B.E. Assessment

Private Enterprise Formality and the Role of Local Government, Viet Nam, M4P, 2004

    This paper explores the roles that provicial governments in Viet Nam play in entrepreneurs' decisions to register their businesses.

    The research questions for the paper are:
    · Are owners of small off-farm businesses more likely to operate formally, that is,i.e. register ascompanies, in some provinces more than in others?
    · Can lessons be learned from provinces in the former group where businesses do operate more formally, to help stimulate greater development and formalization of private enterprise in the latter groupp rovinces where businesses are less likely to operate formally?

    The hypothesis for the paper is: Business environments vary from province to province, making it more or less attractive for enterprises to operate formally. Provincial governments have the power to shape these environments.

    On the right hand side are the full report and a 5 page briefing.

    Methods for info gathering
    Secondary research: Documents and statistics on private sector and small and medium enterprise development; A database of firms with tax codes in 14 provinces
    Primary research: A survey of enterprises, financial institutions, and officials in six provinces

    Summary of results
    The data analyzed in this study shows clear and substantial variation in the formality of private enterprise across provinces in Viet Nam. The extreme cases of Thanh Hoa and Ca Mau show that businesses of the same size differ in their decisions on whether to operate them as companies, depending on their location.

    The study also found clear correlation between more comprehensive coverage of private enterprises by local tax officials and greater private sector formality. It can be concluded that a more uniform application of tax policies to a broader range of private enterprises, particularly small industrial ventures, makes them more likely to formally register as companies.

    Associated Activities and Documents
    B.E. Assessment
    »The Impact of Land Market Proccesses on the Poor, Viet Nam, M4P 2004