Vietnam Country Profile

Licences, Infrastructure and Public Utilities

Individual Corruption

According to the Ministry of Foreign Affairs of Denmark and the World Bank Report 2009, the construction sector is said to be one of the most corruption-prone sectors in Vietnam.

Several reports, including the Transparency International Global Corruption Barometer 2007 and the Transparency International 2006 report that citizens often have to bribe in order to obtain access to public utilities and infrastructure. Individuals also often bribe nurses or doctors in order to obtain a faster or better medical service. They also bribe in order to obtain licences, for instance, a driver's licence.

According to a February 2009 article from Time, the Vietnamese government decided to distribute approximately USD 12 million to poor Vietnamese citizens as part of an economic stimulus package. However, it turned out that most of the funds were pocketed by corrupt local officials, and villagers throughout the country report that as much as 90% of their funds were siphoned off by local bureaucrats.

Business Corruption

Transparency International 2006 reports that business licensing is becoming less of an issue, as the government has begun to streamline processes. Although the Vietnamese government has sought to improve the investment climate by removing a large amount of 'unnecessary' permits, many public agencies add superfluous permits to the list of required permits and licences in order to re-establish control over regulatory areas. Private companies are severely disadvantaged in relation to state-owned companies in terms of favourable regulatory treatment. According to the US Commercial Service 2007, the non-transparent regulatory regime fuels corruption and bribery to the great disadvantage of private companies.

The Ministry of Foreign Affairs of Denmark and the World Bank Report 2009 states that widespread corruption within the construction sector represents a serious problem. This is further supported by the World Bank Vietnam Development Report 2006, according to which, corrupt relationships between public officials and companies are common. Companies rank the Department of Construction as a highly corrupt agency, although mostly in relation to isolated cases of corruption. Corruption is found in practically all phases of infrastructure projects, from designing and approving projects to allocating loans, providing consultancy, bidding, supervising, auditing and payment. The Ministry of Foreign Affairs of Denmark and the World Bank Report 2009 examined inspection and detection of corruption, asset declaration of public servants, transparency in procurement and the role of the media in curbing corruption in the construction sector. The study reports that Vietnam's construction sector has grown rapidly over the past several years but is still dominated by a few well-connected state-owned companies and presents extensive opportunities for corruption to occur. The study found that few corruption cases in the construction sector are detected, investigated and taken to court.

From the late 1990s and onwards, various clusters and industrial parks have been established in Vietnam to attract foreign investment. According to a 2008 study by the Finnish Embassy in Hanoi, corruption in such investment projects has caused large losses to the state. The Government Inspectorate (GI) reported in 2006 that inspections of 14 major government projects revealed several cases of financial irregularities worth VND trillions. Among these projects was the Ho Chi Minh City East-West Highway Project. In addition, the Vietnam Construction Association has reported that more than 40 construction projects have suffered losses from bad investment decisions, wastefulness and corruption since early 2006. The detection of corruption in infrastructure projects partly funded by foreign development assistance led the World Bank to threaten to call off support and demand the return of funds and Japan to temporarily freeze its low-interest aid loans to the country.

Political Corruption

The most important quasi-government agencies involved in public spending in Vietnam are so-called Project Management Units (PMUs). These units oversee implementation of major infrastructure projects, which are often funded by foreign development assistance. According to Transparency International 2006, there is a high potential for embezzlement and other kinds of corruption in PMUs. As a result, these units have been the target of many government anti-corruption efforts.

The state construction agency, Project Management Unit 18 (PMU 18), which operates under the Ministry of Transport, formed the epicentre of a major corruption scandal in Vietnam. The unit is partly financed by foreign aid and is responsible for a budget of around USD 2 billion for roads and other public infrastructure projects. In 2006, the media uncovered serious levels of kickbacks and irregularities within PMU 18, and top officials were accused of spending public funds on purchasing private homes and betting millions of dollars on football matches. According to a 2008 news article from the American Chamber of Commerce, nine people, including a former director of PMU 18, were sentenced to long jail sentences on gambling and bribery charges in connection with the scandal.

Frequency

The World Bank & IFC: Doing Business 2010:
- Starting a company requires the entrepreneur to go through 11 procedures, taking 50 days and costing 13.3% of income per capita.

- It takes an average of 13 procedures and 194 days at a cost of 248% of the GNI per capita to build a warehouse, including obtaining necessary licences and permits, completing required notifications and inspections, and obtaining utility connections.

- It takes 5 years to close a company at a cost of 15% of the estate.

World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give government administrative requirements (permits, regulations, reporting) in Vietnam a score of 2.7 on a 7-point scale (1 being 'extremely burdensome' and 7 'not burdensome at all').

The World Bank & IFC: Enterprise Surveys 2009:
- Over 52% of companies expect to make informal payments to public officials to get things done.

- Approximately 48% of companies expect to give gifts in order to get a construction permit.

- Over 15% of companies expect to give gifts in order to get an operating licence.

- Over 18% of companies expect to give gifts in order to get an electrical connection.

- 1.6% of the surveyed companies identifies licensing and permits as a major constraint to doing business.

USAID: Vietnam Provincial Competitiveness Index 2008:
- On average, 10% of companies in Vietnam cite that they have difficulties obtaining all licences and permits necessary to start their operations.

Transparency International: Global Corruption Barometer 2007:
- Citizens give medical services a score of 3.1 and utilities a score of 2.8 on a 5-point scale (1 'not at all corrupt' and 5 'extremely corrupt).