IFC and the World Bank's Doing Business 2006 report cited Vietnam as one of the world's top reformers of business regulation, citing government efforts on a number of policies and regulations that affected at least five of the key indicators on the ease of doing business.
But businesses in Vietnam register, operate, and are regulated at the provincial level, where the local government's implementation of reforms can be lax. In many provinces, businesses encounter cumbersome or outdated regulation, excessive licensing requirements, and arbitrary inspections. All of these can cost companies time and money, deter investors, deny job opportunities to local communities, and impede efforts to reduce poverty.
With this in mind, IFC's Mekong Private Sector Development Facility has designed and piloted a Provincial Simplification Program, aimed at helping local governments develop and implement effective business reforms.
In the pilot phase the facility is working with two provinces, Bac Ninh and Binh Dinh, to streamline the business startup process. This entails registration, obtaining a tax code, getting an official company stamp, and buying tax invoices.
Since the launch of the pilot four months ago, MPDF has developed a detailed process map of the four aspects of business startup, based on extensive interviews with officials in government departments and representatives of over 30 newly established enterprises.
Initial findings show that current processes are indeed cumbersome. On average, it takes a total of 126 detailed steps over about 32 days to start a business in Bac Ninh. While this is shorter than the Doing Business estimate of 51 days (which is based on the number of days it takes in the capital, Hanoi), it is still much longer than the six days needed in nearby Singapore. It takes only three days in Canada, where starting a business is faster than anywhere else in the world.
In July 2006 these findings were presented to senior officials of the People's Committee and relevant government departments. Through MPDF, IFC has recommended a streamlined, single-door approach to the startup process. This should very quickly reduce the time required to start a business, to about 15 days. Additional reforms over the long run should reduce time and costs even further.
The new process is expected to bring a significant rise in business registrations. This in turn will generate more tax revenues for the province and create more jobs, accelerating the private sector's impact on poverty reduction.
IFC Helps Influence Policy in Vietnam
As a direct result of the success of the Bac Ninh pilot, the Ministry of Planning and Investment has asked MPDF to provide technical assistance to a government taskforce responsible for streamlining the business registration process at the national level and applying the new process in all 64 provinces.
Through its on-the-ground and hands-on approach, IFC's facility has helped influence policy in Vietnam, to the benefit of the private sector and the millions of people it employs.
Executive Vice President Lars Thunell met on August 16 with the General Secretary of the Communist Party in Bac Ninh, Nguyen The Thao; the Vice Chairman of the Bac Ninh People's Committee, Tran Van Tuy; and the Deputy Director of the Department of Planning and Investment, Nguyen Phuong Bac. Thunell said the project underscores IFC's commitment to fostering improvements in Vietnam's business environment.
| "Improving the environment for doing business is the key to attracting both foreign and domestic private sector investment. By implementing business environment reforms that promote private sector growth, we hope to help Bac Ninh achieve its goal of becoming a leading industrial province in Vietnam." |
Lars Thunell, IFC EVP |
General Secretary Nguyen said, "Despite strong economic growth over the last few years, there are still only about 1,700 private companies in Bac Ninh." The province is one of the most densely populated in Vietnam, with a population of around 1 million. Nguyen added, "Through IFC's technical assistance, we hope to streamline administrative procedures in ways that will help household businesses become formal enterprises. This will enable them to enjoy benefits of being registered companies, including access to financing and the ability to export their products directly."
For more information contact:
Andrew Mak
Hong Kong
Tel: (852) 2509 8110
Fax: (852) 2509 9363
E-mail:
amak@ifc.org
or
Ann Bishop
Mekong Private Sector Development Facility
International Finance Corporation
Tel: (855) 2321 0922 (Ext 217)
E-mail:
abishop1@ifc.org
