Business Licence: "Good" and "Bad" to Reform

There’re 6 reasons for reforming the grant of business licence in particular and regulations concerning business activities in general.

 

First: Huge direct cost. If this cost takes 3 per cent of GDP (as the proportion of Australia), each year our country spend US$1.2 billion for the grant of business licences, nearly equivalent to the ODA investment to our country in recent years.

 

Second: Indirect cost results in distort the price shaping structure and wrongdoing in resources allocation. Small and medium sized enterprises suffer worst damage from the combination of 2 kinds of costs. They can miss development opportunity, thus slowing down the general growing speed of our economy.

 

Third: if this situation remains, the development of enterprises will be inhibited while their potential and demands are enormously growing. At present, our country has two hundred thousand enterprises. That number will increase to 5 hundred thousand by the year 2010 due to the government’s goal. It is said that the country is developing under potential. Failing to exploit the enterprise’s great potential is our own mistake.

 

Forth:  Reform will create better fairness. Development and fairness must go together. Core fairness is the equal chances for everyone, not only in social policies or regulated by taxation. Because if only some people granted business licences could catch business opportunities, many others will lose.

 

Fifth: It’s necessary to create a more competitive business climate for the economy to strongly develop and to accord with international commitments.

 

Finally: Reform is to improve the role of the State. A strong State should not cover all matters and management. It just focuses on important tasks relating to its function, leaving others for the society. We need a State, which can operate and manage more effectively at macro level and cooperate better with market to develop the it.

 

Putting this fact in common circumstance, Vietnam is a transferal economy, in which the role of State and market remain unclear. State sometimes covers market’s tasks. Another, our administrative reform carries out more slowly than economic reform. Many administrative tools such as licences are complicated and costly for state and society to grant but without high efficiency.

 

Problems of property: “About 70 per cent of Nation’s human resource assembles in State owned agencies and enterprises. This is a very influential force on the economy. Those people are also part of the administrative machinery so they won’t be willing to give up their privileges. Moreover, they have conditions to cling on to mechanisms beneficial to them. On the other hand, in our economic mechanism exist 5 major inadequacies:

 

1. Inadequacy in thought: At present, staffs in public rights agencies still have the way of thinking that “open in their hand” – means that State agencies will encourage enterprises to develop in certain sectors they can control. This is against our constitution rules that citizens and enterprises have full rights to do business of all fields, which are not banned by law. Those employees look at the people on criminal consumption. They don’t believe in the people’s capability but overconfident of theirs and their position. They give themselves rights to judge things to be done or not.

 

2. Inadequacy in awareness of rights of State and the people, enterprises. Normally, the rights of State owned agencies and employees are limited. They only can do what the law permit whereas people can do what the law don’t ban.

 

3. Inadequacy in awareness of respective interests of State, public and people. Some State owned agencies seem to serve public interest, but in fact they do not. The reasons for this are partly by wrong awareness, partly by the attitude of ducking responsibility, even, by abusing state’s rights for private benefit.

 

4. Lack of a supervisory mechanism: State owned agencies are given and create to each others huge rights without an efficient mechanism for both State agencies’ mutual supervision and the people’s supervision.

 

5. Inadequacy in capability of state running agencies and employees. So are the capability of people and enterprises. They haven’t been fully aware of their rights and responsibilities to exercise. In many enterprises exist the psychology to wait for a State’s paper based guarantee of their natural rights. This reaction is rather easy to understand because for a long time they haven’t been accustomed to such rights naturally. When it comes, they keep hesitating, on another hand, they want to have evidences to cope with questions and requirements from public rights agencies. The Vietnamese “culture” of abiding law proves negative specific characteristics: respecting relations than law; preferring lobbying for private power than striking for popular legitimate rights which are protected by law. Capability of people and enterprises to participate in building, supervising and implementing the regulations remains poor.

 

Is reform possible?
Reform must be launched from comprehensive and long lasting aspects. There are “six lacks” in our law system. They are lacks of Transparency, Consistency, Synchronization, Stability, Foresight and Feasibility. To react to “six lacks”, enterprises use “3 No”: No truth telling, No expanding, No prolonging.

 

In order reform, initial need is to supervise the law and regulations making process. There’s inadequacy in the process of promulgating regulation itself. Even the National Assembly can easily be “duped” by compliers. Although statement on general principles highlighted in the regulation draft is correct, irrational licences and formality are “trapped” in detailed provisions. The National Assembly has to well recognize this.

 

Moreover, it is necessary to build up an institution for the people to exercise their rights of denounce, such as, asking to stamp out regulation documents which irrationally hinder their rights of free business. For long time, state’s effective “routine” should be applied. For examples, Regulation Influence Assessment (RIA) should be implemented answer questions of criteria of licences; if licences are constitutional, reasonable, necessary; if there are other solutions and how about its costs and its equivalence to interest.