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VCCI report finds problems in administrative reform

“Flow of business law in 2021”, a report of the Vietnam Chamber of Commerce and Industry, shows that hundreds of circulars that guide the implementation of laws are issued each year. The quality and transparency of the documents are in question.

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The number of circulars released from January 1, 2016 to July 20, 2020 accounted for 68 percent of total documents issued.

On average, once a law is enacted, there are 6.8 government’s decrees, 1.8 PM decisions and 25.8 circulars that guide the implementation of the laws. With the overwhelming quantity, circulars play a very important role in realizing the policies and they have a significant impact on the business environment.

The compilation of circulars is mostly implemented by units belonging to ministries. If compared with the process of promulgating decrees, laws and ordinances, the level of control over the quality and transparency of circulars is lower.

Under the 2005 Enterprise Law, circulars must not set business conditions. The regulation is also seen in the 2014 and 2020 Investment Law. Under the Law on Promulgation of Legal Documents, circulars must not set administrative procedures, unless they are authorized by laws.

However, circulars that stipulate business conditions can be easily found. There are several types of circulars.

The first is the circular with open business conditions, which is mostly seen in the banking sector, for example Circulars 40/2011 dated December 15, 2021, 17/2018 dated August 14, 2021, 28/2018 dated November 30, 2018 which stipulate conditions for granting establishment and operation licenses to joint stock banks; and licenses for establishment and operation of joint venture banks and 100 percent foreign owned banks.

The second is the circular with business conditions ‘hidden’ in required technical standards. For example, the circular requires businesses to satisfy the requirements on facilities, practicing certificates and more.

The massive promulgation of so many business conditions in circulars makes for a less favorable investment and business environment, according to VCCI.

The report by VCCI also pointed out that ‘abuse’ of circular promulgation exists. There are very detailed decrees which stipulate all conditions and administrative procedures, and the law can be implemented while there is no need to issue circulars. However, ministries still issue circulars, even though they are not authorized.

As a result, law enforcement heavily depends on the regulations in circulars. Analysts say that in some cases, circulars have higher validity than laws as they set requirements which don’t exist in the laws. This harms the business environment and poses risks for businesses.

Quality

The VCCI report also points that some circulars have been suspended because of problems in quality. Circular 15/2019 of the Ministry of Science and Technology, dated November 15, 2019 on the national standards of stainless steel was suspended just eight months after issuance.

In many cases, the regulations stipulated in circulars are different from laws and decrees, thus causing contradictions and making it difficult to implement the laws.

Circular 40/2021/TT-BTC dated June 1, 2021, for example, which stipulates that the owners of electronic trading floors must make tax declarations and pay tax for individuals, faced strong opposition from businesses. As a result, the legal document had to be amended right after issuance.

According to VCCI, circulars act as the bridge that explains the provisions of the laws, ordinances and decrees to bring the laws into life. If circulars have problems, this will cause an entanglement of the entire investment and business process. As a result, the spirit of legal documents at higher levels cannot be brought into life.

Pham Chi Lan, a respected economist, said that low-quality circulars which are not feasible, and are unpredictable and inconsistent are making it difficult to improve the business environment. However, the compilers of the circulars don’t have to take responsibility for the circulars.

Nguyen Dinh Cung, a respected economist, said, on average, the National Assembly enacts about 20 laws, but there are 150 decrees and 500-600 circulars. That is, the legislative branch is giving too much room to the executive branch to make regulations. 

Tran Thuy

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