Viet Nam: it’s time to make regulations strong and effective

Tuesday, Oct 02, 2018 08:45

Vo Tri Thanh

Viet Nam has made great efforts in fine-tuning its regulatory system and reaped certain successes in recent years. This is, however, not yet finished but now is the right time to speed up this reform to make regulations strong and effective.

Since 1986, Viet Nam has issued a number of laws to regulate economic activities in line with market-oriented reforms.

In 1996, the National Assembly introduced the first Law on Legal Normative Documents (also known as the Law on Laws). This law specifies the authority of different bodies in promulgating different types of regulations, including laws, ordinances, decisions and circulars.

Viet Nam also embarked on simplifying administrative procedures. This direction of work was initiated in the 1990s but only materialised during the 2000s, especially since 2007. Reducing barriers for local firms to do business is acknowledged as a core priority to support the business community and enhance competitiveness.

Additionally, Viet Nam had made numerous efforts to harmonise domestic laws in line with international commitments and international best practices. Such efforts became evident during the 2000s as Viet Nam joined the World Trade Organisation (WTO) and free trade agreements (FTAs).

Various legal documents (such as the Enterprise Law, Investment Law and guiding documents) were issued and amended, with a view to create a more level playing field for enterprises of all forms of ownership.

Viet Nam’s regulatory reforms have contributed to the enhancement of the quality and effectiveness of laws and regulations. Many outstanding achievements have been recorded since the reform.

The slowdown in economic growth in the late 1990s put more pressure on reform which was then powered by the introduction of the Enterprise Law in 1999 – recognised as one of the most fundamental reforms Viet Nam’s business law.

The law officially acknowledges the right of doing business of people: “Citizens are free to do business in all business areas not prohibited by laws.” The law has resulted in a business boom and hence contributed a great deal to Viet Nam’s economic recovery and growth, job creation and poverty reduction.

About 160,670 private businesses were registered during the 2000-05 period, 3.2 times more than the total number of private enterprises during 1991-99.

Another example is Project 30 (in 2007) and Resolution 19 (since 2014) which aimed to reform administrative procedures as well as improve the business environment and competitiveness of the nation in the context of Viet Nam’s deeper economic integration.

Project 30 set out to simplify at least 30 per cent of administrative procedures and reduce administrative costs by at least 30 per cent during 2007-10. It conducted a comprehensive review of all administrative procedures.

The project contributed to the reduction of administrative burdens on businesses and citizens, especially regarding invoicing procedures (saving US$20 million a year), tax declarations and collections (cutting costs by $50 million a year) and customs procedures (saving $30 million a year).

Resolution 19, with more powerful reforms, marked the first time that specific targets were designed to ensure the improvement of the business environment. It set out specific targets that need improvement and the minimum requirement of improvement with many areas consistent with the World Bank’s Doing Business survey.

It also mapped out various reference targets in line with the average level of ASEAN-4, which implied bolder and more serious attempts by Viet Nam to move closer to ASEAN standards before the regional economic community comes into play.

Notwithstanding difficulties in enforcement, achievements of Viet Nam in regulatory reforms are considerable, reducing barriers to market entry and transaction costs.


Market-oriented reform is Viet Nam’s goal and also a key for the country to be more confident in deepening international integration. In turn, global trends and international integration commitments are significant catalysts for domestic reforms in Viet Nam. With that, there are now two other major challenges for regulatory reforms in Viet Nam.

Many studies show that in Viet Nam, micro, small and medium enterprises find it hard to grow (“Missing middle” economy). The reasons behind this are problems associated with property rights protection, competition and access to factors of production (land, capital, etc.) Having strong and effective regulations over those issues is very much a challenge.

Another challenge is to have good regulations to support and facilitate technology and innovation. This is really crucial for Viet Nam to sustain economic growth which relies more and more on improvements in productivity and innovation.

In the context of the Fourth Industrial Revolution (Industry 4.0) and digital economy, regulatory policies and regulations need to ensure the spirit of innovation on the basis of healthy and fair competition, the overall socio-economic benefits, especially those of consumers, and the State’s interests.

However, designing and implementing such appropriate regulatory policies and regulations are not simple tasks.

For example, there are still ambiguities about the nature of service providers such as Uber, Grab, Airbnb – are they taxi companies and hotels, or just technology and software companies?

In addition to creating infrastructure platforms that provide super-connectivity, openness and data security, we must be fully aware of how to deal with a fast-moving market. New business models have appeared with few good regulatory practices for reference, therefore assessment on the multi-dimensional impact of the new business models is also difficult, not to mention the cost of conversion.

This is very challenging! However, it does not mean it is impossible for us to have a proper ‘rules of play’ to ensure that the process of conversion to the digital economy is implemented in a better manner and as best as possible.

First of all, we need to radically change the approach to governance and ways of making policies and building regulations. In a super-connected world with the rise and rapid development of the digital economy, a prominent feature of effective governance is speed.

Speed is not everything but very important. With the fast changing pace, the process of setting rules and standards must be in tune with technological improvements. Regulators and policymakers must be flexible enough to respond quickly to changes without distracting from the overall goal and the shared values. With the shift of technology, they have to be able to adjust the direction in "real time".

On the other hand, domestic reforms and international economic integration require Viet Nam to commit further to regulatory reform.

By 2045, according some studies of ASEAN Visions, ASEAN as an Economic Community will reflect full partnership in economic progress, where the regulatory environment is business- and people-friendly, and where the rule of law prevails and public resources are effectively managed.

For the smooth flow for goods and services within the region, ASEAN will have to institutionalise a regulatory system where Good Regulatory Practice (GRP) and a Regulatory Management System (RMS) are embedded at the national level with Regional Regulatory Co-operation (RRC) at the ASEAN level.

The process of good governance at ASEAN begins at the national level where the regulatory environment must be transparent, predictable and effective.

To ensure successful reforms, it needs strong political commitment by the Government. Simple goals and adherence to international standards/best practices are essential (Self-assessment in regulatory management is simply not enough).

Active involvement of stakeholders should be welcome, while sharing of information (comments, feedback and transparency) and effective communication are highly complementary.

Reforms need, of course, a sound institutional structure with sufficient capacity.

* Vo Tri Thanh is a senior economist at the Central Institute for Economic Management (CIEM) and a member of the National Financial and Monetary Policy Advisory Council. The holder of a doctorate in economics from the Australian National University, Thanh mainly undertakes research and provides consultation on issues related to macroeconomic policies, trade liberalisation and international economic integration. Other areas of interest include institutional reforms and financial systems.

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