Major changes are now required for Vietnam’s investment law and corporate law, which made up a strong foundation for the country’s business law system, especially when Vietnam is undergoing economic reform for next stage development, according to Vu Tien Loc, chairman of Vietnam Chamber of Commerce and Industry (VCCI).

Coming into force in 2014, these two important laws have created breakthroughs in terms of attractinginvestment to Vietnam and creating businesses, as well as inspiring the formulation of other business regulations, Loc said in a conference discussing the revision of the two laws on February 20. 

With these instruments in hand, the government has initiated the removal and simplification of business conditions, shifting the focus from prior review to post review in processing administrative procedures, Loc continued. 

Vietnam’s business and investment environment, thus, has been transformed positively, he said, referring to the growth rate of business creation over the last three years at the highest in 20 years, and the rapid development of the private sector. 

However, various aspects of these two laws have now proved to be the hinderance to Vietnam’s further economic development, Loc stated. 

Firstly, the business registration process remained a concern for local enterprises. Vietnam was ranked 104th in terms of market entry level  in the World Bank’s Doing Business report, making it one of the worst indicators of Vietnam’s business environment. 

Secondly, Vietnam has nearly five million household businesses, which make up 30% of the GDP. However, the existing legal framework addressing this type of economic component remains inadequate, causing difficulties for household business to register to become enterprise. 

Restrictions on tax and accounting process must be abolished to motivate millions of household businesses to become a strong private business community, he stressed. 

To achieve this target, Loc expected to minimize business conditions for small and micro enterprises in the upcoming revised corporate law, in turn allowing the revision of tax and accounting laws. 

There should be more incentives to encourage business households to register and become enterprises, Loc said. 

Sharing the same view, Truong Thanh Duc, chairman of the BASICO law firm, said new mindset is required to draft new corporate law. 

Duc added that business household having business registration certificate should be considered enterprise, while classifying it as a type of business form is unfair, and a vague notion in the legal system. 

Proposing removal of investment law

Chairman of the BASICO law firm Truong Thanh Duc requested the removal of the investment law, which should be incorporated into the corporate law for simplification. Since its issuance, the core objective of the law is to classify types of business permitted for operation. 

As such, the corporate law on enterprises would now regulate which type of businesses are permitted or conditional, Duc stated.

Nguyen Van Toan, vice chairman of Vietnam’s Association of Foreign Invested Enterprises (VAFIE), said Vietnam, after 30 years of foreign investment attraction, now requires investment projects with high added value instead of solving the unemployment issue. 

As of present, Vietnam has not been able to attract high quality projects from the US or EU. Statistics showed that US investment in Vietnam amounted to US$500 million out of the  total US$340 billion investing abroad in 2018. 

Meanwhile, investment capital from China to Vietnam is five-fold that of from Germany, raising the question whether Vietnam’s business environment is not suitable for investors with high-tech projects from developed countries. 

Toan added a much-needed revision of the investment law would help Vietnam attract more quality projects and create a better linkage between the FDI and domestic sector for greater spillover effect. 

This would address the weakest point in Vietnam’s effort of attracting foreign investment, Toan stressed. 

Hanoitimes