On legal environment:
Tony Foster: “My impression generally is on the speed of law making and law changing. It’s getting faster and faster. A substantial body of law is now being passed.
The quality has gone up as well. You look at the Competition Law, for example. It’s a good-looking law. And the Bankruptcy Law is also better than the predecessor. The actual quality and the quantity is getting better and better and it’s more and more difficult for lawyers to keep up with everything.”
Sesto Vecchi: “Of course, there have been many new and important laws passed during the past year. There have also been many changes to existing laws. Changes in the law can be disruptive. However, change is not a negative. Continued change is necessary to reflect new thinking and to reflect recent experience.”
Nguyen Hoang Anh: “The legal environment in the past year saw positive developments. Perhaps, the most impressive legal document is Decree No. 181/2004/ND-CP guiding the implementation of the 2003 Land Law. The Land Law and the so-called super Decree are the outcome of a time-consuming and thorough drafting process, which help handle many issues and are expected to overhaul the entire system of land legislation in Vietnam, creating legal bases for the formation and development of a new real estate market. The enforcement of the Land Law and sub-law documents, however, is facing many difficulties, especially in localities. Enforcement, in most cases, is even more important than the law itself.”
Pierre Angles d’ Auriac: “I highly appreciate the issuing of the Law on Bankruptcy and the Law on Credit Institutions (amended), among several laws passed in 2004.
The Law on Credit Institutions (amended), for the first time, enshrines a credit institution’s right to autonomy in loan decision-making. Entering into force on October 1, 2004, the amended Law provides significant reforms in favor of foreign investors. From now on, foreign credit institutions are permitted to contribute capital to, and purchase shares in, credit institutions operating in Vietnam. Furthermore, 100% foreign-owned banks are also allowed to be established in Vietnam. However, State-owned credit institutions remain to play decisive and leading role in the monetary market.
The new Law on Bankruptcy, replacing the Law on Business Bankruptcy of 1993, came into force on October 15, 2004. It introduces a large range of reforms in order to enable bankruptcy procedures of insolvent businesses by providing simplified and more flexible bankruptcy procedures, allowing parties other than creditors to participate in bankruptcy procedures, and by giving courts more flexibility in dealing with insolvent businesses.”
On investment and investment legislation:
Sesto Vecchi: “The investment environment has continued to improve. I believe that government officials now have a much more pragmatic outlook than in the past. However, there remain too many processes and procedures that require approval and too many documents that require certification, legalization and the like. These requirements are often irrelevant to the truthfulness or validity or relevance of a fact or document.”
Tony Foster: “The investment situation in the country is very interesting. People who are here are very keen on investing more. People who are not in Vietnam (I mean foreign investors) are coming to look in greater numbers than since 1996. But there isn’t as much actual investment as might be expected because it is still difficult to invest in many fields.
There’s nothing that’s particularly problematic about the foreign investment laws themselves. But the problems that most investors have are in the areas that relate to investment, like land, tax and intellectual property. The other laws are of much more variable quality than the investment laws. The investment laws themselves are not problematic. The bureaucracy that’s involved is also a problem. But the investment situation is in fact quite good. People who are here are optimistic and they are investing more and more.”
Nguyen Hoang Anh: “There are not many big foreign investors coming to invest in Vietnam in the past year. Though foreign investors are still interested in investing and investing more in Vietnam, their investments focus on restructuring and developing the existing projects rather than on formulating and implementing new ones. However, the fact that Vietnam State Bank now permits foreign banks to open more branches in Vietnam and purchase shares in Vietnam-based commercial banks is an evidence of the improving investment environment in the country.”
Nguyen Tuan Minh: “The investment situation in the past year saw restoration and growth but the investment scale remains small with most foreign investors coming from the Asian countries and territories rather than from Europe or the US. This may be attributed to the complexity and changeability of Vietnamese investment laws. Besides, though foreign investors can enjoy many investment preferences, such preferences are scattered in different laws and sub-law documents, which require them to go through different complicated procedures. These are the real barriers to foreign investment. We agree that foreign and domestic investment laws should be unified to avoid overlapping and create level playground for both domestic and foreign investors.”
On law advising:
Tony Foster: “There are many difficulties in advising laws in Vietnam because the laws are not precise. Vietnamese laws are very vague and sometimes inconsistent. There’s often no precise use of terminology.
Different Vietnamese departments take the charge of dealing with particular laws. Other countries have very precise laws. If you have issues, you go to courts. Here, if you have a problem with the laws you have to go to the very administrators who prepared the law in the first place and you know what happens then. That’s why we often have to provide investors with advice on what administrative agencies might conclude rather than what the laws require. That requires substantial knowledge of how the government works.”
Nguyen Tuan Minh: “Legal consultancy in particular and consultancy activities in general in Vietnam saw many developments in 2004. Domestic consultancy companies are becoming more specialized and competing with Vietnam-based foreign ones though the latter still hold a leading role in relations with foreign parties as well as in big foreign investment projects.
Vietnamese legislation on consultancy, however, is still vague and there’s not yet a fair playground for all consultants. For example, foreign auditing companies provide tax or business consultancy, which in nature is also legal consultancy, but is not governed by the legal consultancy legislation. In other words, there’s a lack of separate regulations for separate types of consultancy.”
Sesto Vecchi: “There was a time when lawyers advising foreign investors only needed to know the main laws. That, of course, is no longer possible. Vietnam now recognizes and is addressing a commercial and economic environment that is far more complex and sophisticated than it has ever experienced. To be knowledgeable, lawyers have had to specialize. With a more complex environment, the laws must speak with more clarity and in more detail. Specific situations must now be more specifically addressed. Naturally, the passage of new laws lags the need for such new laws. That is not unique to Vietnam. In Vietnam the law is still far behind international practice, so the gap is wider. However, the gap is closing, and Vietnam is to be commended for working toward bringing its law and practice into conformity with international law and practice.”
Nguyen Hoang Anh: “There’s nothing to complain about the legal consultancy environment in Vietnam because it is open and convenient. Vietnam is one of the countries in the region that early opened its legal market. Today, though foreign law firms’ branches cannot participate in legal proceedings in Vietnam, they can advise on Vietnamese laws through Vietnamese lawyers working for them.”
Suggestions for lawmakers and expectations:
Tony Foster: “The best thing they (lawmakers) could do is to establish a law-making body so that you have a group of experts, I mean legal experts, who really know how to draft laws and all laws should go through that group of experts so that they can make all laws consistent and good.”
Nguyen Hoang Anh: “I hope there will be more and more quality laws in Vietnam and priority will be given to the formulation and passage of those laws that are practically significant and necessary for the legal environment. The lawmakers, however, should not be hasty. A late but quality law is much better than an early but infeasible one. Vietnam needs a clearly-oriented long-term law-making strategy.”
Pierre Angles d’ Auriac: “I hope that the legal environment is more transparent and the investment situation of Vietnam is more attractive. I am looking forward to the codification of the Law on Foreign Investment in Vietnam and the Law on Promotion of Domestic Investment for both local and foreign companies to enjoy the same treatments. Actually, many promulgated sub-laws show the efforts of Vietnam lawmakers to harmonize regulations applicable to local and foreign investors, and the most illustrative example is corporate income tax of 28% and the same corporate income tax incentives applicable to both local and foreign enterprises. Only the codification of the two Laws may challenge effectively the current discrimination between domestic and foreign invested businesses.”
Sesto Vecchi: “Certainly, WTO membership is the priority (for Vietnam lawmakers). It will be of significant benefit to Vietnam: it will remove garment quotas, provide a forum to resolve trade disputes, lower tariffs, etc. However, and beyond WTO, the business environment must continue to improve by broadening the tax base; eliminating corruption; and continuing to get costs such as taxes, land, etc under control. Vietnam has begun to do these things and the response of investors has been positive. However, these changes are not accomplished easily. They require focus and perseverance.
I think that growth in foreign investment can be expected to continue in 2005. If conditions for investment continue to improve, investors’ response will follow. I see nothing that will either hasten or curtail the pace of legal reform in the coming year.”.-