BizCLIR

With the introduction of a modern Enterprise Law in 1999, a vast number of small businesses in Vietnam joined the formal sector through the process of company registration. The legal mechanism of registration is related to economic growth—in almost all cases, formal access to capital requires evidence of registration; moreover, the submission of a company to the country’s formal tax structures provides vital revenue for the state. The new Enterprise Law, which became effective on 1 July 2006 and replaced the 1999 law, continues the trend of liberalizing the private sector in Vietnam and leveling the playing-field among all types of enterprises, whether private, foreign-invested, or state-owned. The revised Commercial Law, which took effect on 1 January 2006, regulates the establishment of representative offices and branches of foreign traders and foreign-invested trading enterprises.

One fundamental issue for private businesses in Vietnam, whether large or small, is the dominant role played by state-owned enterprises in the economy. The new Enterprise Law, although legally consistent with international standards, cannot in itself serve as a counterweight to the advantages afforded SOEs over many private sector firms in the Vietnamese economy. In addition, the Enterprise Law is somewhat ahead of the implementing capacities and supporting institutions needed for a truly effective company law to be in place.