To achieve that breakthrough goal, the requirement is to review and perfect the institutions and legal system not only to serve state management but also to create development for economic sectors.
Correctly identifying the obstacles from institutions
In recent seminars and discussions organised by the Ministry of Justice, many bottlenecks in law-making were identified by representatives of management agencies and enterprises. The reduction of administrative procedures has not really created a breakthrough. Although there is no shortage of support policies, they are not clear, especially there is no specific mechanism for businesses to fully access. Many regulations are not suitable for practice, causing different interpretations.
Meanwhile, from the perspective of law enforcement, innovation in thinking is still slow, especially in the innovation of thinking from management to serving and creating for development; the fear of responsibility and risk still exists.
By the end of 2024, Viet Nam had nearly one million enterprises, 98% of which were small and medium enterprises with the characteristics of small capital, low awareness of law and market information, poor competitiveness and difficulty in accessing resources. One of the most obvious evidence is that these enterprises have difficulty accessing bank capital, reaching less than 20% of the total outstanding credit balance of the banking system. Meanwhile, outstanding credit balance of the private sector has accounted for 93%.
Tran Van Hien, a representative from the Viet Nam Association of Small and Medium Enterprises, said that for small-scale manufacturing enterprises, there are not many mortgaged assets, even though the business is still profitable and the orders are stable, but if there are not enough collateral, the loan application is easily rejected or approved with a low amount, not enough to expand production. In addition, banks often require many documents and records proving financial capacity and a feasible business project, but completing all those procedures takes a lot of time and costs - something that small businesses find difficult to meet, many businesses are struggling not knowing what to do properly.
To reduce the hassle for businesses regarding administrative procedures, Resolution No.68 has set a target of cutting at least 30% of legal compliance costs. Phan Duc Hieu, full-time delegate at the National Assembly’s Economic and Financial Committee, said that this is necessary for the development of the private economy. If a legal regulation is of poor quality, there will be five risks that will be disadvantageous to businesses, which are increasing costs, increasing risks, limiting creativity and business ideas, limiting competition, and creating negative impacts on small and medium enterprises. In fact, there are up to five costs arising from the implementation of a legal regulation. Besides the traditional official costs of time and finance for procedures, there are other costs such as fees and charges calculated by value, investment costs, opportunity costs and finally unofficial costs.
Regarding the risk of restricting competition, Hieu said that we often issue very rigid, mechanical, and complicated legal regulations on market entry conditions and business conditions, and sometimes that is the “protection button” of the institution for monopoly enterprises, causing difficulties for small and micro enterprises. Large enterprises often propose to increase business conditions to be as difficult and strict as possible because they have entered the market, but small enterprises cannot keep up because the costs are too much.
According to Le Hoang, Chairman of the Board of Directors of Thang Long Plastic Joint Stock Company, the issue of governance is the weakest link for small and medium-sized enterprises today, in addition to the capital factor. Particularly with technology transfer, if the State does not have a binding policy in legal regulations so that foreign-invested enterprises (FDI) are required to localize for local enterprises instead of encouraging them as at present, it will be very difficult for private enterprises.
Building laws in the direction of serving the people
Dr. Do Ngoc Thinh, Chairman of the Viet Nam Bar Federation, said that when identifying obstacles from legal policies, it is necessary to explain why the lifespan of legal policies is short, administrative procedures “sprout like mushrooms” after legal regulations are issued; why administrative procedures are cut down but procedures are increasing; why laws are issued in the correct order and procedures but when put into practice, there are “problems”? The problem lies in the limited thinking in law-making in recent times.
“We are currently trying to support private enterprises, most of which are small and micro enterprises, with large laws, with very “massive” subjects and scopes of regulation. It is worth mentioning that institutions and policies do not have maximum differentiation, which invisibly puts pressure on small and medium enterprises. The important issue is to build laws with small and narrow subjects and scopes... to suit them, to activate them so that they can implement them correctly. We must change our awareness and thinking of building laws in the direction of serving the people, not strengthening management,” shared Thinh.
According to National Assembly delegate Phan Duc Hieu, it is necessary to soon build a set of criteria to review and identify policy and legal shortcomings so that ministries and branches can base on them to make amendments, avoiding arbitrary application. In the coming time, it is necessary to establish an independent agency to monitor and support sustainable institutional reform and contribute institutional expertise to create a legal corridor for the development of the private economy.
