Need to quickly dispel the obsession with administrative regulations for businesses

Difficulty in accessing credit is said to be one of the main reasons why many businesses are slow or unable to recover operations, let alone expand production and business...

Cần sớm giải tỏa nỗi ám ảnh quy định hành chính với doanh nghiệp

According to Dr. Nguyen Van Dang, it is necessary to soon dispel the obsession with administrative regulations for businesses. (Photo: NVCC)

Speaking at the 5th Session of the 15th National Assembly on May 22, Mr. Vu Hong Thanh, Chairman of the National Assembly's Economic Committee, pointed out the reality: the total number of newly established enterprises in the first four months of 2023 and those returning to operation decreased by 2% compared to the same period last year.

Meanwhile, the number of businesses withdrawing from the market increased by 25% and this trend may become more complicated in the coming time. Many businesses are facing great pressure to repay debts, having to transfer or sell shares at very low prices.

In many cases, businesses are sold to foreign partners. The phenomenon of many domestic businesses having to withdraw from the market and many businesses having to “sell themselves” to foreign investors has caused public concern.

Difficulty in accessing credit is said to be one of the main reasons why many businesses are slow or unable to recover operations, let alone expand production and business.

According to statistics, Vietnam currently has about 800,000 private enterprises in operation, more than 95% of which are small and medium enterprises. According to a survey by VCCI, in 2022, only nearly 18% of surveyed enterprises said they had loans from banks.

It is worth noting that this rate has been continuously decreasing recently: in 2017, the rate of private enterprises with loans from credit institutions was nearly 49%, in 2018 it was 45%, in 2019 it was 43%, in 2020 it was more than 42%, in 2021 it was over 35% and in 2022 it was only nearly 18%. Along with the difficulty in accessing credit is the pressure of interest rates on loans.

Although the lending interest rate is on a downward trend, it is still high; the average new lending interest rate in VND of commercial banks is still around 9.3%/year. Therefore, according to the Government's recent report to the National Assembly , credit growth as of early May 2023 was only 2.78%, showing that the production and business situation is facing many difficulties.

Notably, one reason why businesses have difficulty accessing credit sources is regulations. According to a 2022 survey by VCCI, nearly 80% of businesses surveyed said the reason they could not borrow capital was because they did not have collateral.

It can be seen that the regulation of only lending when there is collateral ensures the safety of the loan but disregards the opportunity, the possibility of success, as well as the effectiveness of the investment project. Therefore, many investors or businesses will miss opportunities, forced to stop investment ideas, expand production and business just because of the heavy administrative regulations.

Looking more broadly, according to a statement made in early May 2023 by Minister of Planning and Investment Nguyen Chi Dung, in recent years, ministries, branches and localities have issued many more regulations. This reality will inevitably have a great impact on the investment environment in both directions.

If the regulations are reasonable, they will regulate the behavior of the parties involved, contributing to creating an equal, transparent, and competitive investment, production, and business environment. On the contrary, if the regulations only aim to tighten State management but are not suitable for reality and do not meet the needs of the parties involved, they can create cumbersome administrative procedural barriers, narrow the space for economic freedom, and make it difficult for businesses to operate and access resources.

The emergence of overly cumbersome administrative regulations that do not promote basic principles and laws such as competition, equality, freedom, and supply and demand is a manifestation that goes against the process of movement and development of a modern market economy.

The most obvious consequence is that regulations that purely reflect management needs and ignore the needs of stakeholders will increase the time required to complete investment project procedures, or hinder business operations. Typical examples of administrative regulations that have been talked about a lot recently are requirements on fire prevention, fire fighting, or vehicle inspection. Many businesses have had to temporarily suspend operations because they find it difficult to comply with the above inappropriate regulations.

Ensuring and promoting economic freedom is a vital condition for the operation and development of a modern market economy. Therefore, in order to help our country's economy quickly escape from current difficulties and move towards sustainable development, a top requirement is to minimize "binding" regulations that are far from reality. Removing regulations that rely heavily on subjective will is a practical measure to encourage and promote creativity for people and businesses.

In the context of our country's economy facing many difficult challenges today, to quickly remove barriers, create a transparent environment for investment, production and business, and help businesses quickly recover and develop, decisive action from the central government is needed.

Accordingly, “Task Force” should be established soon to directly review and handle inappropriate administrative procedures and regulations. These are interdisciplinary working groups that coordinate with central and local agencies to review which administrative procedures and processes are creating unnecessary requirements and causing inconvenience to businesses, thereby proposing ways to immediately abolish “sub-licenses”.

Timely detection of business needs and implementation of policy adjustments to meet those needs will be the key group of solutions for the government to truly accompany businesses and overcome difficulties. In the current context, removing or adjusting inappropriate administrative regulations will meet the expectations of many businesses, thereby helping businesses overcome difficulties on their own instead of having to downsize, stop, or accept being merged or sold to others.

In addition, authorities at all levels also need to implement many forms of dialogue, recording the opinions and difficulties of the business community. When increasing dialogue sessions, the authorities will not only listen to many opinions, but also find reasonable bases for flexible adjustment of appropriate and practical policy regulations to support the needs of investors as well as businesses.

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