Representatives of startups attend the launch of the 2nd Proof of Concept (PoC) competition held in HCM City (Photo: VNA) Hanoi (VNA) - Creating encouraging polices and a clear legal systemis crucial to attracting investment to innovative start-ups, according to aMinistry of Planning and Investment (MPI) official.
Dang Huy Dong, Deputy Minister of Planning and Investment, said thatcurrently, guidelines on the establishment, management and funding andinvestment mechanisms for small and medium enterprises (SMEs), includingcreative firms, are prescribed in Article 18 of the SMEs assistance law.
However, bar Article 18, Vietnam’s legal system has no specific regulations oncreative start-ups’ investment procedure, legal status, organisationalstructure, rights, responsibilities and obligations of related parties.
Therefore, a decree should be issued to define the legal status of innovativestart-ups and investment funds, as well as incentives for and limitation onthese entities’ profit-generating means and social impact, and at the same timeaddress the legal system’s limitations in the matter.
The MPI has begun drafting such a decree, aiming to establish foundations forinnovative start-ups and exempt them from corporate income tax for a definiteperiod of time.
The draft is now undergoing consultation, with its 40 articles based onexperiences from developed countries such as Canada, the US, Singapore and theEU, stated the Enterprise Development Agency under the MPI.
The draft features detailed provisions on the financial conditions of creativestart-up investors and principles of innovative start-up investment, plus regulationson these companies’ legal status, management, operation and establishmentprocedures.
The draft proposes that individual investors must meet certain financialconditions, such as having an average annual income of 200 million VND (8,900USD) for the last two years before their investment application, or havingtotal assets of 500 million VND (22,250 USD), minus their personal debts. Forinvesting organisations, total required assets in their latest financial reportmust be no less than 1 billion VND (44,500 USD).
Additionally, creative start-up investors, enterprises, organisations andindividuals must stay aware of their contributed capital proportion and theirlegal responsibility in combating money laundering in Vietnam.
The ministry hopes the draft will create an appropriate legal corridor tochannel capital for start-ups in Vietnam, by generating more options forinvestors to make investments through innovative companies and funds.
Dong also commented that if foreign creative projects are registered in Vietnam,they would be incorporated into the country’s creative development,contributing to the improvement of national credit rating and investmentattractiveness.
In the context of rapidly developing technology, creative start-ups are themain force of the innovative ecosystem. Though associated with high-risks dueto the high requirements of technology and innovation, creative start-ups cancontribute great economic value and enhance national competitiveness.
Given the high-risks involved with these firms, traditional funding channelssuch as bank loans are less suitable than start-up ventures as a source offunding.
The Government should also issue policies to support start-ups investmentactivities, such as tax exemptions and reductions, pre-financing, counterpartfunds, or unsecured lending for start-ups to minimise risk to privateinvestors.
Vietnam is working towards becoming a start-up nation in the Asia-PacificEconomic Cooperation (APEC), targeting one million effective enterprises by2020, facilitating technological innovation by giving priority access tofinance, and opening up new market opportunities.-VNA
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