Ministries’ passion for ‘permits’ ties up private sector

Lawyers and economists argued in a Hanoi workshop that the number of business fields listed as prohibited or conditional should be cut by half from the current 157.

The Enterprise Law enacted in 2000 was praised as a breakthrough that would remove the shackles fettering Vietnam’s private sector. After that, Vietnam joined regional free trade pacts and entered the “global playing field” by becoming a member of the World Trade Organisation (WTO).

People hoped that with the progressive law and the nation’s participation in a global economy, the business environment in Vietnam would improve significantly. However, say lawyers and economists, it is becoming more and more difficult to do business in Vietnam. That’s because while the laws are progressive and “open,” ministries have set up a lot of requirements on businesses and created all kinds of “permits,” barriers that hinder the development of Vietnamese enterprise.

Number of restricted business fields is up 500 percent in 10 years

The ears of the officials who convened a recent Hanoi workshop to study draft decision 59/2006 on the implementation of the Commercial Law must have been burning by the time the meeting concluded.

Lawyer Truong Thanh Duc, President of the Basico Law Firm, noted that the number of kinds of business requiring permits has increased five times in the last 10 years, from 29 to 157. In Duc’s analysis, the problem is that when ministries meet difficulties in their management work, they automatically think that it is necessary to put a class of businesses under special control or prohibit them.

The more conditions ministries establish, the more businesses must bow and scrape to obtain permits and overcome other barriers, Duc explained. This hinders the development of Vietnam’s private sector.

Economists stress that in an efficient economy, the number of barriers to entry are few and the laws are clear and transparent.

Permitting requirements can lead to abuse of power

“If we continue to enact laws on the principle of prohibiting or limiting what officials cannot control, there will be abuse of power in granting licenses,” said Le Ba Lich, Chairman of the Animal Feed Association.

Lawyer Cao Ba Khoat, principal of the K & Associates consultancy firm, said that although Vietnam has a plethora of documents which restrict and prohibit lines of business, policy makers do not make it clear why setting up this or that kinds of businesses is restricted or prohibited.

Vietnam has abolished the practice of “secret investigations,” Khoat explained, having concluded that the concept of “national secrets” was abused. However, almost as soon as that happened, ministries, independent agencies and state owned enterprises rushed to promulgate their own “secret regulations.”

Khoat gave an example. Currently, he said, Vietnam prohibits intermediaries from arranging the marriage of Vietnamese citizens to foreigners when the intermediaries do the brokerage for profit. However, the ban has simply driven this line of business underground. Khoat believes that marriage brokerage should be listed as a conditional business – one in which participants must meet special requirements – rather than be prohibited.

Lawyer Duc argued that the number of prohibited or restricted business fields can be cut by half. He sees no need to prohibit the trading of bank note paper, printing machines and printing ink, for example, because in every country, the state itself controls the printing of money.

“Our current public management apparatus is weak. To compensate for their inadequacy, ministries set up more conditions that tie up businesses. If the situation cannot be improved, businesses will die.” Duc warned. Nguoi lao dong

Tags: Vietnam Enterprise Law