-
 The
new UEL is being drafted under the terms of guidance provided by
the Prime Minister, and aims to provide a uniform legal
framework for all Vietnam-based enterprises. This means the UEL
will span private, foreign-invested enterprises (FIEs) and
state-owned enterprises (SOEs). Some SOEs will be transformed
into limited liability or shareholding companies and come under
the UEL but this will take time, perhaps one year. It will also
take time for over 4,000 FIEs to be converted into limited
liability or shareholding companies. But I am confident that it
will be a smooth process.
The drafting committee has carefully considered, and decided not
to include, cooperatives within the scope of the UEL at this
time even though under the current Law on Cooperatives, they do
operate as a collective "enterprise" and have liability similar
to that of a limited company.
Two important non-discrimination rules contained in most
international commitments -- MFN and National treatment are
being taken into consideration in drafting the UEL. However, no
country completely complies with these two rules, and some
exceptions are allowed. For example, the right to maintain some
restrictions on land and business areas are permitted in the
US-Vietnam Bilateral Trade Agreement. Nonetheless, the
restrictions we keep need to comply with international
practices.
Mr Dinh Van An, President, Central Institution of Economic
Management
-
A level playing
field for everybody is necessary. In this context, domestic
private enterprises will face the challenge of competing with
big SOEs and FIEs, which in turn may be a stimulus for them to
improve and further develop. As for SOEs, it is crucial that a
timeline for their transformation is set in the new UEL. The
sooner the deadline, the less state funds will be wasted.
Otherwise, SOEs will rely too much on government subsidies and
will not be keen to develop their business. This issue must be
addressed in the new UEL.
Mr Hoang Quyet Tien, Director, An Sinh Joint Stock Company
-
Foreign and
Vietnamese investors alike are now seeking equal legal
treatment, and a level playing field for all business entities,
including the SOE sector. However, the draft UEL has two
limitations in this regard. First, SOEs will not be subject to
the UEL. Thus, any attempt to introduce a level-playing field
will not really be of any significance while SOEs are subject to
a separate legal regime, and retained under the current system
of state management. Second, FIEs shall be wholly prohibited
from, or restricted in doing business in, certain industries in
which domestic enterprises are permitted. Further, the right to
establish and operate an enterprise is subject to "business
conditions", as provided in the draft UEL, which states that
"Business conditions are expressed in terms of licenses or other
requirements provided by laws, ordinances and decrees", which
enterprises are required to obtain before they can lawfully do
business.
It should be noted that the draft Common Investment Law (CIL)
provides for almost exactly the same application procedure for
investment licenses as is currently provided for under the Law
for Foreign Investment (LFI). In addition, stricter conditions
for the establishment of FIEs are introduced in the draft CIL
than currently apply under the existing LFI. Therefore, if the
Government's intention is to retain the current system of
licensing for foreign investors (subject to stricter conditions
on the sectors in which foreign investors may participate),
there seems little to be gained in introducing the two new draft
laws, and the objective could be more easily attained by
amending the current LFI.
The UEL drafters should ensure that the law is consistent with
existing laws and regulations, but also to take steps to repeal
or amend, as appropriate, any other law which could limit the
scope of application of the new unified laws. This includes, for
example, the amendment of laws and regulations governing dispute
resolution, including arbitration, to ensure that all investors
and enterprises have equal rights of access to dispute
resolution procedures. This means that the UEL and CIL should
really support companies to invest and do business in all
sectors which are not prohibited by law, and to have full
autonomy in their internal business management; not subject to
State regulation or interference (such as discretionary
restrictions from ministries, localities or other state
entities).
Mr Nicolas Audier, Gide Loyrette Nouel Law Firm
-
 The
Enterprise Law made the setting up of private enterprises a
right, not a privilege. The basic principles of good governance
were introduced in this law, but Vietnam is still learning what
governance is. The UEL needs to take into account Vietnam's
international commitments. It is urgent to send the right signal
to the world that Vietnam is serious about its commitments. For
example, the current draft of the UEL requires foreign investors
to make a US$100,000 deposit as a condition to set up their
business in Vietnam, while local investors have no such
requirement. This kind of discriminatory treatment would seem to
be a clear violation of the national treatment principle of the
US-Vietnam Bilateral Trade Agreement's investment chapter.
Moreover, the specific amount seems arbitrary. The argument that
this deposit helps protect Vietnam's small businesses is
questionable, but most importantly, it is the perception of
discrimination and the apparent lack of understanding of the
principle of National Treatment that gives rise to concern.
Mr Fred Burke, Partner, Baker & McKenzie Law Firm
-
 Currently,
SOEs are neither in the form of a limited liability nor
shareholding corporation. This is because they do not possess
two important traits: i) transferability of shares or capital
contribution; and ii) centralized corporate governance.
Therefore, in order to come under the UEL, SOEs need to be
converted into either liability limited or shareholding
companies. In the opinion of the UEL drafting committee, the key
to this transformation process is to replace the current
administrative-based state management system with a suitable
fund management mechanism. Thus it is necessary that: i) the
management function of state-owned business is separated from
the administrative management function; ii) the state acts as an
investor rather than an administrator in SOEs; and iii) the
rights of owners or shareholders must be centrally recognised
and exercised.
Mr Nguyen Dinh Cung, Director of Macro Economic Policy
Department,
Central Institute of Economic Management,and member of the UEL
Drafting Committee
-
 It
is not contradictory for general corporations(parent companies)
to be governed by the SOE Law, and subsidiaries to be under the
new UEL. It is very normal for a corporate entity to be subject
to different laws, just as an individual is influenced by
different rules and principles within a society. The most
important point, however, is how the new law ensures a level
playing field for all enterprises. The Prime Minister wishes to
have the UEL approved by the National Assembly this year. The
UEL should not merely be the sum of the two existing laws, so as
to reduce all overlaps. It must also remove as many differences
among different economic sectors as possible. All people doing
business in Vietnam should be equally treated, especially in
receiving financing, selecting business locations, recruiting
labour, exercising their legal and social rights and
responsibilities, etc.
I do not think it is appropriate for the new UEL to set a
deadline for SOEs' transformation process. It is more
appropriate for the government to be in charge of setting
timelines and implementing the SOE reform process. The 3rd
Central Party Resolution has requested that by end-2005, SOE
restructuring should be basically completed, with only 1,900
SOEs remaining. Another 700 SOEs will be selected for
equitization during 2005-2006, to meet targets set in the 9th
Central Party Executive Committee Resolution. Therefore, by
2006, there should remain 1,200 SOEs, around 450 of which are
public service companies. In Vietnam's current development
context, 450 state-owned public providers are acceptable.
Reforming SOEs, as well as making them operate in the same
environment with other enterprises, are both crucial. Otherwise
SOEs will not be able to cope with the new competitive context.
Nurturing SOEs places a burden on the government.
Mr Ho Xuan Hung, Vice Director,
National Steering Committee for Enterprise Reform and
Development
-
The Committee of
Budget and Economic issues will be responsible for appraisal of
the UEL. The need for a uniform law for all enterprises was
raised when the existing Enterprises Law was drafted. But at
that time we could not afford it. Now it is high time to have a
unified enterprise law in place, to respond to urgent
requirements of a market economy and international integrations.
To become a common law for all kinds of enterprise, the scope of
the UEL must be amended to include converted SOEs which
currently operate under the Law on SOEs. For limited liability
companies with one member, and joint stock companies where the
state holds all or a majority of the chartered capital, their
organization and operations are governed by the Enterprise Law,
while their ownership and management are governed under the SOEs
Law. In my opinion, ideally, the UEL should govern the
organization and operations of enterprises in all economic
sectors.
Mr Hoang Thanh Phu, Permanent member,
Committee of Budget and Economic Issues, National Assembly
-
 It
is critical for the UEL to remove as many differences as
possible in laws and regulations governing the organization and
operations of enterprises in different sectors. But it does not
mean that the UEL itself can create a level playing field for
everybody. Further adjustment in other regulations and policies,
like taxation and investment incentives, is also necessary. The
enterprise legislation plays a role in creating the legal status
of enterprises, so that they can enter the market. After
enterprises enter the market, their operations will depend on
the wider legal 'environment'; namely the whole legal system
spanning laws on contracts, land, taxes, labour, credit,
bankruptcy, settlement of business disputes, etc.
Associate Professor Nguyen Nhu Phat, The Institute of State and
Law
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