Encouraging, Supporting Active Growth of Business Community and Entrepreneurs

The role of the business community and entrepreneurs has been confirmed, not only in resolutions. The Party, the State and the Government have built guidelines, laws, decrees and regulations with specific solutions to support the Vietnamese business community and entrepreneurs to shape, develop and integrate.

Within a 15-year cycle, since the moment the Prime Minister made a decision establishing Vietnam Entrepreneurs Day (October 13, 2004), the Vietnamese business community and entrepreneurs have made ongoing progress, not only because of efforts by enterprises and entrepreneurs but also because of open policies and changes in public awareness of their roles. The country had only 91,755 active enterprises at the end of 2004; the number has soared to over 700,000 now.

Policy breakthroughs

Business is the most important economic sector to economic growth. In the past years, the Party and the State have paid great attention to creating favorable conditions to promote enterprise development. The Company Act 1990 and the Law on Private Enterprises 1990 Law were the first legal documents on private business establishment and operation. The Law on Enterprises and the Law on Investment (amended in 2005 and in 2014) were profound breakthroughs that met long-held expectations of people and businesses following the institutional breakthrough with the Law on Enterprises of 1999.

These two new laws which were built with the spirit of strong reform, giving more power to investors and businesses, placing higher requirements on transparency, information disclosure and shareholder protection, encouraged entrepreneurship and created a wave of business incorporation from the second half of 2015 and maintained momentum of this wave to date.

One year later the law took effect on July 1, 2015. In the year, Vietnam had nearly 106,000 more enterprises with registered capital of VND767,970 billion, up 27.8% in enterprises and 42.4% in value from a year earlier. Also in that year, the country had 1,660 new foreign-invested firms with a total registered fund of VND62,205 billion, or VND37.5 billion per enterprise on average.

The 5th Plenary Meeting of the Party Central Executive Committee (12th term) issued two resolutions on business: Resolution 10-NQ/TW 2017 on developing the private economy into a driving force of the socialist-oriented market economy and Resolution 12/NQ/TW 2017 on SOE restructuring, reform and performance improvement. The Government issued directive policies and resolutions to accelerate rapid and effective business development, including Resolution 35/NQ-CP dated May 16, 2016 on business support and development to 2020, Resolution 19/NQ-CP (now Resolution 02/NQ-CP) on continued implementation of key tasks and solutions for better business environment and higher national competitiveness to 2020. Vietnamese enterprises have been developing rapidly and making positive contributions to stable and sustainable economic growth.

Positively, after over two years of implementation of Resolution 10-NQ/TW 2017, entrepreneurship has spread across society and the private economy has strongly developed in various fields such as construction, processing, manufacturing, automotive, air transport, finance and banking, helping grow Vietnam's national brands in potential and strong industries and fields. Innovative startup tendencies are very vibrant, with over 3,000 active innovative startups.

Vietnam targets to have one million active enterprises by 2020. In recent years, with the close and effective guidance of the Government and the Prime Minister, efforts by central and local authorities and branches, the rapid growth of active businesses has strongly contributed to national and local economic growth. As of December 31, 2018, the country had 714,755 active enterprises, with annual rising corporate incorporations. Over the past three years, the number of newly established enterprises exceeded 100,000 per year, the highest ever (110,100 in 2016; 126,859 in 2017 and 131,275 in 2018), according to the White Paper on Vietnamese enterprises in 2019 released by the Ministry of Planning and Investment.

Focus on improving business environment

The business role has been widely affirmed. However, Vietnamese businesses really wish to have a fair, open and convenient business environment.

In fact, on May 16, 2016, the Prime Minister signed Resolution 35/NQ-CP on business support and development to 2020, aiming to build competitive, sustainable Vietnamese businesses and have at least one million operational enterprises, including large-scale powerful ones.

Resolution 35 focuses on administrative reform, business facilitation, open and transparent e-government construction so as to enable enterprises to oversee operations of administrative agencies via the internet. Business processes, procedures, conditions (if any) and request settlement results for enterprises are published on their websites.

With the active participation of ministries and agencies, Resolution 35/NQ-CP has really brought a new breath of vitality to the business investment environment in Vietnam. Many companies reported to experience more favorable conditions in dealing with administrative procedures thanks to very specific solutions stated in the Resolution, for example, combining cross-sector inspection in one visit and sending just one written request for all papers amended or supplemented to businesses and investors.

Then, the Government issued Resolution 19/NQ-CP dated May 15, 2018 on continued execution of key tasks and solutions on improving the business environment and enhancing national competitiveness.

Resolution 19 aims to raise business environment indicators. As a result, its ease of doing business indices climbed 8-18 places on rankings in 2018, according to the World Bank, with lowly ranked indices raised significantly. Specifically, starting a business index jumped at least 40 places; contract dispute settlement leaped 10 places; and corporate bankruptcy settlement increased by 10 places.

Positively impacted by the two above resolutions, on January 1, 2019, the Government issued Resolution 02/NQ-CP on continued execution of key tasks and solutions for better business environment and stronger national competitiveness in 2019 and to 2021.

Resolution 02 was designed to raise Vietnam’s international rankings of business environment and competitiveness conducted by the World Bank (WB), the World Economic Forum (WEF), the World Intellectual Property Organization (WIPO), and the United Nations (UN) to quickly adapt to new production platforms in the Fourth Industrial Revolution. It also aims to strongly ameliorate the business environment, quickly increase new corporate incorporations and reduce the rate of corporate dissolution and bankruptcy. At the same time, it also aims to reduce input costs, opportunity costs, informal charges for businesses and people; strives to elevate Vietnam’s better business environment and competitiveness to the Group of ASEAN 4, and specificially enhance the business environment and national competitiveness in 2019 and to 2021. The Resolution sets out 71 targets linked to leader responsibility.

According to the Ministry of Planning and Investment, in the year to September 2019, central and local authorities have actively fulfilled tasks assigned in Resolution 02 and Resolution 35/NQ-CP of the Government and Directive 26/CT-TTg of the Prime Minister on business support and development.

The Ministry of Finance has issued 17 circulars to change charge and fee rates applied set by ministries and agencies. Particularly, six fees and four charges (itemized in 17 fee and charge lines) are abolished; 21 fees and two charges (itemized in 47 fee and charge lines) are reduced by 5-25% from the current rates, with some being slashed more.

Locally, as of June 20, 2019, 50 out of 63 localities had developed SME support plans and projects, with many specific policies to meet practical requirements on SME development. In particular, some localities had approved startup support schemes such as Hanoi, Ba Ria - Vung Tau, Thua Thien - Hue and Ha Tinh.

Despite many efforts for change, business feedback showed there are still gaps between policy intention and implementation and between expectations and practical requirements. Companies continued to offer feedback and recommendations concerning administrative procedures, business investment conditions, policy inconsistencies and ambiguity, and ineffective and insufficient access to State incentives and support. The goal of having one million active businesses by 2020 is challenging. Central and local authorities are finding it difficult to allocate resources to deploy SME support policies. Resolution 02 requires ministries to further review business conditions and submit to the Government the abolition and simplification of unclear, unspecific, infeasible business conditions. Nonetheless, to date, only two ministries - the Industry and Trade and the Ministry of Agriculture and Rural Development - have made plans to fulfill this requirement.

According to the independent survey by the Central Institute for Economic Management (CIEM), there is still plenty of room for ministries and sectors to further reform and make more substantive efforts to improve their business conditions.