Implementing Regulatory Impact Assessment (RIA) for the first-ever SME Law in Vietnam

[15 July 2016] — Economica Vietnam has been commissioned by the Agency for Enterprise Development (EDA) under the Ministry of Planning and Investment (MPI) and by USAID under the Governance for Inclusive Growth (GIG) Project to implement the Regulatory Impact Assessment (RIA) of the Law on Small and Medium Enterprises (SME Law). 


In Vietnam, according to the Enterprise Development Agency, an additional 450,000 firms would be established during the 2016-20 period, bringing the total number of firms in operation by 2020 to 750,000. The SMEs were expected to provide jobs for 50 per cent of the country's labour force.  The SMEs contributed 31 per cent to the budget collection and roughly 50 per cent to the economic growth of the Southeast Asian nation, creating 5 million jobs and accounting for 35 per cent of the business community's total investment. 


Expert from Economica Vietnam Presenting the RIA of SME Law at a Workshop Co-organized by VCCI and EDA/MPI 

Small and medium enterprises (SMEs) would receive support to promote their innovations and enhance competitiveness at home and global markets. The Government already issued two SME development plan to support the development of SME. The 2016-20 plan was the country's third five-year plan for developing SMEs. However, it is important to note that support policies for SMEs in the past five years had still failed to meet the demands of enterprises due to the lack of attention and co-ordination among ministries, sectors and localities. In addition, SMEs themselves had limitations such as capital, human resource shortages and low awareness. In the upcoming time, emphasis would be laid on incentives to  innovations by SMEs to create original and high-added-value products with a focus on expanding exports because improved product quality and reduced prices were becoming imperative to enhance competitiveness amid the rapid international integration of Viet Nam. It was estimated that a total of VND3 trillion (US$133.34 million) would be provided to SMEs within SME support programmes. 


The Ministry of Planning and Investment  also acknowledged that Viet Nam had not paid adequate attention to implement a strong legal framework for creating favourable conditions for the development of SMEs. The Ministry also confirmed that current support was still not enough and that more incentives were needed to develop SMEs into a core force of the economy. 


Recently, a series of issued laws such as the Investment Law, the Enterprise Law, and the law on amendments and supplements to several articles of tax laws were already promulgated in  favour of SMEs and private businesses.  The 2014 Investment Law gives more favourable conditions for domestic enterprises as they do not need to have a project to get an investment licence, as foreign invested enterprises must do. However, these are insufficient to facilitate the development of SMEs and private businesses. 


This emphasizes the needs for the formulation of a Law to Support SMEs. According to MPI, this will pave the way for more preferential policies for small-and medium-sized enterprises (SMEs) to help them grow as a core force of the local economy. First steps to formulate the SME Law has been taken.  


According to the prevailing Law on Law Making, a regulatory impact assessment (RIA) must be implemented in parralel with the making and formulation of a law. A RIA is also needed for the draft of the SMEs Law. However, the capacity in implementation of a RIA within EAD/MPI is limited. Therefore, MPI has requested USAID GIG to provide technical support in the implementation of the RIA for the draft SMEs Law.

It is expected that the Regulatory Impact Assessment will help to improve the quality of the SME Law, strengthen the capacity of AED/MPI in regulatory impact assessment. Example and experience from the RIA will also be fed into the formulation of the RIA Guideline which are being developed by the Ministry of Justice under the Law on Law Making in 2015 (another effort by the Government which is also benefiting from support from USAID GIG).  



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