Wednesday, December 13, 2006

Vietnam must clarify laws and fight graft, says foreign business

HANOI (AFP) - Foreign business groups have praised Vietnam, soon to join the WTO, for its stellar economic growth but urged the communist regime to clarify murky laws, fight graft and improve infrastructure.

Vietnam's gross domestic product growth is set to top eight percent this year, the highest rate in East Asia after China, drawing much attention to the country of 84 million, Southeast Asia's most populous after Indonesia.

Businesses hope to cash in on better market access when Vietnam joins the World Trade Organisation on January 11, a key step for what was a war-ravaged communist command economy on the brink of starvation only decades ago.

As the WTO's 150th member and with recently normalised US trade ties, Vietnam hopes for "a new wave of investment," topping this year's record 9.5 billion dollars, said Planning and Investment Minister Vo Hong Phuc.

Foreign corporate and development groups at Wednesday's Vietnam Business Forum (VBF) in Hanoi praised the achievements but also urged the regime to speed up reforms or lose out on many of the expected benefits.

A VBF survey of more than 200 companies in Vietnam, three fourth of them foreign, rated the business environment as "satisfactory" and no better than a year ago, partially due to uncertainties over the implementation of WTO rules.

Respondents favoured Vietnam's strategic location, political stability and macroeconomic management but gave it lower marks for intellectual property (IP) protection, regional competitiveness, infrastructure and its legal system.

Both hopes and concerns were also voiced in a Japan Bank for International Cooperation survey of Japanese companies in which Vietnam overtook Thailand as the third most popular investment destination after China and India.

Vietnam was seen as attractive because of its inexpensive labour force, market growth potential and as an alternative location to giant China, but key concerns centred on poor infrastructure and an opaque legal system.

World Bank country head Klaus Rohland said there was a widespread perception of "a Vietnam that is rising" but warned that the country must follow through on the many legal commitments it has made in order to join the WTO.

"The law is not what's in the books, its the actions that count," he said, urging Vietnam to ensure that "the spirit of the laws -- so progressive, so promising -- is also translated into the spirit of the decrees and circulars."

Mark Farquhar of the Australian Chamber of Commerce said a "lack of timely and consistent implementation of laws, overly cumbersome regulations as well as unclear, uneven laws... remain major impediments in the business environment."

He stressed that the "number one concern" of his group was corruption.

Despite some progress, notably in investigating a multi-million dollar graft scandal in a transport ministry unit this year, "it remains unclear whether these significant cases have been dealt with fully," he said.

"In the longer term, Vietnam must empower the judicial system and media to robustly investigate cases of expected corruption," he said.

"Aggressively tackling corruption is the single most important action the government can take to improve the business environment in Vietnam."

American Chamber of Commerce chairman David Knapp echoed the comment and also urged Vietnam to speed up infrastructure development by allowing private sector participation, especially in electric power and deep-water seaports.

"Rapid growth is putting strains on the country's physical infrastructure, and these constraints threaten foreign direct investment for manufacturing and export," Knapp said in a statement.

He also said Vietnam must improve the education sector and strengthen IP protection, referring to the widespread sale of fake software and movie DVDs, knock-off fashion items and fake pharmaceuticals.

"IP theft hampers investment and innovation, threatens public health and safety and reduces government revenue," he said.