Licensing muddle threatens business

THE FINE PRINT: A proliferation of licensing categories is hurting investment

Nguyen Dinh Cung from the Central Institute of Economic Management said new business licence categories have been issued at the rate of one per week for the past few years, despite reforms in the 1999 Enterprise Law aimed at making business easier.
The number of different types of business licence increased from 194 in 2002 to 246 in 2003, and to 298 by the end of 2004.
Cung worried that these figures did not include hundreds of business licenses “hidden” in the form of “approvals” without a clear classification by the government agency issuing the permits. These hidden licenses occur in 22 business sectors.
The sector with the highest number of business licences is culture and information, at 41, followed by agriculture and rural development, at 37.
“This situation is very alarming. This shows the government agencies are trying to take back the freedom of doing business from the people, a right that has been stated in the Constitution and the [enterprise] law,” Cung told hundreds of representatives from government agencies in a press conference held last week in coordination with German Development Agency GTZ.
Pham Chi Lan, from the Prime Minister’s Research Team, added that many ministries had strengthened their licensing powers through administrative regulations, while many interest groups had intensified lobbying for policies and regulations that favour their interests.
“These groups are trying to prevent the emergence and entrance of new competitors, thus further worsening the business environment,” Lan said.
“This situation is eroding the freedoms created by the Enterprise Law and is attacking the positive impacts of the law,” Lan added.
Cung warned that the government would pay “huge costs” for international corporations if they issued “improper rules” that could harm their business when Vietnam enters the WTO.
“I do think that in order to turn this impetus (of new business licences), a political will is needed from this country’s highest leadership, as they did in the early stage of the Enterprise Law six years ago,” Cung said.
The Enterprise Law 1999, which stated that the people may do business in any field not prohibited by law, will be replaced by the Enterprise Law 2005 on July 1, 2006. Statistics from the Agency for Small and Medium Enterprise Development (ASMED) revealed that 160,672 enterprises were registered between 2000 and 2005. This is 3.2 times more than the total number of enterprises registered from 1991 to 1999. The average number of enterprises registered annually is six times higher now.
Accumulated capital registered by new enterprises is nearly VND321,200 billion (approximately $20 billion).
In addition to these newly registered enterprises, several thousand company branches, representative offices and more than two million household businesses have come into operation all over Vietnam since the opening of the business environment.



No. 763/May 29-Jun 4, 2006