RIA - an Emerging Tool to Reform the Regulatory Framework for Private Sector Development in Vietnam Corinna Kuesel, GTZ Vietnam GTZ - Swisscontact Workshop on Business Enabling Environment 1 September, 2005

Regulatory Reforms for PSD in Vietnam - Status The remarkable economic performance Vietnam’s economy and the private sector in the last decade is very much attributable to regulatory reforms. Specifically for PSD, regulatory reforms are taking place in: Market entry, with the epochal Enterprise Law Operational issues: tax, land, credit, business inspection As a “transitional economy”, to guide the choices and sustain momentum, Vietnam requires an enormous deregulatory and regulatory efforts for effective legal and institutional framework for functioning market under the rule of law.

Many Challenges in Regulatory Reform for PSD From a regulatory policy perspective, despite many progress made, there is a long path to travel to reach int’l norms of regulatory governance: Enforcement and compliance with Law Making Law fall well short of expectations; The political and administrative culture still conceptualize drafting a law as a goal in itself; There is a lack of quality control in rule making, a lack that create opportunities for abuses and mistakes. The absence of judicial review reduces incentives for drafters to be more careful in developing new rules. Financing for drafting new laws and subordinate regulations is alarming deficient (e.g. the budget allocated by the Govn’t for drafting the UEL is only 70 million or roughly US$4,500).

Many Challenges in Regulatory Reform for PSD (2) As far as regulatory institutions are concerned, their capacity need to be strengthened. Drafting committee (members from different line ministry) is core of the system. There is a strong need that members represent a more diversified background. Government initiate 95% of the laws. Ministry of Justice is playing an increasingly important role but is facing different constraints in resources and expertise The National Assembly in increasingly involved in the quality of the legal environment. However, they are overloaded by the huge amount of work.

Tools to improve regulatory framework are there but inadequate and inefficient in some cases… A growing awareness of the need for transparent, open and consultative procedures for making regulations is emerging. Key tools used in Vietnam: Forward legislative plans Consultation with the public Inter-ministerial consultation Justifying and ensuring the proportionality of new laws and regulations Implementation, inspection and enforcement Access to regulation.

And GTZ has joined hands to address some of these constraints… As part of its overall efforts to improve the business environment and investment climate for SMEs in Vietnam. To ensure the focus and efficiency of its intervention, only a couple of constraints are selected to be addressed. Among them the rule-making tools and capacity of regulatory bodies are strongly emphasized. Our focus are on the laws, rules and decisions (e.g. Unified Enterprise Law, Common Investment Law) which are closely related to the improvement of the business environment for private SMEs: These as the start Spill-over effect (replication of the best practices in other law making.

Besides other tools, RIA has been introduced… First to PMRC… Through workshop Implementation of first ever RIA in Vietnam Learning by doing Int’l best practices And then to many others and now warmly welcome: Ministry of Planning and Investment CIEM VCCI Ministry of Justice Local Press Other stakeholders

First - ever RIA in Vietnam was Implemented The Assessment was implemented by PMRC and a local consulting firm with inputs from int’l experts It focuses on one of the most important reform being discussed for introduction in Vietnam through the UEL & CIL in Vietnam. The study and RIA was introduced to the National Assembly last June and was strongly encouraged to be further replicated. The study is being used by PMRC and the drafting committee as a tool to advocate for the UEL and CIL in Vietnam Despites some constraint, this has been a very good start for RIA to be institutionalized in Vietnam

RIA is now widely discussed Awareness Raising Was One of the First Activities and has Brought About Some Impacts… Inputs from the Proj. Inputs from the Proj. RIA is now widely discussed

We did not go alone. Instead, we set up a RIA Alliance with… Local institutions like PMRC, MOJ, CIEM, VCCI, etc. to strengthen their ownership , build up local capacity on RIA, and eventually institutionalize RIA in rule- and decision- making. Other int’l agencies like UNDP to ensure the coordination and impact The press to for awareness raising and for public support & RIA ALLIANCE Business Associations Other Donors’ Projects PROVINCIAL AUTHORITIES Mass Media M O J

The Alliance has mapped out a process… INSTITUTIONALIZATION OF RIA TEST AND REFINEMENT DEV’T OF RIA GUIDELINE REPLICA-TION OF RIA CAPACITY BUILDING WE ARE STILL AT THE EARLY STAGE OF THE PROCESS AND OF THE LEARNING CURVE PILOT IMPLE-MENTATION AWARENESS RAISING

And Initially Agreed on the Approach… (1) Two-pronged approach: Direct supports to the process, e.g. the application of RIA or public consultation dialogues; Development of Guidelines/ Manuals to make them part of the official rule making process. In addition to support at the national level, we are aiming at introducing new laws making tools and capacity building for provincial stakeholders. E.g. at provincial, RIA is more applied for any decisions made Capacity building on RIA, public consultation techniques Make it the process of Vietnamese stakeholders, and GTZ just facilitates the process.

And Initially Agreed on the Approach… (2) RIA and other innovative rule-making tools will be applied not only to law and rule-making but also to decision-making by the Government (central and local) E.g. on a decision made by a local government. RIA is not a panacea and should not be seen as an a-la-mode tool. It should be used in conjunction and in supplement with other tools.

And worked out an Action Plan for Implementation

The very next steps… Building the local capacity for RIA in Vietnam Regulatory bodies/ Government (central and local) Local consultants Business associations Other stakeholders Replication of smaller scale RIAs One on business license (VCCI) One on a decision made at the provincial level (MOJ) One and a new reform to be introduced (MOJ) Localization of the RIA Manual. Awareness raising Formulation of a strategy to introduce other innovative methods for rule-making in Vietnam in supplement to RIA.

Challenges… RIA is new and there is limited local capacity about it. It might be a long way ahead to make them integrated into the rule- and decision-making. Improvement the absorption capacity of the local stakeholders. This will require the clarification of the most effective way and strategy to introduce RIA so it can be used in combination with other tools and good practices (e.g. legal consultation, “notice and comment” mechanism, etc.).

But we will be persistent to further multiply the initial encouraging results. Please be keep informed on our progresses and lessons learnt (successes and failures) on www.sme-gtz.org.vn & www.sme.com.vn. or contact us through: Corinna Kuesel, Chief Technical Advisor, GTZ SME Dev’t Programme Email: corinna.kuesel@gtz.de Le Duy Binh Advisor, GTZ SME Dev’t Programme Email: duybinh@sme-gtz.org.vn Thank you for your attention!