38484 Translated from original Vietnamese document VIETNAM THE BUSINESS INFORMATION CENTER AT THE VIETNAM CHAMBER OF COMMERCE AND INDUSTRY No.17 (20) December 2006 Streamlining the business startup The forms required by the administrative officesareforthemost partredundant process: Further improvements to The draft Circular streamlines the startup application process by stipulating the Government Circular still needed that all three sets of forms can be submitted at one place - the business registration The 2006-2010 SME Development Action Plan shows a strong commitment from the office at DPI. However, the process would government to further streamline business startup procedures and to encourage more be even simpler if the three sets of forms enterprises to be formally established. As a first step in several reforms in this area, were consolidated into one, as most of the the government is introducing a new inter-ministerial Circular to enable more effective information requested is the same. This coordination among the three agencies responsible for the startup process, with an would reduce the time burden on aim to reduce the time and costs of starting a business for entrepreneurs.1 The Circular entrepreneurs, reduce the workload for serves as a basis for continuing reforms, including a planned online company public servants, and lay the groundwork for registrationsystemandnationalenterprise informationdatabaseby2009.2 both an online registration system and a single identification number for each In many provinces, authorities responsible for business startup are anticipating the enterprise, as is planned under the Circular in order to help them make immediate reforms to their own procedures. government'sreformprogram. Now in its sixth draft, the Circular still has a number of weaknesses that need to be Accountability of the different addressed in order make the startup process as simple as possible for governmentdepartmentsisstillunclear entrepreneurs. This bulletin discusses some of the main weaknesses and suggests The Circular's success in achieving ways to address them. reform will depend on the coordination and Entrepreneurs still have to visit the the Circular refers to the need for better information-sharing among, the three different administrative offices many customer service, it does not introduce Ministries and their Departments. The draft times measures to save entrepreneurs from Circular designates the business The most significant improvement in having to repeatedly visit the agencies. For registration office of DPI as being the draft Circular is its call for better example, the Circular should require civil responsible for accepting applications, customer service from administrative servants to inform applicants of basic forwarding relevant information to the departments. The document also attempts mistakes (e.g. spelling errors, capitalization public security and tax departments, and to simplify market entry by creating a single errors) as early as possible and within a notifying entrepreneurs of their application access point for all three business startup certain timeframe, rather than one at a results. For this reason, the staff of the procedures (company, stamp and tax time,andoftenjustbefore thedeadline. registration office needs to be sufficiently registration). According to the latest version Second, with respect to the stamp (or experienced and competent to check the (Continuedinpage4) of the Circular, instead of having to make chop), the draft Circular covers only the several visits to the three different process to receive the permit to make the departments, entrepreneurs will be able stamp; it does not extend through to the to accomplish most of the process point at which the stamp has been made through the business registration office, and is ready for use (this occurs only after it housed in the Department of Planning and has been registered and certified by the Investment (DPI). Department of Public Security).3 This This bulletin is published with support from the However, two key problems still means that even after completing the Mekong Private Sector Development Facility (MPDF), remain. First, while the draft Circular process outlined in the Circular, an a multi-donor funded initiative managed by the International Finance Corporation (IFC), the private- specifies the time limits within which entrepreneur cannot yet legally start sectorarmoftheWorldBankGroup. administrative agencies must process operating a business, as company The "Business Issues Bulletin" provides those applications, these begin only after the documents are not official and legally interested in business issues with a short summary and analysis of a particular topic affecting the agencies have received a complete and fully binding unless they are stamped with the business environment in Vietnam, and exposure to accurate set of application forms. Though officialcompanychop.4 different opinions held by various stakeholders on the topic. The statements and opinions presented here are (1) In Vietnam, to start up a business an entrepreneur needs to undertake three main business startup procedures: company, chop, only meant to provide additional reference material and tax registration. At the provincial level, these steps are carried out respectively by the Department of Planning and Investment, and do not reflect official opinion of the Vietnam theDepartmentofPublicSecurity,andtheDepartment ofTaxation. Chamber of Commerce and Industry (VCCI) or the (2)SMEDevelopmentActionPlanunderDecision236/2006/QD-TTg datedOctober23,2006. Mekong Private Sector Development Facility (3) In order to complete the official startup process, an entrepreneur must have a stamp made and then register that stamp. This typically entails the entrepreneur applying for permit from the Department of Public Security to have a stamp carved. After he (MPDF)/IFC. receives this permit on paper, he must take the permit to a licensed carving workshop to have the stamp made. He then must take Readers are welcome to copy and distribute the information contained in this bulletin provided 6002-I thestampbacktotheDepartmentofPublic Securitytoregisterit,andthenreceivesofficial certificationofthechop. (4) It is worth mentioning that Vietnam is one of only a handful of countries in the world where this is the case; in most countries, a acknowledgementisgiventoVCCI/MPDFasthesource. companychopisoptionalandaformalpermit fromthegovernmentisnotrequiredinorder tohaveonemade. C C V Viewpoints Viewpoints of relevant administrative departments l The draft Circular designates DPI as carving permit altogether). Then he simply has to go to the DPI to the primary office responsible for the pickupthecompanyand taxregistrationcertificates. business startup process, including Mr.PhamDinhTong, issuing the company registration HeadoftheBusinessRegistration Office, certificate and returning the tax DepartmentofPlanningandInvestment, BinhDinhprovince registration certificate and the stamp carving permit. After receiving all of the l The Circular tries to fulfill the Prime Minister's requirements above documents, enterprises can then related to business startup: streamlining unnecessary steps, have their stamp made, register their abolishing unneeded paperwork and minimizing the time and costs stamp, pay the fee and receive a stamp for entrepreneurs. According to the latest draft of the Circular, DPI registration certificate. This means that the tax registration will be the single access point at which entrepreneurs submit certificate, or tax code, would normally be issued before the business startup applications and pick up the relevant registration company stamp is made. According to Circular 10/2006/TT-BTC, certificates and permits. The draft Circular also simplifies however, entrepreneurs are allowed to apply for the tax registration application forms and reduces the limits on processing time taken certificate at the same time they are getting the stamp made. This by the three relevant departments. In order to cut down business is contradictory, because the circular also requires that the startup processing time even further, the Circular could focus on application for tax registration must be stamped with the company reducing the periods associated with company and tax code chop.ThenewCircularshould clarifythisissue. registration. It can offer entrepreneurs the option of either using the To reduce the time and number of administrative visits that are company registration certificate to proceed with the stamp and tax involved with starting a business, the drafting team should registration on their own or of doing so through the business consider: i) specifying each related department's responsibilities; registration office. In those provinces that have the appropriate ii) outlining how officials should resolve situations where they information and communications technology to connect the receive incomplete or incorrect application documents in a more registration offices with the tax and stamp registration offices, business-friendly, customer-oriented manner towards startup procedures could be designed as follows: after receiving the entrepreneurs. The Circular should stipulate that entrepreneurs will company registration information, i) the Taxation Department receive the company registration certificate, tax registration processes the tax code application and send it back to the certificate, stamp sample certificate, and the stamp within fifteen registration office; ii) simultaneously, the Department of Public days at most. This target can be achieved if, after receiving a copy Security issues the stamp carving permit and send it directly to the of the company registration certificate and issuing the stamp stamp carver as specified by the entrepreneur in his carving permit, the Department of Public Security proactively application). Within three days, the entrepreneur (or a legitimate works with the stamp carver to have the stamp made quickly. The proxy) would be able to: i) submit a copy of the company DPI could also collect the fees related to the stamp carving permit registration certificate and pay related fees; and ii) pick up both charge and making the stamp when the entrepreneur first submits the chop itself and the stamp registration certificate from the his application to the business registration office. This way, when Department of Public Security. the stamp is ready, the entrepreneur can go to the Department of Mr.VuBaDac,Deputy Director Public Security just once to pick up both the stamp registration DepartmentforPublicAdministrationand SocialSecurity, certificate and the chop itself (eliminating the need for a stamp MinistryofPublicSecurity Viewpoints of central government officials lThisinter-ministerialCircularisindeed necessaryforthethree For statistical purposes, an enterprise information database that relevant agencies (business registration offices within DPI, is professionally designed and maintained would be ideal. Department of Public Security and the Department of Taxation) to "Professional" means that it would streamline all relevant national be accountable to and communicate regularly with each other as an statistics and enable the retrieval of enterprise-related information initial step, and also to develop a more proactive and effective anytime. The Statistics Office is best placed to coordinate this data; information-sharing mechanism for the future. However, it is worth administrative agencies such as the registration offices, tax considering a more compressive reform: moving to a single departments, Departments of Public Security, Departments of identification code (or number) for enterprises, that would be used Customs and banks would contribute to and share the information. by all relevant administrative departments. The fact that each The current legal framework for statistics is quite helpful in this department currently issues its own code makes the system for regard, as it requires enterprises to provide and update their monitoring companies after registration more challenging and also information for statistical purposes. However, it is not effective confuses businesses. Another consequence of these multiple codes enough, as it does not include strong punitive measures for those is that the registration office, the tax department and the statistics who do not fulfill their reporting obligations. Enterprises should not office maintain three separate databases containing inconsistent beworriedaboutconfidentiality,as theLawonStatistics(clause 27) information on enterprises. Introducing a system based on a single includes the principles of the confidentiality and security of private identification code is not particularly complicated in a technical information, and also clearly forbids the dissemination of specific sense, but it would have significant impact. Down the road, we hope data on enterprises (such as information on names and addresses) develop an electronic verification system for enterprises, which without the consent of those concerned. More importantly, the law does require longer term investment in information technology and forbids administrative agencies from using enterprise information infrastructure. foranypurposesotherthan thoseincludedintheirmandates. 2 Viewpoints It is worthwhile to learn from business registration reforms in few enterprises registering each day? other countries and look for suitable ways to further simplify this With respect to improving the government officials' attitudes process in Vietnam. For example, Australia's business startup towards businesses, on one hand, it is critical to review the system used to require that entrepreneurs visit multiple agencies, compensation policy and packages for public servants (especially provide them each separately with the same information (company those who interact with businesses on a daily basis). The fact that name, address, business sector, etc.), and get different codes. But there is a correlation between the compensation package of, and now all agencies use a system containing a single identification the services delivered by, public servants cannot be ignored. If number (the Australian Business Number, or ABN); this has helped salaries do not allow officials to earn a livable income, it will simply save entrepreneurs time and has definitely minimizes data errors. be too challenging for them to devote 100% of their time and energy In other countries, business registration is designed as a public to serving the public! On the other hand, strict discipline and strong service and is delivered by an independent entity and supervised by penalties should be imposed on public servants who do not properly anadministrativeagency. do their jobs. In the last few months, there have been some cases of Mr.NguyenGiaLuyen, unethical public servants who have made doing business difficult DeputyHeadofStatisticalStandards andMethodology forentrepreneursinHanoi. Division,GeneralStatisticsOffice One of the most significant impacts of the public administration reform program's implementation of the one-stop mechanism at lOneofthemostimportantobjectivesof the district level during the last ten years is that coordination and public administrative reform is to switch communication across units within the same departments have civil servants from the mindset of "state improved. However, the quality of coordination and communication control" to "public service." The fact that across the departments is still poor, and as a result, these "one-stop business registration offices within DPI, shops" in many cases are "one-more-stop shops." If this pilot initiative connecting the three agencies responsible for business the tax department and the Department startup is implemented effectively; its success will definitely of Public Security have staff sitting provide an impetus for reforming other, more complex public together in the same office [in some administrative procedures. The success of Binh Duong province in provinces] does not necessarily mean creating an investment-friendly environment through effective that the business startup process will be coordination among agencies such as the Department of Planning simpler. More important is whether the and Investment, Department of Land Administration, Department staff of these Departments changes their attitude towards of Construction, etc. needs to be studied thoroughly and entrepreneurs and whether the Departments are willing to improve institutionalized so that similar reforms can be implemented communication across offices to process applications as fast as nationwide. In any public administrative reform, the interests of possible. Of course it would be ideal if in every province there was, individuals or specific groups with vested interests may need to be for example, a public administrative center in which staff from the sacrificed to for country's interest. But the fact is that public three Departments could sit together and serve businesses. But agencies at the same level avoid "fighting" too strongly with each even then, some fundamental issues would need to be resolved. other. As a result, the country has seen few very effective public Would such a center have sufficient facilities for staff to do back administrativereforminitiatives. office work onsite, or would they sit there just to collect Mr.VuHoe, applications and take them back to their Departments for further DeputyHeadofPublicAdministrative Reform, processing? Would this be efficient in provinces that have only a MinistryofHomeAffairs Viewpoints from experts lConductingreformstofacilitatemarket departments should streamline its back office procedures so that entry for enterprises is not a new idea. In theyaremorecompatiblewith theinter-departmentalOSS. July 2006, Hai Phong was the first Enterprises should receive their application results at the inter- municipality in the country to pioneer an departmental OSS. It would be highly beneficial for entrepreneurs if inter-departmental "one-stop shop" they were able to submit the stamp carving and tax registration (OSS) for the company, stamp, and tax applications simultaneously so that they can receive the stamp registration. After four months of together with the tax code. On behalf of entrepreneurs, Department operation, the business community of Public Security officials should work with and submit the stamp remains highly supportive of and carving permit to stamp carvers; this would reduce enterprises' appreciates having to visit only one waiting time for the stamp to the number of stipulated days, or even location to complete all three procedures. lessthanthat. As the setup is still in pilot phase, Hai Phong may have to do some Also, the inter-departmental OSS should be a place where the fine-tuning to make the OSS live up to the business community's government clearly and transparently discloses all relevant expectations. Some lessons from Hai Phong as a forerunner in procedures to entrepreneurs. In several provinces where we have simplifying business startup procedures, as well as good practices worked, before they undertook business registration reform, many fromsomesouthernprovinces,should helprefinetheOSSmodel. enterprises said they were hesitant to contact administrative The inter-departmental OSS should be a true single access departments for information and to submit applications. Instead, point for enterprises. The OSS mechanism requires the three they preferred to interact with the government through departments to improve coordination and build the capacity of front intermediary service providers. However, now many newly office staff so that they have adequate knowledge and skills to serve established enterprises no longer feel that they are "begging" the enterprises and customers. Moreover, each of the three authorities for information and to process their applications. 3 Viewpoints Entrepreneurs say that when procedures are transparent and another country which could be adopted in Vietnam. I do not convenient, they are able to better understand their rights and believe that there is. In any case, a one-stop shop alone will not obligations, and consequently are not as afraid to interact with result in the dramatic improvements expected if not publicagencies. accompanied by other reforms and these will need to take The simplification of business startup procedures is regarded account of the particular circumstances of the country. In the as a breakthrough in recent efforts to achieve administrative case of Vietnam this will include the provincial structure, the reform. The presence of an inter-departmental OSS for business level of awareness and use of electronic services and the law startup procedures in a few provinces attests to the initiatives of regarding corporate seals. sub-national governments. If these governments make further Few, if any, countries have the requirements for both prior improvements based on the draft Circular and their own political approval and subsequent registration of seals as part of the commitment to reform, the success of such efforts will help to business start-up process. In many countries the use of seals is improvetheimageandcompetitiveness oftheirlocalities. optional, with contracts and other documents being authenticated by MsPhamNgocLinh,Deputy Director, the signatures of company officers. Even where a seal is mandatory, MCGManagementConsulting&Consultant toIFC-MPDF's a seal-maker rarely requires any documentation other than a BusinessRegistrationSimplificationProject businessregistrationcertificateasauthority tomaketheseal. Current best practice requires, first, that internal procedures be l Since August, Hai Phong has been simplified and, second, that there is integration across experimenting with a "one-door" facility departments. It should be a specific aim to reduce the number of for business registration with officials contacts with the customer to a minimum. Ideally, in a paper- from the Department of Planning and based system such as is currently operating in most of Vietnam, Investment, the Security Department there should be one visit to deliver simplified application and the tax office brought together into documents and a second to collect the registration certificate, tax one room. This has some benefits in that code and seal. The next stage of development is a 'single portal', the customer has only to go to the one allowing the customer to complete the process without visiting the office, but it is still likely that he or she will officeatall. have to make several visits. Both Hai In improving procedures, the aim should be to provide i) easy Phong and Da Nang are now considering a 'one-window' access to a names index via a web site; ii) simple and standardized approach, where the customer deals with a single person and documentation, with structured forms rather than wordy legal documentation is passed directly from the one-stop shop to deeds, and including on-line forms; iii) sharing of information relevantdepartments. between government bodies, so avoiding the need to register in This approach is in keeping with the latest draft of a joint more than one place; iv) procedures for ensuring that information circularfromtheMinistryof PlanningandInvestment,theMinistry held regarding companies is up-to-date and readily accessible to of Finance and the Ministry of Public Security. Unfortunately, the anyone who needs it; and v) publication of both service standards current draft of the circular still implies a requirement for the andperformanceagainstthosestandards. customer to deal separately with the stamp-maker and the A one-stop shop service which meets these standards should Security Department (for registration of the seal), but there is simplify and encourage the formation of new businesses and also scope for provincial authorities to overcome these shortcomings provide those businesses with the range of services to which they and implement a true 'single window' one-stop shop which will areentitledunderthelaw. meettheneedsoftheir customers. MrDavidWalke,InternationalAdviser Several people have asked me whether there is a single 'best onOne-StopShopsforBusiness Registration, practice' model of a one-stop shop used for business registration in EU-VietnamPrivateSector SupportProgram (Continuedfrompage1) for example, enterprises recently surveyed have been particularly satisfied with the province's business startup procedures, citing the completeness and accuracy of applications before forwarding them fact that the Public Security Department works proactively with on. The draft Circular does not have specific provisions on inter- stamp carvers to ensure that entrepreneurs can receive both their departmental communication, nor does it address each stamps and stamp registration certificates in one visit. In Ho Chi department's accountability for responding to entrepreneurs and/or Minh City, which has the largest number of newly-established notifying them of inaccuracies or incompleteness after the enterprises in the country, an online registration system has been information has been forwarded to the Public Security or Tax set up. The system makes it easy for entrepreneurs to seek help Department. There needs to be clarity as to which agency is with the registration process and get answers to their questions, as ultimately responsible for answering entrepreneurs' questions and well as monitor their application progress, saving them time and fornotifyingthemofprocessing delays. visitstoadministrativeauthorities. The Circular should encourage local governments to adopt The Circular should allow for provinces that wish to make innovativepractices registration even easier than the law stipulates to do so, as long as Duringthepastfewyears, inordertoattractmore investment,a the appropriate controls are in place so that the system is not number of provincial governments have been proactive and abused. Domestic enterprises looking to expand their businesses in innovative in improving coordination and developing customer the country and foreign enterprises looking for places to invest tend orientation among their local departments. In Binh Dinh province, toseekoutprovincesthat makeiteasy. Publisher:NguyenVuKien-DirectorofBusinessInformationCenter-BIZIC-VCCIOffice:5thfloor-InternationalTradeCenter-N09DaoDuyAnhSt.,Hanoi Legalconsultants:Mr.TranHuuHuynh,DirectorGeneralofLegalDept.,VCCI-Mdm.PhamChiLan,SeniorAdvisor Tel:(84.4)5743084Fax:(84.4)5742773E-mail:vcci@hn.vnn.vn Layoutandprintedby:NewdaysJSC.;10,000copies LicenseN:067/GP-XBBTbytheMinistryofInformationandCulture,dated29/12/2003