An enterprise law fit for the next 20 years

The Law on Enterprises is seeking to open up business prospects for companies wishing to get involved in Vietnam’s future growth, ironing out limitations along the way. 

Pham Duy Khuong, managing director of ASL LAW, talks about the influence of the law on the Vietnamese economy after 20 years, and how it can be improved upon even further.

An enterprise law fit for the next 20 years

The latest Law on Enterprises is expected to help businesses through difficulties

Over the last two decades, what impact has the Law on Enterprises made on important reforms to improve the business environment in Vietnam?

In 1999, the Law on Enterprises was born on the basis of merging the Law on Companies and the Law on Private Enterprises, creating a common legal framework for economic entities in the market economy as well as creating equality between types of businesses.

Over the past 20 years, the law has undergone two amendments in 2005 and 2014. The amended Law on Enterprises 2014 is considered to contain many breakthroughs for administrative procedure reform and risk reduction on policies for corporate bodies.

Firstly, the amended 2014 law removed the requirement to have a seal. This change has been positively evaluated, keeping pace with the legal system of many advanced countries globally. Moreover, it also reduces license types and specifies the business lines subject to conditional businesses and abandoned ones. Business safety rose, while rights and assets of enterprises are protected by law.

How has this contributed to transforming the economy of Vietnam, especially in terms of attracting foreign investors?

The law has made important reforms that contribute to drastically improving the business environment and attracting investment from overseas. Vietnam has achieved many positive results, contributing significantly to the overall growth of the economy, and helping to change the economic face of many localities.

In the first phase, foreign investment plays a role as a pusher, creating a breakthrough by adding important resources for development investment and arousing domestic resources. This exploits and takes advantage of potential and advantages, bringing the country through difficult or crisis-hit periods.

Only 10 years after doi moi, with the support of foreign investment resources, the average annual GDP growth reached 8.2 per cent, creating a foundation for socio-economic growth and development for the next stage.

It has actively contributed to improving the economic system and business investment environment according to the principles of the market economy; improving the capacity of economic management, corporate governance, supporting the process of reforming state-owned enterprises, and raising the competitiveness of the economy.

 

The proportion of foreign investment in the total development investment capital has increased gradually, from nearly 15 per cent in 2005 to 23.7 per cent in 2017.

What are limitations of this law, and what further amendments and supplements would you suggest in order to create a safe and attractive business environment?

Besides positive and important reforms, the law still contains some limitations. Specifically, compliance costs have decreased significantly but are still high, while businesses still lack the tools to protect their interests. For example, inspection of authorities only focuses on detecting errors of the enterprise, instead of focusing on answering questions, solving difficulties, and supporting businesses.

As mentioned, the amended Law on Enterprises 2014 increases safety for businesses, but there are still certain risks for them that come from inconsistent terminologies in legal interpretation - for example in some circulars issued by ministries, as these may not be compatible with others. Implementation instructions are optional and made on an authority-by-authority basis, which is the source of legal compliance risks in Vietnam.

Therefore, the law needs to detect this issue and deal with it to ensure the legal system is uniform. Besides this, some industries still apply control measures, significantly restricting the freedom of doing business such as legal services, finance and banking, and some other services.

In addition, regarding a number of conditional business lines after sub-licenses, the supervision from authorities is not really tight.

For example, in the case of condominium management, this is a conditional business but when it comes into operation the initial conditions may change or no longer exist over time. However, the authorities also lack inspection steps on this issue. Thus, the amended law must ensure the inspection and supervision of conditional business lines.

Vietnam’s business environment ranks 67 out of 141 economies. Therefore, the amended enterprise law is required to have provisions compatible with international standards, ensuring that Vietnamese businesses have the same legal advantages as those in the same field in other countries, especially in cross-border areas. This creates important conditions for Vietnam to join international trade organisations, as well as to participate in free trade agreements.

Although the procedure for entering the market has been shortened, in general it has not yet created competition in comparison with the region. In particular, the actual time is usually much longer than the time in the law. Therefore, the amended law should abolish unnecessary procedures, such as notification of seal samples to reduce costs for enterprises. VIR

Law on Enterprises needs greater reforms

Law on Enterprises needs greater reforms

Vietnam must continue to improve on its Law on Enterprises, experts and researchers said at a law conference in Hanoi yesterday.

Draft Law on Investment adds incentive sectors

Draft Law on Investment adds incentive sectors

Numerous sectors were added to receive incentives under the Draft Law on Investment to ensure it matches the new FDI strategy.

 
 

Other News

.
Nine more expressway contractors suspected of construction violations
Nine more expressway contractors suspected of construction violations
BUSINESSicon  05/07/2020 

Nine more former contractors have been accused of irregularities in the construction of a 139-kilometer-long expressway whose severe deteriotion was reported shortly after its opening in central Vietnam.

VASEP decries taxes on semi-processed and processed seafood
VASEP decries taxes on semi-processed and processed seafood
BUSINESSicon  05/07/2020 

Tax agencies have slapped many firms with a corporate income tax on semi-processed seafood products at 20%, while their products for exports or domestic consumption that are mainly processed, 

Domestic property market faces uncertainty
Domestic property market faces uncertainty
BUSINESSicon  05/07/2020 

The domestic real estate market is hoped to have growth in the fourth quarter of this year and before the Lunar New Year 2021 if, by this year-end, the domestic economy is restored to levels from before the COVID-19 pandemic.

Hanoi moves towards approving construction of third Aeon Mall
Hanoi moves towards approving construction of third Aeon Mall
BUSINESSicon  05/07/2020 

The proposed construction of a parking lot and the Aeon Mall Hoang Mai Trade centre will soon be decided upon by the Hanoi People's Committee as Prime Minister Nguyen Xuan Phuc has approved the adjustment of the city's construction planning.

Pork and oil prices key to keeping inflation in VN under control: experts
Pork and oil prices key to keeping inflation in VN under control: experts
BUSINESSicon  05/07/2020 

With huge inflation pressure on the way in the remaining months of this year, a close watch must be kept on the prices of key products like oil and pork to hit the goal of keeping inflation below 4 per cent, experts have said.

US firms create record 4.8 million jobs in June
US firms create record 4.8 million jobs in June
BUSINESSicon  03/07/2020 

The reopening of businesses has spurred job growth but a rise in Covid-19 cases may hamper recovery.

Chubb Life Vietnam honored “Best Companies to Work for in Asia 2020”
Chubb Life Vietnam honored “Best Companies to Work for in Asia 2020”
BUSINESSicon  03/07/2020 

Chubb Life Vietnam has been recognized as one of the “Best Companies to Work for in Asia 2020” by HR Asia, the continent’s leading publication for Human Resources professionals.

VN government to sell stake in country’s biggest brewery
VN government to sell stake in country’s biggest brewery
BUSINESSicon  03/07/2020 

The Government will sell its 36% stake, equivalent to 230.8 million shares worth some VND37.6 trillion (US$1.6 billion), in the Saigon Beer-Alcohol-Beverage Corporation (Sabeco), the country’s biggest brewery, this year.

Fabric production an issue for Vietnam's textile industry
Fabric production an issue for Vietnam's textile industry
BUSINESSicon  03/07/2020 

Fabric production is a challenge for Vietnam's textile and garment industry when it comes to free trade agreements (FTAs) requirements on product origin.

Vietnam's FDI inflows to increase
Vietnam's FDI inflows to increase
BUSINESSicon  03/07/2020 

A new wave of foreign direct investment driven by global uncertainty such as the US-China trade war and the COVID-19 pandemic is imminent in Vietnam, 

Predatory debt collectors hustling on borrowed time
Predatory debt collectors hustling on borrowed time
BUSINESSicon  02/07/2020 

Debt-collecting businesses are to be banned in Vietnam as part of local government action to protect customers’ rights, with the upsurge of predatory lending services triggering heated debate and eroding public trust.

Vietnam draws up roadmap to eliminate monopoly in power sector
Vietnam draws up roadmap to eliminate monopoly in power sector
BUSINESSicon  06/07/2020 

A solution for the power industry has been put into discussion: selling entire power plants to investors after they are put into operation.

Proposal steers sports betting to starting line
Proposal steers sports betting to starting line
BUSINESSicon  03/07/2020 

A proposed national steering committee is expected to help Vietnam build clearer prize-winning entertainment rules and set up closer connections between government authorities and investors 

State Audit of VN notes high pay for foreign specialists in ODA projects
State Audit of VN notes high pay for foreign specialists in ODA projects
BUSINESSicon  05/07/2020 

A foreign specialist in an ODA (Official Development Assistance) project can receive VND500-700 million a month, while pay for a Vietnamese specialist is just tens of millions of VND.

EVFTA will broaden skies for aviation across Vietnam
EVFTA will broaden skies for aviation across Vietnam
BUSINESSicon  03/07/2020 

Never-before-seen activities in Vietnam’s aviation sphere are expected to come to EU businesses soon on the back of the landmark EU-Vietnam Free Trade Agreement.

RCEP benefits on horizon for ASEAN
RCEP benefits on horizon for ASEAN
FEATUREicon  02/07/2020 

With the Regional Comprehensive Economic Partnership scheduled to be signed this November, doors will soon open to attract more investment and swell Vietnam’s trade with international partners.

An abundance of advantages to diversify ops into Vietnam
An abundance of advantages to diversify ops into Vietnam
BUSINESSicon  02/07/2020 

Amidst the new wave of foreign investment and relocation after the pandemic, director general of the Foreign Investment Agency Do Nhat Hoang explained Vietnam’s outstanding advantages and how it can seize arising opportunities.

Vietnam closes in on tech app tax avoiders
Vietnam closes in on tech app tax avoiders
BUSINESSicon  02/07/2020 

Apple and Google are once again under fire over tax avoidance in Vietnam, with none of their revenues from their app markets being retained in the country. However, a new law could soon enable local authorities to take their cut.

Drugmakers fight to attain approval
Drugmakers fight to attain approval
BUSINESSicon  02/07/2020 

Switzerland’s drug maker Novartis Pharma Services AG has announced a GMP qualification for Lek Pharmaceuticals d.d. within the scope of certification for medicines in Vietnam,

PouYuen lays off thousands  due to Covid-19 difficulties
PouYuen lays off thousands due to Covid-19 difficulties
BUSINESSicon  02/07/2020 

More than 6,000 workers of the Taiwanese company, PouYuen, in HCM City have been laid off due to the company's business difficulties during the Covid-19 pandemic.

 
 
 
Leave your comment on an article

OR QUICK LOGIN