VCCI report reveals problems in administrative reform

“Flow of business law in 2021”, a report by the Vietnam Chamber of Commerce and Industry, shows that hundreds of circulars that guide the implementation of laws are issued every year. The quality and transparency of the documents are in question.

The number of circulars published from January 1, 2016 to July 20, 2020 represented 68% of the total documents published.

On average, once a law is enacted, there are 6.8 government decrees, 1.8 PM decisions and 25.8 circulars that guide the implementation of the laws. With the overwhelming amount, circulars play a very important role in the realization of policies and they have a significant impact on the business environment.

The elaboration of the circulars is mainly implemented by units belonging to the ministries. Compared to the process of promulgation of decrees, laws and ordinances, the level of quality control and transparency of circulars is lower.

Under the Companies Act 2005, circulars do not have to set out trading conditions. The regulation is also present in the Investment Law of 2014 and 2020. Under the Law on the Promulgation of Legal Documents, circulars shall not lay down administrative procedures unless authorized by law .

However, circulars which stipulate the trading conditions can be easily found. There are several types of flyers.

The first is the circular with open commercial conditions, which is found above all in the banking sector, for example circulars 40/2011 of December 15, 2021, 17/2018 of August 14, 2021, 28/2018 of November 30, 2018 which stipulate conditions of granting of establishment and operating licenses to joint-stock banks; and licenses for the establishment and operation of joint venture banks and wholly foreign-owned banks.

The second is the circular with the commercial conditions “hidden” in the required technical standards. For example, the circular requires companies to meet requirements for facilities, certificates of practice, etc.

The mass promulgation of so many business terms in circulars creates a less favorable investment and business environment, according to VCCI.

The VCCI report also pointed out that there is an “abuse” of circular promulgation. There are very detailed decrees which stipulate all the administrative conditions and procedures, and the law can be applied without the need to issue circulars. However, the ministries always issue circulars, even if they are not authorized.

As a result, the application of the law is highly dependent on the regulations contained in the circulars. Analysts say that in some cases circulars have higher validity than laws because they establish requirements that do not exist in laws. This harms the business environment and poses risks to businesses.

Quality

The VCCI report also indicates that some circulars have been suspended due to quality issues. Ministry of Science and Technology Circular 15/2019, dated November 15, 2019 on National Stainless Steel Standards, was suspended just eight months after it was issued.

In many cases, the regulations stipulated in the circulars are different from the laws and decrees, which causes contradictions and makes it difficult to apply the laws.

Circular 40/2021/TT-BTC of June 1, 2021, for example, which stipulates that owners of electronic trading rooms must file tax declarations and pay personal tax, has encountered strong opposition from businesses. As a result, the legal document had to be changed right after it was published.

According to VCCI, circulars act as a bridge that explains the provisions of laws, ordinances and decrees to bring laws to life. If the circulars have problems, it will lead to a tangle of the whole investment and business process. As a result, the spirit of legal documents at higher levels cannot be put into practice.

Pham Chi Lan, a respected economist, said shoddy circulars that are unworkable, unpredictable and inconsistent make it difficult to improve the business environment. However, circular compilers do not have to take responsibility for circulars.

Nguyen Dinh Cung, a respected economist, said that on average the National Assembly enacts about 20 laws, but there are 150 decrees and 500-600 circulars. That is to say, the legislative power leaves too much room for the executive to establish regulations.

Tran Thuy

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