The Prime Minister and members of the government have agreed to propose to the National Assembly that Article 292 of the Criminal Code 2015 be removed due to it hindering the development of internet and telecommunications-based companies and startups in particular.

The article, which is yet to take effect, requires all internet service providers work strictly within the terms of their licensing, including gold trading, e-commerce, multi-level marketing, payments, games online, and other internet-based services.

The article is unsuitable and unfair for internet-based business activities and should be removed to avoid other unnecessary amendments to the Criminal Code, Prime Minister Nguyen Xuan Phuc said at the government's August monthly meeting.

There are 267 conditional business activities in Vietnam, all of which are subject to the provisions of the Civil Law, but only internet-based business activities are subject to the Criminal Code, so the article needs to be removed, the government concluded at its monthly meeting on September 1.

There have been many arguments around Article 292. The Ministry of Justice wants to retain the article to allow for easier supervision, while the business community seeks freedom in the business environment.

Startup founders contacted by VET were pleased to hear the article is likely to be removed. Mr. Nguyen Hoang Anh, founder of Fastsell, said that if Article 292 took effect the company, as a mobile e-commerce platform, would be restricted as it would be unable to provide payment services to customers.

“The application of the Criminal Code on business activities are against global trends, but the recent decision from the government to remove Article 292 will provide stability to startup investors looking to invest in Vietnam,” he said.

Mr. Nghiem Xuan Hiep, founder of Booknhanh, said he was relieved to hear Article 292 would be removed. “We are now able to provide the other functions of a service networking business, including online payments,” he said.

Regardless of whether Article 292 is removed at the National Assembly meeting in October, Vietnam should continue to improve the legal framework for startups.

Startup investors need a clear legal framework that cannot be misunderstood and laws should be more protective of investors, Mr. Do Hoai Nam, founder of SeeSpace, told VET.

“Article 292 of the Criminal Code not only makes startups anxious but also investors,” he said. “When investors invest in a company they become partly responsibility for that company. With this article there will be few investors willing to invest in a startup in Vietnam’s internet or telecommunications sectors because even a small violation by the investee has legal ramifications for the investor.”

“I think Vietnam is a creative and innovative country but as a foreign investor I would feel ten times more comfortable putting money into Singapore than I would into Vietnam,” said Mr. Chris Malone, Partner of the Boston Consulting Group.

Foreign investors, he went on, evaluate an investment opportunity by how trustworthy it is and whether they have fair legal recourse.

“If you look at international rankings, I would say now is not the time to invest in a startup in Vietnam,” he said. Investors may still do so if they have strong personal connections and aren’t reliant on the law, he added.

VN Economic Times