Regulatory Quality Needs Improvement

10:54:48 AM | 7/15/2021

The quality of framework laws has been raised in the past years, with decree-level documents made more specific and clearer. Circulars are still there to ensure that all provisions of laws and decrees are enforced in practice. Even when circulars are issued for guidance, in some cases, enterprises have to rely on other official dispatches of relevant authorities for the full understanding of the law.

Actually, circulars and official dispatches are very familiar and important in law enforcement in the business community. Needless to say, the quality of these documents will significantly affect the investment and business environment of Vietnam.

In recent years, the Government has stepped up institutional reforms by setting performance targets and reducing compliance costs for businesses (annually issued Resolutions 02/NQ-CP, formerly Resolutions 19/NQ-CP; Resolution 35/NQ-CP in 2016 and Resolution 68/NQ-CP in 2020). Policymakers detailed these instructions by amending, supplementing or replacing business-related documents. The business community clearly recognizes regulatory reforms from decree level upwards.

According to a report released by the Vietnam Chamber of Commerce and Industry (VCCI), in the last two terms, the number of new circulars and official documents issued by central authorities has tended to decrease. Specifically, in 2016-2020, the National Assembly promulgated 112 laws, ordinances and resolutions; the Government issued 745 decrees, and the Prime Minister made 232 decisions. Ministries and central authorities issued 2,532 circulars/joint circulars.

However, when reviewing circular-level documents, some regulations still go against the above reforms. Contents of some circulars are inconsistent with higher-level documents, non-transparent and unreasonably hinder the operations of enterprises. Circulars stipulate business conditions and administrative procedures that are not assigned by laws or ordinances. Besides, worryingly, the contents of some official documents are problematic in terms of regulatory nature or quality.

According to Mr. Dau Anh Tuan, Director of VCCI Legal Department, law enforcement waits for circulars for detailed instructions on enforcement, while the latter stipulates business conditions even though the former does not grant it the power to this effect. Some circulars even do not agree with higher decrees.

According to some companies, many regulatory documents are placing pressure on enforcement agencies and causing damage to businesses. They also wonder whether official replies from regulatory bodies are the basis for them to execute or not.

Regarding regulatory quality, Mr. Tuan added that many regulatory documents dispatched to localities and enterprises only quote articles of laws rather than more detailed instructions for enforcement and suggest businesses find out laws for themselves.

These bottlenecks reduced the effect of “campaigns” to improve the business investment climate pursued by the Government.

From the business perspective, Mr. Nguyen Hoai Nam, Deputy General Secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP), said that there is a need to have specific sanctions for poor documents that affect business investment and business operations of enterprises.

"We have a lot of sanctions to handle violations of citizens but have too few to handle officials that make poor legal documents,” he said.

Citing VCCI’s research, Mr. Tuan suggested upholding the role of circular quality supervisors. Indeed, enterprises need to have their voices on drafted circulars. It is necessary to monitor circular promulgation, assess policy impacts and promptly collect execution information.

“Now, there are sanctions to handle citizens and businesses for administrative violations. A similar procedure should be imposed on civil servants and officials who draft documents that have a bad impact on people. Therefore, personal responsibility in this process needs to be specified. Besides, legal units of ministries and agencies need to have a stronger voice to prevent bad legal documents from being issued," he noted.

In the long term, circulars should not be issued in large numbers. The power of a circular is defined within a sector but it affects all people. Decrees of the Government should have broader perspectives, while circulars should provide just sample forms.

Ms. Nguyen Thi Minh Thao, Research Director of Business Environment and Competitiveness (CIEM)

Many ministries and agencies have achieved positive circular reforms but still face a lot of shortcomings. For example, Circular 40/2021 of the Ministry of Finance, effective from August 1, provides guidance on value-added tax, corporate income tax and tax management for business households.

One inconsistent content with the tax law is requiring e-commerce platforms to declare and pay taxes on behalf of merchants. Given the current pandemic outbreak where e-commerce should be encouraged for stronger development, tax authorities tend to administer and collect more instead of providing a better and more effective playing field for all people and businesses.

Some circulars and official dispatches are issued for specific situations, such as Circular 02/2021/TT-BGTVT of the Ministry of Transport requiring installation of cameras to monitor passengers on vehicles.

The circular shows a small perspective of a ministry but affects a lot of people. So, policymaking should be based on the opinions of many parties. It is not advisable to issue a circular and then suspend it because this will reduce the effectiveness of the policy.

Mr. Nguyen Hoai Nam - Deputy General Secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP)

The inconsistency of circulars with decrees and laws upsets enterprises. For example, when a frozen shrimp product for human consumption is exported from Vietnam, the Ministry of Agriculture and Rural Development assigns a unit for food safety inspection as per Circular 48 (that guides the enforcement of Food Safety Law). If this product comes from a foreign country to Vietnam, it is managed and censored by other agencies according to the Law on Veterinary Medicine. As Vietnam is highly integrated, the recognition of equivalent products is a generally applied mechanism. Why there is different management for the same product in Vietnam?

Many regulations in circulars and official documents lack practicality and feasibility. The delayed issuance of official dispatches still occurs. Although official dispatches are not regulatory, other procedures will stop without them.

Quynh Chi (Vietnam Business Forum)