Only a fraction of the 6,000 foreign-invested companies have applied for fresh licenses after new business laws were passed in 2006 to meet the country’s World Trade Organization (WTO) commitments.

Cao Thi Huyen Trang of DC Law Office said the foremost reason was that re-registering wasn’t mandatory.

“The laws don’t say they [the businesses] will have to shut down without a new license,” she added.

For years the 6,000 foreign enterprises have been operating with an “investment license” issued to them under a pre-WTO legal framework.

But in 2006 a whole new legal framework for business and investment came into existence following the enactment of the Business Law and Investment Law.

Only 3 percent of foreign businesses have registered afresh so far and they have until next July to do so.

Trang said many found it unnecessary to obtain a new license simply because their projects were close to completion.

Nguyen Gia Huy Chuong of P&P Law Office said another reason was the companies’ reluctance to deal with administrative procedures.

“If it was fast and simple to complete procedures as in Singapore or Hong Kong, where businessmen can simply register for licenses from their laptops, perhaps more would [apply],” Chuong said.

The government was also partly to blame since it issued guidelines to interpret the laws too long after they actually took effect, other legal experts said.

Not until last September, just ten months before the July 2008 deadline, did it pass a resolution on the nitty-gritty of the implementation of the two new Laws.

But the most important reason foreign firms were keeping their distance was legal, lawyers said: they were afraid of losing privileges under the new laws.

The secretary of the Business and Investment Laws Enforcement Working Group, Nguyen Dinh Cung, said though some incentives could be maintained for five years after Vietnam joined the WTO, any form of subsidy for textile and garment exporters had to be immediately abolished.

They are no longer entitled to a lower corporate income tax rate of 10 percent, but have to pay the universal 28 percent rate.

“But even legal experts are unsure whether this applies to textile or garment or both.” Cung said.

Nestle’s attorney Phan Thi Hong Diem said another gray area was distribution.

For instance, foreign investors’ share in a distribution joint-venture could not exceed 51 percent, Diem said.

“So, under the new laws, foreign investors may have to reduce their stake. The local partners certainly don’t want this to happen.” Trang added.

The scrapping of the “unanimous rule” in the Business Law wasanother deterrent to fresh registration, Dr. Le Net of the HCMC Law University said.

Under the old rules, important decisions had to be agreed upon by all members of a joint-venture’s board.

This has been abolished and approval by a simple majority is now enough to carry decisions.

“The prospect of losing their power may induce weaker stake-holders in joint-ventures to desist from re-registering,” Net explained.

“It all comes down to the issue of power and interests.”

As for why the deadline is necessary at all, considering the laws aren’t mandatory, some say they are puzzled.

This may be just another “loophole” in the Vietnamese legal system that is very much in a nascent state.

Source: TBKTSG