|The Fuji Electric Vietnam Company's production line in Dong Van III Industrial Park, Duy Tien district, Ha Nam province.
The business code, since its formation in 1999 and two major reforms in 2005 and 2014, still has numerous shortcomings and limitations, according to the experts.
Compliance costs – expenses incurred to keep up with industry regulations – remained high. Notably, decreases in compliance, if any, were often results of Government directives or reform programmes when what the country desperately needs is a framework to reduce such costs systematically, said Nguyen Dinh Cung, former head of the Central Institute for Economic Management (CIEM).
Ministries and agencies tend to over-regulate the business sector, especially firms specialised in legal services, finance and banking. Technical barriers often proved to be significant hurdles to starting operations in such fields. Level of policy risk and legal complication remained high. Businesses often found themselves without reliable means to protect their legitimate interests, said Cung.
Ministries were slow to push for legal reforms thanks to both red tape and a lack of incentives.
“One cannot expect changes to come from within the ministries. If what we are hoping for are swift legal reforms we must find the strength to push for them in the private sector,” said Cung.
On the other hand, according to Cung, the law has been getting more lax when it comes to State-owned-enterprises (SoEs). Regulatory oversights and poor law-enforcement have resulted in many SoEs being unable to establish an efficient management framework or fail to adhere to good management practices.
Pham Duc Trung, head researcher of CIEM’s business reform and development, said the country has been struggling with the implementation of the Organisation for Economic Cooperation and Development (OECD) 39 principles for corporate governance as a standard for business management.
For example, the State has yet to define its strategy and function in many SoEs even after the formation of the Committee for Management of State Capital at Enterprises – a central body responsible for the management of a massive amount of assets owned by the State in SoEs.
A lack of autonomy has resulted in SoEs being unable to adopt modern management standards because SoEs cannot make important decisions without approval from the State, Trung said.
Trung called for greater autonomy be granted to SoEs along with accountability for their performance. The State must build a system of performance criteria for SoEs to follow and they must be made to publicise financial information and their management board selection.