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Dr Adam Fforde
Vietnam's important Public Administration Reform program is suffering core problems. Prime Minister Phan Van Khai has said that whilst some procedures and laws that were ‘creating difficulties’ for the population had been improved, others had been set up in their place. Such barriers are based mainly on the desire to create opportunities for graft, and to protect insiders’ business interests.
Important technical reforms, strongly supported by the IMF and World Bank, are being wound back. Whilst current state spending is falling in real terms, state investment spending is up around 2.5 times on the year - a very rapid rate of increase. This is almost entirely funded by increases in aid, which will probably rise over $ 500 million this year, and is a very important part of the rural development and infrastructure programs. These have been hit by corruption and inefficient project analysis, which is why it took so long to get the spending going, and the main reason why the development impact is so low. Accordingly, the authorities, in 1995, set up two ‘General Departments’ under the Ministry of Finance, to manage state investments. Like the police and the Treasury, these so-called ‘vertical’ organisations, had some independence from local authorities. Now, their local offices are to be moved back under local authorities. This will probably lead to greater enjoyment of local rake-offs.
Another area of rampant illegality is in the important area of rural cooperatives. Rather many of these still exist, left over from the period of ‘Red’ rural development. According to the 1996 Law on Cooperatives, all cooperatives have to operate in accordance with the Law - that is, re-establish or wind up. This involves a number of major changes that hit at local interests, one being that members can no longer be forced to pay levies based upon the land area. Instead, cooperatives should create their income from service charges. Unfair levies were one key reason for the recent rural unrest. However, according to press reports probably around half remain as they were.
A final example of how the bureaucracy supports local interests is the new plans for regulating the rural land market. Any land ceded for profit (that is, sale, although that term is not used) will need: A. a contract; B. certification from the commune that the land is legally held; C. approval from the cadastral department of the district; D. payment of taxes by both parties. At each point a stamp is required, for which farmers usually pay.
Vietnam's GDP is capable of growing back fast whenever these barriers are lowered by reformers. At 5 per cent in 1998, it is still top of the pole in ASEAN. Much of this success was attained by relatively easy moves to cut back on inefficiencies and push state businesses to increase exports. Through 1999 and 2000 this slack will have to be made up in other areas. This may happen through the emergence of small businesses to soak up the increasing volumes of labour seeking employment outside farming. But it is not very likely.
WATCHPOINT: How genuine is the government's commitment to reform?
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AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.
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