attraction when compared to some other regional countries such as Indonesias case. The neighboring country has higher population than Vietnams, better growth in the crisis and the business environment is more favorable than Vietnams one at this time..

Despite of backward indicators and result, business environment n Viet Nam still has some advantages and improvement. As reported by the World Bank in 2011, Vietnam also had some progress in improving the business environment in some aspects. Out of the 183 countries (economies) were surveyed, Vietnam is one of the 83 economies that has the management mechanism to create an easier way for the establishment of an enterprise; Viet Nam is one of the 91 economies that permits general description of mortgaged assets for creation of easier access to credit. In the field of protection of investors, Vietnam is one of 45 economies regulating clearly the obligations of the members of Board of Director in the transactions involving relating
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parties. Vietnam is also one of the 97 applying mechanism on the basis of risk, making it easier for cross-border trade. Government has developed the overall national administrative reformation program in the period from 2011 to 2020. The government continuously shows the determination for building up a clean, strong, smooth, modern, effective and efficient mechanism.

III. Causes
The causes of the situation that Vietnamese business environment dropped ranks globally: One of the main reasons that Vietnam was ranked at lower position out of the overall nations ranking and individual criteria ranking is Vietnam has slow innovation and improvement of regulations to support and bring benefits the business environment in comparison to other countries, so even though the conditions and policies for the business environment of Vietnam is not changed or slightly improved, but still fell down in relation to the other countries because those countries have improvement in the policy supporting and creating advantages for business environment more quickly and powerfully Vietnam. Besides, there are several indicators of business conditions in Vietnam were rated as weak. For example, in the sixth indicators decreasing ratings, there are four indicators: start up a business, registration of property, getting credit, paying tax which have component criteria unchanged from 2011 to 2012, even while some components have evolved in a positive direction (eg, start up business costs decreased from 12.1 to 10.6,), however, the ranking of these indicators of Vietnam has been reduced in relation to the other countries because other countries improving faster, stronger. In addition to the slow innovation, another reason is the State of Viet Nam has not formed the proper policies. As analyzed above, many indicators such as start up a business, dealing with construction permission, getting electricity, register property and resolving insolvency have many procedures to submit and complete. This causes difficulties for enterprise and business people, especially in Viet Nam
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nowadays, society still exists problems, and one of them is bureaucracy and the administrative systems are not transparent enough. Besides, policy to protect investors is still weak. Other causes for this situation are the factors related to the economy in Viet Nam. First of all is the high rate of inflation. Inflation in Viet Nam in 2011 2012 was approximate 20%, which make price and cost increase many times. As the result, the cost of export and import also increase, causes difficulties for exporting and importing enterprises. Moreover, the trade tariff and barriers also is struggle for foreign companies planning to invest and establish business in Viet Nam.

IV. Recommendation
Some recommendations for Viet Nams government to improve the quality of business environment: The first is stabilizing the macroeconomic environment. Instead of focusing on the growth of economy, the government should target in a stable economy. The most important issue is to decrease the rate of inflation, reduce the interest rates for companies easy to borrow money and access to capital. The second is making protection of investors interests better, especially the granting of licenses in different fields. This will attract more investors. They will feel safe when doing business in Viet Nam. The third is protecting the intellectual property rights (IPR) and the effective treatment for the cases of violating IPR. In recent years, the protection of intellectual property rights remains some negative problems; causing many sue cases related to it. Therefore, the government should tighten the law and regulation; have reasonable remedy for violation of IPR.

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 The fourth is continuing implementation of infrastructure and commercial projects in order to ensure reliable power supply. As analyzing above, getting electricity. The fifth is that the government should continue to improve the quality of Vietnam's labor force. With the young, cheap and abundant labor resources, Viet Nam is one of the countries that have advantage of labor force, which the foreign investors are interested in very much. Still, the qualification and quality of labors are very low, leading to the low quality of production systems and result. Thus, improving the quality of labor force not only increase the trust of the investors but also increase the labor price to raise position of Vietnamese labors in the world. The sixth is the fight against bureaucracy, corruption and continue to reduce and simplify administrative procedures. There are still many procedures with many complex steps slow down the process of doing business in Viet Nam. If the procedures are reduced, the administrative systems are made more transparent, doing business in Viet Nam will be easier and more comfortable.

CONCLUSION
In summary, although the business environment in Viet Nam in 2011 - 2012 was underestimated as reported by the World Bank but it has certain strengths that need to maintain and develop. These weaknesses have been seen and discovered. The government of Viet Nam should have the appropriate optimal actions to reform the deficiencies and restore the position of Viet Nam on the international market.

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