Transcript Public Private Dialoge in the Making of the Enterprise Law

Public Private Dialoge in the Making of the
Enterprise Law and Investment Law (2005):
The Case of Vietnam
Presentation at the International Workshop on Public Private Dialogue
Paris, 1-2 February 2006
Thomas Finkel
Chief Technical Advisor
MPI-GTZ SME Development Programme
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Vietnam: A Quick Overview
 “Doi Moi” (renovation policy) in 1986 shifted the
economy from planned to market-oriented
 Stable macro-economic conditions
 High economic growth:
 7.0% in 2002
 7.2% in 2003
 7.7% in 2004
 8.4% in 2005
 Living standards steadily improving, poverty
decreasing
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Vietnam: A Quick Overview
 Still poor and under-developed country:
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Per capita GDP: $550 (2004)
Predominantly agricultural economy (70% of population)
Less than 1 enterprise per 1,000 people
Human Dev’t Index: ranked 104/177 countries (2005)
 Business environment not yet competitive:
 WEF competitiveness 2005 rating: 81/117 (downgraded by 4
ranks from 2004) – lowest among ASEAN countries
 WB Doing Business 2006: Vietnam third in number of reforms,
but still ranked 99/154 in overall ease of doing business
 State-owned enterprises still dominate key sectors of the
economy; tend to be inefficient, unable to create sufficient jobs
 FDI is increasing (~US$5.4 bil. in 2005), but competition from
other East Asian for FDI is stronger than ever
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Despite a Growing Private Sector – Serious
Investment Climate Problems Remain
Some improvements in the business
environment in the last decade:
 The environment for doing
business has improved
 Results of Enterprise Law of
2000:
 Freedom to do business
guaranteed
 Nearly 200,000 new enterprises
established within 6 years of
passing the law
 Very important effects in terms of
job creation, poverty reduction and
growth
Remaining Issues and challenges:
 The quality of growth still is a
matter of concern
 Achievement of Vietnam
Development Goals requires
bolder reforms of the business
environment
 Accession to WTO imminent
 Legal framework for business
still inconsistent and in some
cases contradictory
 Implementation of business
laws inconsistent; thus
business environment varies
from province to province
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Current Legal Framework for business and
investment in Vietnam:
 Laws regulating business organization:
 Enterprise Law 1999 - private domestic enterprises
 SOE Law 2003 – State-owned Enterprises
 Foreign Investment Law –FIEs
 Law on Cooperatives – business cooperatives
 Laws regulating investment activity:
 Foreign Investment Law
 Domestic Investment Encouragement Law
 Weaknesses of legal framework:
 Unlevel playing field
 Inconsistencies between the laws
 Not compliant with international best practices and
commitments
 Implementation and enforcement of laws is weak
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Enterprise Law (EL) and Investment
Law (IL)
 The making of the EL and IL commenced in 2003. They were
passed in November 2005 with the following objectives:
 Address level playing field issues
» One business registration system for all investors
» Same rights for investors (both domestic and foreign)
 More freedom to do business/investment
 More transparent business environment/ further
administrative reforms
 Address issues related to NT, MFN and WTO
 Set timeframe for SOEs to be converted and subject to the
same playing field
 Improve corporate governance practices
 However, they are effective only from 1st July 2006.
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Public Private Dialogue in Vietnam
 Rationale for Public Consultation and Public Private Dialogue:
 Public consultation and PPD has been made mandatory by
Vietnamese laws and Government regulations
 Required under USBTA and WTO
 Increasing awareness (though still low) of the Government and the
business about the benefits of public consultation
 For main mechanisms by which the Government in Vietnam consults the
business community:
 Public meetings between specific Government agencies and
interested business interests;
 Direct requests for contributions of specific business representatives
by Government agencies assigned to draft particular business laws;
 Announcement of draft regulations and laws on the mass media or
the internet and requests for comments from the public;
 The bi-annual Vietnam Business Forum.
 In addition to this is the inter-ministerial consultation: formation of interministerial drafting committees and their operating method is a way to
guarantee the consultation between ministries on business laws or
regulations.
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Quick diagnosis of main constraints in public
consultation
 Public consultation is still implemented in an ad-hoc manner rather than a thorough
and systematic process
 Government’s ambivalence regarding how exactly PPD is to be carried out.
Vietnam’s governmental bodies, at present, appear committed to maintaining the
power to decide which voices should participate in the dialogue and which should
not.
 Entrepreneurs generally believe that sticking their own individual necks out to
advocate for change on behalf of their greater community can come with personal
costs—and with little in terms of potential personal gains to balance these costs.
So they say: “better not to rock the boat”.
 VCCI – the main policy dialogue partners of the Government – is a semigovernmental organization with much of a top-down function.
 In Vietnam, the Government-centric concept of consultation rather than the more
enterprise-centric concepts of advocacy and dialogue prevails.
 From the Government side, the shortage of resources (human and financial),
unavailability of a systematic approach to public consultation, lack of techniques
and expertise and absence of a penalty and incentive mechanism have made public
consultation by many government bodies formalistic and ineffective.
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GTZ’s Approach to Support Public Consultation
under the UEL and CIL
Introduction of Regulatory Impact Assessment in which public
consultation on contentious issues is strongly imbedded and policy
dialogue was carried out in a systematic manner
 Focus on the “shift from an investment licensing
mechanism to investment registration”, i.e. a significant
reduction of entry barriers
 Conducted by Prime Minister’s Research Commission,
with support from GTZ and UNDP
 Under the assessment, 7 major business test panels
and 3 consultation workshops were held in major
cities from North to South of Vietnam
 The process and study results were presented to:
 Policy makers and business community
 To the National Assembly (workshops organized
by PMRC and GTZ, as well as by MPDF)
 A Regulatory Impact Statement on the issue was
developed, in which opinions from all stakeholders,
included minority groups, are included.
 Used by PMRC for different proposals to the Prime
Minister on the issue of investment licensing
(under the CIL)
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GTZ’s Approach to Support Public Consultation
under the UEL and CIL (cont.)
Direct support to the organization of policy dialogue meetings
between government agencies, the drafting committees and private
sector
 Support to policy dialogues, forums to exchange
ideas on the draft laws between domestic and foreign
business community and the drafting committee.
 Foreign business community: mainly through
Eurocham with strong participation of the European
business community and lawyers.
 Domestic business community under the umbrella of
VCCI (Legal Department).
 Results of the meeting were documented and sent to
the drafting committee together with written detailed
comments by stakeholders on the draft laws.
 Accompanied by a press campaign and
documentation of the results to make sure that the
chambers’ member see the benefits of their
participation.
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GTZ’s Approach to Support Public Consultation
under the UEL and CIL (cont.)
The consultation process is supported by highquality studies on business issues related to the two
laws. The studies were used as inputs and food for
discussions at consultation workshops.
This recommendation
was strongly debated
in consultation workshop
and policy dialogues
supported by GTZ
and recommends that:
“…an individual may
establish an one
Member liability limited
company…”
Now praised by the
EL adopted in 2005:
business community
“…One-member
as one of the
Liability limited
important advances of the
company is owned
law in further liberalizing
by an organization or
the freedom to do
by an individual……”
(Article 62)
business
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GTZ’s Approach to Support Public Consultation
under the UEL and CIL (cont.)
Additionally, the consultation process is supported by strong participation of
the mass media, which has made the law more transparent, more
participatory and has strengthened public ownership of the laws.
Inputs from GTZ
Inputs from GTZ
Inputs from GTZ
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Key Results Obtained
 Domestic business associations become more proactive
and more professional in public consultation
 Results of policy dialogues with support from GTZ were
documented into formal appeals and many
recommendations were reflected in the laws when they
were passed in Nov. 2005
 Critical issues were widely discussed by the public with
support of the local mass media
 Business associations are becoming more and more
aware of the importance of actively taking part in PPD
 GTZ’s inputs and approach to PPD have set an example
and a model for other PPD activities in Vietnam
 New tools and mechanisms in public consultation and
PPD are introduced and increasingly adopted by
Vietnamese partners
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Key Factors for Success
 It is important to emphasize the ownership of national
stakeholders
 Make the local stakeholders aware of the benefits of involving in
the policy dialogues with the Government
 Keep the participants informed about how their proposal and
requests have been addressed by the Government
 Do not just complain, but suggest solutions also
 Collective voices are important
 Technical advice to consultation process is important
 Good advice on business law contents is important. However,
more important is how it is communicated
 Identify the right dialogue partners
 Use the press and other media
 Build trust between the private and the public sector
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Thank you,
and for additional information,
please contact:
Mr. Thomas Finkel
Chief Technical Advisor
GTZ SME Development Programme
97, Tran Quoc Toan, Hanoi Vietnam
Email: [email protected]
or visit our websites: www.sme-gtz.org.vn and www.sme.com.vn
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