Other countries experience in reducing cost burden

(ĐTTCO) - Practically speaking, commercial contracts between international parties are immediately revised when any legal compliance cost arises. In foreign countries, the “burden of government regulation” is taken seriously and governments across the globe are putting in a lot of effort to cut this cost. Vietnam should learn from them.

Other countries experience in reducing cost burden

Similar to Vietnam, Tajikistan’s economy is transforming. The country’s legal system is complicated with many laws, decrees, resolutions, directions governing the economy. 
In 2007, Tajikistan was worse off than Vietnam in “burden of government regulation”. However, in 2017, Tajikistan overtook Vietnam in this global ranking. 
Tajikistan has the highest growth in “burden of government regulation” score in the world, its 10Y-average score growth was 7.8% vs 2.43% of Vietnam between 2007-2017.
Between 2008-2018 Tajikistan made many significant changes to improve its business climate. 
 Although the business climate in Vietnam has continuously been improving, it’s at a standstill in mid average-income-country zone. The operating environment of enterprises is still weak and lacks the competitive edge. 
Tajikistan has simplified the required administrative legal process and eased enterprises’ established conditions, to attract more investments from local private enterprises as well as from foreign companies. 
The country amended regulations in construction licensing in 2010 and 2015. Tajikistan also reduced its legal tax rate in 2011 and 2014. The operating system of tax authorities was also upgraded consecutively in 2014, 2015 and 2017. All these changes helped to cut down enterprises’ “burden of government regulation”.
Canada is the first country to legalize the rule of “one for one” to control the legal compliance cost. By applying this rule, Canada has successfully cut down enterprises’ administrative costs. 
Firstly, if a new regulation comes up with a new legal cost, the law makers will reduce the cost of other related administrative processes.
Secondly, the new regulation is always issued in tandem with eliminating the old one.
In two years, 2012 and 2013, the government removed 20 unnecessary regulations and the “one for one” rule successfully helped cut the enterprises’ legal costs. In effect, about USD 24mn and 344,000 working hours were saved.
In 2014 and 2015, Canada revised 11 laws and regulations which caused the legal cost to increase by USD 500,000. To offset this rising cost, Canada removed the other 13 legal documents, saving businesses’ USD 3.2mm and 80,000 working hours.
Canada specifically keeps analyzing and improving its business environment and legal regulations every year. 
Some experiences from Canada have been applied in Vietnam and the impact of new/revised 2015 regulations on businesses’ activities have been evaluated.

Singapore has the friendliest business environment in the world. Its score of “burden of government regulation” is always high compared to other regional and global countries.
Singapore revises its legal system every year. The country amended regulations of business establishment in 2009, 2010 and 2019. It simplified the working permission process in 2010, 2014 and 2017. The credit regulations were improved in 2011 and 2014. It issued the revised laws of contracts, bankruptcy, and customs in 2015, 2018 and 2019.
Most administrative legal processes are done online. The technology has even been applied in courts and arbitration activities to save costs and effectively settle disputes.
Singapore maintains a system to evaluate both current impact and future effectiveness of the legal framework on enterprises’ activities.

Since the 2008 global crisis, Malaysia has been upgrading its legal system. The country has made the private sector the key economic growth driver.
Malaysia has established specific offices to be in charge of evaluating the legal compliance cost. These offices tasks play an important role in improving the country’s productivity.
The drafted documents are always sent to enterprises for their views and advice. The new regulations are usually evaluated before issuing. This process continues even after the laws are enforced. The country also keeps improving its evaluating system.
To completely cut down the legal compliance cost, Vietnam should strongly enforce Resolution 139/NQ-CP dated 9 November 2018 on “enterprises’ cost cutting” and Resolution 02/NQ-CP dated 1 January 2019 on “keep implementing the objectives and solutions to improve the business environment and increase the nation’s competitive capability in 2019-2021”.
The government and Ministry of Justice should require law makers to seriously evaluate the regulations’ impact. The legal makers should consult governments to amend laws and regulations in ways to make them more effective. 
The evaluation process should focus on each element of “burden of government regulation”, such as administrative procedure compliance cost, fees and charges, opportunity costs and hidden costs.

Lawyer. Nguyen Hung Quang CEO of NHQUANG & ASSOCIATES

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