Why the construction industry is leading the compliance costs?

Minister cum Chairman of the Office of Government, Mr. Mai Tien Dung, said that the cause of the difference was due to officials, heads of each locality. Photo: Internet.

Exceedingly high direct costs

According to Mr. Ngo Hai Phan, Director of Department of Control of Administrative Procedures (Office of the Government), Vice Chairman cum General Secretary of the Advisory Council for Administrative Procedures Reform, the APCI 2018 consists of two component indicators, reflecting the two major types of costs that enterprises have to pay when implementing administrative procedures: time and expense directly (money).

The group of construction procedures ranked at the bottom of the rankings, with mostly exceedingly high direct costs, accounting for 93% of the total, which is the decisive factor for this group of procedures to become the most expensive.

"Specifically, although in terms of time cost, these procedures were not at the highest level with 108.9 working hours and 2.15 million VND (1.72 times higher than the time to complete the administrative procedures in other fields and nearly 37 times higher than the tax administration group that has the fastest execution time), but the high direct costs have made the construction industry to become the most expensive administration group.

The component index (direct cost) has become a determining factor in the compliance costs of this group. Accordingly, for every one million VND that a business has to pay for any of the procedures in this group, 930,000 VND is the direct expense that the business needs to complete the file and 70,000 dong is the cost of time that businesses have to spend,” Mr. Phan said.

The survey results of 309 enterprises showed that the average cost of administrative procedures was about 64.1 million VND, 869 times higher than the average cost of administrative procedures in the field of taxation (about 73,700 VND) and over 5 times higher than the average cost of the 8 groups of administrative procedures surveyed.

The surveyed enterprises also said that they needed more time to complete the administrative procedures because it took a long time to prepare their dossier along with the process of working with the consultant to prepare the drawings, design, field research... In addition, the amendment of the dossier also requires a lot of time to comply with the local planning, technical requirements for the works. These are the two most time-consuming steps in the total time of administrative procedures in the construction industry.

There are differences between localities

In essence, many inadequacies in the current document stipulate the administrative procedures in the investment, land and construction have been studied by the Government since the implementation of Project 30 until the promulgation of the Government's Resolution No. 2/NQ-CP on simplification of 285 administrative procedures with the requirement to amend many contents in order to simplify and harmonize procedures, including procedures on investment, land, construction,… However, these reforms of the procedures are limited to individual sectors instead of seeing this procedure chain as a complete process for implementing a land use and construction project.

The report also pointed out that the cost of implementing the same procedure varies between localities. For construction procedures, provinces in the Northern key economic region have the highest compliance cost, nearly 2.3 times higher than the average of the whole country. At the same time, the compliance costs in the Southern key economic provinces accounted for only 20% of the national level. And the compliance costs in the Central key economic region are approximately the same as the national average.

These costs are proportional to the difficulty, scale and total investment of the construction project, some provinces spend only 440,000 VND but in some places, the cost is 255 million VND. Some enterprises said that the high cost is due to the fact that the legal requirement of local planning, construction standards are unclear, not uniform and highly dependent on the evaluation of the State management agencies. This leads to businesses spending a lot of money on preparing and editing their records.

Minister cum Chairman of the Office of Government, Mr. Mai Tien Dung, said that the cause of the difference was due to officials, heads of each locality.

"If we are not synchronized, not implemented from central to local, nobody wants to reform, because cadres of procedures do not want to leave their interests. When procedures are public, transparent, the cost related to bribes will greatly reduce. In fact, many localities have successfully implemented the model of the public administration center, people who want to show their gratitude also do not know who to give money to,” the minister emphasized.