VCN - The provisions of law related to investment and business activities have great influence on the operations of enterprises, helping improve investment efficiency. But according to Nguyen Dinh Cung, former Director of the Central Institute for Economic Management and Management (CIEM), in Vietnam, many regulations are still overlapping, greatly influencing investment decisions and pouring capital of investors and enterprises.
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|Dr.Nguyen Dinh Cung.|
How do you comment on the overlap of current business regulations?
In Vietnam, investment and business activities are most affected by the Law on Investment and the Law on Enterprises. However, these two laws have many issues related to each other, but they provide overlapping and contradictory regulations. In particular, not only these two laws but also many other laws such as law on Construction, Land, Environment, Real Estate Business, Housing also have overlaps. This overlap has existed for many years which is also quite complex. This affects the process, order and procedures for making investment decisions. Many enterprises take a lot of time to invest from building ideas to operating the project, even 3-4 years to complete the project. Such prolonging will lose the business opportunity; change the market, leading to an increase in investment costs and a decrease in investment efficiency.
What is the overlap between the Law on Investment and the Law on Enterprises now?
The Law on Investment and the Law on Enterprises overlap when covering both real acts of enterprises such as capital contribution, share purchase. The Investment Law should only focus on new investment activities, creation of new assets, while investment in capital contribution and share purchase is only converting capital and assets from one person toother, which does not affect the assets of the enterprises. These two issues must be separated, but the overlap is that the Law on Investment still interferes in this activity.
With the above-mentioned provisions, the Enterprise Law has followed international practices, while such regulations of the Investment Law make State agencies intervene too deeply and unnecessarily in investment activities of enterprises. This has made capital contribution activities to buy shares prolonged, creating unnecessary costs for enterprises.
In particular, the overlap of this provision will greatly affect investment activities of startup enterprises. Because startups always need capital, they will need angel capital (rich individuals that finance a startup in the first period, but in return, they will have partial ownership of enterprises), venture capital, then commercial investment. Currently, domestic investment capital and venture capital fund are few, mostly foreign investment. Venture capital is often little, which only supports startups in the early stages. But the little capital investment takes 7-8 months to be permitted, the cost of permission is more than the amount of investment. This also makes startups go abroad to raise capital, then set up companies abroad, creating huge economic losses if the startups grow into a billion-dollar enterprise.
What is the solution to overcome this situation?
First of all, legal regulations are overlapping because we have too many legal documents, we run too much by administrative management. The policy of cutting off only makes the top, not the root of the problem, therefore, cutting off the "tops" of this rule and"sprouts and buds" of other regulations grow. Therefore, the necessary solution is that law-making agencies and enforcement agencies must change their minds and re-think unnecessary interventions for business investment activities.
We need to manage according to market principles, the State should not focus on "management", need promote business development. When the State focuses on managing which is holding back development, not paving the way for new business opportunities and discouragement. In particular, regulations of this type will not be appropriate for the context that Vietnam is urgently in need of mobilising resources, intellect, and encouraging aspiration to turn Vietnam into a prosperous country.
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Therefore, to amend the legal overlaps, it is necessary to have an independent group of experts, under the direction of a Deputy Prime Minister, to give radical solutions. Because legal regulations often involve a lot of rights and interests of groups, independent experts must be involved in the process, which creates the objectivity of the reform activities to achieve the right goals.
By Binh Nam (writing)/ Binh Minh