19 among domestic investors. About 2,500 companies have been formed under SARL since 1991 when the Company Law became effective.

Corporate governance of a SARL under the Vietnamese Company Law differentiates between a small SARL of less than 12 members and a larger SARL of 12 or more members. A small SARL is directed by a manager to be appointed by a majority of SARL members, generally through consensus. The manager can be a shareholder of the SARL or an outsider whose actions are binding to third party. For the larger SARL of 12 or more shareholders, corporate governance must follow the same rules as for an SA. that is a Board of Directors to be elected by the General Assembly with the same quorum of 75 percent of total shares value, two controllers for internal audits, and so forth.

# **Regulatory** Issues **Beyond the Company Law**

With the Company Law, Viet-Nam has created legal forms for private sector activities. This is a good beginning to create a legal framework for the emerging private sector, but many regulatory impediments remain which constrain actual investment. A recent survey of domestic investors' perceptions of impediments to investment reveals that bureaucratic regulations, the legal system, and corruption are three of the five most serious obstacles to investment. (The lack of financing and export difficulties are the other two impediments listed.) Predictably, complicated administrative regulations have been found a more serious problem than the broad "laws" such as the Company Law.

A myriad of administrative regulations affect both domestic and foreign investors at all phases of business operations, but domestic investors are burdened with more bureaucratic red-tape. They are not given the same incentives as FDI. Viet-Nam investment policy is inherently biased against domestic private investors. In terms of process, the principal documents required of domestic investors are found in Article 4 of Circular No. 141/PLDSKT, dated March 3, 1992, by the Ministry of Justice, but "concerned ministries" often require supplemental documentation. The approval process is prolonged by the detailed nature of these requirements and by the multiple steps involved. (1) Application documents must be prepared and should include a "business plan" and project proposal (for industrial investment) to be submitted it to the concerned Department/Directorate. (2) Such Department renders an opinion and forwards it to the local People's Committee. (3) This opinion is considered by the local People's Committee. (4) An escrow account should be opened. (5) The local People's Committee issues a license. (6) The business must register with the Arbitration Authority. (7) An application must be made to the Police Department for a security clearance. (8) A public announcement appears in the newspaper. And (9) A business license tax is paid. A permit for the establishment of new business units is supposed to be granted in two months, but the actual steps detailed in the approval process above always require much longer to complete. As a result, approvals can take as long as a year particularly if the applicant is unfamiliar with the procedure and does not handle the steps personally.