Gaps in business law will cause damage to Vietnam
By Bill Hayton in Hanoi
Published: December 14 2006 00:50 | Last updated: December 14 2006 00:50
Legislative gaps are causing serious problems in Vietnam and will dull its competitive edge after it joins the World
Trade Organisation next month, the country’s international business community warned on Wednesday.
Business leaders told the annual Vietnam Business Forum, organised by the IFC, the World Bank’s commercial
arm, they were particularly concerned about missing legislation on securities, banking and the creation of trading
branches.
Dominic Scriven, director of Dragon Capital, one of the country’s few foreign-owned investment houses, told the
Hanoi forum he was pleased the National Assembly had passed a new securities law in 2006. However, none of
the secondary legislation was in place with less than a month before it came into force on January 1.
“Given the increased exuberance in the Vietnam securities market,” he said, “I recommend that the government
expedite the process.”
Mr Scriven welcomed the rapid expansion of the securities and bond markets but warned that a lack of clarity
could deter some investors.
Government officials at the meeting admitted that there had been delays but insisted they were committed to
improving the business environment. Tran Xuan Ha, vice-minister of finance, said the government was looking at
replacing some government decrees covering the securities market. These decrees are pieces of secondary
legislation intended to set out how a law should be implemented.
Still, there is no shortage of foreign investment in Vietnam, with the economy expected to growth 8.2 per cent this
year. Vo Hong Phuc, the planning and investment minister, said foreign direct investment was expected to reach
a record $9.5bn (€7.2bn, £4.8bn) this year.
An increasing number of companies are moving into Vietnam ahead of its WTO entry. However, concerns about
rules in the banking sector remain. Ashok Sud, chief executive officer of Standard Chartered Bank in Vietnam,
said: “A number of issues have been outstanding for a long time.” In particular, he called for a decree on foreign
exchange trading to be revised in line with international standards.
The sector has been shaken by a police investigation into forex trading carried out by ABN Amro, the bank, with a
branch of the state-owned Industrial and Commercial Bank. Four ABN Amro employees have been arrested and
the bank recently paid more than $4.5m in an effort to settle the case.
Phung Khac Ke, the deputy governor of the State Bank of Vietnam, said efforts were being made to maximise the
liberalisation of forex transactions.
He acknowledged that there had been a delay in approving detailed legislation but said that a consultation
process was under way.
The European Chamber of Commerce told the forum the missing legislation was leaving foreign companies
unable to register local branches. A new decree announced by the government in July failed to provide guidance
on the issue.
Businesspeople working in Hanoi say missing legislation is a peculiarly Vietnamese problem. While Klaus
Rohland, the Vietnam director for the World Bank, described the changes in the country’s legal framework over
the past three years as “remarkable”, there were many areas where key issues had not been resolved.
A lawyer at the forum said the main problem was disagreement between interest groups in the government and
the Communist party that sometimes continued even after legislation had been passed by the National Assembly.
“Unlike China, which tends to pilot laws in one province before rolling them out nationwide, or Thailand, which has
a democratic process of consultation, many pieces of legislation in Vietnam are unveiled without proper
evaluation of their impact,” he said.
Copyright The Financial Times Limited 2006
