Confusing policies keep foreign investors away

According to a recent report by the Foreign Investment Agency, Vietnam attracted over US$14 billion worth of FDI in the first half of 2022, a 9 percent decrease year-on-year.

Vietnam's Association of Foreign Invested Enterprises (VAFIE) suggested that Vietnam is better at attracting capital from East and Southeast Asia due to its geographical proximity and cultural similarity.

Capital flows from the U.S. and European countries such as Britain, France and Germany are lower due to issues such as Vietnam's lack of intellectual property protection, cumbersome administrative procedures and slow, unclear policies.

Since last year I and colleagues in the policy and legal consulting business have been noticing a spike in our workload.

We are constantly being asked to study and clarify regulations and policies for market penetration or business expansion in Vietnam, partly due to the slow issuance of policies and legal documents, which means they are unable to keep up with changes.

For example, the energy industry has been waiting for the Power Plan VIII for the past two years, but the Ministry of Industry and Trade is still tinkering with a draft plan.

The financial technology (fintech) industry is also in limbo.

In 2015 I helped organize the launch of the Vietnam Fintech Club in Ho Chi Minh City, the foundation of the current Vietnamese fintech community, with nearly 6,000 members.

Seven years have passed but there is still no sandbox for fintech investors. The Decree on Control of Financial Technology Activities drafted by the State Bank of Vietnam is still in the stage of consulting stakeholders.

Meanwhile, industries that already have a legal basis for reference are encountering other issues related to the clarity and coherence of these legal documents.

For example, an investor in the healthcare industry was confused by the requirement to disclose the cost of imported medical equipment under Decree 98 issued last year though, under World Trade Organization regulations, this is considered confidential information.

Statistics show that on average Vietnam's laws would need another seven decrees and 26 circulars each before they can come into effect.

In my observation, most investors agree with the spirit of reform behind recent laws but specific regulations under them are often controversial.

Many decrees were issued only for their issuing agencies to make hasty corrections immediately afterward following protests from the business community.

Local authorities often have to seek guidance for implementing new circulars, while businesses have to come to policy and legal consultation units such as ours to clarify unclear points in official documents and instructions.

According to the Vietnam Chamber of Commerce and Industry, this is partly because circulars are issued mostly by ministries' specialized units and so the processes are not as transparent as those for issuing decrees, laws and ordinances.

A policy is considered effective when there is high consensus among related parties and there is full impact assessment and careful calculation of enforcement and compliance costs.

Regulations require all government ministries and sectors to consult organizations and businesses before finalizing policies. However, businesses often only have the opportunity to comment on the initial version as there is no mechanism for accountability or monitoring further down the process.

The Ministry of Justice recently chaired a conference to discuss communication of policies that have a great impact on society.

The government's policy and law development portal was launched earlier.

These do demonstrate authorities' desire to improve the transparency of the lawmaking process and promote interactions between the public, businesses and law-drafting agencies to improve the legal environment.

But the quality of policies could only be improved if there is a change in the approach from controlling to regulating and from asking-giving to supporting.

The global integration of the Vietnamese economy brings with it a huge amount of work to create policy corridors for all areas from traditional fields to brand-new ones.

As long as foreign businesses find policy issues confusing, they would hesitate to invest, hindering the goal of making Vietnam the second most attractive country for FDI in Southeast Asia.

*Cam Ha is a communication expert. The opinions expressed are her own.