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Some inadequacies in establishing businesses in Vietnam today

According to the statistics of Business Registration Management Department – Ministry of Planning and Investment, the number of enterprises (enterprises) in our country has grown strongly. By the end of September 2017 [1], the whole country had 93,967 newly registered enterprises with a total registered capital of VND 902,682 billion, an increase of 12,516 = an increase of 15.3% in the number of enterprises and an increase of VND 273,588 billion = 43. , 4% of the registered capital against the same period last year [2]. The number of enterprises returning to operation was 21,100 enterprises, an increase of 590 enterprises = 2.8% compared to the same period in 2016. The average registered capital per enterprise in the first 9 months of 2017 reached VND 9.6 billion. , an increase of 1.9 billion = 24% over the same period in 2016. The number of employees expected to create jobs of newly established enterprises in the first 9 months of 2017 is 886,453 employees. It can be seen that the activity of registering a new enterprise has been meeting the business needs of investors, the number of established enterprises is quite large, an average of 10,000 newly established businesses every month.

It can be seen that, besides the administrative procedure reform measures in establishing businesses, the legal provisions of the Enterprise Law 2014 (LDN 2014) and the 2014 Investment Law have contributed significantly in improve the investment environment and promote business freedom of enterprises. However, the current reality of establishing a business still has many shortcomings. According to Mr. Tran Buu Long, Deputy Director of the Credit Guarantee Fund for SMEs in Ho Chi Minh City. HCM said, the approval process for beneficiaries is too complicated, too cumbersome to make businesses not excited to participate. Many businesses complain about unclear administrative procedures, annoying and time consuming business. The length of implementation of investment procedures and complicated financial management is one of the obstacles to the rapid implementation of projects as well as the expansion of its scale to suit the dynamic and continuous changes of market and enterprise.
According to a survey of Ho Chi Minh City Statistical Office. Ho Chi Minh City operates over 1,000 businesses, businesses and the informal business sector which is a major business component in Vietnam. This subject lacks motivation to set up a business because of concerns about legal issues, tax procedures, lack of understanding of business operation management. Among them, up to 73% of production facilities do not intend to change the operating model to enterprises. In addition, difficulties faced by enterprises such as lack of capital (up to 60%), administrative procedures, poor competition, lack of manpower, production space, high prices … lead to a deadlock on the road. starting a business [3].
Regarding the legal perspective, some shortcomings and limitations can be reviewed as follows:
Firstly: Limitations in enterprise registration procedures
The Enterprise Law 2005 and currently the LDN 2014 have provisions except for specific fields. According to Article 3 of the LDN 2014, “Where specialized laws have specific provisions on the establishment, management organization, reorganization, dissolution and related activities of enterprises, the provisions of the Law shall apply. there”. Accordingly, the Enterprise Law and guiding documents only apply to business entities such as joint-stock companies, limited liability companies, partnerships, and private enterprises operating under LDN without serving registration of all kinds. Other business models in specific fields such as joint venture banks, securities trading organizations, insurance companies … Therefore, improving the procedures for establishing businesses, helping investors reduce spending fees, time to enter the market as well as breakthroughs in administrative procedure reform at LDN 2014, Decree 78/2015 / ND-CP of the Government regulating business registration (Decree 78/2015 / ND-CP) not all companies are entitled. For enterprises governed by specialized legal documents, the order, procedures and documents for establishment of enterprises are still subject to the decisive influence by specialized laws. Enterprises in these fields do not need to carry out business registration procedures at the Department of Planning and Investment but register at the specialized management agency in accordance with the specialized Law. As a result, the clear regulations on business registration procedures at LDN are disabled by specialized laws.

Secondly, regulations on naming enterprises also hinder investors’ freedom to set up enterprises
The regulation on enterprise name was legalized in Article 38.39 LDN in 2014 and Chapter III of Decree No. 78/2015 / ND-CP, specifically prohibiting naming of enterprises in the following cases: Identical names causing confusion with the name of a registered enterprise as prescribed in Article 42 of the LDN 2014; Using names of state agencies, people’s armed force units, names of political organizations, socio-political organizations, socio-political-professional organizations, social organizations and commune organizations – an association to do all or part of a proper name of an enterprise, except where it is so approved by that agency, unit or organization; Using words and symbols in violation of the nation’s historical, cultural, ethical and fine traditions and customs. However, the specific identification of characters who are celebrities, characters in history considered to be anti-righteous, hindering progress, is not clearly grounded. The above general provisions have caused a lot of confusion for investors and regulatory agencies, leading to the “arbitrary” refusal of management agencies in the enterprise registration level, which has not guaranteed the freedom to succeed. set up an enterprise, which has the right to name the investor’s business.
Third: Inadequacies in the regulations on enterprise registration documents
For each type of enterprise, when registering for establishment, it will be required to detail the composition of the dossier, from Article 20 to Article 23 of the LDN 2014. In Clause 2, Article 9 of Decree 78/2015 / ND-CP regulates : “The business registration agency must not require the founder of the enterprise or the enterprise to submit additional documents or documents other than those specified in the application for enterprise registration.” However, there are still regulations on a number of business lines. When registering to establish an enterprise, a permit for the establishment of a specialized ministry is required. For example, the field of fertilizer and pesticide production is granted by the Ministry of Agriculture and Rural Development; In the field of medicines for human treatment granted by the Ministry of Health, is the Department of Planning and Investment entitled to request investors to provide these licenses in addition to the documents set in the LDN 2014? Obviously, if requested to submit more, the Department of Planning and Investment violated the provisions of Clause 2, Article 9 of Decree 78/2015 / ND-CP. But if not required, the Department of Planning and Investment violates the provisions of other specialized laws [4]?
Fourth: on business investment conditions
The conditions for business investment that investors must meet when establishing businesses in specialized fields are not clear. According to Clause 2, Article 9 of Decree 118/2015 / ND-CP detailing and guiding the implementation of a number of articles of the Law on Investment, business conditions are expressed in the following forms:
“A) License;
b) Certificate of eligibility;
c) Practicing certificate;
d) Certificate of professional liability insurance;
d) Written certification;
e) Other forms of documents prescribed by law are not prescribed in Points a, b, c, d and dd of this Clause;
g) Conditions that individuals and economic organizations must meet in order to carry out business investment activities without having to obtain confirmation and approval in the forms of documents specified at Points a and b, c, d, dd and e This Clause. ”
Some conditions such as “written confirmation”, “other forms of documents”, “requirements, standards, personal conditions, economic organizations must meet in order to carry out business investment activities. without the need for confirmation and approval in the form of documents ”is too general and ambiguous. This will affect the freedom of doing business, establishment of businesses of investors in conditional business areas.
A review of the current regulations on licensing conditions or criteria suggests that there are often three groups of conditions: (i) the conditions for conducting a regulated business, (ii) the condition. on business entities (iii) conditions of services and products that are the object of business activities. However, the conditions for doing business are crucial and popular in all conditions for licensing. The other two groups of conditions only play an additional role; appear in some cases. The more types of conditions applied at the same time, the more difficult, troublesome, and expensive the license. Among the conditions for conducting a business, there are usually conditions on place of business, facilities, equipment, qualifications of workers, plans or business plans. business, etc. Many cases, business conditions or licensing criteria are expressed in general, unclear, subjective and unpredictable forms; not meet the scientific and practical requirements for regulations on licensing conditions, such as compliance with the planning, adequate equipment, managers with appropriate qualifications and experience. and have a feasible business plan.

For example, according to Article 5 of Decree No. 86/2016 / ND-CP guiding the establishment and operation of a securities company, one of the conditions for granting a license for establishment and operation of a public entity is This company is: “Having a working place to ensure securities trading activities; Having sufficient material and technical facilities, office equipment, computer systems, software for investment analysis, risk analysis and management, document storage and preservation. materials and equipment to ensure safety and security for the company’s office under the guidance of the Ministry of Finance. For securities underwriting and securities investment advisory operations, the conditions on equipment and equipment are not required. ”
It can be seen that the unclear regulations on business conditions can lead to many consequences. First of all, it significantly increases the cost of “entering” into the business market of industries that require a license, and also overall business costs for businesses. On the other hand, it creates risks in business and reduces the level of compliance with the law. Investors and businesses do not understand and know what to do and how to “right”, “enough” and “in accordance” with the law; and therefore, it is not possible to predict whether permission will achieve the intended outcome. It can be seen that the system of regulations on unclear business conditions has become a major barrier, preventing investors from entering the market.
Fifth, the application of online technology in business registration is still difficult
From April 15, 2013, online enterprise registration will be officially implemented nationwide according to Circular No. 01/2013 / TT-BKHDT dated January 21, 2013 of the Ministry of Planning and Investment. . This regulation aims to reduce the number of cumbersome procedures when individuals must go directly to the State administrative agency to carry out many registration procedures. However, through actual implementation, very few businesses can use online tools to register their businesses. The reason is that the online business registration is relatively complicated. To complete the application, the investor must read the entire 77-page online business registration guide at the national business registration portal and must know the law, must know fill in the right trades in the system of business lines … This makes people confused and unable to do so. Apart from the fact that people do not have the habit of using electronic administrative services, the complicated aspect of the online business registration system also makes it not very practical, wasting resources and not achieve the expected results.

Sixthly, inadequacies in the regulation on the system of economic industries
Although LDN in 2014 does not specify the business line in the Business Registration Certificate, but in accordance with Article 7 of Decree 78/2015 / ND-CP, when registering a business establishment, the investor still Must register business lines under the code of industry level IV in the system of economic industries in Vietnam as stipulated in Decree 43/2010 / ND-CP before. The business registration agency shall compare and record business lines, codes of business lines in the National Business Registration Database, in case the business lines are not included in the System. If the economic sector is in Vietnam but it is specified in other legal documents, then write it according to the sectors and trades specified in those legal documents. However, in reality, many cases of investors intend to register their business in industries that are not prohibited or not restricted by the law or conditional business but not in the economic sector code. The reason is that Vietnam’s economic system has not yet covered all economic sectors. Therefore, it leads to the phenomenon that enterprises and State agencies do not know which business lines the enterprises belong to. This is also a problem when implementing the Enterprise Law and is not consistent with the principle that investors have the right to autonomy in businesses that are not prohibited by law. The application of the industry code system is sometimes incompatible and inconsistent with the development requirements of the economy, at the same time, it costs time and costs for investors; Increase barriers to market entry. Therefore, it is required to apply the business registration code when the business registration is not entirely appropriate. The business registration line should only be understood as an industry that individuals and organizations have the right to register but are not prohibited by law. The business registration agency should only be a secretary, recording the business registration lines and trades that are designed to be open-minded so that they can design new industries according to the investor’s or in the past. process of development of the economy and the needs of society. Therefore, it is necessary to amend the legal documents in the direction that: The inscription of the business line of the enterprise at the time of business registration is only for the purpose of state management and is of statistical and business significance. only registered business lines expected business. How the sub-sector belongs to state management agencies.
Seventh, the disclosure of business information does not meet the requirements of investors
Article 30 of Decree 78/2015 / ND-CP has regulations on standardization and updating of enterprise registration data. This provision not only recognizes the legal status of the state agency for the formation of a business entity but also ensures the social recognition of the existence of enterprises in the market. However, through the implementation of the disclosure of enterprise information, there are still some limitations as follows: Although the requirement for enterprises to be established must be publicly disclosed on enterprise registration, although However, the management mechanism for enterprises that violate this regulation is lacking. In fact, many businesses after establishing do not disclose information. On the other hand, there is no linkage between the agencies having the authority to register enterprises, so enterprises established under specialized laws do not carry out the procedure of information disclosure on the National Business Registration Information Portal. Gia. This leads to investors being unable to look up business information in conditional business lines consistently. In addition, the disclosure of corporate information will only officially apply to businesses established on February 25, 2013 under Decree 05/2013 / ND-CP. Therefore, information about businesses established before this time is not uniformly and completely updated on the National Business Registration Portal. This leads to the situation that it is difficult for investors who want to establish a new business to fully search the names of existing businesses to avoid duplication. Therefore, business registration documents may be returned due to violations of regulations on naming enterprises, causing time for investors. On the other hand, it also arises the situation, if you want to name correctly, you must “ask” experts of the Department of Planning and Investment to check whether the name of the business that you want to name is appropriate.

Eighth, about law enforcement
According to a survey conducted by the Vietnam Chamber of Commerce and Industry, the weaknesses of the business environment in Vietnam compared to competing countries are corruption, informal costs, quality of public administrative services and quality of infrastructure. According to the 2017 World Bank Survey on Business Environment (WB), the cost of doing business in Vietnam is still substantially higher than that of other ASEAN countries. In particular, there are items such as the cost of access to electricity nearly 49 times higher than the Philippines. Not only the official costs can be quantified but also the unofficial and incomplete costs are burdening the shoulders of businesses, hindering the development of the whole economy, despite great efforts from Government with the message of the Assisted Government [5]. Administrative procedures in Vietnam have never been an advantage compared to many countries in the world. Compared with the international and regional competition of the investment environment, the procedures for establishing a business and starting a business in our country are still complicated, costly and time-consuming. This is also partly due to the law enforcement work of the competent officials. The survey showed that the situation of submitting business registration documents is very easy to be returned by business registration officers for reasons such as incorrect declaration of professions, incorrect translation of initials. ., so investors to “get the job” often have to spend informal costs. Besides, many business staffs do not have enough professional capacity as well as authority to evaluate whether the business registration contents are right or wrong, thus leading to many errors when issuing business registration certificates. Some of the subjects banned from participating in establishment of enterprise management such as cadres, civil servants, officers … establishing enterprises but having difficulty controlling mechanism. This not only affects the stable business environment, but also the rights of many individuals and organizations involved.
It can be said that the national legal system has an important role in ensuring the freedom of doing business in general and for ensuring the freedom to set up enterprises in particular. The clarity, efficiency, and comprehensiveness of the legal system will determine the development of the economy. From the inadequacies that still exist in our country’s business establishment practice in recent years, it can be seen that it is necessary to conduct more comprehensive and in-depth study of legal provisions in order to further improve domestic institutions. with business establishment in particular and economic laws in general.

Author: Pham Nguyet Hang (synthesized)

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