Cutting into red tape to reform business outlook

The reform is funded by the Government of Norway through the Norwegian Agency for Development Cooperation  (NORAD) and the Government of Switzerland through the Swiss State Secretariat for Economic Affairs (SECO) with technical support and policy advice from UNIDO.

UNIDO’s  Chief Technical Advisor of the reform project Gunnar Koren, tells VIR’s Ngoc Linh about the benefits it brings to the business community.

What is the current stage of the project? When will the national business registration system be operational?

The project started in 2008 with the first phase completed at the end of 2010.  A new legal framework for Business Registration in Viet Nam was established which served as the basis for the establishment of a new national business registration system - NBRS.  The different registration processes of business, tax and seal-engraving permission and notification to the Ministry of Public Security and the General Statistics Office are now consolidated. In early 2011, the records of more than 550.000 businesses resided in separate local business registration registers were manually and digitally converted and transferred to the national system and around 550 staff of Business Registration Offices –BRO’s nationwide was trained to operate the new registration system under the new legal framework.

One of the chief purposes of the new system is to standardize, streamline and simplify the registration process throughout the nation and to lay the foundation for the phase that we are in now where the main outputs is to give access to legally valid enterprise information including financial statements of shareholding companies to private and public sector through the Internet.  It is expected that Phase 2 will be completed by Q1 next year with the launching of a new national enterprise registration portal. We are also considering the possibilities of setting up a trial program for those who are interested before the portal is officially made available to the general public.

Does it mean that the public can access information about enterprises on the Internet?

Yes, they will be able to access this information through the Internet. Moreover, MPI/ABR and UNIDO are implementing e-signature and e-payment solutions to make the registration process fully electronic and to give the business community the possibility to purchase information products and services in a much more convenient fashion. It is expected that the system will become fully operational by Q1 next year.

What benefits will this system bring?

A consolidated business registration system not only plays a key role in improving transparency in the business environment but also reduces transaction costs and risks during and after business registration. A clear example is duplication of enterprise name which is one of the most common and complex issues in business registration which has been addressed partly with the establishment of the NBRS and it will be further strengthened with the introduction of the information services where anyone can check if an enterprise name is available for registration.

The new web-based enterprise information services which I mentioned earlier will be made available to the authorities, the business community and the general public allowing access to reliable and legally valid information about enterprises.

There are three main areas where the system is important:

The first is ease of market entry and development of the business sector as a whole. Legally valid information is a necessity for businesses to operate safely and for contract enforcement.

Business registration implies the protection of the rights of workers (such as health insurance and pension benefits). Formal establishment is also usually a precondition for accessing business support incentives.

The second is for the business community. An official business register is a valuable and trustworthy source of information to find potential business partners. They allow for verification of both historical and current information as well as profile of businesses, thereby reducing the risks and costs of business partnerships. Financial and business service providers can also use the registry to find potential clients.

The third is for the public sector at large. Business registration provides the basis for tax collection and also broadens the tax base. It is important for statistical purposes as they are a source of knowledge on the private sector and its trends. A business register is also an essential tool for policy making, and it acts as a pool for dependable information for credit information systems, social security, land registries, secured transaction registries and for the courts.

What is the biggest challenge for the operation of the registration system?

Keeping information in the register always up-to-date and correct! Firstly, it is extremely important for enterprises to be aware that that they must keep their particulars in the register always up-to-date and correct. It is the responsibility of each and every business to make sure that they always fully comply with the relevant laws and regulations. Secondly, to make the business community fully aware of the advantages and benefits they would receive from a system like this, but I am confident that the business community will over time see the evident benefits when system goes live next year.

In order for the reform to be implemented successfully, it is important to have a change in mindset of the business registration staff. Have you witnessed that change?

During the past four years I have experienced many positive changes. Previously, many Registrars talked mainly about control and granting but now they talk about how customers (businesses) can be served better in respect to both registration process and giving access to legally valid enterprise information. A new and modern information dissemination system - portal is an important tool for the Business Registration Offices to be able to achieve this goal.

Vietnamese government wants to establish a modern and convenient business registration system to improve the business climate, how do you compare this system with those of other countries?

There are certain international standards which any modern system must adhere to. The National Business Registration System of Vietnam was developed based on the “Norwegian Model” where the related ministries and agencies are interlinked and cooperate tightly with one another.

In Viet Nam the tax code is now also the enterprise code which creates a unique ID for the enterprise. This is one very important aspect when it comes to establishing computerized systems. Another is that in a paper-based system it is quite common to have information stored mainly in free text, but in a computerized system the information must be coded in a structured manner and digitalized.

An example of this is how business activities are registered in the system. The idea of simply making electronic copies of the business activities based on the previous paper-based system makes no sense. Data must be coded, arranged and collected automatically and precisely with least human intervention. The reform means that all previous procedures and ways of thinking should be evaluated to remove administrative obstacles so that the registration process is streamlined and simplified as much as possible.

An efficient registration system should contain the following: consolidated process and procedure a single points of registration for business, tax and other permits, using one common form offering the same standards nationwide, coupled with a unique enterprise ID which is recognised by the different government institutions involved. In addition to the “traditional” way of registering a business in person, a modern system such as the NBRS also offers different services through the Internet such as online registration and enterprise information dissemination services. These new services will greatly reduce time and costs involved in the process of registration for perspective enterprise founders and allow the general public and government agencies access to legally valid and trustworthy enterprise information held in the register.

That said, reforms differ from country to country, there is no “one-size-fits-all” system that can be taken from one country and applied to another without much customization and modification which is exactly what we have been doing in the past four years developing the National Business Registration System of Viet Nam based on the Norwegian model.