Improving Legal Document Quality

1:39:56 PM | 12/1/2022

Vietnam has significantly improved the business environment, adopted policies to cut compliance costs for enterprises, reformed administrative procedures, reviewed conflicting and overlapping regulations to remove bottlenecks in business, and amended major investment-related laws. The business environment has been thus more favorable for investors and enterprises.

However, enterprises are still complaining about problems and inadequacies in business. This is partly blamed for the limited quality of legal documents, especially instructive documents.

Limited quality of legal documents

According to the Institute of Legal Science under the Ministry of Justice, after 35 years of doi moi (reform), Vietnamese laws have made progress in both quantity and quality. The relatively consistent legal and policy system has basically matched the socialist-oriented market mechanism and met socioeconomic development and international integration requirements to a certain extent. However, the quality of the legal system remains low. For example, some regulations still do not fit actual socioeconomic conditions and social needs as well as administrative requirements of authorities (especially in the context of the far-reaching impacts of the Fourth Industrial Revolution, digital society construction and international integration). A number of regulations lack predictability and stability, which risks investment and business planning of people and businesses. The lifespan of some legal documents in some fields is not high. Worse, several regulations have even not determined resources for enforcement or not taken practicability into full consideration.

Mr. Dau Anh Tuan, Deputy General Secretary, Director of the Legal Department of the Vietnam Chamber of Commerce and Industry (VCCI), said that despite various actions taken to accelerate reforms, enterprises are still complaining about problems and inadequacies in business. This is partly because of the limited quality of legal documents, especially instructive documents.

As for enforcement documents, according to the VCCI Legal Department, circulars and official dispatches are two important documents that instruct the enforcement of laws, ordinances and decrees. Besides positive aspects, the quality of circulars is still a matter of concerns. For example, circulars still stipulate business conditions, which are prohibited in the Investment Law 2020. Their provisions are not consistent, transparent and feasible, hence troubling businesses. In particular, some circulars were suspended from enactment shortly after they took effect. The abuse of circular promulgation still seems to continue. In some industries and fields, law enforcement is too dependent on circulars, fueling concerns over the return of “pipe laws" and "framework laws" (laws with extremely generic provisions).

Besides, the quality of official dispatch, a form of administrative document, draws much complaint. For a long time, businesses have been familiar with official dispatches that instruct how laws are enacted. Although this is a contextual solution, it poses many risks that the official dispatches on legal regulations will be created with the entirely subjective will of issuing agencies. Quality, reliability and responsiveness of official dispatches are still of popular concern.

More proper mechanisms for circular issuing needed

To have higher quality legal documents, according to a report on regulatory quality and business facilitation conducted by VCCI, Vietnam needs to be more transparent about the circular development process and publicize draft versions and received feedback.

At the same time, it is necessary to unify criteria on business conditions to lay the groundwork for lawmakers/policymakers to recognize types of regulations allowed to be regulated as well as provide the basis for supervisory organizations/agencies. It is also important to control authorization for instructive circulars right in specialized laws. In addition, there is a need to improve the quality of impact assessment reports where enterprises should be consulted and surveyed for new policies that will have strong effects on businesses and to enhance the transparency of regulations on receipt of business feedback, especially information on handling complaints relating to enterprises in law reviews performed by authorities.

For official dispatches, according to the report, Vietnam needs to have a better control mechanism for their contents to completely prevent legal regulations in official dispatches. There should be a mechanism to increase accountability of authorities in handling and answering business matters; publicize official correspondences to companies on websites by authorities. This will be a very good source for businesses to access information about law applications to similar cases and also a way for authorities to monitor the response and settlement of emerging matters.

The abused promulgation of guiding circulars (even if they are not authorized or may be specified in higher-value legal documents) has made the Vietnamese legal system complicated and of uncertain legislative quality. Therefore, it is necessary to restrict the creation of many guiding circulars. This must be reflected in documents from decrees upwards and must be installed be an effective monitoring mechanism. At the same time, it is important to control circulars on business conditions and administrative procedures right in laws. In specialized laws, it is necessary to pay attention to authorization of instructive circulars where absolutely no authorization of regulations on business conditions is made and authorization of regulations on administrative procedures is minimized.

The failure to attach responsibility of policymakers seems to make light of legislative quality, while legislation has huge impacts on the business operations of enterprises and even on the business and investment environment. Therefore, there is a need to have a mechanism to determine the responsibility of policymakers that cause damage to enterprises.

Market entry conditions for gold traders are still inadequate

Mr. Dinh Nho Bang - Vietnam Gold Trading Association

By current law, bullion production, raw gold export and raw gold import for bullion production shall be carried out by the State Bank of Vietnam (SBV). Since the SBV is a governmental agency, not a business entity, there is no need to include the SBV among governed subjects as with companies in the investment law. Therefore, the SBV's bullion production is out of the scope of investment law.

As for gold bar purchase and selling according to current law (Decree 24 of the Government on gold business management) licensed by the SBV to both gold traders and commercial banks, this is likely a conditional business. Or gold production can be removed from the list of conditional business as it has been held and regulated by the SBV (i.e., the market supply is held and managed by the SBV). As for the free market, gold trading should be decided by the market itself.

Reducing time of settling construction procedures

Mr. Nguyen Quoc Hiep - Chairman of Vietnam Association of Construction Contractors

Currently, an investor has to carry out a lot of construction-related procedures for an investment construction project, including project appraisal, basic design appraisal, design appraisal, environmental impact assessment, and fire prevention design appraisal. The investor must complete procedures one by one, and there are many to be completed to start the work. Therefore, the Law on Construction should have regulations to reduce the time and cost of carrying out construction procedures. For example, in Ho Chi Minh City, the "3-in-1" mechanism is currently being implemented. Specifically, individuals and organizations only need to submit a complete application for three procedures at the same time: Basic permit appraisal, technical design appraisal and construction permit appraisal. This has cut a substantial amount of time for these procedures.

In fact, so many projects have two or more investors, consortiums and associates (without establishing a new legal entity) and all investors are recorded on the investment certificate as project investors. Nevertheless, according to Article 6 of the Law on Housing and Article 19 of Decree 99/2015, the investor is not allowed to authorize joint venture parties to sign a house purchase and sale contract or partnership, and associate investors are not allowed to make an agreement on division of housing products of their project but only share profits in cash or shares. This regulation is inadequate and troublesome to investors because they all are project investors legally recognized on legal documents of their project. As project investors, they can utterly make agreement on authorizing remaining investors to sign a house sale and purchase contract, or they are also free to agree on the form of profit sharing from their cooperation, in cash or in project product.

Many "bottlenecks" in pharmaceutical and medical equipment industries

Ms. Tran Ngoc Anh - U.S.-ASEAN Business Council

Medical licensing documents set short and unrealistic timelines. When they are due, if they cannot be done, they must be applied for extension. This will cause great pressure if the extension is not made in time because enterprises will not be able to import, resulting in a shortage of drugs and medical equipment.

In addition, a reduction of administrative procedures must be effective. As administrators and policymakers are the same, they tend to keep licensing procedures and request repeated extensions, even in case of amendments and supplements (for example, Decision 1661/2021 of the Prime Minister on annulment of procedures for extending drug registration certificates). It is necessary to radically reform and monitor policymaking to avoid policy abuse.

Vietnam needs to reform policymaking methods. As regulations are created by man, if they want to untie bindings, they simply lift barriers. For example, there is currently no clear regulation on socialization in the health sector. There is a need for clearly governing joint venture and association in the medical sector, clarifying regulations on leasing testers and supplying testers after winning bids to facilitate delivery of medical services to people. At the same time, it is important to enhance management of diversified capital sources. State-funded budget is tightly managed while funds from health insurance payments and voluntary medical examination and treatment services need to be loosened to enable hospitals to actively purchase good machinery, improve health care, and raise the quality of medical care.

Inadequacies of legal documents in the food industry

Mr. Tran Hong Uy - European Chamber of Commerce in Vietnam (EuroCham)

Decree 09/2016/ND-CP of the Government stipulates that all types of salt used in food processing must be supplemented with iodine and flour must be supplemented with iron and zinc. These purposes are very good but the application, without any risk management in use, is universal and obligatory to all, regardless of whether they need it or not. Fishermen must use iodine-added salt to marinate caught sea fish although sea fish are rich in iodine. Fish sauce is rich in iodine but it must also be supplemented with iodine.

Wheat flour accounts for less than 3% of the Vietnamese grain diet. A small percentage of 3% has no community effect but enterprises still must supplement iron and zinc which are very expensive. Instead, food processors are encouraged to use them only. Our food processors have repeatedly sent recommendations regarding the mandatory use of salt with iodine in direct human consumption, daily cooking and solid salted seasoning, but no changes have been made for more than four years now.

By Quynh Anh, Vietnam Business Forum