-
 It
must be understood that it is not investment incentives,
geography, nor infrastructure that accounts for the differences
in economic development between provinces. The economic success
of certain provinces is largely due to the creativity and
dynamism of local authorities. Most importantly, other provinces
need to be aware that they can be equally successful, and I
would like to make specific suggestions as to how they can do
this.
Vietnam's legal regimeincluding laws, sub laws, and
regulationscan be roughly classified into three groups. The
first group includes very clear legal documents, which are easy
to implement and basically supportive towards business. One
example is the stipulation on business registration in the
Enterprise Lawthere are no cases of significant deviation from
the law and very few differences between provinces in terms of
the business registration process. Regretfully, this group does
not include many documents.
The second group comprises those documents that are outdated or
have not yet been drafted to deal with new business issues. For
example, there is currently no central government regulation
related to domestic private sector participation in
infrastructure, so the local authorities need to be very
proactive in this regard.
The third group includes the majority of legal documents, which
are very vague, complex, difficult to implement and very costly
if implemented properly. This is where creativity and
flexibility of local authorities is necessarythe "one door"
policy implemented by Binh Duong and Da Nang is a good example
of this creativity. But in order to implement this type of
policy successfully, it is crucial to have absolute support and
buy-in from all local officials--from the top provincial leaders
including the Chairman of the People's Committee, the Party
Secretary, Chairman of the People's Council, right down to the
middle and grassroots level, including departments, districts
and communes.
Take the issue of land allocation and land lease as an example.
In the official regulations for acquiring a piece of land for
business, an enterprise must obtain approval from all levels of
commune, district and provincial departments, including natural
resources and environment, finance, public security and other
agencies, depending on the enterprise's business activity. The
current regulations do not stipulate the exact responsibilities
or response time requirements of each administrative agency at
the grassroots and middle levels in this process. Therefore
businesses may spend considerable amounts of time and money in
this process. Binh Duong province simplified this process by
setting up an Investment Advisory Committee whose key members
are representatives of all the related agencies. To grant land
allocation or a lease to an enterprise, this committee simply
calls a meeting to get agreement from all the related agencies.
Of course this is difficult to do. Lower-level officials will
likely resist this simplification effort because clearly it will
reduce their unofficial income, while the official salary of
public servants is low. To implement such a process
successfully, it is necessary to develop a remuneration scheme
that makes up for the lost income of these officials.
Mr. Nguyen Dinh Cung, Director of the Department for
Macroeconomic Policy,
Central Institute of Economic Management (CIEM)
-
 My
research on comparative provincial business environments has
revealed that the single most important factor in understanding
provincial economic development is the proactiveness and
dynamism of the province. This factor goes far beyond simple
implementation of central laws or attempts to reduce transaction
costs for entrepreneurs. At its root, provincial dynamism is the
fundamental attitude of the provincial administration towards
private sector development.
Provincial dynamism manifests itself in two key areas. The first
is the extent to which provincial institutions closely
coordinate and work together, in order to facilitate the
activities of entrepreneurs. In high-performing provinces,
entrepreneurs can expect that a decision by a provincial
department impacting their business is unlikely to be overturned
by the Provincial People's Committee. Similarly, entrepreneurs
can rest assured that district and communal governments will not
put subsequent roadblocks in the way of their project, after
they have already registered at the provincial level.
Second, dynamic provincial governments resolve ambiguities in
business regulations on behalf of the private sector. Ambiguity
is a normal part of doing business in Vietnam, and is often the
result of unclear wording in legal documents, long delays in
implementing documents being promulgated for central laws or
decrees, contradictions between implementing documents
(circulars, directives, official letters, and, People's
Committee decisions) and even Central Laws themselves, or a lack
of any clear legal regime for a particular business issue. When
private business activities are disrupted because of legal
ambiguity, the decisions made by the provincial government can
make a huge difference in the success of a business venture. Far
too many provinces cost businesses considerable time and money
by forcing them to wait until the ambiguity is cleared up by
subsequent implementing documents or an appeal to central
authorities. A few provinces even use these uncertainties as an
entry barrier to firms that might offer competition to their
local 'champions'.
The truly successful provinces work with firms to find immediate
solutions to firms' problems, in the midst of ambiguity, through
provincial-level experimentation, while awaiting more clarity.
These initiatives save entrepreneurs valuable time and money,
and quite often find their way into subsequent central
legislation when they are successful. We need look no further
than the "One Door, One Stamp" policy for an excellent
illustration of this process.
Mr. Edmund Malesky, Fellow, Weatherhead Institute of
International Affairs,
Harvard University
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