Legal reform is the first step towards changing the institutional framework for investment. It is only effective, however, if it results in changes on the ground.

The next challenge for the Government, therefore, is to ensure that the liberalising trend reflected in these new laws is translated into more business-friendly administration by State officials.

A new wave of "soft" reform of administrative structures is required to reduce bureaucracy and position government as an effective facilitator of business.

Directive No 32/2006/CT-TTg of the Prime Minister, issued on September 7, 2006, for reducing bureaucratic burdens on doing business in Viet Nam, sends a strong positive signal that the Government takes administrative reform seriously.

Directive 32 acknowledged that urgent measures were needed to rectify administrative order and discipline public officials who harass or otherwise cause trouble for businesspeople in their interactions with the State.

Directive 32 obliges all State agencies to immediately implement an internal check of procedures regarding dealings with individuals and businesses and to eliminate unnecessarily bureaucratic aspects such as excessive documentation requirements.

Agencies must also establish a system of receiving and dealing with complaints about administrative procedures from service users. Agencies must educate public officials on the importance of professionalism in their dealings with the public. And public officials are required to wear name tags at all times when dealing with the public so that they can be identified in case of a complaint.

On a more general level, Directive 32 makes heads of state agencies jointly responsible for the behaviour of staff under their supervision, providing an incentive for managers to impose strong discipline in their departments. The media is encouraged to actively monitor state agencies and criticise those officials who violate the law or harass individuals and businesses.

The thinking behind Directive 32 is certainly positive, and the business community welcomes all measures designed to increase the efficiency of administrative procedures.

At the same time, investors want to see specific steps being taken to put Directive 32 into action.

Because Directive 32 mandates the establishment of internal rather than external mechanisms for dealing with complaints, it may remain difficult in practice for investors to effectively challenge officials’ decisions or behaviour. There is no set template for a review procedures and investors therefore may be frustrated by "in-house" reviews which are not conducted objectively or according to due process.

The Government may consider the experience of other countries in establishing an independent agency with the power to investigate allegations of administrative abuse and report to high-level decision makers, as an effective way of increasing responsibility.

Furthermore, the Government needs to further consider which individual or agency is responsible for ensuring Directive 32 is implemented successfully. Heads of state agencies are required to submit quarterly reports to the Prime Minister on the implementation of the directive, but without strong centralized leadership, one suspects that the impetus for reform may dissipate.