Participation and Regulatory Compliance in Vietnam
Regulatory non-compliance by firms can have disastrous consequences, such as factory collapses or massive chemical spills, but many developing countries lack the capacity to strictly enforce regulations on firms. To address this issue, some countries are trying to encourage firms’ self-compliance through greater involvement of firms in law-making processes. However, little research has been done on the impact of this approach. Researchers are evaluating whether participating in the law-making process influences businesses’ regulatory compliance in Vietnam.
Companies have a uniquely powerful influence over their workers and the environment, and unregulated or noncompliant firms can create disastrous consequences, such as factory collapses or massive chemical spills. But many developing countries lack the capacity to strictly enforce regulations on firms. To address this issue, some countries are trying to encourage firms' self-compliance by adopting participatory law-making processes. Theory suggests that firms involved in regulation drafting will have a better understanding of new regulations and will view the legislative process as more legitimate; the resulting legislation is also likely to be of higher quality and better tailored to local preferences, reducing conflict between firms and the state. However, there is little existing evidence on the impact of such legislative participation. To address this knowledge gap, researchers are conducting a randomized evaluation to study the effect of legislative participation on businesses' regulatory compliance in Vietnam.
Since 2000, over 250,000 private enterprises have registered and begun operations in Vietnam. Vietnam' s Ministry of Labor and Social Affairs (MOLISA) estimates that less than 10 percent of these firms are in compliance with rules on worker safety, with more frequent violations among smaller businesses. To promote better compliance, the Government of Vietnam adopted a participatory law-making approach. In 2008, the Vietnamese National Assembly enacted a law requiring that an agency drafting a regulation must post the draft for 60 days for public comment, study the comments, and file an internal report on why the comments were accepted or not.
Vietnam' s Ministry of Labor and Social Affairs (MOLISA) released a draft of the regulation online for public comment in May 2014, along with a position paper laying out the need for the new regulation and the specific issues covered. Researchers will study 1,800 firms in Hanoi and surrounding provinces to whom the new regulation applies. These firms will be randomly assigned to one of the following groups :
Treatment 1 (Information): This group will receive an informational presentation on the new regulation, but will not be offered a chance to participate in the drafting process.
Treatment 2 (Participation): This group will receive the same informational presentation as the information group, and will also be provided the opportunity to comment on the law through an online portal.
Treatment 3 (Legitimacy): This group will receive the same presentation and feedback opportunities as the participation group, and will also be told that their comments will be included in a briefing book to be submitted to the regulation drafting committee. Researchers will send participants a copy of the briefing book once it is assembled.
Treatment 4 (Indirect Democracy): This group will receive the placebo treatment, but then also be subsequently informed about the participation of firms from T2 and T3.
Comparison: The comparison group will receive a placebo treatmentan informational presentation on the services the VCCI provides to the business community.
Researchers will also randomly select 100 additional firms, separate from the treatment and comparison groups, to act as "judges" of legal quality. These firms will be given untitled and unmarked versions of both the draft and final regulation to judge which is superior. The opinion of this group will be used as a measure of the quality of the resulting regulation.
After the final regulation is circulated, researchers will monitor all firms in the treatment and comparison groups for compliance.
Study ongoing, results forthcoming.