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Law battles non-state corruption

Publicly held companies, credit organisations, and investment funds in Vietnam may be subject to the new Law on Anti-Corruption, whose draft is currently under discussion by the National Assembly.

 

The legislature is scrutinising the draft amendments to the existing Law on Anti-Corruption. One of the new points in the draft is that the law, which is now applied to state-run agencies and firms, is also to cover non-state firms, including publicly-held companies, credit organisations, and investment funds as pilot non-state entities.

The draft’s Article 106 states that publicly-held companies, credit organisations, and investment funds have to issue regulations on transparency in their organisational structure and operation, and on responsibility of their heads, including chairmen, CEOs, general directors, directors, and chief accountants.

Meanwhile, Article 107 of the draft also states that these companies, organisations, and funds are required to maintain transparency and control over their heads’ assets. This is aimed at protecting the interest of stakeholders and depositors.

They also have to issue regulations on the declaration of their heads’ assets and income, and be subject to inspections from the governments, ministries, cities, and provinces.

Under the existing Law on Anti-Corruption, only state-run agencies and firms are subject to these regulations. However, according to drafters, these regulations must be applied to non-state enterprises because they will help “enhance enterprises’ role in anti-corruption”, and “the development of corruption-free and healthy business culture plays a very important role in both state and non-state sectors”.

However, these new provisions have gotten poor reviews from both experts and firms.

“While the proposed changes to the law can appear justifiable in the abstract, given the Criminal Law provisions that are already in existence, there is a danger that the changes could have a chilling effect on legitimate business while adding little in the way of deterrence to the illegitimate,” Tony Foster, managing partner of law firm Freshfields Bruckhaus Deringer Vietnam, told VIR.

Nguyen Quang Vu, a business lawyer from Venture North Law Limited, told VIR that the provisions are “irrational”. “Moreover, private firms have their own regulations about asset transparency and control and supervision over all activities of their heads. Thus the state should not interfere in their activities. Private firms often have many stakeholders, whose interests are protected by the law and the firms’ regulations. The stakeholders are responsible for their assets, not the state,” Vu said.

Despite this disagreement, many National Assembly members are putting their weight behind the new provisions.

Deputy Nguyen Quang Dung of the central province of Quang Nam said it would be necessary for the new law to cover non-state firms and those working for these firms, because this will be in line with the existing Criminal Law, which also covers these entities with specific punishments.

Like many deputies, Tran Tat The, representing the northern province of Ha Nam, also said that corruption in the non-state sector “has been growing rampantly and with complexity, especially in the areas of loaning, bidding, contracting, and in unofficial costs like gifts, tours, or job generation”.

“Finally, all the costs of this type of corruption are paid by consumers who have to buy products at high prices,” The said. “The fact that the new law covers the non-state sector is in line with the United Nations Convention against Corruption in which Vietnam is a signatory.”

According to deputies Do Van Binh from the northern port city of Haiphong and Nguyen Van Khanh from the southern province of Binh Duong, one of the biggest challenges is found in the complicated connections between state-owned agencies and firms with non-state enterprises in trading materials and goods.

“The most corruption can be seen in public services and projects in administration, construction, road projects, education, and healthcare,” Khanh said.

“If we focus the fight against corruption only in the state sector, without the non-state sector, the desired result cannot be gained,” Binh said.

But lawyer Vu argued, “If the state-run agencies’ operations are made transparent, no private firm would dare to bribe them. [Without corruption,] this is the thing that a private firm never wants to do.”

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Law battles non-state corruption

Publicly held companies, credit organisations, and investment funds in Vietnam may be subject to the new Law on Anti-Corruption, whose draft is currently under discussion by the National Assembly.

 

The legislature is scrutinising the draft amendments to the existing Law on Anti-Corruption. One of the new points in the draft is that the law, which is now applied to state-run agencies and firms, is also to cover non-state firms, including publicly-held companies, credit organisations, and investment funds as pilot non-state entities.

The draft’s Article 106 states that publicly-held companies, credit organisations, and investment funds have to issue regulations on transparency in their organisational structure and operation, and on responsibility of their heads, including chairmen, CEOs, general directors, directors, and chief accountants.

Meanwhile, Article 107 of the draft also states that these companies, organisations, and funds are required to maintain transparency and control over their heads’ assets. This is aimed at protecting the interest of stakeholders and depositors.

They also have to issue regulations on the declaration of their heads’ assets and income, and be subject to inspections from the governments, ministries, cities, and provinces.

Under the existing Law on Anti-Corruption, only state-run agencies and firms are subject to these regulations. However, according to drafters, these regulations must be applied to non-state enterprises because they will help “enhance enterprises’ role in anti-corruption”, and “the development of corruption-free and healthy business culture plays a very important role in both state and non-state sectors”.

However, these new provisions have gotten poor reviews from both experts and firms.

“While the proposed changes to the law can appear justifiable in the abstract, given the Criminal Law provisions that are already in existence, there is a danger that the changes could have a chilling effect on legitimate business while adding little in the way of deterrence to the illegitimate,” Tony Foster, managing partner of law firm Freshfields Bruckhaus Deringer Vietnam, told VIR.

Nguyen Quang Vu, a business lawyer from Venture North Law Limited, told VIR that the provisions are “irrational”. “Moreover, private firms have their own regulations about asset transparency and control and supervision over all activities of their heads. Thus the state should not interfere in their activities. Private firms often have many stakeholders, whose interests are protected by the law and the firms’ regulations. The stakeholders are responsible for their assets, not the state,” Vu said.

Despite this disagreement, many National Assembly members are putting their weight behind the new provisions.

Deputy Nguyen Quang Dung of the central province of Quang Nam said it would be necessary for the new law to cover non-state firms and those working for these firms, because this will be in line with the existing Criminal Law, which also covers these entities with specific punishments.

Like many deputies, Tran Tat The, representing the northern province of Ha Nam, also said that corruption in the non-state sector “has been growing rampantly and with complexity, especially in the areas of loaning, bidding, contracting, and in unofficial costs like gifts, tours, or job generation”.

“Finally, all the costs of this type of corruption are paid by consumers who have to buy products at high prices,” The said. “The fact that the new law covers the non-state sector is in line with the United Nations Convention against Corruption in which Vietnam is a signatory.”

According to deputies Do Van Binh from the northern port city of Haiphong and Nguyen Van Khanh from the southern province of Binh Duong, one of the biggest challenges is found in the complicated connections between state-owned agencies and firms with non-state enterprises in trading materials and goods.

“The most corruption can be seen in public services and projects in administration, construction, road projects, education, and healthcare,” Khanh said.

“If we focus the fight against corruption only in the state sector, without the non-state sector, the desired result cannot be gained,” Binh said.

But lawyer Vu argued, “If the state-run agencies’ operations are made transparent, no private firm would dare to bribe them. [Without corruption,] this is the thing that a private firm never wants to do.”

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