Throughout 40 years of Doi Moi, our country has achieved important accomplishments in socio-economic development and international integration. From a centrally planned economy, Viet Nam has gradually formed and improved a socialist-oriented market economy institution, with a legal system that has been increasingly expanded and brought closer to international practices. Hundreds of laws and thousands of sub-law documents have been promulgated, regulating most areas of socio-economic life. Institutional reform programs, administrative reform, and improvement of the investment environment have been implemented continuously over many years. At the policy level, building a rule-of-law State and developing the private economy have been identified as strategic pillars. However, alongside those efforts, an increasingly apparent paradox has emerged: the legal system has become more voluminous, yet the level of legal assurance in society has not correspondingly increased. Many enterprises, investors, and even enforcement officials acknowledge that their greatest concern today is no longer the lack of opportunities or capital, but rather the unpredictability of policies and the manner of law application.
In many cases, the greatest risk does not stem from the market, competition, or economic cycles, but from the institutional environment itself. A project may be financially feasible, technically sound, and socially necessary, yet still be delayed for years merely due to legal obstacles or changes in policy interpretation. This reality indicates that the issue does not lie in whether laws exist, but in whether the law provides stability, predictability, and security for long-term decisions. When predictability declines, legal uncertainty emerges and gradually becomes a systemic risk.
Legal uncertainty, in that sense, is not as conspicuous as a financial crisis, nor as readily identifiable as corruption, yet it silently erodes social trust. It slows investment decisions, induces excessive caution within the administrative apparatus, causes enterprises to retrench, and places the economy in a defensive posture.
Therefore, identifying and analyzing legal uncertainty is not merely a professional concern of legal scholars, but an urgent requirement for national governance and sustainable development.
Legal uncertainty: From a managerial phenomenon to an institutional issue
In modern legal science, law is not merely perceived as a body of norms, but also as a system that generates social expectations. An effective legal system must enable subjects to predict the legal future of their present conduct. When that predictability diminishes, legal uncertainty arises.
In Viet Nam today, legal uncertainty often does not stem from the absence of laws, but from: rapidly changing regulations lacking a clear roadmap; overlaps among laws, decrees, and circulars; fragmented interpretation of the law across agencies; the risk of retrospective review or “reconsideration”; and the blending of administrative management with a tendency toward criminalization.
These manifestations indicate that legal uncertainty is not merely a matter of legislative technique, but an institutional issue associated with the manner in which public power operates. Evidence from real estate and investment practice shows that legality has become the greatest “bottleneck.” Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, stated that “there currently exists a situation in which an enormous amount of capital is immobilized in projects that cannot yet be implemented.” According to Mr. Chau, in Ho Chi Minh City alone, there are up to 504 real estate projects stalled due to legal obstacles, equivalent to nearly 7,179 hectares of land with an estimated value of up to VND 7 quadrillion. Nationwide, the figure is far greater, with more than 2,900 projects “backlogged,” indicating that a vast amount of resources remains trapped and needs to be resolved to serve socio-economic development. Most of the obstacles relate to land, planning, investment, bidding, and food safety. Many projects had completed procedures in earlier periods but were subsequently suspended due to changes in legal interpretation. As a consequence, hundreds of trillions of Vietnamese dong have been “frozen,” contributing to the liquidity crisis and the collapse of the corporate bond market in 2022. Here, the risk does not stem from flawed business calculations, but from legal instability and the manner of enforcement.
Criminalization of economic activities and the psychology of "fear of acting"
One of the most evident manifestations of legal uncertainty in recent years is the tendency to criminalize economic, civil, and administrative relations. In recent years, the number of economic and corruption cases has increased by an average of 15–20% per year, including a considerable number of cases originating from investment and business activities that were lawful at the time they arose. Notably, many investment decisions, project approvals, and contract signings were carried out in accordance with proper procedures and within proper authority in a context where the law lacked consistency, yet years later they were re-examined under criminal liability. The practice of “reassessing the past by present standards” blurs the boundary between business risk, managerial error, and criminal conduct. In that context, a defensive mentality has spread across both the public and private sectors. For cadres and civil servants, particularly in sensitive areas such as land, public investment, natural resources, construction, finance, and banking, the fear of “signing today and bearing criminal liability tomorrow” has become increasingly common. The consequence is a tendency to avoid responsibility, shift authority, delay decisions, and seek repetitive consultations, forming a type of “safety culture.” Many projects are prolonged for years not due to a lack of resources or capacity, but because no one is willing to assume final responsibility. The situation in which actions are “procedurally compliant yet still risky” paralyzes the spirit of daring to think and daring to act within the administrative apparatus. For enterprises, particularly private enterprises, the psychology of “fear of expanding” has gradually taken shape. Many entrepreneurs acknowledge that the larger the scale of operations, the greater the interaction with administrative procedures and the higher the legal risk. In an unstable environment, expanding investment may at times mean placing oneself in a zone of heightened risk. Consequently, instead of making long-term investments, innovating technology, or entering new sectors, many enterprises choose strategies of retrenchment, safe business operations, or even “remaining hidden” within the informal sector. This weakens the overall competitiveness of the economy.
From an institutional perspective, the trend of criminalizing economic relations also reflects the lack of a clear demarcation among three types of liability: managerial responsibility, civil liability, and criminal liability. When this boundary is unclear, criminal law may easily become the ultimate instrument for addressing issues that should have been resolved through civil, administrative, or market mechanisms. In the long term, an environment in which business errors are readily attributed to criminal offenses will not encourage innovation, risk-taking, or entrepreneurial spirit - core elements of a modern economy. Instead, it fosters a mentality of complacency, defensiveness, and the pursuit of “policy safety” rather than the creation of new value. If not reasonably controlled, this trend will weaken endogenous drivers of development and cause institutional reform to fall into a state of partial or half-hearted implementation.
"Localization" of law
Another significant manifestation of legal uncertainty is the “localization” in the interpretation and application of law. The same provision of a law, decree, or circular, when implemented in practice, may be understood and applied differently across provinces and centrally governed cities, or even among departments within the same locality. According to the Provincial Competitiveness Index (PCI) surveys conducted for many consecutive years by the Viet Nam Chamber of Commerce and Industry (VCCI), only about 51.5% of enterprises consider that departments do not properly implement the guidelines and policies of provincial or municipal leaders, and that legal provisions are applied consistently nationwide. The majority of enterprises acknowledge that when expanding operations to a new locality, they almost have to “start from scratch” in approaching and complying with legal procedures. In sensitive sectors such as land, investment, construction, environment, fire prevention and fighting, taxation, and customs, the situation of “each place having its own way of implementation” is relatively common. A project may be approved quickly in one locality but face prolonged obstruction in another, despite fundamentally similar legal conditions.
The primary cause stems from a legal system that still contains numerous framework provisions lacking detailed guidance, leaving substantial room for implementing agencies to interpret. In the absence of a unified interpretative mechanism at the central level, that space is easily filled by subjective understandings and localized administrative thinking. In addition, a defensive mentality regarding responsibility within the administrative apparatus contributes to the trend of localization. Faced with the risk of inspection, audit, or subsequent accountability, many agencies adopt the “strictest possible” interpretation—safe for themselves but increasing costs for society. Not a few localities even introduce additional procedures, conditions, or requirements beyond general regulations with the aim of “tightening management.” These barriers form “soft institutional fences,” fragmenting the national market and restricting the circulation of resources. For enterprises, the “localization of law” significantly increases compliance costs and informal costs. Enterprises must maintain separate legal divisions for each locality and rely heavily on informal advisory channels and administrative relationships. In many cases, “institutional adaptability” becomes a more important competitive advantage than productivity or innovation.
At the macro level, this situation undermines the uniformity of the legal system and disrupts the principle of equality in business. When the same lawful conduct is considered permissible in one place but risky in another, law no longer functions as a common standard but becomes a collection of “local versions.”
From the perspective of a rule-of-law State, the localization of law reflects limitations in the mechanism of decentralization and delegation of powers associated with power control. When the authority to apply the law is dispersed without a coordinated and centralized interpretative mechanism, the risks of arbitrariness and inconsistency are difficult to avoid. In the long term, if not remedied, this situation will weaken the integrity of the national legal order, reduce the attractiveness of the investment environment, and hinder the formation of a unified market.
Legal uncertainty and the erosion of institutional trust
Modern economics and policy science regard institutional trust as a particularly important form of “intangible capital.” Unlike financial or physical capital, trust cannot be directly measured, yet it profoundly shapes the behavior of investors, enterprises, citizens, and civil servants. A stable, consistent, and predictable legal system creates long-term expectations, encouraging actors to accept reasonable risks, invest in the future, and comply with common rules. Conversely, when the law lacks stability and predictability, institutional trust begins to decline, leading to a series of adverse consequences. The erosion of legal trust does not occur abruptly, but accumulates gradually through practical experiences: projects stalled for years without a clear timeline for resolution; regulations that change continuously without transitional roadmaps; cases “reconsidered” after a long period; or divergent applications of the law among localities.
Each individual case may be viewed as an isolated phenomenon, but when repeated with high frequency, they form a negative “institutional memory” within the business community and society. Gradually, law is no longer perceived as a secure anchor, but as a difficult-to-control variable. According to studies by the Organisation for Economic Co-operation and Development and the World Bank, in legal environments lacking stability, compliance costs and preventive legal risk costs may account for 10–15% of total operating costs of enterprises, whereas in countries with reliable legal systems, this ratio is typically only 3–5%. These costs are reflected not only in monetary terms, but also in time, managerial resources, and foregone opportunities. Enterprises are compelled to invest heavily in legal departments, advisory services, administrative relations, and self-protection mechanisms instead of focusing on innovation and productivity enhancement. More seriously, the decline of institutional trust distorts economic behavior. In an uncertain legal environment, actors tend to prioritize short-term interests, avoid long-term projects, limit transparency, and seek “policy safety zones.” This weakens development driven by innovation and fair competition. For the public sector, legal uncertainty erodes internal trust within the administrative system. When officials are uncertain about the legal safety of their decisions, they prioritize risk avoidance over the optimization of public interest. Over time, the spirit of service and creativity in governance is replaced by defensiveness and formalistic compliance. At the societal level, declining legal trust also affects voluntary compliance by citizens. When the law is perceived as inconsistent or subject to sudden change, compliance motivated by trust weakens, giving way to attitudes of expediency and situational flexibility.
From an institutional perspective, this phenomenon diminishes the legitimacy of the rule-of-law State. Law is no longer perceived as a stable and fair standard, but as a flexible managerial instrument dependent on context and enforcing authorities. The gap between “law on the books” and “law in action” widens progressively. At the same time, the erosion of institutional trust may generate a negative vicious circle: legal uncertainty reduces trust; declining trust increases defensive, avoidance, and informal behavior; and these behaviors, in turn, make the legal environment more complex and difficult to control. Without sufficiently strong reforms to restore the reliability of the legal system, the greatest risk lies not in short-term growth deceleration, but in long-term stagnation in development quality and national competitiveness.
From risk management to trust governance
A characteristic of modern governance is the shift from a “risk control” mindset to a “trust-building” mindset. Law is not only a tool for handling violations, but first and foremost a framework for creating a safe environment for long-term decisions.
First, upgrading legislative quality. Law-making must shift from a reactive approach to a predictive approach. Regulatory impact assessment, substantive consultation, and the standardization of legislative techniques must become mandatory requirements.
Second, unifying law enforcement. It is necessary to strongly develop the system of precedents, establish a centralized mechanism for legal interpretation, and issue binding guidance on application.
Third, institutionalizing the protection of legitimate expectations. A modern rule-of-law State does not “surprise” citizens and enterprises with changes lacking a clear roadmap. The principle of protection of legitimate expectations should be more explicitly recognized.
Fourth, controlling the trend of criminalization. Criminal law must be regarded as a measure of last resort; the handling of economic misconduct should prioritize remediation, compensation, and civil–administrative liability.
Fifth, strengthening accountability. Every policy and administrative decision must be associated with clear individual responsibility, particularly when causing damage to society.
Reducing legal uncertainty - A strategic choice
In the twenty-first century, national competitiveness lies not only in natural resources, labor, or tax incentives, but in institutional credibility. A country that builds a stable, predictable, and fair legal environment will attract capital flows and high-quality human resources. Reducing legal uncertainty is therefore not the task of any single sector, but the shared responsibility of the entire political system. It is a process that requires institutional patience, discipline in the exercise of power, and long-term development thinking. Legal uncertainty does not trigger crises immediately; rather, it causes the economy to “bleed trust” day by day, decision by decision, project by stalled project. A country may achieve rapid growth in the short term despite incomplete institutions, but it cannot attain sustainable development without a reliable legal environment. Ultimately, building legal trust is building the foundation for long-term prosperity and for confidently entering a new era - an era of national advancement.
