Inputs and Comments to CIL and UEL: Final Efforts

 

A symposium to contribute inputs and comments to CIL and UEL which was recently held by the Vietnam Chamber of Commerce and Industry (VCCI) was part of the efforts. Pham Chi Lan, member of the Prime Minster’s Research Commission, said that deputies of the National Assembly would soon discuss and approve the two laws. However, many shortcomings still remain. Therefore, organisations which represent enterprises and enterprises themselves should take actions to produce an impact on the National Assembly deputies.

 

The Prime Minister’s guideline is ‘to respect the right to free business, create an open and favourable environment to have more enterprises and attract more investment capital. However, according to experts and legal consultants, the guideline has not been put into the laws with concrete provisions. It can be found in only the general provisions, so enterprises do not really enjoy favourable conditions.

 

Participants of the symposium shared the same idea that there were many unclear definitions in the two draft laws and there were also provisions hampering enterprises’ activities. Talking about the issue, Tran Huu Huynh, head of the Legal Department of VCCI, raised a question whether joint venture enterprises were domestic or foreign investors and who direct and indirect investors are. It is assumable that after holding a certain volume of shares, indirect investors will become direct investors, is it safe for enterprises’ owners or not?

 

Based on the draft Common Investment Law, most participants said that it would be very difficult for enterprises if projects were classified concretely according to specific fields. Also, it would trouble foreign investors if they have to develop projects before applying for business licences. The participants said it would lead to the fact that investors would formalise their business registration with an unreal project.

 

Contributing inputs and comments to the regulation that for each project, investors shall have to register before applying for investment increase, most participants said that the registration would not benefit the State and investors, wasting investors’ money. Also, there are no regulations on coercive measures, leading to a risk that investors may ignore registration procedures. So, some investors may disregard the law.

 

Stating about business and investment registration certificates, the participants said that it was unreasonable as business and investment registrations were different from eah other as the business registration was enterprises’ identification and basic features while investment projects were ideas and proposals. It would lead to confusion if the two factors were combined with each other. Also, the business and investment registration certificate would help administrative reform as it was a result of two different management processes. Most participants said that the provision should be excluded from the draft laws.

 

Since the formation of the guiding idea and during the drafting of the two laws, VCCI and many other organisations have been active in gathering inputs and comments from enterprises to the laws. Inputs and comments of enterprises would be supplemented to a report to the National Assembly, which would help National Assembly deputies have more detail view of the two laws.

 

As far as I am concerned, the ‘using the State’s capital for investment and business’ activities is the biggest shortcoming of the Common Investment Law (CIL) and may be a great constraint to any project developed by equitised State-owned enterprises.

The draft law stipulates that for ‘projects in which the State holds a control stake, persons who are authorised to make investment decisions shall evaluate projects and be responsible for their investment decisions,’ so who are authorised to make investment decisions? Also, according to the draft law, the organisation which is assigned as the representative of the State’s control stake would be authorised to decide project owners and evaluate the project. I think it is like the management of State-owned enterprises with no new features. This may lead to a boom of bureaucracy and corruption. The regulation should be removed as it does not benefit the State or protect the interest of investors. Instead, it would lead to a complicated law and even neutralise the existing laws.

 

The ‘investment policy’ and ‘investment guarantee’ express the national treatment to foreign individuals and organisations when they invest in Vietnam. This would be a piece of good news for foreign investors but Vietnam would face some certain difficulties. The issue is whether the State Bank of Vietnam and commercial banks have enough foreign currencies or not for converting or keeping the price of the local currency while meeting the demand of investors on importing electronic materials for manufacturing consumer goods for the domestic market, or paying technical services, patens, intellectual property right transfer, profit transfer, principal and interest of foreign debts, investment clearing items, money and assets owned by investors. If the country does not have enough foreign exchange reserve, Vietnam may face a risk of a financial crisis.

 

I would like to take word ‘investment’ for example. The word is explained ‘investment means that investors use their capital, consisting of tangible and intangible assets, to form assets to perform business activities.’ I think that the explanation is not completely precise because not all investment behaviours are for business purpose. The explanation is precise for business purpose investment only. Regarding ‘direct investment,’ the draft law explains that ‘direct investment is a form of investment in which investors invest their capital and join the management of investment and business activities.’ The explanation is also not completely precise as direct investment does not have to meet a condition ‘join the management of investment and business activities.’ I propose a correction for the definition, that is, direct investment is the investment of capital, consisting of money or assets, by investors to implement projects or set up enterprises. Similarly, the definition ‘indirect investment’ should be corrected as follows: ‘indirect investment is an investment form via intermediary financial institutions or buying shares on the stock market.’ I propose to supplement an explanation of definitions ‘foreign investor’ and ‘domestic investor.’