Clause 292, Penal Code discourages startups

According to Clause 292 of the Penal Code 2015, providers of illegal services on the internet and telecom network will be jailed up to five years or fined VND5 billion (US$224,000) and face property confiscation if they yield over VND50 million ($2,242) in profit and over VND500 million in revenue.

Mr. Nguyen Hong Truong

Illegal service providers are those who have no licenses or their operations are not in accordance with licenses.

Many businesses and experts said that startup community will be badly affected by this article of law because the internet and telecom network are the means of trading of most startups in Vietnam.

The Government has delayed the validity time of the Penal Code to collect opinions and fix some articles. It was planned on July 1 before.

Meantime many startups have registered their businesses in Singapore, explaining more advantageous business and capital environment.

Mr. Nguyen Hong Truong, chairman of the IDG Ventures Vietnam which is the first technology venture capital fund in the country, said that Clause 292 was one of reasons discouraging startups and sending them to set up their enterprises in Singapore although this is not simple.

In an interview with Financial Investment, a publication of Sai Gon Giai Phong Newspaper, he said that overseas business establishment is usually conducted by those having potential products and services, able to attract investment. However it is a mistake for startups with unclear potential and without products.

According to him, lawmakers have their reasons to worry about unlicensed business activities in some fields because they might cause social consequences and dangers.

However, it is needed for them to tell the difference between causing dangers and possible to cause dangers to society.

If the law is made with whatever ways of understanding, it will permit authorized agencies to casually determine violations and conduct economic management activities. This concerns investors and businesses that can not set their minds at rest to do businesses with an unpredictable legal environment.

In addition, the internet is an extensive field so businesses are unclear that what kinds of licenses will be issued in the future and if their activities will fall within these licenses or not.

Clause 292 has caused startups on the internet not to focus on creating good and effective products. As a result, they will no long dare to invest in the internet and telecom fields.

Mr. Truong proposed not to transfer licensing from administrative into criminal sector. The internet is a quickly developing field which the law will not be able to regulate all types of licenses. Meanwhile, lawmaking must ensure the relatively long stability and enforceability.

So he suggested removing Clause 292 it because it is impossible to amend an article of law with whatever ways of understanding.

The Government has taken good moves for startup and business environment for instance it has reviewed types of licenses to abolish unreasonable ones and increased registration rather than licensing. So the article is opposite to the policy.

By Gia Bao – Translated by Hai Mien

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