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Investment incentive
policies have been unstable for quite a long time. There are
also a number of some negative practices in their
administration, due to the fact that many enterprises are
eligible for incentives, and compete with each other to get
them. Theoretically, an enterprise is automatically eligible to
receive an incentive as long as it meets all the relevant
criteria. In practice, however, companies get stuck with
complicated procedures, delayed appraisal processes, and
additional costs can be incurred. Some enterprises claim that
their applications were rejected, despite being eligible. Other
companies, whose applications were successful, claimed that it
cost them a lot of time and money. Some even paid a 'consulting
service' fee of up to VND 20-30 million.
Current administrative procedures also prevent some eligible
companies from receiving incentives. A number of companies that
possess an investment incentive certificate can't actually get
these incentives, due to disagreement with the tax authorities
on issues like revenues, export turnover and new investment.
This may be an issue of inefficient coordination between the
appraising and certificate issuing authority (i.e. the local
Department of Planning and Investment) and the implementation
agency (i.e. the tax department).
Professor Nguyen Thi Canh, National University of Ho Chi Minh
City
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 If
an incentive policy is clear enough, those enterprises that meet
all the necessary criteria should be able to successfully apply
for it. Incentives are of little value if they are so hard to
access that a company needs additional outside help to interpret
and implement it. The troublesome administration procedures
discourage firms from applying for incentives. Part of the
problem is the complex procedures, and part of it is due to
officials at some government agencies that make the process
difficult for companies.
Mr. Pham Xuan Mai, General Secretary,
Shoe and Leather Association of Ho Chi Minh City
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Recently, when the
tax incentives procedure was adjusted to be more friendly and
convenient, a question was raised as to whether incentive
licensing should be kept or removed. We support the removal of
incentive licenses, since businesses are nowadays able to
determine whether they are eligible for an incentive or not
based on investment sector and locality.
Another issue worthy of serious consideration is that most of
our investment incentives are tax-based, and the costs are not
limited to tax revenue sacrificed by the government, but also
other service costs, like consulting fees, and “under the table
money” paid to different people in the administration system.
Currently, provinces tend to issue their own investment
incentive policies, and use it as a tool to compete with each
other to attract new investment. Out of 50 provinces with their
own incentive schemes, more than two-thirds offer incentives
beyond those provided by central government. If we cannot find a
good solution to this problem, we may lose the trust of the
business community.
Mr. Nguyen Van Phung, Deputy Head of Tax Policy Department,
Ministry of Finance
-
 It
is not advisable for provinces to have their own investment
incentive schemes. Individual incentive policies may initially
help attract some investors to a province. However, this
practice may create a number of negative social and economic
impacts. Unhealthy competition among provinces can violate
national interests (such as lower tax revenues), and can make
investors hesitate to make an investment decision, preferring to
wait for more attractive schemes from other provinces. The
government will have to intervene if too many unreasonable
incentives exist at the provincial level, which in turn
undermines the stability of the investment environment.
Mr. Nguyen Khac Thanh, Managing Partner, Ernst & Young Vietnam
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The province of Hung
Yen was established in 1997, and started out very poor
economically. However, we have been successful in attracting
domestic private investors. In 2003, the People's Committee
issued an incentive policy that was aligned with the Central
government's incentive scheme. Some investors ask us whether the
province has any additional incentives beyond those in the
national scheme, as other provinces are trying to attract them
with additional incentives. In our opinion, the greatest
incentive is an enabling investment environment in which
administrative procedures are fast and convenient, thereby
saving time and money for investors. The cost of a delayed
administrative step may exceed land rental fees for several
years.
The presence and long-term commitment of a number of big private
companies like LiOA, Kinh Do and Hoa Phat in our province can be
taken as evidence that a favorable investment environment
exists. I think the government should conduct a comprehensive
review of all existing provincial incentive policies, and have a
clear viewpoint on this practice, so that there will not be any
unhealthy competition between provinces to attract investment.
Mr. Doan Anh Quan, Deputy Director,
Department of Planning and Investment of Hung Yen Province
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