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STREAMLINING THE BUSINESS STARTUP PROCESS:
further improvements to the Government Circular
still needed
The 2006-2010 SME Development Action Plan shows a strong commitment
from the government to further streamline business startup
procedures and to encourage more enterprises to be formally
established. As a first step in several reforms in this area, the
government is introducing a new inter-ministerial Circular to enable
more effective coordination among the three agencies responsible for
the startup process, with an aim to reduce the time and costs of
starting a business for entrepreneurs.1 The Circular
serves as a basis for continuing reforms, including a planned online
company registration system and national enterprise information
database by 2009.2
In many provinces, authorities responsible for business startup are
anticipating the Circular in order to help them make immediate
reforms to their own procedures. Now in its sixth draft, the
Circular still has a number of weaknesses that need to be addressed
in order make the startup process as simple as possible for
entrepreneurs. This bulletin discusses some of the main weaknesses
and suggests ways to address them.
Entrepreneurs still have to visit the different administrative
offices many times
The most significant
improvement in the draft Circular is its call for better customer
service from administrative departments. The document also attempts
to simplify market entry by creating a single access point for all
three business startup procedures (company, stamp and tax
registration). According to the latest version of the Circular,
instead of having to make several visits to the three different
departments, entrepreneurs will be able to accomplish most of the
process through the business registration office, housed in the
Department of Planning and Investment (DPI).
However, two key problems
still remain. First, while the draft Circular specifies the time
limits within which administrative agencies must process
applications, these begin only after the agencies have received a
complete and fully accurate set of application forms. Though the
Circular refers to the need for better customer service, it does not
introduce measures to save entrepreneurs from having to repeatedly
visit the agencies. For example, the Circular should require civil
servants to inform applicants of basic mistakes (e.g. spelling
errors, capitalization errors) as early as possible and within a
certain timeframe, rather than one at a time, and often just before
the deadline.
Second, with respect to
the stamp (or chop), the draft Circular covers only the process to
receive the permit to make the stamp; it does not extend through to
the point at which the stamp has been made and is ready for use
(this occurs only after it has been registered and certified by the
Department of Public Security).3 This means that even
after completing the process outlined in the Circular, an
entrepreneur cannot yet legally start operating a business, as
company documents are not official and legally binding unless they
are stamped with the official company chop.4
The forms
required by the administrative offices are for the most part
redundant
The draft Circular
streamlines the startup application process by stipulating that all
three sets of forms can be submitted at one place - the business
registration office at DPI. However, the process would be even
simpler if the three sets of forms were consolidated into one, as
most of the information requested is the same. This would reduce the
time burden on entrepreneurs, reduce the workload for public
servants, and lay the groundwork for both an online registration
system and a single identification number for each enterprise, as is
planned under the government's reform program.
Accountability of the different government departments is still
unclear
The Circular's success in
achieving reform will depend on the coordination and
information-sharing among, the three Ministries and their
Departments. The draft Circular designates the business registration
office of DPI as being responsible for accepting applications,
forwarding relevant information to the public security and tax
departments, and notifying entrepreneurs of their application
results. For this reason, the staff of the registration office needs
to be sufficiently experienced and competent to check the
completeness and accuracy of applications before forwarding them on.
The draft Circular does not have specific provisions on
inter-departmental communication, nor does it address each
department's accountability for responding to entrepreneurs and/or
notifying them of inaccuracies or incompleteness after the
information has been forwarded to the Public Security or Tax
Department. There needs to be clarity as to which agency is
ultimately responsible for answering entrepreneurs' questions and
for notifying them of processing delays.
The
Circular should encourage local governments to adopt innovative
practices
During the past few years,
in order to attract more investment, a number of provincial
governments have been proactive and innovative in improving
coordination and developing customer orientation among their local
departments. In Binh Dinh province, for example, enterprises
recently surveyed have been particularly satisfied with the
province's business startup procedures, citing the fact that the
Public Security Department works proactively with stamp carvers to
ensure that entrepreneurs can receive both their stamps and stamp
registration certificates in one visit. In Ho Chi Minh City, which
has the largest number of newly-established enterprises in the
country, an online registration system has been set up. The system
makes it easy for entrepreneurs to seek help with the registration
process and get answers to their questions, as well as monitor their
application progress, saving them time and visits to administrative
authorities.
The Circular should allow
for provinces that wish to make registration even easier than the
law stipulates to do so, as long as the appropriate controls are in
place so that the system is not abused. Domestic enterprises looking
to expand their businesses in the country and foreign enterprises
looking for places to invest tend to seek out provinces that make it
easy.
(1) In Vietnam, to start up a business
an entrepreneur needs to undertake three main business startup
procedures: company, chop, and tax registration. At the provincial
level, these steps are carried out respectively by the Department of
Planning and Investment, the Department of Public Security, and the
Department of Taxation.
(2) SME Development Action Plan under Decision 236/2006/QD-TTg dated
October 23, 2006.
(3) In order to complete the official startup process, an
entrepreneur must have a stamp made and then register that stamp.
This typically entails the entrepreneur applying for permit from the
Department of Public Security to have a stamp carved. After he
receives this permit on paper, he must take the permit to a licensed
carving workshop to have the stamp made. He then must take the stamp
back to the Department of Public Security to register it, and then
receives official certification of the chop.
(4) It is worth mentioning that Vietnam is one of only a handful of
countries in the world where this is the case; in most countries, a
company chop is optional and a formal permit from the government is
not required in order to have one made. |
