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. 3