Conflicting regulations impede investment projects

Over the last few years, the government has put in much effort in improving the legal framework for a robust business environment. Earlier, the government had issued Decision 35 on a new business development strategy and also encouraged increased business competitiveness through Decision 19 and Decision 02.

Illustrative photo.

Illustrative photo.

Conflict in regulations

However, so far the business environment in Vietnam is still not transparent enough and too many constraints continue to remain unresolved. One of the biggest bottlenecks that most local authorities and enterprises have complained about recently is a duplication and conflict between different regulations. The conflict is more significant and glaring between different laws and various guiding documents.

The Vietnam Chamber of Commerce and Industry (VCCI) has collected and clarified some conflicts, duplications and overlaps in various regulations. VCCI has sent a report to the Prime Minister on issues such as laws of investment, land, construction, environment and auctions. Following are the details:

  • Conflict arises between Investment Law and Residential Housing Law in the investment approving process of residential housing construction projects.
  • Conflict exists between Investment Law, Auction Law and Land Law on choosing the investor in a project with land use right.
  • Conflict occurs between Construction Law, Residential Housing Law and Investment Law in the investment for location introduction process.
  • Conflict is between Investment Law and Environment Protection Law at the report submitting stage on the impact of a project on the environment.
  • Conflict arises between Construction Law, Investment Law and Residential Housing Law at the time of issuing the planning certificate.
  • Conflict occurs between Land Law and Investment Law at the time of appraisal of land use purpose.
  • Duplication arises between Investment Law and Urban Planning Law for planning and investment approval.
  • Inconsistency arises between Real Estate Business Law and Land Law on minimum standards for investment approval.
  • Opposing regulations impede Land Law and Investment Law on housing allocation for labor in industrial zones.
  • Inconsistency occurs in Land Law and Civil Law on the right to lease the assets of a land via annual payment.
  • Conflict comes between Investment Law and Land Law at the time to terminate the investment project and repose the land.
  • Inconsistency arises between Investment Law and Land Law on tax reduction and tax exemption of projects with tax incentives.
  • Inconsistency arises between Investment Law and Land Law on the requirement for margin deposit of a project.
  • Duplication impedes Investment Law and Real Estate Business Law in the process to get approval for project transferring.
  • Inconsistency arises between Investment Law, Real Estate Business Law, Residential Housing Law and Land Law on the right to transfer the real estate project.
  • Differences could stop Investment Law, Government Capital Management and Usage Law and Construction Law to complete procedure and process of investment in projects above VND 5,000bn.
  • Inconsistency arises between Construction Law and Auction Law on choosing contractors to appraise the architecture and financial estimation.

Impact on enterprises and authorities

These conflicts and duplications impact investment projects very significantly. Most investors are not clear about the procedures to implement the process and relationships between laws. This issue causes the investors to waste time, lose the investment opportunities, increase operating costs and business risk.

When completing the administrative process, enterprises have to complete many duplicate administrative steps, and summit same documents to many different government offices.  This issue is time and cost consuming. The enterprises also have to meet many different investigating teams for clarifying the same content.

Besides the risk in delay and increased costs, enterprises also face the risk of legal violations. In some cases, when enterprises follow this law, they could be violating other laws.

Furthermore, legal conflicts and duplication also create confusion for authorities when enforcing these laws and cause a fear among authorities who could make mistakes.

Currently, many local authorities are scared of processing the many complicated procedures. They try to push the task onto others to avoid the risk. Hence, many investment projects have been delayed. Many projects have been brought to the government and Prime Minister for approval. The slowness in public investment disbursement is also a negative example. Furthermore, not only public investment but also private investment is seeing continuous delays.

Practically speaking, the latter regulations will have higher effectiveness than the older regulations. However, different ministries use different laws to suit themselves. Moreover, the investigators have not been consistent. Hence, it is fair to say that the authorities push the blame and responsibility on private residents and companies.

Causes and solutions

The above conflicts and duplications are caused by fragmentation and inconsistencies in the Vietnamese legal system. Some people call it a fragmented legal system. Although, most laws are issued by the National Assembly or approved by the National Assembly, people still call this a law of ministry A, or ministry B. There must be a reason for this conflicting practice.

During the time of building the law, most ministries try to expand the scope of enforcing the law and ignore the duplication as well as conflicts in existing laws. Some law makers even tend to create more rights, such as certificate issuing rights or investigation rights for their ministries.

Vietnam lacks an independent government body to review all laws, propose amendments, suggest solutions and prevent conflicts and duplications in making the laws.

Conflicts and duplications in laws and regulations have created many frictions and a diversity of methods in implementation of projects by different localities. This has also been the reason for rampant corruption in implementation of projects.
Currently, most conflicts and duplications in laws are resolved by negotiations between ministries and sectors. Some law makers try to avoid arguments with other ministries, hence, they accept the conflicts in laws; or ignore the conflicts and duplications in laws if they do not impact their ministries directly.

To resolve these problems, VCCI made some suggestions as follows:

Firstly, the government should review and evaluate in entirety the reality of the conflicts in legal regulations and create specific solutions to integrate them into the action plan of the government to revise the laws in next scheduled meetings. The government should issue a directive or propose to the National Assembly Standing Committee to issue a resolution to generally revise the laws.

Secondly, the government should direct the integration, cooperation, information sharing, and create a common voice between law makers of different ministries to resolve the problems and prevent the conflicts in making the revised laws of public investment, construction, environment protection and land.

Thirdly, to shorten the time of resolving the problems which remains in some laws which are not being revised in next meeting of National Assembly, the government should propose that the National Assembly create a new law to revise the other laws.

Fourthly, government should establish an independent office to be the center for reviewing and revising all legal documentations to prevent the fragmentation in the legal system and suggest solutions to improve the multi-ministries procedures.

Fifthly, ministries should delegate an independent department to build the policies, mechanisms and legal frameworks for the ministries, rather than task the lower-level offices and departments to build legal documents or approve different certificates. Having separate tax policies in the General Tax Office of the Ministry of Finance is a good solution and should be applied widely.

Dr. Vu Tien Loc Chairman of VCCI

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