Problems relating to Trade and Investment on Vietnam
24. Indigested legislation, abrupt changes |
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Issue |
Issue details |
Requests |
Reference |
| (1) Deficiency and Ambiguity in Legal System | - While in more and more cases, the administration seeks public comment (including enterprises) before promulgation of laws, the legal system including revenue code remains undeveloped. Interpretation of laws varies from one government employee to another. It negatively affects the business activity of enterprises. - Due to the nebulous, inadequate implementing legislative rules and regulations, fines and additional tax are levied, on occasions, at the sole interpretation/ discretion of the tax investigator in charge. - Due to the nebulous, inadequate legal system including tax laws, variances in the tax investigators' interpretation of tax legislation have caused all kinds of problems in business activity of enterprises. It appears promulgation of New Laws is no help as they do nothing but make the matters more complex defying interpretation. |
- It is requested that in advance of legislative promulgation, GOV makes effort to hear from enterprises, and spares ample time to study practical implementation of the legislation. - It is requested that GOV takes step to concretise and elucidate the implementing rules and regulations. - It is requested that GOV overhauls the entire legal system (including refinement of the language used in the laws, legal documents, etc.) and thoroughly ensures uniform interpretation before promulgation of each legislation. |
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| (Action) - The National Assembly in April 2002 approved price treaty concerning dumped prices, and monopoly pricing, and in May, approved national treatment and most favoured nation treatment in international trade, and in the same month, approved treaty on safeguard provisions on import of foreign goods. |
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| (Improvement) - On 4 October 2002 the National Assembly approved the transfer of judicial tasks from the Ministry of Justice to the Supreme People's Court of Vietnam in an effort to develop a more independent judiciary. The Government issued Ordinance on Judges of People's Courts and the Ordinance on Prosecutors of the People's Procuracy, which regulate the activities permitted to be undertaken by judges and prosecutors. This is an effort to limit corruption and restore public confidence in the judiciary. - English version of the existing laws and regulations and implementing regulations have now become available. - On 8 April 2005, Prime Minister's Directive "On measures to create new development in foreign direct investment attraction in Vietnam" was promulgated, the measures of which are epitomised as follows: (1) Do not issue documents restricting or ceasing investment licensing that do not comply with the Law on Foreign Investment and related legislative documents and international commitments. (2) Focus on implementing the pledges stipulated in the AFTA, the US-Vietnam Bilateral Trade Agreement, the Vietnam- Japan Joint Initiative as well as agreements signed with the EU. (3) Promulgate legislation providing a guideline for implementing the Investment Law and Company Law, assuring uniformity, transparency and predictability of such legislation. The measures must satisfy transferability, non-retroactivity, and attractiveness requirements. (4) Completely execute the taxation provisions that do not affect the investment incentive measures as regards investment incentive for the projects specifically authorized by GOV. - (Registration of Shareholders) Pursuant to Law on Enterprise No. 60/2005/QH11 (LOE2005), shareholders holding more than 5% of the total shares must register with the business registration body within seven working days form the date of obtaining the shares. (Manager of Enterprise) Pursuant to LOE2005, the legal representative of a limited liability company (LLC) and a shareholding company (SC) must be a resident in Vietnam. If he/she is absent from Vietnam for more than 30 days, he/she must provide a power of attorney to another person to exercise the rights and follow the obligation. (Publication of business registration) Within 30- days from the date of issuance of a business registration certificate, the enterprise must publish its business registration in the network of information on enterprises or a written or electronic newspaper in three consecutive issues. When any alteration is made to the business registration, the enterprise must arrange for the publication of such alteration within the time limit and in the manner as stipulated in this article. (Investment Procedure) Decision No.1088/2006/QD-BKH (MPI 19 October 2006) (Decision 1088) details Standard Forms for conducting investment procedures in Vietnam, Pursuant to Decision 1088, investors must use Standard Forms in preparing investment documents in filing applications for investment registration, investment evaluation, and business registration under the new regime for the new investing enterprises system. The investment procedure formally made into Standard Forms is contributory toward enhancing efficiency and transparency in the investing business environment. - GOV promulgated on 5 September 2007 Decree No. 139-2007-ND-CP "Providing detailed guidelines for implementation of a number of articles of the Law on Enterprises No. 60-2005-QH11, promulgated on 29 November 2005" (Decree 139). Decree 139 sets forth, among others, the guidelines for: (1) Foreign investors investing in Vietnam for the first time, (2) FIEs not yet completing re-registration of investment certificates pursuant to Decree No. 101/2006/ND-CP of September 21, 2006, (3) Shareholders attending the general shareholders meeting, and (4) Guidelines for cumulative voting. If a foreign investor investing for the first time in Vietnam owns more than 49% of the charter capital, such investor must complete the investment registration. If the share ownership is less than 49% of the charter capital, the provisions under Decree No. 88/2006/ND-CP, on Enterprise Registration applies. Foreign investors not completing the re-registration of the Investment Certificates are subject to constrictions in respect of the scope of business, the period of investment and the various conditions under the existing investment certificate. Regarding the shareholder's right, any institute holding more than 35% of the charter capital of a limited liability company or any institute holding more than 10% of common shares of an enterprise is entitled to appointment of three directors maximum in the General Staff Assembly and also in the General Meeting Of The Shareholders (GMS). Decree 139 also permits shareholders cumulative voting by the affirmative voting of GMS. |
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| (2) Inadequate Corporate Reorganisation Scheme | - Inadequate legislation in Vietnam to materialise minority squeeze out scheme (MSOS) gets in the way of corporate reorganisation. | - It is requested that GOV advances its legislative overhauls that enable MSOS. | |
| (3) Inadequate/Delayed Issuance of Detailed Implementing Regulations for New/ Amended Laws (Legal Systems) | - Promulgated laws are not followed up by their implementing regulations, decrees, etc. (as in Japan) so that in many cases, they remain effectively unexecuted. In addition, GOV's announcement of foreign trade legislation in many cases gets implemented with extremely short notice. Moreover, some of them get effectively aborted by the opposing voices from enterprises, association of commerce and industry, etc. Sense of uncertainty prevails. - Upon enactment or amendment of law, promulgation of their detailed implementing rules/decrees lags behind, followed by confusions in administrative agencies, procedural delays, etc. impacting business operation of foreign enterprises entering Vietnam. Ambiguity in the implementing rules and regulations compels administrative officers' resort to their own discretionary judgement. It causes inconsistency from their previous judgement, while from time to time giving vent to their demand for illicit payments, giving a hard time to the applicant. |
- Establishment of Forum is desirable for exchange of communication by and among Japanese affiliated enterprises, accounting offices, etc., - Implementation of the mechanism for distribution of the latest information. - It is requested that GOV takes step to ensure completing of the implementing decrees, rules and regulations are ready and in good order, upon enactment of laws and regulations and their amendments. |
- Foreign Exchange Regulations - Law No. 27/2001/QH10 on Fire Prevention and Fighting - Taxation System on Foreign Contractors, etc. |
| (4) Abrupt Revision of Laws and Fees | - In Vietnam amendments in laws and public charges take place abruptly without advance notice in many cases. By all rights, all amendments in laws and public charges should provide an adequate grace period necessary for all concerned to get well informed about the details. Otherwise it can be problematic to business operation. Especially, the recent changes in immigration law (amendment on visa exemption as to Japanese), the rate of increase in wage, import restrictions on used goods (repealed this time), water charge increase (in excess of 30% only in Dong Nai), etc. have given great impact upon the company operation. | - It is requested that GOV takes step to collect views of enterprises especially foreign funded enterprises before amending laws and public charges to avoid occurrences of serious problems. Also, in deciding legislative implementation, it is requested that GOV allows sufficient period to have the new laws and fees known by all concerned. | - LAW ON ENTRY, EXIT, TRANSIT AND RESIDENCE OF FOREIGNERS IN VIETNAM |
| (5) Frequent Changes in Legal System/ Confusions in Employment | - Confusions arising from frequently changes on law on labour, labour practices, official's implementation. | - It is requested that GOV works toward clarification of legal system, and maturing of environment and society | |
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