Smoother rules can help EU groups thrive

After years of anticipation, Decree No.37/2019/ND-CP has officially come into force. How ­important is the issuance of this decree to EU businesses in Vietnam?

Kent Wong

Decree 37 came into force on May 7, guiding the implementation of the Law on Planning. This is considered an effective tool to apply to the Law on Planning for solving some of the issues which cannot be solved by the law alone, due to the lack of guiding legal provisions.

According to the Ministry of Industry and Trade (MoIT), there are 370 projects pending because there are no grounds for further processing. This is because the Law on Planning invalidates some articles of the related provisions in 48 specialised laws and four ordinances. Therefore, after the law was issued, there was a gap which is now filled by Decree 37.

The Law on Planning and Decree 37 are both important in light of amending the whole system of planning. Related laws and ordinances have been amended according to the principles set out in the Law on Planning.

Decree 37 clearly regulates the specific procedure from the beginning up until the announcement and uploading of the planning on the national database.

First, promulgating the fixed time limit for conducting each step in the administrative procedure prevents the competent authorities from delaying the establishment and the approval of new plans to extend the time for investment projects to complete implementation or adjustment, according to the new plans. The investors can properly review the legitimate formulation and implementation of planning prescribed to actively and effectively protect their rights.

Second, systemising and publicly accessing the plans create a formal and reliable planning information channel that allows updating and managing information in a transparent way to help businesses monitor planning and reduce costs.

Finally, the decree specifies regulations on comments on planning. They will no longer see the usual story of only the ministries automatically making adjustments. Instead, a discussion committee should include representatives of the ministries, economic, social, environmental experts, and residents living in the affected areas to participate in the debate. These provisions will overcome the situation of just prioritising planning benefits for a number of ministries and large enterprises, ensuring fairness for all economic sectors.

What benefits will EU businesses enjoy from the law’s new ­approach of market-based orientation?

When investing in Vietnam, foreign investors such as EU ones must pay attention to the current types of planning that directly affect the approval of projects. Vietnam has business sector planning, provincial planning, urban planning, product planning for agriculture, forestry and aquatic products, and indicators for the number of doctors and teachers for every 1,000 people for each province. According to the chairman of the Phu Yen People’s Committee, there are up to 200 plans in the province, with many plans overlapping and contradicting each other.

The reform of the planning system with the aim of market orientation, transparency, and fair competition will give EU companies and other investors equal opportunities in accessing land and other economic resources, and bring many benefits.

First, they will simplify procedures. Instead of 95 laws and ordinances, investors only have to relate to two legal documents regulating planning. This is a way to reduce admin procedures and increase transparency and stability of the law to attract EU investors.

Second, the law helps terminate some types of product planning, as well as some unusual types of planning such as planning of rice export traders, planning of tobacco business, and planning of tilapia. The competent state agency will only formulate plans for infrastructure, resource use, and environmental protection. The Law on Planning completely eliminates product planning, and will shift focus to a market-oriented economic approach.

Third, currently, the competent authorities are assigned to carry out sector planning and then in some sectors appear to be planning with large enterprises in that industry. With specific provisions on the conditions for adjusting the planning, the order and procedures for adjusting the plan, the Law on Planning overcomes the current arbitrary adjustment, arbitrary disproportionate planning projects, and limiting the waste of the country’s resources.

Next, a constant obstacle for investors has just been removed by the Law on Planning and Decree 37. Previously, when approving a new project in a town, if such a project was fixed and approved by the government, the competent authority had to wait for approval from a higher authority or wait until the planning changed

It was noted that there was a case where a reliable and capable foreign investor wanted to start a project which the competent authority could not approve such a project due to the fixed indicator or the approved planning of that area, and so only one factory was allowed.

Now, the Law on Planning allows the adjustment of the lower planning if it does not affect higher planning. It means that the competent provincial authority can adjust the plan at their discretion without waiting for the change of planning from the competent higher-level authority.

Previously, such adjustments would have to wait for the approval or corresponding adjustments from a higher level, costing the investor a fortune while waiting. Even worse, the investor might just walk away.

Lastly, the law and decree will give foreign investors a vision for investment. According to the Ministry of Planning and Investment, most of the current plans are only valid until 2020. The government will soon adopt a strategy for the period of 2021-2030. The Law on Planning and Decree 37 shall act as an important legal background for building that upcoming strategy.

They are also the basis for the development of golf projects. Under the direction of the prime minister, the decree on conditions of golf course business and investment will soon be submitted to the government.

Despite improvements, some ­problems remain. Do European businesses meet any difficulties related to planning ­issues in ­cities and provinces across the country?

The Law on Planning and Decree 37 do not contain detailed guidelines on the scope, order, and procedures for formulation, appraisal, and approval of planning adjustments in the transition period. Therefore, the adjustment and supplementation of the project to the previously approved planning face difficulties due to a lack of legal regulations.

The MoIT has proposed that during the transition period, when there is no specific guidance on the scope, competence, order, and procedures for specific implementation under the Law on Planning, the government issue a resolution allowing the MoIT to have authority to continue appraising additional current power and grid projects to meet the electricity demand.

Similarly, the Ministry of Natural Resources and Environment has also stated that there are currently five locations that have not yet been issued land use planning and plans for 2016-2020. These are Danang, Quang Nam, Ben Tre, Ca Mau, and Hai Duong. In addition, a series of localities that want to adjust land use planning have also become stuck. For example, in Ninh Thuan and Binh Thuan provinces, authorities cannot transfer land use purposes according to the titanium planning to develop solar power projects.