State incentives and a solid legal framework for social enterprise arenot yet in place, said experts at the workshop entitled "Socialenterprise - From policy to practice" co-hosted recently by the CentralInstitute for Economic Management (CIEM) and the British Council (BC) inHanoi. Report by the Vietnam Business Forum.
Silent contributions to the community
According to studies performed by CIEM and the British Council,Vietnam currently does not have a legal framework for socialenterprises, so they have not been formally recognised. The socialenterprise model is quite new and not yet widespread. Social enterprisesare mainly formed spontaneously or transformed or restructured from oldnon-governmental organisations (NGOs). Hence, most of them cannot standon their own financial incomes. Their production and businessoperations are able to afford 50 percent of their operating costs andsocial purposes. Without official State recognition, social enterprisesencounter a lot of difficulties when they do business with theirpartners.
Pham Kieu Oanh, Director of the Centre forSocial Initiatives Promotion (CSIP), said that for the time being,there is no a common concept of social enterprises, which varies fromlocality to locality and with each perspective. However, in most commonsense, social enterprises are thoses that perform and pursue theobjective of social development and environmental protection in the formof a business entity.
Social enterprise may havedifferent legal forms, depending on countries, like non-governmentalorganisations, charity foundations, cooperatives or private businesses.They, either profitable or unprofitable, are similar to other businessesas they are organised and managed in the form of an enterprise.However, they are different from other forms of enterprises as they arecreated to solve social issues like poverty, environmental pollution andchild protection.
The research on 11 socialenterprises by the Spark Centre, a social development centre, shows verypositive results. One of the examples is Evergrowth dairy cooperativemodel. With its daily dairy purchase and selling activities, Evergrowthpurchases and sells 16 tonnes of milk a day with a price difference of2,000 VND per kilo. In 2012, Evergrowth’s revenue grossed 72 billion VND(3.384 million USD) and its profit was 3 billion VND, of which 40percent share was distributed to its members and the remainder was usedfor further investment and development, benefiting over 3,000 farmers,of whom 90 percent are Khmer, a minority group. Before the project waslaunched, 60 percent of households were poor but many have now escapedfrom poverty with a monthly income of 3 million VND from each dairy cow.
Another example is Tri Duc Emergency TransportService 115 based in Yen Bai province. Starting with just 12 employeesin 2009, the company has to date transported 2,000 patients from theirhomes to hospital or transferred amongst hospitals safely with apreferential service charge of only 15,000 VND per km, equal to the taxifare. In 2012, the company’s revenue was 1.2 billion VND and the profitwas 200 million VND. Thereby, the company has helped the poor in theregion to access emergency service at a rate that is 10-30 percent lowerthan normal rates. Also according to the research by the Spark Centre,in 2012, every firm involved in agriculture had revenues ranging from600 million VND to 319 billion VND and together they brought benefits to60-10,000 people. In healthcare, the revenue ranged from 300 millionVND to 15 billion VND and beneficiaries were 20,000 people.
Towards sustainable development
According to research by the British Council, the current difficultiesof social enterprises are their shortage of specific businessstrategies and plans, community service ideas, and others. In addition,the 2005 Law on Enterprises does not explicitly define provisions onestablishment, operational method, rights and obligations of socialenterprises. In the meantime, a true social enterprise must make clearwhy it is established, who it serves, what is the purpose of itsproducts and services, how it affects the target audience in society. Todate, social enterprises are still likened to other commercialenterprises and they thus do not get preferential State treatment likecorporate income tax, export duties, credit support and infrastructuresupport.
Nguyen Dinh Cung, Acting President of CIEM,said the Law on Enterprises needs to be amended and supplemented withsome provisions recognising the legal status of social enterprises. Healso suggested two solutions to greater sustainable development of thiskind of business. Firstly, that social entrepreneurs be allowed toreceive funds from stakeholders to create development investmentcapital. Secondly, that social enterprises be legally recognised andgiven preferential policies concerning tax and land as other types ofbusinesses in Vietnam.
Accordingly, the draft law,Cung said, also proposed to obligations subject to social enterprises:Complying and maintaining their principles and goals during theoperational time; operating for the sake of solving social andenvironmental problems as registered. In addition, social enterprisescannot use granted funds for purposes rather than compensate costs forcommunity service activities.
Some expertssuggested clear definitions for social enterprises in order todistinguish from charitable organisations in order to prevent abuse ofcharitable activities for illicit benefits.-VNA
Silent contributions to the community
According to studies performed by CIEM and the British Council,Vietnam currently does not have a legal framework for socialenterprises, so they have not been formally recognised. The socialenterprise model is quite new and not yet widespread. Social enterprisesare mainly formed spontaneously or transformed or restructured from oldnon-governmental organisations (NGOs). Hence, most of them cannot standon their own financial incomes. Their production and businessoperations are able to afford 50 percent of their operating costs andsocial purposes. Without official State recognition, social enterprisesencounter a lot of difficulties when they do business with theirpartners.
Pham Kieu Oanh, Director of the Centre forSocial Initiatives Promotion (CSIP), said that for the time being,there is no a common concept of social enterprises, which varies fromlocality to locality and with each perspective. However, in most commonsense, social enterprises are thoses that perform and pursue theobjective of social development and environmental protection in the formof a business entity.
Social enterprise may havedifferent legal forms, depending on countries, like non-governmentalorganisations, charity foundations, cooperatives or private businesses.They, either profitable or unprofitable, are similar to other businessesas they are organised and managed in the form of an enterprise.However, they are different from other forms of enterprises as they arecreated to solve social issues like poverty, environmental pollution andchild protection.
The research on 11 socialenterprises by the Spark Centre, a social development centre, shows verypositive results. One of the examples is Evergrowth dairy cooperativemodel. With its daily dairy purchase and selling activities, Evergrowthpurchases and sells 16 tonnes of milk a day with a price difference of2,000 VND per kilo. In 2012, Evergrowth’s revenue grossed 72 billion VND(3.384 million USD) and its profit was 3 billion VND, of which 40percent share was distributed to its members and the remainder was usedfor further investment and development, benefiting over 3,000 farmers,of whom 90 percent are Khmer, a minority group. Before the project waslaunched, 60 percent of households were poor but many have now escapedfrom poverty with a monthly income of 3 million VND from each dairy cow.
Another example is Tri Duc Emergency TransportService 115 based in Yen Bai province. Starting with just 12 employeesin 2009, the company has to date transported 2,000 patients from theirhomes to hospital or transferred amongst hospitals safely with apreferential service charge of only 15,000 VND per km, equal to the taxifare. In 2012, the company’s revenue was 1.2 billion VND and the profitwas 200 million VND. Thereby, the company has helped the poor in theregion to access emergency service at a rate that is 10-30 percent lowerthan normal rates. Also according to the research by the Spark Centre,in 2012, every firm involved in agriculture had revenues ranging from600 million VND to 319 billion VND and together they brought benefits to60-10,000 people. In healthcare, the revenue ranged from 300 millionVND to 15 billion VND and beneficiaries were 20,000 people.
Towards sustainable development
According to research by the British Council, the current difficultiesof social enterprises are their shortage of specific businessstrategies and plans, community service ideas, and others. In addition,the 2005 Law on Enterprises does not explicitly define provisions onestablishment, operational method, rights and obligations of socialenterprises. In the meantime, a true social enterprise must make clearwhy it is established, who it serves, what is the purpose of itsproducts and services, how it affects the target audience in society. Todate, social enterprises are still likened to other commercialenterprises and they thus do not get preferential State treatment likecorporate income tax, export duties, credit support and infrastructuresupport.
Nguyen Dinh Cung, Acting President of CIEM,said the Law on Enterprises needs to be amended and supplemented withsome provisions recognising the legal status of social enterprises. Healso suggested two solutions to greater sustainable development of thiskind of business. Firstly, that social entrepreneurs be allowed toreceive funds from stakeholders to create development investmentcapital. Secondly, that social enterprises be legally recognised andgiven preferential policies concerning tax and land as other types ofbusinesses in Vietnam.
Accordingly, the draft law,Cung said, also proposed to obligations subject to social enterprises:Complying and maintaining their principles and goals during theoperational time; operating for the sake of solving social andenvironmental problems as registered. In addition, social enterprisescannot use granted funds for purposes rather than compensate costs forcommunity service activities.
Some expertssuggested clear definitions for social enterprises in order todistinguish from charitable organisations in order to prevent abuse ofcharitable activities for illicit benefits.-VNA
