The 2005 Enterprise Law and the Investment Law took effect from July 1. Master Nguyen Dinh Cung, member of the drafting board of the Enterprise Law and head of the Marco Department of the Central Economic Management Institute, talked about initial impacts of the laws on the Vietnamese economy.
What do you think about the impacts of the new laws on groups of those who are subject to the laws?
The two laws will produce a strong impact on foreign-invested enterprises and foreign investors who want to invest in Vietnam. However, there are two notable things. At first, not all foreign-invested enterprises will benefit. Those enterprises investing in the industries with strong protection, such as motorbikes, automobiles and cement, will see their privilege cut as other investors will join the industries. Other enterprises will have right to do business in those industries which are not prohibited by law, which has been applied in other places for a long time.
Also, State-owned enterprises will witness a strong impact. In fact, State-owned enterprises have enjoyed more priorities. However, the priorities will be removed gradually or basically removed until 2010. As a result, the State-owned sector will suffer. Many enterprises may be left behind. However, in the long term, business administration will become more transparent in accordance with the standard stated in the law and recognised internationally.
Do you think will the two laws are awaiting Vietnam’s international integration?
In general, the Enterprise Law and Investment Law have made the Vietnamese market economic institution more perfect. The economy will no longer be constrained and cut among State-owned, private and foreign-invested sectors. At present, the cut can be seen in the whole economy and each enterprise. State-owned enterprises rely on the State’s accumulation while private enterprises accumulate internally, from their profits to reinvest. The two sectors have not developed any other accumulation source yet. When the common law takes effect, we expect to create a frame for enterprises to accumulate capital from outside sources. For example, in other countries, an enterprise can become a group after 30 or 40 years of stable development. Why can the enterprise do this? This is because the enterprise has many outside capital mobilisation channels.
Given that enterprises which will see their priorities cut do not want to convert in accordance with the new law. How will they be treated?
These are foreign-invested enterprises. For ongoing projects, the laws will not impact on them as a conversion will benefit them more. Those enterprises which do not want to convert do not want to develop new projects. After two years, if they do not convert, they can operate under the old laws until the end of their projects.
Many experts say that the economy will not develop to wait for guidance on the laws or the implementation of the two laws is different from a locality to another. What do you think about it?
There is a problem. There will certainly be a gap due to a transitional period between the new and old laws. There are also many situations. For example, if an enterprise applied six months ago, the question is whether the enterprise will observe the old or new law. If the enterprise has observed the old law, it is unclear whether it will be able to observe the new law or not. Also, will the results of projects, which have not had documents finished yet, be recognised or not? Investors fear that they have to complete procedures from the beginning. Many foreign investors have asked me the question but I do not have power to answer, so their question was submitted to the Legal Department of the Ministry of Planning and Investment.
Foreign investment has fallen dramatically over the past two months. Do you think it is evidence of what we have said?
I have not had any figure but if foreign investment has fallen or did not increase, it may be evidence of the fact that investors are still waiting.
Do you think enterprises’ proposal on a postponement of the approval of the Investment Law resulted from the fact that enterprises did not understand what the Ministry of Planning and Investment had explained? Has the proposal been settled harmoniously or we have opted to approve the law, which will be adjusted by decrees, if there are any problems?
What enterprises have not understood clearly is the form and content of registration document. Also, the law distinguishes foreign-invested or locally-invested projects, which have different registration and evaluation conditions and contents. A Vietnamese private enterprise develops three projects. The first project uses the enterprise’s capital; the second, loans from local sources; and the third, from foreign sources. Will the third project be considered as locally-invested or foreign-invested one? This shows a great obstacle to the implementation of the law. Regarding the registration procedures, the law stipulates that investors fill the application and does not state any condition and norm for the application to be accepted. I think the regulations in the law are unclear and unpredictable.
Kim Phuong
Vietnamese
