Vietnam Business: Vietnam Development Report 2006 Report Business: Development Vietnam Vietnam Report No
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Report No. 34474-VNReport No. Vietnam 34474-VN Vietnam Development Business: Report 2006 Vietnam Business Vietnam Development Report 2006 Public Disclosure Authorized Public Disclosure Authorized November 30, 2005 Poverty Reduction and Economic Management Unit East Asia and Pacific Region Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of the World Bank Public Disclosure Authorized Public Disclosure Authorized IMF International Monetary Fund JBIC Japan Bank for International Cooperation JSB Joint Stock Bank JSC Joint Stock Company LDIF Local Development Investment Fund LEFASO Vietnam Leather and Footwear Association LUC Land-Use Right Certificate MARD Ministry of Agriculture and Rural Development MDG Millennium Development Goal MOC Ministry of Construction MOET Ministry of Education and Training MOF Ministry of Finance MOH Ministry of Health MOHA Ministry of Home Affairs MOI Ministry of Industry MOLISA Ministry of Labor, Invalids and Social Affairs MONRE Ministry ofNatural Resources and the Environment MOT Ministry of Transport MPDF Mekong Private Sector Development Facility MPI Ministry of Planning and Investment NBIC National Business Information Center NGO Non-Governmental Organization NOIP National Office for Intellectual Property NPL Non-Performing Loan NPV Net Present Value ODA Official Development Assistance OOG Office of Government OSS One-Stop Shop PCF People’s Credit Fund PCI Provincial Competitiveness Index PER-IFA Public Expenditure Review-Integrated Fiduciary Assessment PFMB Protection Forest Management Board PMRC Prime Minister Research Commission SAV State Audit of Vietnam SBV State Bank ofVietnam SCIC State Capital Investment Corporation SEDP Socio-Economic Development Plan SFE State Forest Enterprise SIDA Swedish International Development Agency SME Small and Medium Enterprise SOCB State-Owned Commercial Bank SOE State-Owned Enterprises SPS Sanitary and Phyto-Sanitary SSC State Securities Commission UAIC Union of Associations of Industry and Commerce UNCTAD UnitedNations Conference for Trade and Development UNDP United Nations Development Program UNICEF United Nations Children’s Fund U.S. The United States USAID US Agency for International Development USBTA US-Vietnam Bilateral Trade Agreement VAS Vietnamese Accounting Standard VASS Vietnamese Academy of Social Sciences VAT Value Added Tax VBARD Vietnam Bank for Agriculture and Rural Development VBF Vietnam Business Forum VBP Vietnam Bank for the Poor VB SP Vietnam Bank for Social Policies VCA Vietnam Cooperative Alliance VCCI Vietnam Chamber of Commerce and Industry VDG Vietnam Development Goal VGCL Vietnam General Confederation of Labor VHLSS Vietnam Household Living Standards Survey VITAS Vietnam Textiles Association VLSS Vietnam Living Standards Survey VNPT Vietnam Post and Telecommunications Corporation VSI Vietnam Social Insurance WHO World Health Organization WTO World Trade Organization WVS World Values Survey This report was prepared in partnership by the Asian Development Bank (ADB), the Department for International Development (DFID) of the United Kingdom, the Japan Bank for International Cooperation (JBIC), the Mekong Private Sector Development Facility (MPDF) of the International Finance Corporation, the United Nations Development Programme (UNDP), the United States Agency for International Development (USAID) and the World Bank. Some of these donors conducted major analytical efforts which provided very useful inputs in the preparation of this report. The Making Markets Work for the Poor project by ADB, the Vietnam Competitiveness Initiative by USAID, and the Investment Climate Assessment by the World Bank are outstanding in this respect. The donors involved in the preparation of this report also contributed key inputs through their engagement in a range of specific pieces of analytical work. Examples include the regular evaluations of the Joint Vietnam-Japan Initiative by JBIC, the Private Sector Discussion Series by MPDF, the work on the impacts of accession to the World Trade Organization, studies produced by specialized United Nations agencies such as the International Labour Organisation (ILO), and the support to data development at the General Statistics Office (GSO) by the World Bank and other donors. The donors involved in this partnership effort also provided inputs and guidance to the overall effort through a Steering Committee comprising Kanopkan Lao-Araya (ADB), Alan Johnson (DFID), Yuho Hayakawa, (JBIC), Quynh Trang Phuong Nguyen (MPDF), Jonathan Pincus (UNDP) and Dennis Zvinakis (USAID). The preparation of the report involved consultations with Vietnamese researchers and practitioners who participated on a personal capacity. Their inputs and feedback were coordinated through a Reviewing Committee comprising Dr. An Van Dinh (Central Institute for Economic Management, CIEM), Cuong Manh Nguyen (Ministry of Labor, Invalids and Social Affairs, MOLISA), Doi Duc Do (Ministry of Natural Resources and the Environment, MONRE), Lawyer Huynh Huu Tran (Vietnam Chamber of Commerce and Industry, VCCI), Lan Chi Pham (Prime Minister Research Commission, PMRC), Son Kim Dang (Ministry of Agriculture and Rural Development, MARD), Dr. Thang Nguyen (Vietnamese Academy of Social Sciences, VASS) and Thuy Dinh Pham (GSO). Several individual researchers and teams were in charge of producing or coordinating key pieces of analytical work that were used as inputs for the report. Among then are Loren Brandt (University of Toronto) on land, Amanda S. Carlier (World Bank) on the investment climate assessment, Paulette Caste1 (consultant) on social insurance, Van Nhu Dang (VASS) on social impacts of global integration, Emilio Fukase (World Bank) on capital markets, Kamran Khan (World Bank) on provincial finance, Tien Van Nguyen (VASS), Thuy Dinh Pham (GSO) and Rob Swinkels (World Bank) on the rural investment climate assessment, Hang Thi Thu Pham (VCCI) on women entrepreneurs, Martin Ravallion (World Bank) and Dominique van de Walle (World Bank) on the impacts of land market development, Thomas A. Rose (World Bank) on the financial sector assessment, William Smith (ADB) on land markets, Cuong Tien Tran (CIEM) on the post-equitization study, Wim Vijverberg (University of Texas at Dallas) on household enterprises and Michael Warlters (World Bank) on infrastructure. The team in charge of formally writing the report was led by Martin Rama and included Noritaka Akamatsu, Viet Tuan Dinh, Quy Toan Do, Quang Hong Doan, Daniel Riley Musson, Dzung The Nguyen, Minh Van Nguyen, Duc Minh Pham, Hoa Thi Mong Pham, James Seward, Vivek Suri, Rob Swinkels, Son Thanh Tran and Carolyn Turk from the World Bank. The writing team also relied on a vast range of documents and studies, produced by local and foreign experts. Findings and recommendations from those studies are reproduced throughout the report. It is difficult to give each of the experts involved, individually, the credit they deserve. Their studies are listed in the bibliographic section of the report. Huong Thanh Hoang (National Economics University) helped with the processing of household survey data, Phuong Thu Nguyen (VASS) with data from the investment climate survey, Tuyet Anh Pham (VASS) with data from enterprise censuses, Sa Kim Le (VASS) with the comparative analysis of studies on impacts of global integration, and An The Ngo (Hanoi Agricultural University) with maps. Nha Thi Vu (Vietnam Development Information Center) was in charge of bibliographical research and referencing. Support in the processing of the document was provided by a World Bank team including Dung Thi Ngoc on editing, Ha Thanh Hoang on publishing, and Hang Thu Nguyen and Hedwig Abbey on administration. Overall guidance was provided by Homi Kharas and Klaus Rohland from the World Bank. Steve Price-Thomas (Oxfam GB) and Mary Hallward-Driemeier (World Bank) were the peer reviewers. The report was also reviewed by the International Monetary Fund (IMF). Comments and suggestions by numerous colleagues are gratefully acknowledged. TABLE OF CONTENTS Acknowledgements Executive Summary.. ............................................................................... i I. AN EMERGING ECONOMY ................................................................. 1 1. Businesses of all Sorts .................................................................... -3 2 . Business and Development............................................................... 18 3 . Efficiency and Competitiveness ......................................................... 29 4 . The Investment Climate.................................................................. 42 I1. KEY MARKETS AND INPUTS............................................................. 57 5 . Banking and Finance .................................................................... -59 6 . The Land Market .......................................................................... 72 7 . The Labor Market ......................................................................... 84 8 . Infrastructure Services. ................................................................... 98 I11. POLICIES FOR BUSINESS ............................................................... 109 9 . Global Integration., ...................................................................... 111 10. Domestic Reforms ....................................................................... 123 11. The Local Dimension ...................................................................