Sharing economy rules required

November 15, 2019 | 16:00
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Sharing economy platforms have taken Vietnam by storm in recent years, especially in the fields of transportation, hotel bookings, and fintech. However, the rise of internet-based sharing services like Grab, FastGo, Airbnb, and Agoda has caused a headache for policymakers to adjust the regulations to manage disruptive businesses.
sharing economy rules required
By Nguyen Quang Dong Director,Institute for Policy Studies and Media Development

Amid a contradictory and unclear legal framework, the government and businesses will face certain risks and disadvantages, leading to a negative impact on the economy.

First, businesses may run the risk of facing retroactive duties if there is no official legal framework in place. To avoid this, some businesses have registered as foreign legal entities in Vietnam. This will help startups to raise funds and conduct mergers and acquisitions. However, they will have to pay more legal fees and miss local incentives and support. Above all, this will dampen businesses’ long-term confidence in Vietnam’s legal system, policies, and rule of law.

Second, it is inevitable to create informal markets, especially in the financial sector. This gray area poses a number of risks for businesses and consumers such as fraud and other financial crimes. In the case of disputes, there is nobody to protect investors, businesses, and users.

Third, this will cause a tax loss for the government especially when Vietnamese owners register their businesses as foreign legal entities. It means they will pay some kinds of taxes to overseas countries instead of to Vietnam. If these problems remain unsolved, it is definitely a step back for the development of sharing economy in this country.

We recommend that Vietnam should focus on promoting two fields, namely peer-to-peer (P2P) energy trading and digital content markets.

For the energy market, the private sector plays an important role in ensuring national energy security. P2P energy trading will encourage the private sector to invest in power generation systems, especially in solar, to meet their needs. If Vietnam can develop this market, the country will have a breakthrough solution to the problem of energy security.

Meanwhile, more attention should be paid to the digital content market. The main reason lies in its enormous power to influence other digital economic sectors through creation of user data and motivating development of the media, e-commerce, financial, and other service markets.

Platforms such as Facebook and YouTube play an increasingly important role by allowing users to generate content, which has great potential for commercial exploitation. In this market, specific regulations on social network licensing, content censorship, user content control, and dispute resolution are the gray areas that the state can consider for adopting a sandbox practice.

The Vietnamese government has been committed to driving the Fourth Industrial Revolution and the digital economy but results are not clear. Both government and ministry leaders have announced their support for a regulatory sandbox and set different timelines for implementation. However, Vietnam has yet to apply sandbox practice. The sharing economy project and the national digital Transformation project do not contribute directly to the creation of a regulatory sandbox, but only offer orientation.

With a sector management model in Vietnam, the authority of developing regulations and licensing is in the hands of ministries. It means each ministry is responsible for developing the regulatory sandbox. However, the implementation is stuck at the level of ministries although the government does have a vision for sandbox practice.

The Ministry of Transport is in charge of the sandbox policy for ride-sharing services like Grab, be, and FastGo. The Ministry of Culture, Sports and Tourism manages the sandbox in the field of tourism and accommodation services like Airbnb and Traveloka, while the state bank will develop sandbox policy for fintech such as cryptocurrencies and P2P lending. As of present, ministries have yet to complete the sandbox policies.

To address delay in developing a regulatory sandbox, we recommend solutions focusing on both creating a legal framework for the sandbox in general, and enforcing sandbox licensing.

First, the government needs to establish a state working group on sandboxes that includes leaders from the ministries of justice, transport, industry and trade, and information and communications. The ministries will co-ordinate and consistently implement the government’s vision of sandbox policies. The group needs to submit to the government the legal process and guidance for implementing a regulatory sandbox for technology products. After approval, the ministries can rely on this process to apply sandbox practice across different fields.

Second, a national sandbox office should be established to perform a one-door policy like receiving registration applications, issuing ­licenses, and monitoring experimentation. As a result, such an office can reduce the administrative burden and facilitate startups to innovate and launch new disruptive or transformative businesses.

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