Central Institute for Economic Management Implementation of the Enterprise Law: New way of policy enforcement in Vietnam By Nguyen Dinh Cung Director of Department for Macroeconomic Policy 68 Phan Dinh Phung, Ha Noi, Vietnam Tel: (84) 08044929; Mobile: (84) 0913571596 E-mail: cung@netnam.org.vn

1. Scope of Enterprise Law Application The Legal framework for forms of business organization: 1. Law on foreign direct investment in Vietnam 2. Cooperative law 3. Law on state owned enterprises 4. Enterprises Law (1999): stipulates 4 types of business organization: - Sole Proprietorship - Partnership - Limited liability company - Join Stock Company

2. Core changes of Enterprise Law 1. Introduction of automatic procedures for incorporating private enterprises Under the previous company laws: - Complicated: 20 steps and 20 documents for getting permissions and approvals from numerous state agencies - Time-consuming: it took from 6 to 12 months to complete - High cost: 10 to 20 VND millions (700-1400 USD)

2. Core changes of Enterprise Law Investors Communal People's Committee Preparation of establishment file Preparation of business registration Establishment Certificate District People's Committee Certificate by Notary Office Local Hospital Local Police Station Certificate by Bank Required Professional License Bank Business registration is not approved Establishment is not allowed Office of Provincial People's Committee Enterprise Statutes Line Department List of Board Members, Inspection, etc.. A completed establishment file File submitted to: Department of Planning & Investment or Office of Provincial People's Committee or Line Department Enterprise Owner founding Members' Identification Certificate or Household registering Book Line Ministries Provincial (city) People's Committee Department of Planning and Investment Establishment is allowed Business registration is approved Issue Establishment License Business Registration Certificate The end

2. Core changes of Enterprise Law 2. Abolishment of 150 business licenses (among 400 existing ones) 3. Abolishment of approval or agreement letter of relevant state agencies for any changes in enterprise activities, such as: - Entering into new industries - Setting up branches or representative offices - Changes in investment, shareholders, headquarters' address...

3. Responses of vested interest groups 1. From Government officials - Delay of implementation reasoned by: + lack of guidelines + have not received official document yet,... - Realization of regulations inconsistent or contradict to the EL - Issue licenses which had been already abolished - Criticized that the implementation of EL resulted in loosing state management or creating social disorders: “ghost enterprise”, tax evasion, transportation accidents, social evils, ....

3. Responses of vested interested group 2. From existing Registered enterprises Complaints:implementation of the EL leads to: + collapse of cooperatives + Unfair competition + Unhealthy enterprise, including inefficiency of resources Lobby for recovering of barriers or licenses

4. Impact of EL implementation -- Number of newly registered enterprise dramatically increased - Number of enterprises expanded their activities, created branches, representative offices, increased investment capital, ... In 2000, over 9000 enterprises expanded their scope of activities

4. Impact of EL implementation

4. Impact of EL implementation Reasons: 1. Content of the EL is clear, consistent, especially market-oriented and business - friendly; no room for discretion by officials. 2. Strong commitment of government: The special Task Force found by the P.M - 20 members: experienced economic and legal experts - headed by First Deputy Prime Minister

4. Impact of EL implementation - Duties: + Drafting regulations + Supervising implementation of the EL + Regularly report to the PM 3. Public support + closed co-operation between the Special task force and mass media: TV, Radio, Newspaper, ... + Any barriers, unwillingness of vested interest groups has been quickly disclosed => remedies therefore timely and effectively introduced.

Thank you very much