Socialist Republic of Vietnam

HA NOI — March 6, 2003

The Ministry of Trade is honing a competition law which it describes as a "double-edged knife", designed to prevent both experienced foreign companies and privileged Vietnamese firms from using unfair practice to dominate the domestic market as the country opens up to regional trade.

The trade ministry discussed the drafting process and some of the difficulties involved at a seminar in Ha Noi a fortnight ago, where it also sought more expert recommendations on the law.

The ministry said the drafting committee needs more input on its seventh draft so that a final version can be made available for public comment.

Some provisions of existing legal documents governing free trade and fair competition remain inadequate and too weak for the government to control increasingly sophisticated competition, the ministry said.

The ministry defended the time-consuming drafting process, citing the complex issues involved in Viet Nam’s transition from a planned economy to a socialist-oriented market economy.

Viet Nam launched central planning soon after the French withdrew from North Viet Nam in late 1954, and started to shift to a market economy in late 1986, when the Party launched its doi moi (renovation process) initiative.

However, after more than 15 years of doi moi the impacts of public sector on the national economy remain substantial, with major state-owned firms acting as big market players with business privileges.

To attract more foreign investment, Viet Nam has also issued many incentives – such as land right use and tax reduction – for foreign-invested joint ventures.

This preferential treatment has unwittingly formed considerable discrimination between the various economic sectors, giving certain businesses an unfair competitive edge.

The ministry said that the government will use the new competition law as a tool to create a level playing field. The law will also serve as a "sharp knife" to cut down the high-handed attitude of major state-owned firms, which have been using their monopoly status to manipulate the market, the ministry added.

A new competition law is seen as even more imperative as Viet Nam opens its commodity and service markets to foreign companies in the process of international integration.

The ministry added that businesses from economic powers such as the US, EU and Japan have begun to compete with domestic rivals in the Vietnamese market, and that given their capital resources and expertise, they will not hesitate to use means such as price fixing and dumping to outperform domestic businesses.

Even the Association of Southeast Asian Nations (ASEAN) members have to sit down to discuss ways to control competition within the ASEAN framework in the process of implementing the ASEAN Free Trade Area (AFTA), said the ministry.

Each of the member nations will be responsible for demanding that business individuals and corporate entities in their own countries strictly observe agreed measures for healthy competition, and maintain or build necessary institutions to devise a corridor for economic integration between ASEAN members.

The Draft Committee said that it started working on the law in 2000, with the involvement of many ministries and research institutes.

The committee translated foreign competition laws and studied international law to give law makers the necessary context in which to debate the proposed legislation.

Collaborative approach

Over the last three years, the draft committee has organised 11 international symposiums to seek expertise from officials in France, the USA, Canada, Russia, Germany, Japan, Australia, the Republic of Korea and Taiwan.

Domestic businesses were also asked to comment on the draft so that the law could be written to combat specific types of fraudulent practice.

The draft law covers all domestic and foreign corporations, individuals and business associations regardless of social status.

It deals with competitive behaviours in a business transaction, including limited competition agreements; abuse of major market player and monopoly status, and other forms of unhealthy competition.

The draft law is applicable to all competitive behaviours occurring inside the country and outside Viet Nam when certain behaviour affects domestic competition.

The draft law also covers malpractice of government offices and state-owned companies in undermining healthy competition inside Viet Nam.

Competition laws in China mainland and former Soviet republics have incorporated provisions to monitor government offices in case they issue regulations that could adversely affect competition.

The committee said that such regulations are often found in bidding procedures granting licences to some companies but rejecting applications from others without credible reasons. — VNS