Pragmatic approach to businesses needed

Most businesses that are in need of capital in the current economic scenario expect a regulatory adjustment, as most of them are facing extreme difficulties in running their entire operations.

This viewpoint was expressed by Dr. Nguyen Minh Thao, Head of the Environmental Research Department of Business and Competitiveness at the Central Institute for Economic Management (CIEM).

Pragmatic approach

At the Forum titled ‘Business and Law’, organized by the Ministry of Justice for the first time on 20 December, Mr. Pham Binh Minh, Standing Deputy Prime Minister, affirmed that the Government has always set a goal of substantive support for businesses that is efficient and sustainable.

He said that one of the support measures is to identify and remove legal difficulties and obstacles for enterprises. In 2022, the judiciary reviewed nearly 22,000 documents related to enterprise operations so as to prepare proposals for amendment. They also annulled nearly 6,000 documents that had many inadequacies and were with overlapping criteria.

Notwithstanding, the reality is that enterprises are still facing risks from many adverse factors. For instance, the 2 percent interest rate support package meant to help businesses recover is still a setback. Ms. Nguyen Minh Thao stated that the suffering of enterprises has been acknowledged by many and this policy is expected to bring abundant capital, estimated at VND40,000 bln. However, by the end of August, commercial banks had only disbursed about VND13.5 bln.

Mr. Dau Anh Tuan, Deputy Secretary General and Head of the Legal Department at the Vietnam Chamber of Commerce and Industry (VCCI), analyzed that because of the unprecedented Covid-19 pandemic, the administrative agencies also lack confidence and lack consistency in policy design and promulgation, which is causing difficulties for implementing agencies. While the source of support capital is the money from the budget, commercial banks and even borrowers are very cautious because there will be inspections later, so the legal risk is high.

Ms. Thao said that when approaching policies, businesses always expect to comply with the law and not find ways to circumvent the law. But when implementing, it is difficult to avoid risks and errors. Therefore, the inspections of enterprises, if any, should focus on guiding enterprises to do better, instead of seeing enterprises as objects of law violations. According to her, it is not uncommon for cases of confusion in understanding legal regulations, so when businesses ask questions, state agencies respond by quoting legal documents and asking to comply with regulations, which creates a vicious circle and a deadlock.

Sharing this same opinion, Mr. Nguyen Thanh Tu, Director of the Department of Civil and Economic Law under the Ministry of Justice, also said that in the process of preparing for this forum, the Ministry of Justice has noted many opinions of enterprises expressing concern about the criminalization of civil and economic relations.

Lawyer Nguyen Hung Quang, CEO of NHQuang & Associates Law Office, said that not only domestic enterprises, but also foreign enterprises with strong potential, strong consulting and legal support teams, also have concerns about this issue. He added that regardless of whether the business has made any mistakes or not, just seeing the law enforcement force come to their workplace can make enterprises lose customers and orders.

Woes of state agencies

From the point of view of state management agencies, Mr. Ta Quang Don, Director of the Legal Department at the State Bank of Vietnam, said that it is necessary to properly recognize the risks from officials and employees. For the banking industry, the process of implementing the interest rate support package, and assessing the resilience of enterprises is a stage that has many potential risks, so the more specific the guiding criteria are, the better for both parties.

However, legal risks may also occur in the relationship between the enterprise and its customers and within the enterprise itself. Lawyer Nguyen Hung Quang said that during the period of the Covid-19 pandemic, he and his associates had to handle a series of cases that were related to contract performance during the period of isolation and "3 on-the-spot" policy.

Therefore, policymakers need to widely disseminate draft regulations, open multiple channels to receive and process feedback, and continue to monitor implementation throughout the policy implementation stage. For their part, enterprises need to actively approach relevant legal fields, organize a legal department, or use legal services from outside.

Enterprises, especially SMEs, often do not monitor the legal environment related to their operations. Mr. Dau Anh Tuan, for instance, is a company that manufactures air-conditioner pipes using copper materials which is currently crying out for a 5 percent increase in export tax due to changes in corporate policies, and this has caused them to panic or even go broke. To adapt to such policy risks, enterprises themselves need to develop a risk management regulation and have a department to monitor and control compliance related problems.

According to comments at the forum, under the circumstances that the world economy is facing many uncertainties, Vietnam's macro economy is not really stable, especially the financial market, and improving the business environment in general and minimizing legal risks, in particular, is more urgent than ever.

Of course, good corporate governance is indispensable, but this is a factor that must be accumulated gradually. While 90 percent of enterprises are small and medium-sized, they are still under corporate governance and the State must apply policies wisely to create conditions and support enterprises in a substantive, effective and sustainable way. If legal regulations are not clear, they create different interpretations and lead to unstable planning, frequent changes, and limited capacity of the civil justice system, which then creates further risks.

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