The Implementation Of The WTO Commitments Finance Essay - Free Essay Example

Vietnams economy after joining the WTO in 2007 and liberalization in service sectors have benefited greatly from the attraction of FDI. In the past decade, Vietnam has actually had an innovation of legal framework and has had the full and prompt implementation of the WTO commitments which are fundamental factors in ensuring that Vietnam continues to attract large amounts of FDI in 2011 2015. However, the fact is that due to the complexity of the provisions of the WTO Commitment, the State agencies in charge of foreign investment and trade at the local (provincial) level tend to hesitate in granting investment certificates if there is no clear guiding regulation. In fact there is little guidance on the implementation of WTO Commitments issued from the ministries in charge of the Government and therefore, the State agencies in charge of foreign investment and trade at the local level often have to seek written guidance of the ministries in charge on a case by case basis fr om time to time. However, the guiding opinion often takes a lot of time to be issued (usually 1-2 weeks and some cases even up to 2-3 months) and sometimes unclear or uncertain for implementation. Therefore, my recommendation is that the WTO commitments must be implemented comprehensively and timely nationwide, especially at the provincial level. If there is no real need for further clarification or transformation of the national legal documents of any specific WTO commitment, they should be directly applied. In addition, officers of State agencies in charge of foreign investment and trade at the local (provincial) level must be well trained by professional experts from time to time on the implementation of the WTO commitments in order to enhance their professional capacity and skill in handling WTO commitments related issues in their daily work to minimize the timing for issuance of investment certificates. Investment licensing Adopting a one stop shop approval Accordin g to the Law on Investment, a sector in which investment shall only be permitted subject to specific conditions as stipulated by law is considered as sectors in which investment is conditional. One example of the sectors in which investment is conditional is banking and finance (the condition of minimum charter capital), real estate business (the condition that any organization or individual providing real estate brokerage services must have at least one person with a real estate brokers certificate; any organization or individual conducting real estate valuation services must have at least two people with real estate valuers certificates; and any organization or individual conducting real estate trading floor services must have at least two people with real estate brokers certificates, and if providing real estate valuation services must have at least two people with real estate valuers certificates  [1]  ), entertainment, public health (the condition of practicing certificate of managing doctors and the registration of operation), education and training (the condition of registration of operation)  [2]  . For example, in order to open a branch of a foreign clinic in Vietnam, the foreign investor must obtain the dentist practice certificate for the head of the dental clinic including the legal representative and the director of the enterprise with the Ministry of Health of Vietnam first and this certificate will often take approximately 2 months to obtain. After that, the foreign investor will submit the application file to the local licensing body i.e. the Department of Planning and Investment where the office of the branch will be located. It will take approximately another 2-3 months for being issued with an investment certificate. The requirement for the investment certificate in this sector is that the new enterprise must have a minimum capital at least US$200,000. Finally, the newly established enterprise must obtain an operation license issued by the competent local health authority i.e. the provincial Department of Health before its operation which will take another 1-2 months. As such, there are three competent authorities that the foreign investor must approach for the operation of the branch in Vietnam. For any application for investment certificate in this kind of sector, local licensing authorities are in fact rarely to comply with the deadline for processing application files for investment certificates as required by law and therefore make the period of application processing longer than expected and foreign investors cannot proceed the investment as their initial scheduled plan. The requirement for foreign investors to approach a series of governmental agencies as the example in the above paragraph renders the process unduly time consuming. I therefore recommend that Vietnam changes the current lengthy process to a à ¢ÃƒÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬ÃƒÆ'†¦Ãƒ ¢Ã¢â€š ¬Ã…“one stop shopà ¢ÃƒÆ' ¢Ãƒ ¢Ã ¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬Ãƒâ€šÃ‚  approval process i.e. the competent local licensing authority is fully in charge of the whole process. The competent local licensing authority will be liable to contact other competent State authorities where necessary. It will reduce significantly the timing for issuance of investment certificate from the current period of 4-6 months to a shorter period of 4-6 weeks as it is usual in other countries in the region. Unnecessary changes to the investment certificate According to the current law and regulations on investment, any change of the content of the investment certificate of a foreign owned enterprise must get written approval from the local licensing authority. The investment certificate often contains name of the legal representative of the enterprise, name and address of the investors of the enterprise, branches and their address, scope of business and charter capital and investment capital. While the registered scope of business and the a mount of investment capital and charter capital is important to third parties which have business with the enterprise and any change thereof must be recorded, other information such as name and address of the branch for example is indeed not necessary to obtain approval for change the original investment certificate. In the business circle, such changes happen so often from time to time and should be let within the power of the enterprise and/or investors without the requirement of amending the investment certificate. Many small modifications lead to changes in the investment certificate will cause the volume of work is not necessary for not only businesses but also the licensing agency. In addition, at present if an enterprise wants to open a branch or change the address of a branch, the enterprise must apply for two kinds of licenses. The first one is the permit to open the branch which is issued by the local Peopleà ¢ÃƒÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¡Ãƒâ€šÃ‚ ¬ÃƒÆ' ¢Ãƒ ¢Ã¢â€š ¬Ã… ¾Ãƒâ€ šÃ‚ ¢s Committee where the branch is opened. The second one is the enterprise must apply for change of the investment certificate of the enterprise to reflect the change of branch. Besides, different local licensing authorities have different interpretation/application about a branch of an enterprise. Although branch is in nature not a new legal entity but a defendant unit of the enterprise, some local licensing authorities request the branch to have registered charter capital which is stated in the branch license which does not include in the total charter capital of the enterprise. This causes difficulties for enterprises when registering branches (new branches or registering any change of the existing branches such as change of address or registration of branch after corporate restructuring). I recommend that the content of investment certificate must be simplified to record only important information and minimize the requirement of change of investment certificate for normal changes during the normal course of business. Businesses / investors are ready to notify the licensing agency about these changes but changes in the investment certificate and requirements for licensing twice for branches should be abolished to reduce unnecessary work and costs for businesses and state authorities. Clarification of investment incentives According to the current regulations, the State encourages some investment sectors and geographical areas by providing certain investment incentives such as tax incentives. At present, conditions for enjoying tax incentives are stated both in the Investment Law  [3]  and tax laws (import duty law  [4]  and corporate income tax law  [5]  ) and therefore there is a considerable overlap led to the ambiguous and different interpretations of the law on tax incentives. Local tax authorities will only refer to relevant tax laws rather than the investment law to apply tax incentives for enterprises and local licensing autho rities will, in some cases, not state the tax incentives granted on the investment certificate of the enterprise (according to the standard form of investment certificate issued together with the Law on Investment and the Law on Enterprises) causing uncertainty to foreign investors. In addition, since 1 January 2009 onwards, any currently operating enterprise with a project for investment and construction of a new production line, for expansion of scale, for renovation of technology, for improving the ecological environment or for increasing its manufacturing capacity, shall not be entitled to corporate income tax incentives for that part of its income derived from such investment project. I recommend that only a list of sectors and a list of geographical areas to be issued by the Investment Law and the relevant tax laws will refer to it for consistent application and the local licensing authorities will base on the issued list of sectors and the list of geographical areas to sta te the tax incentives granted to the enterprises on the investment certificates as a guarantee for the foreign investors. In addition, tax incentives granted for the enterprise should be uniformly applied for the construction of new production lines and for expansion of scale of the original investment project because both reflect economically the same. In other words, any existing and operating investment projects that expands its operation by constructing a new production line or expanding the scale of the original investment project should be treated the same as a newly established investment project. Licensing in specific sectors Distribution Opening up the retail market: more transparent After three years of joining the World Trade Organization (WTO), as an official member of Vietnam has opened up business opportunities for Vietnams market access to other member countries like the U.S., Europe Conversely, with nearly 90 million, Vietnam is considered as potential m arket, the group of five attractive retail market in the world with a size of about 55 billion dollars in 2008 and forecasts about 88 billion dollars in 2009 and 101 billion dollars in 2010. However, to date, after more than a year to open the retail market entirely, only some retailers overseas have provided a relatively large operation in Vietnam such as Metro Cash Carry (Germany), Bourbon (France), Parkson (Malaysia), Lotte (South Korea) The large retailers such as Wal Mart (U.S.), Dairy Farm (Singapore), Carrefour (France) has been considered as potential investors but not yet in Vietnam. According to the schedule of trade liberalization under WTO commitments, in 2009 the time limit under WTO commitments in the services sector was lifted. In fact, Vietnam was fully open for enterprises with 100% foreign capital participation from the retail market on 1-1-2009. However, the opening of the retail market through the establishment of retail establishments in Vietnam Monday dependency problem still needs economic Inspection (Economic Needs Test ENT) under WTO commitments. Under the General Agreement on Trade in Services (GATS), ENT is used in trade negotiations on services. There is the view that, on one hand ENT is a tool for the new member states more flexibility in the application of market-opening policies, on the other hand, it is a form of market access barriers that are identified established and operating under Article XVI of GATS. According to statistics from the WTO Secretariat, there are more than 90 members out of 153 WTO members, including Vietnam, used ENT to adjust problems of trade and services among member countries (including Bulgaria, Canada, EC 12, South Korea, Sweden and Vietnam, which used ENT in its commitment to wholesale and retail service). According to Article XVI of GATS, even on the regional scale or throughout the territory, WTO members cannot issue or maintain any of the following measures: 1: Limit on the numb er of service providers as the number of quotas, monopolies, exclusive service suppliers or the regulations of ENT; 2: Limitations on the total value of transactions or services specified ENT; 3: Limitations on the total number of service operations or quantity of service output expressed in terms of units specified in the form of quotas or regulations on the ENT; and 4: Limit the total number of persons may be employed in a particular service sector or service providers can recruit, the number of necessary and directly related to the supply of a particular service as numerical quotas or regulations on the ENT. With the provisions of this XVI GATS, the WTO members fully empowered to prescribe the ENT in the lists of specific commitments and Vietnam is one of those cases. According to the Schedule of specific commitments on services in Vietnam and WTO, ENT defined as a restriction on the distribution of market access Vietnam Retail (Part 4 Distribution Service, Schedule of S pecific Commitments able to service). Under GATS, ENT is based on the following criteria: 1. Number of retailers present in a specific geographic region; 2. The stability of the market; and 3. Geographic scale of the residential sector. In addition, the Government of Vietnam also provided two other criteria i.e. the planning of the provinces, cities and population density: In addition to the first foreign retailer, the establishment of other retail outlets will be considered in a case by case basis and depends on the number of retail outlets, market stability, population density in the province, into which retailers will be established, and the suitability of an investment project to design overall planning of those provinces and cities  [6]  . So, if one thinks the market needs one more point of sale, the local licensing agency will grant permission for investors, but if that is not necessary, the licensing agency may refuse to grant permission. The licensing will depend entirely on subjective wills of the licensing agencies in each locality and which may arise from negative phenomena. Although debate still exists about the advantages and limitations of the free and open competitive retail market of Vietnam for foreign business, but stand from the perspective of application of the law, the Government of Vietnam need more transparency in the application of ENT conditions. So far, after more than three years of opening the retail market, Vietnam does not have specific guidance about ENT and specifying the criteria for application of ENT in the legal documents, as may be determined what is the specific point of sale, clearly defined ENT and geographical zone (Zoning), defining what is the final consumer, retail units. Therefore, to truly become a destination for corporate multi-national retailers, I think Vietnam should have specific guidelines on ENT and transparent definition, scope and criteria applied ENT application, explaining how each a pplicable criteria and processes, procedures and time limits apply these criteria. On the other hand, due to the particular economic management and geographical location, each locality needs to develop and promulgate criteria applied on the basis of common standards ENT (ENT frame) of the Government. However, the problem should be posed is whether or not to each locality will issue a separate ENT, because if we are not skillful, the local ENT becomes a form of local laws apply used for retail establishments. ENT criteria applied should also be openly published and even applied at the national or local level. Besides, the criteria that applying ENT should be periodically reviewed to suit the conditions of economic development economic development of regions and each local area. In addition, another problem is related to a number of competent State authorities to see the opening of the transaction offices as if it is the establishment of additional retail outlets. Under Decree 23, a retail outlet is a unit owned by the business to do retail. However, the transaction offices may have other functions as service centers or warranty products for enterprises, which do not necessarily retail. In this case, if the transaction offices do not conduct retail, the competent State authority should not subject the application to open transaction offices to an ENT assessment.