“Unofficial costs” counted as being higher than loan interest rates annoying businesses

BOT projects remains vague and intransparent

This judgment was made by Dang Huy Dong, Vice Minister of Planning and Investment at the online seminar on "reducing the burden of costs and promoting private enterprises’ development" organized by Viet Nam Government Portal.

According to the Vice Minister, BOT fees are unreasonable with which enterprises and people are burdened because the implementation of BOT projects does not follow any principle or standard.

As realizing the shortcomings of BOT projects, the Ministry of Planning and Investment has strongly raised its objection, which the management agency seems not to “comply with”.

BOT projects which have been executed are generally considered to bring mutual benefits to the investors, the State and people. Thus, why the investors did not publicize the construction costs and traffic flow of the vehicles on the constructed road sections, which are the basic for fee calculation, Dong raised the questions.

The cost burden

Unofficial costs are considered as "petty corruption" but in reality, its consequences are not less serious than grand corruption and even more serious for the entire socio-economic development of the country.

"If unofficial and official costs are not controlled, they will destroy Vietnamese enterprises and people", the Vice Minister emphasized.

Meanwhile, Phan Duc Hieu, Deputy Director of the Central Institute for Economic Management, said that based on a survey conducted by the Vietnam Chamber of Commerce and Industry (VCCI), up to 60 per cent of enterprises had to pay unofficial costs, which are a relatively high proportion.

Regarding official costs, taxes and fees are the visible numbers that people can realize. However, the time and opportunity costs which are official costs are invisible. In reality, these two costs cause the enterprises to spend a huge amount.

Specifically, an enterprise has to assign a person to be in charge of a specific administrative procedure. For example, the average monthly salary of an employee at a private enterprise is VND5.7 million (equivalent to US$251.2) per 24 man-days, equivalent to over VND200,000 (roughly US$8.9) per man-day. Therefore, over VND2 million (approximately US$89) will be spent on a 10-day administrative procedure. If VND2 million is multiplied by 500,000 enterprises, the amount will reach to hundreds of billion Dong.

However, that is only one administrative procedure out of nationwide 5,000 - 6,000 administrative procedures, Hieu added.

Besides, when an enterprise carries out an administrative procedure, it, however, is not sure either whether or exactly when the procedure is completed. This may cause the enterprise to lose the business opportunity or even get contract penalty, etc. Therefore, these costs, if quantified, will be a huge amount, becoming a heavy burden to enterprises in terms of input costs.