IDEAS Insights Vietnam's emergent social enterprise sector | Page 5

Nevertheless, this decline in ODA funding has not dampened Vietnam’s
entrepreneurial spirit: each year, ‘more than 80,000 enterprises register for
establishment’. [15] Indeed, despite the reduction in ODA, the donorship network
around the social enterprise movement in Vietnam has also gradually strengthened,
with the British Council and Spark Center for Social Entrepreneurship Development
expanding their involvement in the country, among others. Incubators such as CSIP are
supporting the continued development of Vietnamese social enterprise.
As in many other markets regionally, social enterprises in Vietnam still face some key
constraints. Misunderstanding and limited awareness remain a problem, both in terms
of consumer expectations and attitudes from local authorities. [16] The latter group
will reportedly still often rate financial implications above social impact. Local SEs also
frequently lack the capability to access financial capital, often having no assets to
mortgage. Additionally, their traditionally low profitability, coupled with longer payback
periods on projects, has subjected them to higher loan interest rates from Vietnamese
banks. Compounding these issues further, Vietnamese SEs do not have ready access
to management advice, and struggle to attract high quality human resources. [17]
Enveloping these drawbacks is a still wider problem, concerning ambiguity in the
legislation regulating SEs; these continue to lack a clearly defined legal framework in
which to operate. An important example of this is that social enterprises are still not
permitted to register as hybrid organisations (such as an NGO owning a profit-making
unit, a set-up relatively common in some developed markets such as the U.K.), and
instead must operate two parallel organisations that are subject to different sets of
laws. This kind of situation may quickly manifest deeper problems, because the
business part of an organisation must pay regular corporation taxes, inhibiting its ability
to reinvest revenue into the part focused on social value.
Although some Vietnamese SEs are able to benefit from tax incentives if employing
people with disabilities, women, or ethnic minorities, there is ‘still a gap between
administrative regulations and real implementation’. [18] The tax code in Vietnam is
therefore also still incomplete as it pertains to social enterprise, and arguably remains
unready to accommodate more complex social business organisations, which may face
compliance issues.
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