Business as usual: Bribery remains a way of life in Vietnam

By An Dien, Thanh Nien News

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A laborer of a state-owned bridge building company works at a construction site of a bridge in Hanoi April 1, 2015. In 2014, 66 percent of 9,859 Vietnamese firms surveyed said they usually pay extra informal charges to facilitate business activities while during the previous year, 41 percent of the respondents said they did so, according to the Vietnam Provincial Competitiveness Index 2014. Photo: Reuters

Several days ahead of Tet, Vietnam’s Lunar New Year holiday, the owner of two Hanoi hotels received a not-so-nice surprise from a state agency.
That organization had sent her a list of 35 public servants she was to hand “lucky money” -- a symbolic gesture purported to bring the recipients good fortune in the new year. In the past, she'd received requests from other government agencies for money to cover their employees' vacations.
“That was corruption,” said Le Dang Doanh, a veteran Vietnamese economist who related to the hotelier's ordeal during a conference held last month.
A number of independent studies have confirmed that the practice of giving and receiving bribes is so common in Vietnam that it is understood to be a routine part of doing business. To make matters worse, two recent national surveys confirmed the problem is getting worse.
On Thursday, the Vietnam Provincial Competitiveness Index (PCI) 2014 reported a significant jump in the prevalence of bribe-paying across the board. Last year, 66 percent of the survey's 9,859 participating Vietnamese firms said they usually pay extra informal charges to facilitate business activities. During the previous year, 41 percent of the survey's respondents said they did so.
On Tuesday, the Governance and Public Administration Performance Index (PAPI) 2014 confirmed that about one fourth (24 per cent) of its citizen respondents reported paying “informal charges” for their land use right certificate. About 12 percent reported having to pay a bribe for hospital services, while almost one third (30 per cent) of respondents with children in primary school said they'd been illicitly solicited by educators.
These numbers have all increased since 2012, where 17 per cent had to pay a bribe for land use right certificates, 10 per cent for hospital services and 12 per cent for primary education.
Apparently, the findings came as no surprise for all.
“I do think it does reflect [the situation]. If you talk to people on the street, they’ll all talk about the same thing,” Edmund Malesky, PCI’s lead researcher, told Thanh Nien News.
From top to bottom
In what was apparently an unprecedented move, in 2005 Le Kha Phieu, Vietnam’s Communist Party chief from 1997 until 2001, told Tuoi Tre (Youth) newspaper that “corruption permeates the whole network from top to bottom and bottom to top.”
“I say frankly that there were people who came to see me to offer me money — 5,000 or 10,000 dollars — no small amount," Phieu was quoted by the newspaper as saying at that time.
Also in 2005, when the first Provincial Competitiveness Index was launched, the Communist Party commissioned an unprecedented survey that confirmed nearly a third of government employees in Vietnam admitted they would take a bribe, if one were offered.
In the same year, the National Assembly -- the national legislature -- passed Vietnam's first anti-corruption law. Ever since, the country’s top leaders have repeatedly pledged to launch no-holds-barred crackdown on corruption -- to little effect.
In 2014, Vietnam ranked 119th out of 175 countries in the Transparency International (TI) Corruption Perceptions, 126th on the World Bank’s Control of Corruption Index, and 74th on the International Country Risk’s Guide corruption rankings.
“The government and the Party have announced their intentions to deal with these problems but implementation has been patchy and slow,” a foreign diplomat told Thanh Nien News on condition of anonymity
‘They are naïve’
Many analysts blame the entrenched practice of giving and receiving bribes on Vietnam’s failure to complete the market reforms that began in the late 1980s. They say there is still too much state control over the economy, which allows connected insiders to profit.
“Since the rewards to obtaining permission for such thing as land use, starting of companies, foreign direct investment is higher, more are willing to pay bribes to obtain such permission,” said Dennis McCornac, a professor of economics at Loyola University in Baltimore (Maryland).
There has been growing call for Vietnam to amend laws to overhaul its business climate in a bid to curb corruption. Prime Minister Nguyen Tan Dung has repeatedly called for further reform of Vietnam’s business climate after acknowledging that red tape has continued to hinder the country's development.
Meanwhile, analysts say that large-scale corruption (e.g. kickbacks on procurement contracts or sweetheart land deals) has only increased over time in Vietnam since there are more projects and those in high places have more power.
Anders Hjorth Agerskov, a Work Bank official, said at a workshop last January that
Vietnam is 2nd on the list of World Bank clients against whom there are corruption complaints, with the transport, information communication and technology, and water sectors being the biggest offenders. With 189 complaints, Vietnam is behind only India with 308.
Japan, Vietnam’s largest aid donor, has suspended its official development assistance (ODA) to the country twice since 2008 due to corruption in major infrastructure projects.
The government had hoped that a few high-profile executions of white-collar criminals will suffice to deter future corruption.
But very few are buying it.
“They are naïve,” said Lien Khui Thin, a former death row inmate.
In 1999, Thin and two other men, including a prominent banker, were sentenced to death for embezzling VND3 trillion (now US$141 million) by falsifying government loan documents. Thin's two accomplices were executed in 2003, but he was granted full amnesty in 2009.
“Just compare the time I received the death penalty and now, you’ll see corruption has shown no sign of letting up,” Thin said. “If anything, it's on the rise.”
DA NANG REMAINS AN INVESTMENT MAGNET
For the second year in a row, Da Nang continued its reign at the top of the economic governance rankings in the Vietnam Provincial Competitiveness Index (PCI) 2014 thanks to many practical initiatives designed to create a favorable environment for business development.
The annual survey by the Vietnam Chamber of Commerce and Industry and the US Agency for International Development rated all 63 provinces and centrally-governed cities in terms of ease of doing business, economic governance, and administrative reform efforts based on the polling of 9,859 domestic non-state companies operating here.
The central city has been touted as one of the most business-friendlies places in Vietnam and a model for others across the country to follow.
"It doesn't matter how the indicator is. Da Nang is always way different," said Edmund Malesky, PCI’s lead researcher.
Of nearly 1,500 foreign firms surveyed in the PCI 2014, 72 percent said they were able to register their operations in Da Nang within a month. On average, only 38 percent of total respondents were able to say the same about doing business in Vietnam.
“One of which is the ease of establishing a company, the friendly business climate here, and the forward thinking and supportive government officials in Da Nang," said Chuck Palazzo, an American businessman who runs an IT company there.
At the top of the index, the central city is followed by the Mekong Delta province of Dong Thap and Lao Cai in the northern mountains. After a decade in the PCI survey, Ho Chi Minh City stepped into the top five group of best-governed provinces and cities in Vietnam.
“Ho Chi Minh City has always been an attractive destination for many domestic and foreign investors and it has recently implemented many activities to improve the operational efficiency of its governance apparatus, especially in streamlining administrative procedures,” the PCI report said Thursday.
“The strengthening of business-government dialogues in order to solve problems for the business community in the city has spurred local confidence in investment and business expansion. Such improvements were especially challenging when one considers the scale and complexity of the Ho Chi Minh City economy,” it said.
Hanoi ranks 26 on the list.

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