Infrastructure deficiencies remain a hurdle to domestic development

CA - Improving physical infrastructure, governance and financial regulations remain key areas of concern at the mid-term Viet Nam Business Forum (VBF) entitled "Beyond 2011 - Viet Nam's Longterm Ambitions" held in Ha Noi yesterday.

While acknowledging certain improvements and Viet Nam's potential for growth, foreign business members have grown increasingly cautious and uncertain as to future economic policies.

"Today we note that there are still crippling deficiencies and delays in the development of key infrastructure projects," National Chairman of the American Chamber of Commerce (AmCham) Christopher Twomey said.

The state of Viet Nam's physical infrastructure and its negative impact on investment in the export and manufacturing sectors has been mentioned at previous VBFs, ahead of the meeting of the Consultative Group (CG), a platform for discussion between the Government and donor agencies on development policies and donor pledges.

"Reliable energy supply remains an area of concern for foreign investors that have experienced severe power cuts throughout the last months," Alain Cany, Chairman of the European Chamber of Commerce in Viet Nam, said.

On average, electricity outage hours for each firm nearly doubled from 50 hours in 2009 to 89 hours in 2010, Alain confirmed.

Although the consumption of electricity is projected at 12 per cent minimum per annum, power plant capacity is unable to keep up, which has resulted in a shortfall in power supply.

The VBF believed that a reduction in the Electricity of Viet Nam (EVN)'s dominance in the sector was needed in order to solve out-of-market retail price issues. The group additionally called for the effective implementation of laws on renewable energy sources.

The VBF additionally expressed strong concerns regarding the development of roads, small and scattered ports and related land-side infrastructure projects necessary to ensure the timely and efficient movement of cargo.

"A significant increase in passenger and freight traffic in and around HCM City and the poor connectivity of the Hai Phong Port has fuelled this concern," said Tony Foster, head of infrastructure working group.

Responding to these concerns, a representative from the Ministry of Industry and Trade calmed investor fears, saying that enterprises would not have to worry about electricity supply this year because of favourable weather conditions and the implementation of competitive price mechanisms from July 1. The Son La Hydro-electricity plant is set to be supported by new generators in order to keep it operational at all times.

With three power plants, including Mong Duong, Hai Duong and Phu My (with a combined capacity of 3,600MW), future electricity supplies in Viet Nam are set to look good.

An official from the Ministry of Transport stated that work was in progress on enabling the ports of Hai Phong - Quang Ninh and Van Phong - Dung Quat to handle 100,000 tonne vessels and over.

"Over the next five to 10 years, Viet Nam will have a better port system for transport," the official said.

Governance, money

The VBF yesterday stressed its concerns regarding stagnated investment licensing, transparent governance and financial regulations during 2010.

AmCham said that this year's Provincial Competitiveness Index (PCI) revealed that 70 per cent of companies that regularly ship goods feel that they must pay bribes in order to expedite customs procedures.

The Singapore Business Group agreed that customs clearance remained a challenging experience, with unofficial payments to compel customs officers to perform their duties or else risk delays in the formalities of clearing and releasing goods.

EuroCham member companies reported their experience of long approval times and numerous delays in business registration and investment licensing, especially in HCM City and Ha Noi.

Banking and capital market working groups urged the State Bank of Viet Nam and the Ministry of Finance to use the current economic environment as a stimulus to move ahead with tough structural reforms.

Dominic Scriven, head of capital markets working groups, suggested that the ministry and the State Securities Commission establish a legal framework for credit rating agencies, facilities for repo activities, derivative instruments while adjusting requirements for account opening by foreign entities.

VBF's banking working group suggested the central bank draft a forward-looking roadmap rather than implement administrative restrictions in order to reduce the cost of delivering banking products and services and to clear major impediments for consumer banking and consumer finance industries.

The Minister of Planning and Investment, Vo Hong Phuc, welcomed investor feedback and committed to considering suggestions at the forum.