Improving polices for social enterprise area for sustainable development goals
IMPROVING POLICES FOR SOCIAL ENTERPRISE AREA FOR
SUSTAINABLE DEVELOPMENT GOALS
Vu Thi Quynh Anh
Vietnam Korea University of Information and Communication Technology
ABSTRACT
A sustainable development concept is a phrase which is used commonly in this time and
social enterprise is a kind of business which can response this asking. However, the number of this
sort of business is still limited because of difficult in their operation. These dilemma come from
many cause but the biggest problem is that there is not a specific policies which do not explain
clearly about their favour that they is permitted. The content of this paper is that analysis the cause
of policies and propose some solutions in which advancing the quantity and the quality of this kind
of business.
Keywords: social enterprise, subtainability development
1. INTRODUCTION
Social enterprise is not a new concept in community but the awareness of people about this
kind of business is still finite. This area of business brings not only an economic value but also a
dramatic social benefit.
It can be seen that social enterprises have taken advantage of human resources including the
disable group which was given up by a dramatic development of market economy. However, in
comparison with the total of business in market, the number of social enterprises is still limited.
There are a plenty of elements which cause this status, but this article concentrate only on the
policies of government.
The writer collects some of data statistics from researches of British Council to assessment the
achievement in which this type of company bring. In addition, qualitative analysis method is utilized to
evaluate the effective of policies which impact on the operation of social enterprises directly.
2. SOCIAL ENTERPRISE
2.1. Definition
The first time social enterprise has emerged in England in the seventeenth century, in which
purpose to cut down the number of labor in government agency. This kind of business played a role
as an intermediary company which conducted social activities. They were an essential part that
combined individual business and authority to satisfy demand both of them: economical and social
benefit. In this time, this model is extended fulfill over the world with an expanding activities.
There are several definition about this sort of business which is created by some different state
and organization. However, the definition of the UK Government and the Organization for
Economic Cooperation and Development (OECD) is the most well-known.
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The UK Government defines: “Businesses with primarily social objectives whose surpluses
are principally reinvested for that purpose in the business or in the community, rather than being
driven by the need to maximise profit for shareholders and owners.”
The Organisation for Economic Cooperation and Development (OECD) defines social
enterprises as “any private activity conducted in the public interest, organised with an
entrepreneurial strategy, but whose main purpose is not the maximisation of profit but the
attainment of certain economic and social goals, and which has the capacity for bringing
innovative solutions to the problems of social exclusion and unemployment” (OECD, 1999).
In Vietnam, according to the Enterprise Law 2014, rticle 10 of Decree 96/2015/NĐ-CP and
legal documents, to become a social enterprise, business is required to meet the following basic criteria:
- Being an enterprise registering under the provisions of this Law
- Operational objectives is solving social and environmental issues and bringing the
community benefit.
- At last, 51% of the total annual profit of the enterprise is used to reinvest in order to meet the
social and environmental objectives as registered (Vietnam Govement, 2014).
Consequence, the differences between social enterprise and commercial business are
operating goal and capital origination. There are three characteristics of this business area:
- Firstly, the main responsibility of social enterprise is resolving the social issues
(environment, supporting on disadvantaged group, solving a social conflict...) which increase
benefit for community. On the one hand, they supply their product on market in which aim to
satistic demand ofdisable group or generate employment for them. On the other hand, they
contribute to create an equality of society.
- Secondly, although the main mission of this kind of business is social goals, they are not a
charity organization simply. Their business operation aim to offset a cost for the main purpose that
is solving a social issues. Their mission is not earning money, it is that how is the way to maximize
social effective.
- Thirdly, most of after tax profit is utilized to reinvest or resolving the social issues that are
commited in Enterprise Registration Certificate. Moreover, they are also permitted to receve capital
from charity organizations or funds.
Then, social enterprise has a fairly wide range of activities and get a strong bond with many
of objects. Their mission associate with social problems to protect and development social value
which are given up by commercial company because of their maximize profit goal.
2.2. The role of social enterprise for the sustainable development of society
In many economy, it always exists a hole and we called “state failures” and “market
failures”. It is a fictious if we hope that economy can respond all of the humand needs in society. It
means that it exist a group who is forgotten because of the strong advancement of economy. They
may be the poor, the the disabled, people with social diseases such as HIV/AIDS who are called a
disable group and the state could not afford the burden of welfare of this group. Social enterprise is
formed with this purpose which respond the demand for disabled people throughout implying
innovative goods and services that are suitable for the needs of special circumstances people. In
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addition, the most important role of social enterprise is that creates employment opportunities to
integrate social for the disadvantaged group, thereby it builds a healthy relationship for society.
In addition, social enterprise also contributes to resolve social issues that have not been cared
or ignored because of the maximum profit goal of commercial businesses such as climate change,
environment, recycle problem…
Some consequency that social enterprises have achived will demonstrate for their effort in
economy country development.
2.2.1. Creating job
It is clearly that social enterprises have an enormous contributed to reduce the financial burden for
the authority. It can be seen that 60% of social enterprises was set up with the primary priority that
generate employment for a million people in difficult circumstances (Bristish Council, 2019).
There are 14,6% ethnic people and 7,8% disabled people in nation. Statistically, 76% of
people with disabilities have read and write ability but they can not find job, so 70% of them
depend on social assistance from the state or their family (Neu, 2018). Some fields of social
enterprise such as organic agriculture, handicraft industry, restaurant services, financial
consultation, industrial innovation... have helped they for integrating life better and reducied
inequality in society.
2.2.2. Social efficiency
It is obviously that we can not use profit criterion to compare activity efficiency between
social enterprise and commercial business because of their different operation goals. On the other
hand, it is absolutely major shortcoming if we just use only the measurement of social impact for
contribution of social enterprise. Social enterprise is a perfect combination to achievement two
objectives: econimical and social values. Many of people who have a job from this kind of business
get out of poor. They have not only earning money but also decreasing subsidy amount from
government. Consequency, this also help to reduce the number of society's vices.
Many typical social enterprises in Vietnam such as Hoa Sua College have trained free for
thousands of vulnerabled students and disabled people and helped them with employment
opportunities. Another social enterprise is Phu Quy Agricultural Product Farm which has built
sucessful an eco-orange and chemical-free farm model in Nghe An with protection enviroment goal
and generation a stable job for a single mom, ethnic minorities women and disable people. It can be
seen that economical efficient from these businesses is not high but the social values that they have
created extremely admirable.
3. STATUS OF SOCIAL ENTERPRISE AREA POLICIES IN VIETNAM
3.1. Situation of social enterprises in Vietnam
Social enterprise in Vietnam started before 1986 with name cooperative. After this period,
the strong development of NGOs (Non-governmental organizations: non-profit social enterprise),
social enterprise which is opened from the private capital stills very limited. However, after
enterprise law in 2014 is effective, nearly 200 social enterprises [1] were established, most of them
are a enterprise of social orientation and profit. By 2016, the number of businesses increased more
than 5 times (over 1,000 social enterprises [3]) and in January 2019, there are over 19.000 social
enterprises [4]. Specifically, the result achieved after 5 years since the new law has been enacted:
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3.1.1. Activity sectors
Since 2014, the most obvious change has been in the diversion of social enterprise. Many
charity organizations, NGOs, centers and associations which was established from charity capital
have transformed to a enterprise of social orientation and profit. Therefor, the structure of this
business model becomes more various. Previously, the activities of social enterprises focused
mainly on public services sectors such as health, clean water, sanitation, education... Nowadays, it
has been many investment in other sectors such as environment and climate change, energy despite
two segments are still quite limited.
Currently, a lot of social enterprises invest in agriculture (accounting for 35% [4] of the industry
structure) in order to create job for vulnerabled groups in society such as: people completing
imprisonment, people with HIV/AIDS, people with disabilities, ethnic people... Some services have
appeared in the portfolio of social enterprises. Although they are not large, but they have fully exploited
the capacity of the vulnerabled groups (people with physical disabilities but still well perform the work
with high technical job): financial support consulting (3%), industrial innovation (website design,
printing) (2%), financial support services (2%), culture and culinary (1%). [4]
3.1.2. Geographic distribution and activities area
According to a British Council survey (2011), there are only 167 social enterprises [1] in our
country. They mainly concentrated on Hanoi City (41%), Ho Chi Minh City accounted for only
13%, the figures in other provinces was not significant [1]. In 2019, these rate have a clearly change
with 30% in Hanoi and 22% in HCM [4] It shows that people's awareness has changed obviously
about role and position of social enterprise in economy. The central region and southern provinces
accounted for 17% [4]. Although the numbers are not high but in comparision with overall of above
19,000 social enterprises in the country, it is an impressive figure for social entrepreneurship in
rural areas.
Beside a growth in number , social enterprises market are expanded. Five years ago, social
enterprises just operated in local (12%, they were mainly cooperatives) [2], they have expanded
distribution in nation (30%) or associated regional (17,1%) [4], some businesses have exported their
products in many foreign countries (22% [4], most of products are agriculture and handicraft).
Although the number of social enterprises in the next year are always more increased sharply
than the previous years, but only 10% (Bristish Council 2019) of these enterprises have registered
social enterprise legally (it ups 32% in compared with 2015 (Neu, 2018). However, it wonders that
why 90% of enterprises with social enterprise characteristics did not register to get tax incentives or
the right to mobilize from assistance organizations (Clause 2, Article 10 of the Law on Enterprises
2014 (Vietnam Government, 2014). The main cause is policies:
3.2. Status of social enterprise area policies in Vietnam
3.2.1. Tax policies
As mention in section 1, they have to use at least 51% their profit for the social and
environmental objectives but there is neither any duty-free polices for retained income nor priority
about land tax which lead to extremely disadvantages for them. At present, they are use priority tax
policies of commercial business, most of policies concentrate on agricultural sector without a
unique policies for this special kind of businness. Therefore, it prevents broadening their business
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operation because of lacking capital. This is the most essential reason that make they do not register
legal despite of their characteristic.
3.2.2. Financial support policies
Most of society enterprises in Vietnam are a small business and micro one because of lacking
capital. A number of starting business men have difficult circumstances or they belong to a group of
disadvantaged people, their own capital is very small even thought only having ideas. However,
Vietnamese awareness of this type of business stills limited. Society enterprises with their special
characteristics: small size business, the majority of profits have to reinvest or deal with social
problems, hight social efficiency but low economic profits. Therefore, the probability of getting
capital from investment companies is very small while there is no interest rate priority policies from
bank. It is obviously that there is a few of number social enterprise investering on energy and
climate change. One of the reasons of this is lacking of capability, especially on energy sector
which requires an enormous of money if we want to have a fundamental investment.
When the pandemic Coronavirus disease is happening, the financial of social enterprises become
weak seriously. The risk of 38% of these businesses going bankrupt because they do not have enough
capital to maintain operations. However, up to now, there has not been any government policy to
regulate the interest rate support or capital incentives for the social enterprise sector.
3.3. Difficulty in accessing policies
Recently, Vietnam's administrative policies and procedures have changed significantly, but in
general, they are still cumbersome. Most of social business owners share the same opinion that the
complicated of process is the main cause that make them disappointed. They do not know where to
start and which departments of the government will help them with the procedures.
At mention above, the number of people who star-up by social enterprises originate from
rural, therefore, their sense about policies, special knowledge is still limited. However, there are no
individual policies for this area. If they want to get a priority, they have to research a plenty of law
and policies which is absolutely challenger with them.
4. IMPROVING POLICIES OF SOCIETY ENTERPRISES FOR A SUSTAINABLE
DEVELOPMENT GOALS
Depending on the assessments in section three, in order to the social enterprises develop more
strongly, it is essential to implement some synchronous solutions:
Firstly, government need to enact laws for the social enterprise sector, it is necessary to
specify incentives for income tax, land tax... It is necessary to develop a flexible tax and credit
supporting mechanism, which is suitable to the sector and size of the business (for example, giving
tax deductions according to the level of emission reduction, according to the level of social
contributions that businesses did). In addition, the state needs to build a legal framework to
facilitate social enterprises: certificates about social enterprises which help them to get capital from
investerment companies and products receive the favor of society.
Secondly, government issue clear regulations on preferential loans from banks: extending the
payback period, reducing interest rates, loan terms and mortgages for social enterprises also need to
expand. The state also needs to consider about establishing racial banks which its mainly mission is
solving capital problems for these businesses and creating their motivation to develop.
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Lastly, government needs to have a specific development program or scheme for social
enterprises. The number of projects, social enterprises in enviroment, energy, high-tech industry
sector just account for a small percentage in industry structure of kind of business, then, the
authority should define development targets in terms of quantity and quality of social enterprises. In
addition, the capacity of owner of social enterprise is still finite, hence, it is necessary to build a
project to boost knowledge of starups or people who has a tendency to generate a social enterprise.
5. CONCLUSION
Social enterprise is an important sector of economic which plays an essential role in a social
sustainable development. Although its economic benefit is not hight but the social value that it
creates extremly enormus such as: creating a job for disadvantage people, decreasing an economic
burden for government and bring a social equality.This kind of business have to face with many
difficult which is created for without an individual law for it. Therefore, what government should
do is consider to enact a specific regulation to encourage development of this sort of business.
REFERENCES
1. British Council, CIEM, CSIP(2019), Social Enterprise in Vietnam. [Online]
2. Government(2014), Vietnam‟s Enterprise Law [Online]
3. NEU, UNDP Vietnam (2018), Foster SIB Sector in Vietnam [ebook]
4. OECD(1999), Social Enterprises, OECD, Paris.
5. Social Enterprise UK(2017), The Future of Business - State of Social Enterprise Survey 2017.
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