SOCIAL ENTERPRISE IN VIETNAM CONCEPT, CONTEXT AND POLICIES

HANOI 2012

SOCIAL ENTERPRISE IN VIETNAM CONCEPT, CONTEXT AND POLICIES

Main authors NguyễnĐìnhCung LưuMinhĐức PhạmKiềuOanh TrầnThịHồngGấm

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CopyRights

ThisresearchreporthasbeencompletedbytheCentralInstituteofEconomicManagement(CIEM)withvaluablesupportfromCentreforSocialInitiativesPromotion(CSIP),withinaprojectfundedbyBritishCouncilVietnam.

Theviewsexpressedinthisreportarethoseoftheauthorsanddonotnecessarilyreflecttheviewsoftheaboveorganizations.

This research report contains Intellectual Property Rights which are owned by the British Council. Copy orreproductionofthisresearchreportcanonlybecarriedoutwithpriorwrittenagreementfromBritishCouncil.

BritishCouncilVietnam

BritishCouncilistheUK’sinternationalculturalrelationsorganisation,workinginover100countriesworldwide.WebuildengagementandtrustfortheUKbyexchangingknowledgeandideasbetweenpeopleworldwide.Theculturalrelationsherebymeanstoenablepeoplearoundtheworldtoshare,create,learnanddevelopeconomicandculturalopportunitiesthatdelivergreaterprosperityandsecurityforeverybody.

Across Vietnamwework in partnershipwith government, companies, institutions, not-for-profit organisationsandthepublic,providingeconomicandculturalopportunitiesinawiderangeofareas:fromEnglishtohighereducation,fromschoolstosocialinnovation,andfromcreativitytoclimatechange.Weworkwithpartnersfromtheverybeginningofanideasothatwhatwedotogethermeetsbothourneeds.

MakingadifferenceinVietnam

English:TransformingtheteachingandlearningofEnglishforoveronemillionlearnersofEnglishbyworkinginpartnershipwith theMinistryofEducationandTraining (MoET)andbydrawingupon the reputationofourteachingcentresforexcellenceandquality;

Highereducation:Supportinginternationalcollaborationinhighereducation,researchandinnovationbyworkingwitheducationalinstitutionsinbothVietnamandtheUK;

Qualifications:Providingbetteraccesstoacademicandemploymentopportunitiesformorethan20,000peopleayearbyadministeringinternationallyrecognisedqualifications;

Skills:ImprovingemploymentprospectsforthousandsofstudentsbyworkingwiththeVietnameseGovernment,collegesandbusinesssectortodevelopinternational-standardvocationalandtechnicaleducationprogrammes;

Schools:Developingtrustandunderstandingbetweenyoungpeopleasglobalcitizensbycreatinginternationalschoolpartnershipsthatprovideaglobaldimensiontoteachingandlearningformorethan5,000studentsandteachersinVietnam;

Arts: Increasing awareness in Vietnam and the UK of each other’s creativity and innovation and creatingopportunities for UK- Vietnam artists to collaborate by working in partnership with government, the UK andVietnamartscommunities

Climatechange:Raisingawarenessoftheneedtoreducetheimpactofclimatechangebyidentifying30youngclimatechampionsinVietnam,connectingthemwithpeersfromaroundtheworld,andassistingthemtodevelopprojectswhichwillhelpcombatnegativeeffectsofclimatechanges;

Social innovation: Supporting the social and economic development of Vietnam by connecting Vietnameseindividuals,communities,businessandgovernmentwithUKexpertiseinrelevantareassuchassocialenterpriseandmedia;

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INTRODUCTION ixSUMMARY xi

PARTI: WHATARESOCIALENTERPRISES? 1

1.1. SOCIALENTERPRISESCONCEPTS 11.1.1. BriefontheevolutionanddevelopmentofSocialEnterprises(SE) 11.1.2. Differentviewpointsonsocialenterprisesconcept 41.1.3. Typicalcharacteristicofsocialenterprises 61.1.4. SocialEnterprieseintherelationwithotherorganisationsandsocialtrends 10

1.2. THEDEVELOPMENTOFSOCIALENTERPRISESINVIETNAM 191.2.1. BeforeĐổimới(1986) 191.2.2. From1986-2010 191.2.3. From2010-todate 211.2.4. AbriefonthestructureofSocialEnterprisessectorinVietnam 24

1.3. ORGANISATIONALFORMSANDLEGALSTATUSOFSOCIALENTERPRISESINVIETNAM 261.3.1. SocialenterprisesinVietnamtodate 261.3.2. Organisationswithpotentialtobetransformedtosocialenterprisesmodel 31

PARTII:HOWTODEVELOPSOCIALENTERPRISESINVIETNAM? 36

2.1. INTERNATIONALEXPERIENCES 362.1.1. TheUnitedKingdom 362.1.2. TheUnitedState 402.1.3. Korea 422.1.4. Thailand 442.1.5. Singapore 48

2.2. ANALYSISOFSOCIALENTERPRISESSITUATIONINVIETNAM 502.2.1. DifficultythatsocialenterprisesarecurrentlyfacinginVietnam 502.2.2. SocialissuesandresourcesinVietnam:OpportunitiesandChallenges 57

2.3. RECOMMENDATIONSONMECHASISM,POLICIESFORTHEDEVELOPMENT OFSOCIALENTERPRISESINVIETNAM 61

2.3.1. DefininganofficialconceptforSocialEnterprisesinVietnam 612.3.2. InstitutionalisationofsocialenterprisesinVietnam 632.3.3. MeasurestoencourageandsupportsocialenterprisesinVietnam 64

CONCLUSION 67REFERENCES 69

CONTENTS

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LIST OF IMAGES

LIST OF BOXES

Image1 Typical‘hybrid’characteristicofsocialenterprises

Image2 BaseofthePyramidGroup

Image3 PositioningSocialEnterprises

Image4 ImpactAssessmentcriteriaofSocialEnterprises

Image5 AreasandcontentofCSR

Image6 SometypicalFairTradetrademarks

Image7 MatrixofSocialactivities

Image8 Organizationalforms/legalstatusof167SocialEnterprisesparticipatedinthemappingexercise

Image9 Topfiveareasforsocialenterpriseoperation

Image10 UKEcosystemforsocialenterprises

Image11 SomemilestoneinpoliciesofThaigovernmentforSocialEnterprises

Image12 Assetsstructureofsocialenterprises

Image13 TheconnectingroleofSocialEnterprisesandstatepolicies

Image14 Modernperspectivesonnationalbalancesheet

Image15 Stateneedstodevelopthethirdsector,includingsocialenterprises

Box1 Ashoka-InnovatorsforthePublic

Box2 GrameenBank-Atypicalmodelofsocialenterprise

Box3 SkollFoundation

Box4 HanoiBusinessandManagementUniversity:ACooperativeofIntelligent

Box5 Congratulationsforbeingclassifiedaspoor

Box6 Tears...Charity

Box7 BritishAmbassador-‘ODAforVietnamwilldecrease’

Box8 HumanitarianCooperative

Box9 ResearchandTrainingCentreforCommunityDevelopment

Box10 HoaSuaTourismEconomicsHighSchool

Box11 TheCentreforSocialInitiativesPromotion(CSIP)

Box12 The‘WilltoLive’Centre

Box13 MaiVietnameseHandicrafts-MVH

Box14 TòheStockcompany

Box15 Clanbookcasemodel

Box16 KOTOInternational

Box17 Microfinance-CEPFund

Box18 AnDienbatteryfactory

Box19 StateSOEdeliveringpublicwork:amarketdisability

Box20 LGTventurePhilanthropies

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LIST OF TABLES

LIST OF ABBREVIATIONS

Table1 ComparisonbetweenSocialEnterprises,NGOandtraditionalenterprises

Table2 ComparisonofsomesocialimpactindexbetweenSocialEnterprisesandtraditionalenterprises

Table3 Averagesizeandeconomicefficiencyofdifferenttypesoforganisations

Table4 Socialenterprises“Nest”inVietnam

ADB AsianDevelopmentBank

BC BritishCouncil

BoP BaseofthePyramidGroup

CIC CommunityInterestCompany(UK)

CIEM CentralInstituteforEconomicManagement

CP StockCompany

CSIP CentreforSocialInitiativesPromotion

CSR CorporateSocialResponsibility

DFID DepartmentforInternationalDevelopment(UK)

DNNN StateEnterprise

DNXH SocialEnterprise

DNhXH SocialEnterpreneur

FLO FairTradeLabelingOrganisation

FT FairTrade

HDI HumanDevelopmentIndex

HTX Cooperatives

IFAD InternationalFundforAgricultureDevelopment

L3C LowprofitLimitedLiabilityCompany(America)

NFP NotforProfit

NGO NonGovernmentOrganisation

NPO NonProfitOrganisation

NSNN Statebudget

ODA OfficialDevelopmentAssistance

OECD OrganizationEconomicandDevelopmentCooperation

OECF FundOverseasEconomicCooperation(Japan)

QLNN Statemanagement

SROI SocialReturnonInvestment

TNDN Enterpriseincome(Tax)

TNHH LimitedCompany

TSEO ThaiSocialEnterpriseOffice

WB WorldBank

WWF WorldWildFunds

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INTRODUCTIONOverthelast20years,therenovationandopendoorpolicyinVietnamhavecreatedfavorableconditionsforthedevelopmentofstrongbusinessinallnon-stateeconomicsectorsandsocialorganizations.Clearly,businesseshavemadesignificantcontributiontoVietnameconomicachievementandgrowth,thesamewithsocialorganiza-tionsinimplementingvarioussocio-economicobjectives,suchaspovertyreduction,environmentalprotection,socialjustice...Infact,influencedbytheneedsofdailylife,manysocialinitiativeshavebeenimplementedusingbusinessactivitiesastoolstoachievingsocialsolutionsforthecommunity.ThismodelisaSocialEnterprise(SEs).IntheWorld,socialenterpriseshaveemergedcenturiesago,andnowhasbecomeamajorsocialmovementsacrosscontinents.Manycountrieshavepoliciestoencourage,promotesocialenterpriseswithaviewthatStateshouldcooperateandshareresponsibilitywithsocialenterprisestoprovidepublicwelfaretoachievegreaterefficiency.

Inthecontextofcurrenteconomiccrisisinourcountry,theGovernmentdecidestorestructure,undertakefiscaltightening,reductionofgovernmentdebt,toaddressincreasinglycomplexsocialandenvironmentalissues.Webelievethat it isessentialtodevelopsocialenterprisesinsupportingthedevelopmentofcomprehensiveandsustainablecountry.Therefore,itistimelynowtopromoteawarenessofthesocietyandtheStateoftherolesandthesignificanceofsocialenterprisesmodel.Socialenterprisescanbeseenashavingmanypotentialadvantages,derivedfromnon-profitnatureandsustainablesocialmission.SocialenterprisescanbecomeeffectivepartnersoftheState,supportingtheStatetoachieveitssocialobjectives.

Onthatbasis,TheCentral InstituteofEconomicManagement (CIEM)haspartneredwith theBritishCouncil inVietnamwithsupportfromtheCentreforSocialInitiativesPromotion(CSIP)inundertakingastudyresearchonthetheme:“SocialEnterprisesinVietnam-concept,contextandpolicy”,aimedattwomainobjectives:(i)promoteawarenessofsocialenterprisesand(ii)establishthefirstgroundfordiscussionofpolicydevelopmentforsocialenterprisesinVietnam.TheResearchreportisalsodesignedwithtwopartsrespectively:PartI:acomprehensiveunderstandingofsocialenterprisesconceptintheworldandinVietnam;PartII:ananalysisofthecurrentsitua-tion,theoverallcontextinordertopresentrecommendationsforestablishmentofpoliciesforsocialenterprisesdevelopmentinVietnam.

Thisreportwaswrittenbymainauthorsincluding:DrNguyenDinhCung,VicePresidentoftheCentralInstituteforEconomicManagement,Mr.LuuMinhDuc,Researcher,oftheCentralInstituteforEconomicManagement,MsPhamKieuOanh,DirectoroftheCentreforSocialInitiativesPromotion(CSIP)andMsTranThiHongGam,Devel-opmentandSocietyManageroftheBritishCouncilinVietnam.

WewouldliketoexpressourgratitudetoMr.SimonBeardow,DeputyDirectoroftheBritishCouncilVietnamandMsCaoThiNgocBao,DirectorofDevelopmentandSocietyprogrammesofBritishCouncilVietnamfortheiref-fectivecooperationandassistancethroughouttheprojectintheirroleofrepresentingthedonor.Wewouldalsoliketothankcolleagueswhohaveinvolvedinwritingandimplementingtheresearchincluding:Mr.PhanDucHieuandMsNguyenMinhThao(CentralInstituteforEconomicManagement);MsDaoThiHueChi,MsChePhongLan(CSIP);Ms.PhamTranThuyTien(BritishCouncilVietnam).

Inaddition,wewishtothankMadamPhamChiLanandMrNguyenQuangA,independenteconomists;Mr.NguyenHoaCuong,DeputyDirectorofDepartmentofEnterprisesDevelopment(MPI);Mr.NguyenQuangVinh,DirectorofOfficeforBusinessSustainableDevelopment(VCCI)fortheirvaluablecontribution,commentsandcriticisminsupportingtheteamtofinalizetheresearch.

Inordertocompletethisresearch,wecarriedoutmanystudyvisits inandoutofVietnam.Wevisitedandin-terviewed15socialenterprisesinHanoi,HoChiMinhCityandHoiAn,DaNang;metandinterviewed18socialenterprises,representativesofsocialenterprisesassociation,expertsandgovernmentofficialsworkinginsocialenterprisessectorinSingapore,IndonesiaandThailand;attended4eventsandseminarsinVietnamand2confer-encesandtwotrainingworkshopsonsocialenterprisesinSingaporeandThailand.Duringthesevisits,wehaveexperiencedgreat cooperation andenthusiasm from the social enterprises. Informationobtained from thesestudyvisitsisfactualdatawhichisindispensableforthisresearchreport.

Therefore,onthisoccasionwewouldliketothankthefollowingsocialenterprises:KOTOCo.Ltd,VietPicturesCoLtd, The ‘Will to live’ centre,MorningStarCentre, ToheCompanyLtd,MicroventuresBloomOrganization,

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TheMarineGiftsCo.Ltd,NorthWestSupportingdevelopmentLtd,Ecolife,HelpCorporation,MekongQuilts,MaiHandicraftsCo.,Ltd.,EducationCentreforDeaf(CED),StreetsInternationalCo.,Ltd.,SolarServeCompanyLtd.

Wewouldliketoextendourthankstothefollowingorganizationsandsocialenterprises:LienCentreonSocialInitiatives,Socialsupportdivision-MinistryofCommunityDevelopment,YouthandSports,SocialEnterprisesAs-sociation,BelieveNJCafé,OSchool(Singapore);BritishCouncil,PTPorosNusantaraUtama,ProVisiEducation,MittranGroup,BinaSwadaya,Socialenterprises- innovationcentreandthethirdsector-TrisaktiUniversity,PTKampoengKearifan, InstitutePluralism(Indonesia);OfficeofsocialenterprisesThailand,ThammasatUniversity,ChangeFusion,PensookHealth,CreativeClub,OpenDream,I-genius,DoiTungcoffee(Thailand).

TheauthorswouldliketothanktheBritishCouncilVietnamfortheirsponsorshipinimplementingtheresearchandpublishingthisreport!

DrNguyễnĐìnhCungVicePresidentCentralInstituteforEconomicManagement

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SocialEnterprises(SEs)havebeenformedfromsocialinitiatives,baseonademandofsolvingconcretesocialproblemsof thecommunitiesand ledbyentrepreneurial spiritof the founders. Thisuniquespontaneityanddynamic characteristics resulted in the legging behind of public awareness of lively development of socialenterprises. To date, there are nearly 200 organizations in Vietnam are considered having embedded fullytypicalcharacteristicsofSocialEnterprises;thepioneeringsocialorganisationshavebeenfoundedsince1990s,however,SocialEnterpriseconceptisstillverynewinVietnam.

Whataresocialenterprises?

Socialenterpriseshavebeen founded firstly in theUnitedKingdomsince the17thcenturies. In the followingcenturies,stepbystepmodelsofmicro-finance,cooperatives,socialhousinghavebeenfoundedandreplicatedinEastEuropeandNorthAmericacountries.However,socialenterprisesonlystartedtodevelopstronglyandexpanded intoan internationalmovementofcurrentscale in1980,whenthere isareplacementofawelfarestatemodelwithaninnovativeview.Inwhich,theroleoftheStatehasbeenstreamlined,sharedandcompactedandtransferpartofitsfunctionofprovidingsocialwelfaretothirdsector.Theseareorganizationsstandinginbetweenpublicsectorandprivateenterprises.Accordingtopublishedstatistics,by2005,therewere55,000socialenterprisesintheUKgeneratingtotalrevenueof27billionpoundsandcontributes8,4billionpoundsperyeartothecountryGDP.Onaglobalscale,thesocialenterprisesmovementhasbeenflourished,withatypicalmodelofGrameenBankinBangladeshandthefounderofthebankwasawardedtheNobelPrizein2006.Manycountrieshaveofficiallyacknowledgedsocialenterprisesandcreatedregulatoryframeworkandpromulgatedpoliciestoencourageandsupportsocialenterprisesdevelopmentintheirrespectivecountriessothatthissectorcansupportthestatetoimplementsocialobjectivesmoreefficiently.

Although,thediversityofsocialenterpriseshasledtodiversifiedandmulti-facetteddefinitionsofsocialenterprises,ingeneral,socialenterprisesareorganizationswhichhave3characteristicsasfollows:- socialmissionisthetoppriority- usingbusinessactivities,faircompetitionastoolstomeetsocialobjectives- re-investprofitgeneratedfrombusinessactivitiesintotheorganisations,communitiesandsocialobjectives.

Inaddition,mostsocialenterprisespossesssometypicalcharacteristics,suchas:(i)astructureofsocialownership;(ii) incomegeneratedfrombusinessactivitiesandsponsorship; (iii) impact isassessedonbotheconomicandsocialsides;(iv)servingtheneedofthebaseofthepyramidgroups,whoarepoor,vulnerable,marginalised.(v)initiativeswith“bottomup”approach;(vi)openandlinkage;(vii)closelyassociatedwithsocialentrepreneurs;(viii)employeesofsocialenterprises’aresocialworkers(arepaidnotvolunteers).

Socialenterprisesoftenarerecognizedas‘hybrid’modelsbetweenthetwotypesofnon-governmental,non-profitorganizationsandbusinesses. In fact,socialenterprisesmodelcanbeappliedtomanytypesoforganizationswithdifferentlegalstatus,suchasNGOs,limitedcompany,sharedcompany,Cooperatives,Funds,Association,Clubs ... It should beclearlydistinguished, social enterprises is a completelydifferent concept to corporatesocialresponsibility(CSR)orFairTrade(FT),althoughthesemodelscanconnectandintegrate.Notably,socialenterprisesbaseonsocial initiatives inwhichbusinessactivitiesareused toprovidesustainable solutions tosociety,enablingthemodelstohavemoreadvantagesoverothermodelsintermsoftheirorganisationalandfinancialautonomy,efficiencyandscaleofsocialimpact.

IntheperiodbeforeDoiMoi,Vietnamalreadyhadanumberofmodelsthatcouldberegardedassocialenterprises,whichwere cooperatives providing jobs for people with disabilities. After 1986, the renewal and open-doorpolicyoftheStatehavefacilitatedstrongdevelopmentofenterprisesinvariouseconomicsectors,charitiesandcommunitydevelopmentwithinandoutsidethecountry.Frommid-1990s,somesocialenterpriseshaveemergedsuchasHoaSuaSchool,KOTORestaurantinHanoi,andMaiHandicraftsinHCMCcity.However,publicawarenesshavebeenimprintedwithaclearseparationbetweentwotypesoffor-profitbusinessesandnon-profitNGOs,sosocialenterprisesdevelopmenthasonlybeenverymodestwithlimitedscale.Since2010,Vietnambecamealowaverageincomecountrywithgraduallyreducedofinternationalaid,anumberofNGOshavetransformedintosocialenterprisestopursuitnewdirections.

SUMMARY

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At the same time, social enterprises concepts have been promoted andwidely disseminated in Vietnam bysomeorganizations,suchastheBritishCouncilVietnamandCSIP.Dozensofnewsocialenterpriseshavebeen‘incubated’byCSIP through thecompetitiveselectionprocesswith recognitionandsupport from thecentre.Currently,Vietnamsocialenterprisescanbeclassifiedinto3groupsasfollows:(i)thenon-profitsocialenterprisesusuallyaretransformedfromNGOactivitiesbyestablishingbusinessbranchestoenhancethesustainabilityoftheorganisations;(ii)non-profitsocialenterprisesarenewsocialenterprisesmainlyoperateunderacorporateform,(iii)profitsocialenterpriseswithsocialorientationwhichareusuallycooperatives,creditfunds...EstimatednumberoforganizationsthathavepotentialtobecomesocialenterprisesinVietnamisupto25,600organizationsofallkinds.That’snottomentionnon-publicnon-profitorganisations;SoEsprovidepublicservices,stateservicesunitsandpublicscientificandtechnologicalorganisationsencouragedbytheStatetoconvert intoenterprisemodeltoimproveefficiency.Alloftheaboveorganisationscanapplysocialenterprisesmodel.

HowtodevelopsocialenterprisesinVietnam?

StudyofinternationalexperiencesinthissectorshowsthattheUK’sgovernmentfirstannouncedtheconceptofsocialenterprisesand itsdevelopmentstrategysince2002. In2005,anew legalstatus foranewtypeofenterpriseswaspublished. It is theCommunity InterestCompany (CIC)model,designedspecifically forsocialenterprises.Thisistheonlyonemodelofenterprisethathasbeenaddedinthelast100years.SocialenterprisescanchoosetoregisterundertheCICbutitisnotcompulsory.Currently,thereareabout2500CIC,majorityofsocialenterprisesintheUKareoperatingunderNGOstatus.Notably,UK’sgovernmentputsocialenterprisesinageneralstrategytopromotedevelopmentandactiveinvolvementofthethirdsector,includingNGOs,charities,communities,andvolunteers.

Regardinginstitutions,theUK’sgovernmentestablishedaspecializedsocialenterprisesdepartment(SEnU)intheRegionalOfficeofthethirdsector,undertheCabinetOffice.IntheU.S.thefederalgovernmentestablishedtheOfficeforSocialInitiativesandtheparticipationofcitizensoperatingasNPOorganization,andalsocreatesanewtypeofenterprise-lowprofitcompany(L3C)forsocialenterprises.

In Asia, the Korean government issued Social EnterprisesDevelopment Law in 2007 and set up the SocialEnterprisesSupportCommitteeundertheMinistryofLabortocoordinatethepromotionandsupportofsocialenterprises. The biggest interest of South Korea for social enterprises is their effectiveness in creating jobsparticularlyintimesofeconomiccrisis.TheThaigovernmentalsoestablishedtheSocialEnterprisesPromotionCommitteeunder thePrimeMinister’sOfficesince2009, theThaiSocialEnterprisesOfficedirectlyundertakeresearch and development of social enterprises policy from 2010. A development strategy and a socialenterprisesordinancewereissuedin2010-2011,andatpresent,anewlegaldocumentisbeingdrafted.SingaporeGovernmentestablishedaSocialEnterprisesOfficelocatedintheMinistryforCommunityDevelopment,YouthandSportsfrom2006alsoemphasizedtheroleofsocialenterprisesinhelpinggovernmenttocreatejobsfordisadvantagedcommunitygroups.

Meanwhile, socialenterprises inVietnam facedmanydifficulties from limitedawarenessof thepublic, lackofofficialrecognitionfromthestate,lackofaclearlegalstatus,restrictionsonhumanresources,abilitytoaccesstocapital,managementskills,communitycohesion,aswellasasystemofintermediaryorganizationstoprovidesupportservicesandnetworkconnections...

Vietnam has embarked on a new stage of development, but still among the developing countries, with lowaverageincomes.Thecountryremainspoor,whileeconomicgrowthprocesshasposesmanyemergingsocialandenvironmentalissues.Thereareabout24millionpeople(28%ofthepopulation)areinneed,includingpoorhouseholds,peoplewithdisability,childrenwithspecialcircumstances,peoplereleasedfromprison,peoplelivingwithHIV/AIDS,theelderly...Besidesthereareseriesofotherissuessuchassocialviolence,unhealthylifestyle,stressoftheurbanpopulation,overloadededucationandhealthcare,foodsafety,wastehandling,airpollution,energysaving,culturepreservation...

Obviously,itwastimefortheGovernmenttoconsidersocialenterprisesaspartnerstoshareloadofprovisionofsocialservices.SocialenterprisecanassisttheGovernmenttoachievesocialobjectives.Theissuanceoflegaldocumentation,creatingregulatoryframework,officiallyrecognizeandsetsoutspecificpoliciestoencourageand support social enterprises, aswell as institutionalising the implementation of those policies is extremelynecessary.

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PART I: WHAT ARE SOCIAL ENTERPRISES?1.1 SOCIALENTERPRISECONCEPTS1.1.1. BriefontheevolutionanddevelopmentofSocialEnterprises(SE)movement

intheworld

SocialEnterprisesisanewconceptinVietnam,although,currentlytherearenearly200organisations1(thisisbasedonthemappingexercisecompletedbyBritishCouncil,CSIPandSparkin2011)areadoptingsocialenterprisemodel2.Oneofthemosttypicalandpioneeringsocialenterprisethathavebeenwell-knowninVietnamisKotorestaurant,whichwasestablishedinHanoisince1999.Infact,therearemanyorganizationsthathavebeenestablishedandoperatedassocialenterpriseswithoutrealisingthattheyaresocialenterprises,thustheactualnumberofsocialenterprisesinourcountrywouldbemuchbiggerincomparisonwiththeabovestatistic.Similarly,allovertheworld,socialenterprisespracticesandmovementhavealwaysdevelopedfaraheadofpublicawareness.

United Kingdom was the birth place of Social Enterprises and to date has been the country where SocialEnterprisesmostdeveloped.AccordingtoMacDonaldM.&HowarthC.’sresearch(2008),thefirstdocumentedsocialenterprisemodelaroseasaresultoftheplague(BlackDeath)epidemicin1665.Duringtheplague,aswealthy families fledoutofLondon,manypoorpeoplewere leftunemployed. In thissituation,ThomasFirminestablishedamanufactoryusinghisownmoneytosupplymaterialsfortheoperationandprovidedemploymentsfor1700people.Atthetimeofestablishment,Firminclearlystatedthathewillnotpursuitmaximisationofprofitbuttotransfertheprofittocharitablefunds.

Bylate18thandearly19thCenturies,asmallnumberofUKsocialenterprisescanbecategorisedintotwogroups:(i) Some wealthy people changed their views in undertaking charity activities. Instead of offering financial

support, thatmightcreatedependenceand lazinessamongthepoor,whichmightalso leadto“idlemakeevils’problems,theyfocusedonprovidingemploymentswithtrainingtoenablethepoortomaintainjobsandincome.Thisallowedthepoortobecome“usefulcitizensofthecountry”.Thefirstmicro-financefund(mainlytoprovideloansforproductiontools)wasestablishedinBath.TheSchoolfortheIndigentBlind,formedin1790inLiverpoolwasperhapstheearliestexampleofasocialenterprisemodelineducation.Schoolstotrainandproviderehabilitationactivitiesforcriminalchildren,anofficialfunctionofthepolice,wererecognisedandsupportedbytheGovernment.Duringthistime,therewerenumeroussocialinitiativesincludingtrainingonseamanshipskills,carpentryforchildren,usingincomegeneratedfromcoffeeshops,etc.Especially,someof the first socialhousingprojectsadoptingsocialenterprisemodelswereestablishedat this time,whereinvestorsacceptedamaximumreturnoninvestmentattherateof5%.

(ii) Atthesametime,manymodelsallowingemployees,thefirsttime,toenjoymorerightsinsigninglabourcontractandownershipofbusinessplananddistributionofprofitswereestablished.ModelssuchasCo-operatives3, ProvidentSocieties,andIndustrialSocietiesdistributedprofitandwelfaretothewholecommunity,aswellasofferingvotingrightstoallmembers.Thisallowedmemberstohavetheirsayinmanagingtheorganisationandthebusinesses.

Inaddition,inpractices,manylibrariesandmuseumsinEuropeandNorthAmericanhaverunbusinessbyopeningsouvenirshops,organisingauctionstoraisefundsfortheirownactivities.Although,thiswasnottypical, itstillcouldbeseenaspartofearlyactivitiesadoptingsocialentrepreneurship’sspirit.Theyaimedtousethebusinessto enhance the sustainability of the organisation, as well as solutions to address social issues onwhich theorganizationswereestablished.

1 BritishCouncil-CSIP-Spark(2011),mappingreportonsocialenterprisesinVietnam2011.2 DNXHinEnglishisSocialEnterprise(SE);DNhXHinEnglishisSocialEntrepreneur.3Inthisstage,themodelsofcooperativesinAgriculture,handicraft,housingareverydevelopedinGermany,Sweden,France,andItaly.

2

Inaddition,inpractices,manylibrariesandmuseumsinEuropeandNorthAmericanhaverunbusinessbyopeningsouvenirshops,organisingauctionstoraisefundsfortheirownactivities.Although,thiswasnottypical, itstillcouldbeseenaspartofearlyactivitiesadoptingsocialentrepreneurship’sspirit.Theyaimedtousethebusinessto enhance the sustainability of the organisation, as well as solutions to address social issues onwhich theorganizationswereestablished.

In20thcenturies, followingtheGreatDepression(1929-1933),socialenterprise’sactivitiesexperiencedsomedecreasewhentheKeynes’seconomicmodelbecamepopular.ThemodelencouragedstrongerStateinterventionintheeconomyandthus,aftertheWarII,seriesofstatewelfaremodelswereestablishedintheWestofEuropeandNorthAmerica.

OnlyuntilMargaretThatcherbecamePrimeMinisterin1979,SocialEnterprisesgainedprofounddevelopmentand expanded across theUK into a powerfulmovement as it is now. She intended to reduce State role inprovidingsocialwelfareandbelievedthattheStateshouldnotinvolvedirectlyinarea.

PublicservicesandsocialwelfareareoftenseenwidelyasoneofthemaindutyoftheState;however,currently,governmentsofmanycountriesinEuropeandNorthAmericadeliverthesedutiesbyoutsourcingtheservicestocivilsocietyorganisationsandprivatecompanies.Intheirview,theStatesystemtendtobebureaucraticandispronetocorruption,thereforetheycannotdeliverashighqualityservicesascivilsocietyorganisationsandprivatecompanies,whichhavebeendeveloped from local communities.Moreover, along thegrowthof civilsocietycommunity,limitationoftheStatesystemclearlydemonstratethatitisnotenoughfortheState,onitsown,toaddressincreasingandmorecomplexsocialissues.TheStateshouldnotonlysharetheresponsibilitiesofprovidingsocialwelfaretocitizens,butalsoshouldconsidercivilsocietyorthethirdsector(todistinctthosetopublicandprivatesectors)asavitalpartnerinsolvingsocialissues.

Scale and roles of the third sector (social enterprises) in the UK nowadays

TheUKisaleadingcountryinsocialenterprisemovementintheworld.Accordingtopublishedstatistic,by2005,therewere55,000socialenterprisesintheUKgeneratingtotalrevenueof27billionpoundsandcontribute8,4billionpoundsperyeartothecountryGDP.Thesectorcreated475,000jobsandengaged300,000volunteer,accounted for5%of total labourworking inenterprises.Almost social enterprises are small and super smallenterprises.Averagerevenueofasocialenterprisewas285,000poundsperyearandincomegeneratedfromcommercial activities was at 82% (other funding was generated from sponsors and fund raising activities).Accordingtothemostupdatedstatistic4,thereare90,000socialenterprisesintheUKwithtotalrevenueof70billionpoundsin2011.

In2002,theUKDepartmentofTradeandIndustry(DTI)announcedthegovernmentstrategyforsocialenterprises,inwhichthefirsttimeofficialdefinitionofsocialenterprisewasannounced.

In 2005, theUK issued a new legal framework for social enterprises, inwhich theywere namedCommunityInterestCompany-CIC.Thiswasthefirsttimeinthelast100years,theUKhasaddedandlegalisedanothertypeofenterprises.Ofcourse,socialenterprisesstillcanregisterunderdifferentstatussuchaslimitedcompany,jointventures,NGOs,Funds,Association,etc.In2010,theUKgovernmentpromotedaprogrammecalledBigSociety,inwhichtheGovernmenthasputsupporttowardsthedevelopmentofco-operative,Supportingfunds,Charityfunds,andsocialenterprisesattheirastheirtoppriority.

Social enterprises is expanding fast all over the world

In the last 30 years, social enterprises have grown significantly beyond countries’ borders and become asocialmovementwithglobalimpactandscale.Thefollowingarefactorsthathavepositivelycontributedtothisdevelopment:

First,globalizationtrendhascreatedopportunitiesforsocialenterprisestoconnect,sharingknowledge,resourcesandmultiplysocialenterprisesmodelbeyondcountries’borders.

4 AccordingtoDrGladiusKulothungan,UniversityofEastLondonattheconferenceonpromotingsocialenterprisesthroughViet-namUniversitieson9/4/2012atNationalEconomicUniversity,Hanoi.

3

Box1:Ashoka-InnovatorsforthePublic

Ashokaisamongthetoporganizationintheworldthatpromotessocialenterprisesdevelopment.OperatingasanNGO,Ashokawasfoundedin1980byBillDraytoninWashington,DCaimingtoidentifyanddevelopSocialEnterpreneursthroughSocialInvestmentFund.Atpresent,theyhave160staffand25branchesin73countriesacrosstheworld.Theyhaveselectedandsupported2,145people(alsocalledAshokafellows).Infact,Ashokafocusestheiroperationindevelopingcountries,inparticularIndiaisthecountrywiththeearliestandbiggestnumberofAshokafellows(283),followedbyBrazil(273),Mexico(145).Startingwithabudgetof50,000USD/year,nowAshokahasinvestedmorethan32millionUSD/yearinsocialentrepreneurs.

Sources: collecting from Wikipedia and Ashoka website.

-Second,humanityvalueshavebeenstronglypromoted.Itistimewhenpeopletalkaboutpost-industrialsocietyandtheroleofcivilsociety.Thereareseriesofothersocialmovementssuchasenvironmentalprotection,FairTrade,CorporateSocialResponsibility(CSR),Millenniumgoalsandhumandevelopmentindexhappening.

Box2:GrameenBank-Atypicalmodelofsocialenterprise

In1974,Bangladeshsufferedaterriblefamine.EconomicProfessorMuhammadYunuswasdeeplyimpressedwhenhelendedaverysmallfunding-27USDto42households-thatenabledthemtomakeproductsforsale,helpedthemfrombeingvictimsofpovertyandtheheavyloanwithhighinterestatthattime.In1976,hepilotedamicro-financemodelforthevillagesaroundChittagongUniversityandachievedagreatsuccess.In1979,theprojectreceivedsupportfromtheCentralBankofBangladeshandcontinuedtoexpandinTangaildistrict,Dhakacity.In1983,GrameenBankwasofficiallyestablishedandstartedexpandingoperationsacrossthecountry.

Besides the government support, The Grameen Bank also received funding from many internationalorganizationsandsocialfunds,suchasFordFoundation,IFAD,SIDA,WorldBank,OECF.Notably,inordertoraisefunds,theGrameenBankissuedinternationalBondswithofficialguaranteeofBangladeshGovernment.Asof10/2007,7.34millionpoorpeoplehadborrowedmoney from thebank,97percentofwhomwerewomen.Atthistime,thebankhadoperatedin2,400brancheswith24,700employeesandprovidedsupportin80,200villages.Todate,thetotalloansthebankhasoperatedisupto11.35billionUSD,withrepaymentrates as high as 96.6%. TheGrameenBank has become themost efficientmicro-financemodel, createdopportunityforthepoortoaccessloanwithverylowinterestratesandwithoutdeposit.SuccessofGrameenBankhasbeenreplicatedin40countriesaroundtheworld. In2006,Professor.YunusandGrameenBankwereawardedtheNobelPeacePrizefortheirefforts,initiativesandachievementsinreducingpoverty.

Sources: collecting from Wikipedia and Grameen Bank website.

-Third, thepresenceofsocial impact investors, thosearepursuingsocial impact insteadof traditionalprofitearning.Theycreateinter-nationalnetworkstocollaborate,shareandsupportsocialenterprisesglobally.Thisisparticularlybeneficialtothedevelopmentofsocialenterprisesindevelopingcountrieswheretherehavebeenhighdemandforcapitalandcapacitybuilding.

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1.1.2.Differentviewpointsonsocialenterpriseconcept

Itcanbeseenthatmostsocialenterprisewereestablishedspontaneously(shouldbeunderstoodpositivelythatwillbeexplainedinthespecificationssection),basedonthecreativityofthefounderstosolvespecificsocialproblems.Pressing tocomeupwith a social solution, theorganisationcanbe formedas ahybridbetweennon-profit orcharitableorganisationandbusiness,withoutknowingthattheirorganizationhasoperatedasasocialenterprise.

Forexample,inthecaseofKoto,Mr.JimmyPham(Kotofounder)offeredhousingandfoodsforagroupofstreetchildreninHoChiMinhCityfromtheearly1990s.However,withadesiretocreatesustainablelivelihoodsforthechildren,asaVietnameseproverbsay“donotgivethemafish,butteachthemfishing”,hefoundedacompanyinrestaurantbusinesstoprovidevocationaltrainingforthechildrenwithspecialconditions.Therestaurantalsoprovidesthemwithaplacetopractice,aswellasgeneratingadditionalincometosupplementtrainingfunds(studentshavebeenfullysupportedwiththecompanysponsorships).

Until2008,whenacoupleofintermediaryorganizationswithamissionofdevelopingsocialenterprises,suchasCSIPandSparkwereestablished,asocialenterprisesconcepthasbeenformallyandwidelyintroducedinVietnam.TherearestillafewnumberofSocialEnterprisesestablishedasincubatedmodelorthathavebeenawardedwithsocialinnovationprizesandoftentheyoperateatsmallscalefarfromcomparabletothosespontaneouslyestablishedsuchasKotoorGrameenBank.Thisisoneofthetypicalcharacteristicsofsocialenterprises,thatallowsthemodeltobehighlydynamicandflexiblebutthisatthesametimeleadstodifferentdefinitionsofsocialenterprises.Thedebateonsocialenterprisesisstillongoing,evenininternationalforums.

Social enterprises definition by the United Kingdom and OECD

Inthesocialenterprisedevelopmentstrategy2002,TheUKgovernmentdefined: “A social enterprise is a business 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”.

Thisdefinitionisverycomprehensive,sticktothebasiccharacteristicsofsocialenterprise.First,doingbusiness,shouldbeunderstoodasamodel,apro-activeapproachandsolutionsthattheorganisationhasadoptedinitsoperationratherthanbind it tightlytotheformofacompany,whichshouldnotbeconsideredmorethananorganisational tool.Second,socialobjectivesaresetoutas theprimarymissionofsuchorganizations.Socialenterprisemustbeestablishedtopursuitsocialgoals.Third,inprinciple,theprofitsareredistributedbacktotheorganizationorcommunity,nottoindividuals.

TheOECDdefinitionofsocialenterpriseis: “Social enterprises are organisations which are operating under several different legal forms applying entrepreneurship spirit to pursue both social and economic goals at the same time. Social enterprises often provide social services and employment for disadvantaged groups in both urban and rural areas. In addition, social enterprises also provide community services in education, culture and environment sectors”.

Box3:SkollFoundation

SkollFoundationisasocialenterpriseFunds,establishedin1999byJeffSkoll(firstpresidentofEbay);withheadquarterinSiliconValley,USA.SkollFoundationmissionistobringaboutlargescalechangestosocietybyinvestingin,connectingwithandrewardingsocialentrepreneursandsocialinitiativesthataddresspressingproblemsoftheworld.TheFoundationinvestedinsocialentrepreneursthroughthe‘AnnualSkollAwardforsocialentrepreneurship’.Skollsetuponlinecommunitycalled‘SocialEdge’toconnectsocialentrepreneursworldwideandorganizeSkollWorldForumannuallyonsocialenterprisemovementinOxford.Inaddition,Skollalsomakeshortfilmstointroduceandrewardsocialentrepreneursaswellasawarding5scholarshipsannuallyenablingsocialentrepreneurstoattendMBAprogramatSkollCentre.By2009,59socialenterpreneurshavereceivedfinancialsupportfromSkoll.Skoll’ssponsorshipforsocialenterprisesandsocialentrepreneurshasbeentotaledupto40millionUSDperyear.

Sources: collecting from Wikipedia and Skoll Foundation website.

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A wider understanding of social enterprise

Among various understanding of social enterprises, themost open concept is “Social enterprises are profit-generating businesses. On the outset, it looks like other traditional businesses with the only difference that a social mission was placed at the centre of the business, with profit objective taking supplementary role”.Anotheropendefinitionalsostatethat:'Asocialenterpriseoperateslikenormalbusiness,butthemanagementanduseofprofittargetingatsocialandenvironmentalgoals’Carefullystudiedthesedefinitions,therearesomeweakpoints.Aftercarefullystudiedthesedefinitions,thefollowingareconsideredasweakpoints:

First,socialenterpriseshavebeensimplifiedandalmostequatedtotraditionalenterprises.Lookingatitssurface,itisrighttosaysocialenterprisesaredoingbusinesswithaccounting,inventorysystems,warehousing,salesandmarketingstaffastraditionalbusinesses.Butthetypicalcharacteristicofsocialenterprisesshouldbehighlightedthatsocialobjectivesarethemainmissiononwhichsocialenterprisewasestablishedandoperated.

Second, by the above understanding, social enterprises can easily be blended with traditional businessesimplementinggoodCSRactivities.Inordertobuildagoodimageandbeingcustomers-friendly,manycompaniesarewillingtodeclaretheirsocialmissionextensively.Infact,therearemanytraditionalbusinesswereestablishedfromexcellentsocialbelief.However,thequestionofwhethersocialobjectivesaretherationalefortheexistenceandoperationoftheorganizationornotshouldbethekeytodifferentiatethetwotypesoforganisations?Here,allconceptsdonotmentionthesharingofprofit.Thus,thereisnoclearevidenceandjustificationtoclassifythelevelofcommitment‘forsocial’or‘forprofit’ofanorganization.

A narrow understanding of the definition

Despites, there are also narrow understanding of the definition of social enterprises. Some views requiredsocialenterprisesto“register in a form of a company, with equal competition with other businesses. If the social enterprises were supported or given incentives by the States, they may only benefit from those policies in certain fields and base on social impact in that sector only”.Moreover,socialenterprisesshouldnotbegivenanyspecialtreatmentsthanotherbusinessesasthismightleadtounfairtreatment.Anegativeconsequencemightbethatbusinesseswanttobenefitfromtheincentives,thereforemightdecidetotransfertosocialenterprisesmodel.Someviewsevengo furtherbyopposing the social enterprisemodel, they think thateveryenterprisebringbenefit tosociety (suchasprovidinggoods, servicesandcreating jobs). Itmightbe thatCSRareahasbeenignored,thereforeimageofcompanieshavebeenquitenegative.“If CSR is being operated well, all businesses would be social enterprises’. On the other side, some opinion requires ’social enterprises have to be partly owned by a non-profit organization”.

Undeniably, the above comments carry some important views, especially for policy formulation andinstitutionalizationofsocialenterprises,aswellastoenhancecomprehensiveunderstandingofsocialenterprises.However,thesedefinitionshavenotfullycapturedthenatureofsocialenterprisesasbelow:

First,itiswidelyacknowledgedthatsocialenterprisesareorganizationalmodels,aspecifictypeofbusinessinaconceptnatureotherthanlegalstatus.Iforganisationsarestrictlyrequiredtoregisterascompanies,wemaymiss lotofmodelsthathaveoperatedascompanies(faircompetition)butnotnecessarilyhavetoregisterascompanies.

Somenon-governmentalorganizations(NGOs)confirmthattheywouldliketotransformintocompanies,however,they are hesitant to do so due to the lack of comprehensive legal framework, lack of awareness of socialenterprisesamongstateagenciesandlocalauthorities,andthefearoflosingexistingincentives.Infact,manysocialenterpriseshavebuilt twoseparateoperational strands:anNGO to implementactivities tomeetsocialobjectivesandacompanytogenerateincomefortheoperationoftheNGO.

Second,theviewpointisalsonotaccuratebecausenomatterhowintensiveandeffectiveacompanyCSRis,thecompanycannotbeconsideredasasocialenterprise.Thetwomodelsaredifferentinnatureandapproachesfromestablishment.Ifthesemodelsareblendedasone,wemaylooseopportunitytoelicitanddevelopsocialinitiativessuchassocialenterprises.

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Similarly, the thirdopinion isnot reallynecessary,and itmightevendiscouragethedynamism,creativityandflexibilityofsocialenterprises.Moreover,oneofthestrengthsofsocialenterprisesistoovercometheweaknessesofNGOsustainability;therefore,bindingsocialenterprisestoNGOoperationalstructurewouldlosethepotentialreplacementofSocialEnterprisestoNGOs.

Other definitions

OpinionfromCentreforSocialInitiativesPromotion(CSIP): “Social enterprise is a concept that refers to the work of social entrepreneurs under different legal entities

depending on specific purposes and operating conditions. Social enterprises directly target at social benefits, and are led by a strong entrepreneurial spirit to achieve both social benefits as well as economic returns”.

TheCSIP’sconceptofsocialenterprisesisquiteopen,creatingmoreopportunitiesforCSIPtoselect,incubateanddevelopsocialenterprisesatearlystageinVietnam.First,CSIPlinksocialenterpriseswithsocialentrepreneurstoemphasizetheroleofthefounderswhocanharmoniessocialinnovationwithsocialentrepreneurship.

Second,socialenterprisescanoperateinvariousformswithdifferentlegalstatuses,whichissuitabletothediversityof thecivilsociety inVietnam;highlightedby innovativeroleofNGOs.At thesametimeopenuppossibility forotherorganisationssuchasmicro-financefunds,charityfunds,co-operativesandevensomesocialorganizations,businessorganizations,publicserviceenterprisesinthepublicsectortotransformintosocialenterprises.

Third, CSIP’s key criteria to determine social enterprises seems to be similar toOECD’s definitionwhen theyrequiresocialenterprisestopursuitbothsocialobjectives(key)andbusinessobjectives-“doingbusinessanddoinggoodtogether.”SimilartoOECD,issueofprofitdistributionwasnotmentionedexplicitlyinCSIPdefinition.Someorganizationshavedefinitionsthoughnotyetcomprehensivebuthavehighlightedthenatureofsocialenterprises.Wikipedia’sdefinitionis: “Social enterprises are organization applying business strategies to achieve charitable goals. Social

enterprises can be a for-profit organizations or non-profit.” Mr.BambangIsmawan-founderofoneofthebiggestmicro-financeinstitutionsofIndonesia-BinaSwadayaFund(since1967)says: “Social enterprises are the operation that achieves the objective of social development by using

Entrepreneurship solutions.”

Clearly,theabovedefinitionsemphasizedtherelationshipbetween‘Tools-Solutions’andthestrategy/businesssolutionsandobjectives/socialsolutionsinthesocialenterprisesmodels.Inotherwords,usingbusinesssolutionsasatooltogenerateaspecificsocialsolutionisthenatureofsocialenterprises.

1.1.3.Typicalcharacteristicofsocialenterprises

Asmentionedabove, there is awidepoolofdefinitionsof socialenterprises,baseondevelopment stageofeachcountryandregion,aswellasspecificcharacteristicsandprioritiesofeachorganization.However,wecansummarysomebasiccharacteristicsofsocialenterpriseswhicharewidelyrecognisedasfollows:

(i) Social enterprises must undertake business activities

Socialenterprisesmustundertakesomebusinesses.BusinessoperationisauniquecharacteristicsaswellasstrengthofsocialenterprisesincomparisonwithNGOs,non-profitorganisations,charitiesfundsthatsimplyreceivegrantandimplementsocialprogrammes.Therefore,businesssolutionsareinevitablepartofsocialenterprisesmodel.

Moreover, socialenterpriseshave tocompete fairlyandequallywith traditionalbusinesses in thesame field.UnliketheCharityfundswhomaycallforcharitablecontributionsorpurchaseofproductsfromtheorganisationstoraisefund.Forexample,OxfamoperatecharityshopswheretheysellusedproductstophilanthropicpeoplewhobuyproductsbutatthesametimecontributetoOxfamfund.Thiscanbeconsideredasstrandsapplyingsocialentrepreneurshipspirit inOxfamsystem.However,Oxfam isstillanNGO,whichcannotbeconsideredasasocialenterprisebecausetheiractivitiesofOxfamisbasedonvolunteerphilosophy(includingtheaboveactivities)andmainlyrelyoncharityfunding.

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Businessactivities

Socialenterprises

SocialObjectives

Moreaccurately,socialenterpriseshavetogofurtherthantraditionalCharityFunds.Theyshouldprovidegoods,productsandserviceswithgoodqualityandatcompetitivepricestothemarket.This isachallengeofsocialenterprises,andthatexplainswhysocialenterprisesalwaystiedcloselytosocialinitiatives,becausetheirbusinesssolutionsmustbe‘socialinnovation’soitcanbringaboutsocialobjectivesusingbusinessapproach.

Image 1: Typical hybrid of social enterprises

The fair and equal competition, though a big challenge for social enterprises, offer social enterprises theindependence and autonomy in their activities and organizations. This is the typical characteristic of socialenterprisesthatNGOandcharityfundsdonothave.Revenuefrombusinessoperationsmaynotbesufficienttocoverallexpensesofobtainingsocialobjectives,however,withatleastpartialcontribution,usuallybetween50-70%ofcapital(theresttobemobilisedthroughsponsorship),willhelpsocialenterprisestobemoreindependentinitsrelationswithdonors/sponsors.Thisenablesthemtopursuetheirownsocialmissionandmoreimportantlytoexpand the scopeof social activities, suchas increasingnumberof students, thenumberof participatingvillages/districts).Theindependenceandautonomyistiedwiththesustainabilityofbusinesssolutionsaswellasthesocialenterprises.Inaddition,sustainabilityisthestrengthofsocialenterprisesandtherefore,havingagoodbusinessstrategy,profitabilityandsustainabilityisanessentialrequirementforsocialenterprises.

Infact,manysocialenterprisescannotincreasetheirmarketshareinacompetitiveenvironmentandfacetheriskoftransformingbackintoanNGOtomobilisesponsorshipasbefore.However,therearemanyothersocialenterprisesthatcancompetefairlywithtraditionalbusinesses.Forexample,KotoRestaurant-doingverywellwithbothqualityoffoodandservices,ithasbeenrecommendedintheLonelyPlanet,Time-Out;TheproductsofMaiHandicraftsandMekongQuiltswithuniquedesignsthathavegainedgoodsalewithhighprices.

(ii) Social mission as top priority

Socialenterprisesmustholdsocialgoalsastheircoremissionfromestablishment.Inotherwords,eachsocialenterprisewascreatedfortheirspecificsocialpurpose.

There aremanyopinions that traditional businesses alsoprovidepositive social effects. Except a numberofbusinessesinareassuchastobacco,alcohol,discothèque,casinos(somecountriesconsiderthesebusinessesas‘crime’andhavetopaySinTax),therestofbusinessesareproducingproductstoservethesociety,creatingproductivity tools, creating jobs and income. However, the difference is that traditional enterprisesmeetingcustomerneedsorfindingsocialsolutionstomaximiseprofitforenterpriseowners.Incontrast,socialenterprisesusebusinessmodelasatooltoachievetheirsocialobjectives.

Traditional enterprises=identifymarket makeproducts gainprofit Social enterprises=identifysocialissues developbusinessplan solvesocialissues

Clearly,thetwoprocessesaswellasapproachesarecontrastedinnature.Therefore,socialenterprisescanbeprofitable,evenitisessentialforthemtogainprofittoservesocialobjectives,but‘for-society’not‘for-profit’.

HongNgocHandicraftsatHaiDuongprovincehaveemployedpeoplewithdisabilitiestosellsouvenirstotouristsonthewaytoHalong.Clearly,theyhavecreatedpositiveimplicationsforthesocietyinthatrespect,buttheyare still a traditional enterprise, because the primary target of this organization is profit making. The use ofdisabledworkersisonlypartoftheirbusinessplan,whichisnotthesocialmissiontheypursuefromthetimetheyestablishedtheorganization.

Source: CIEM

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Box4:HanoiBusinessandManagementUniversity:ACooperativeofIntelligence

InJune1996,ProfessorTranPhuong,exPrimeMinisterofVietnamtogetherwithsomeofhiseducationalcolleagues founded the Hanoi People owned Business andManagement University, one of the first non-stateuniversityestablishedasa resultofVietnamGovernmentpolicyonsocialisationofEducation.Sinceitsestablishment,ProfessorTranPhuonghasdefinedtheuniversityas“acooperativeof intelligence”,whodeliberately contribute efforts and finance to establish and develop the university sustainably, for qualityhumanresourcesdevelopmentandtalentnourishment,not for profit.

Themanagement structureof the university consists of FoundingCommittee,GoverningBoard, BoardofRectorsandInspectingCommittee.EachfoundingmemberhasoneequalvotingrighttowardsallimportantdecisionsthattheFoundingCommitteemakeregardingdevelopmentdirectionoftheuniversity,notdependentonindividual’s leveloffinancialcontribution.Todate,with16yearsofoperation,profit fromtheuniversityoperation have been reinvested in expanding and upgrading the university infrastructure. The universitywelcomecontributionfromnewmemberflexibly,however,newmembersarerequiredtocomplywiththeuniversityvisionandoperationalapproachasdefinedbyFoundingCommittee.

Starting fromasmallcampus inLoDucstreet, theuniversityhasestablishedanew7storiesbuilding, inanareaof20.000m2inVinhTuy;TheuniversityiscontinuingtobuildasecondcampusinHoangMaithatcanaccommodateup to10,000 students.Over the last15 years, theuniversity havehosteda total of52.794studentsatfourtraininglevels(withuniversitystudentsaccountof86,6%).Withmorethan1.400computers,theuniversityhasbeenabletoadoptthemostadvancedteachingandtestingtechniquesandmethodologies.In2006,theUniversityadoptedanewnameofHanoiBusinessandTechnologyUniversitytoallowtheuniversitytoexpanditseducationalareatotechnologyandtechnicaltrainings.TheuniversityhasreceivedLabourMedalsfromVietnameseGovernmentandProfessorTranPhuonghasbeenawardedHoChiMinhMedal.

ThesuccessoftheabovemodelexplainwhyintherecenttwoworkshopsonSocialEnterprises,twofoundingmembersoftheuniversityhaveproudlyconfirmedthattheUniversityhasbeenoneoftheearliestmodelofSocialEnterprisesinVietnam.

Source: Associate Professor and Doctor Nguyen Manh Quan- Deputy Dean of Business Management, Founding member of Hanoi Business Management University.

(iii) Re-distribution of the profit

Social enterprisesmodel requires profit to be redistributed back to the activities of the organization or thecommunity,whoarealsothebeneficiariesofthebusiness.Infact,theabovetwocharacteristicsofdoingbusinessandservingsocialobjectivesare themost importantcharacteristicsofsocialenterprises.Therequirementofre-distributionofprofitsisacriteriatoonlydefine‘for-profit’or‘for-social’natureoftheorganisations.Thebasicprinciplesofsocialenterprisesarenottodistributeprofittoindividuals.Socialenterprisesshouldnotbeseenasameantogetrich.Aimingtoberich,individualsshouldgowithtraditionalenterprisesmodel.

(iv) Social ownership

SomedescriptionsofSocialEnterpriserefertoanotcommonanddifferentcharacteristicrelatingtoitsownershipandmanagement structurewith participationof communities andother stakeholders andbeneficiaries... ThisenablesSocial Enterprises togainhigh levelof autonomy. This is illustrated throughco-operativesoperatingeffectivelyasSocialEnterpriseinanumberofcountries.

Inreality,mostSEsoperateswithopenanddemocraticmanagementstructure.Requiredtoconnectcloselywiththecommunity,thebeneficiariesandawidenetworkofpartners,withultimatesocialaim,SEsarewillingtosharetheir“power”withallstakeholders.Particularly,inmanySEs,theconceptofequivalentfinancialcontributiontovotingrightwasnotappliedasintraditionaljointventureorlimitedcompanies.InalargenumberofSEs,FoundingCommitteeorManagementBoardhaveappliedaruleof“onevotingforeachmemberwithequalpower”inalldecisionmakingsoftheorganisation,regardlessoftheirfinancialcontribution.

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Source: Wikipedia.org

(v) Meeting the needs of the Base of Pyramid Group

Oneof the typicalmissionsofSocialEnterprises is tosatisfy theneedof theBaseofPyramidGroup.Thisgroupcomprisesthepoorestandmostdisadvantagedpeople,makingup2billionwithincomeoflessthan2USD/day.Theyarethebiggestgroupatthebottomofthesociety;thereforetheyhavebeennamedasBaseofthePyramidGroup.Itisalsoimportanttoacknowledgethat,themarginalisedgroupsincludingpeoplelivinginmountainousandremotearea,peoplewithdisabilities,peoplewithHIV/AIDS,streetchildren,dropouts,releasedprisoners,thoughnotyetbepartofBoPgroup,theycaneasilyfallintothisBoPgroup.ThereforetheyarealsotargetedaudienceofSocialEnterprises.

Image 2: Base of Pyramid Group

WhileitisimpossibleforpublicsectortobeartheburdenofsocialwealthfareforBoP,thePrivatesectorneglectthegroup,theytargetgroupwithbetterabilitytopay.Therefore,SocialEnterprisesplayimportantrolesinfillingthisgap.OnlySocialEnterprisecanprovideservicesandproductstothisgroupatcheapprices.

InColombia,oneSocialEnterprise,partofAshokanetworkhasnegotiatedwithColceramicaCompany,asupplierofconstructionmaterialstosellconstructiontilesatlowpricetopoorfamiliesinUsme-Bogota.Thishasenabledthepoortorepairtheirhouses.Startingfromceramictiles,othermaterialsincludingpaint,roofs,andwindowshavealsobeensuppliedthroughthisspecialchannelcreatedbySocialEnterprises.

(vi) Outstanding characteristics of Social Enterprises

Thoughthefollowingarenotkeycharacteristics,theyareoutstandingandquitecommoncharacteristicsthatareindispensibleindefiningmanysocialenterprises.

Bottomupapproach/initiatives:Asmentioned,mostSocialEnterpriseswereestablishedspontaneously.SEsidentifiedasocialissue;theychooseabusinessmodeltoturntheoryintopracticestosolvetheissue.Onlypeoplewithcloseconnectionwiththecommunity,eventhosewithinthecommunitywhowillbenefitfromtheideascanspotandfullyunderstandaspecificsocialissue.

Forexample,MsPhuongHahnwhoisahearingimpaired,hasestablishedaneducationalresearchcentretostudysignlanguagesthathavebeenusedbyhearingimpairedcommunity;MrNguyenCongHungisapersonwithmobilitydisability,hasselfstudiedITandestablished. “Thewilltolive”centretoprovideITtrainingtopeoplewithdisability.Thetraininghasfollowedinclusiveintegrationapproach(fromtrainingtoemployment);MrTaMinhTuan,influencedbyhisfatherweaknesshasestablishedHelpCorporationtoprovidefamilydoctorservicesandtochangelivingstyleofpeopleinpreventingacutediseases.ThespontaneityofSEsshouldbetakenpositivelyasstemmedfromreallivingdemand,notnegativelyaslackoforganisationorstructure.

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ThespontaneityofSocialEnterprisesexplainswhytheyarealwaysrealistic,dynamicandflexible.ThisistypicalcharacteristicofmostSocialEnterprises.Theycanbedescribedasmobileneutron,explodeandopenupwithideaswhicharesolutionstosocialissues.Beinggeneratedthroughbottomupapproachbasedoncommunitiesneedsandfromgrassrootslevel,SocialEnterprisesoffersustainablesocialsolutions.SocialEnterprisesunderstandtheissuesbetterthananyoneelsethereforetheirsolutionsbestmeettheneedofthecommunitiesandbetteracceptedastheyweredevelopedfromwithinthecommunities.

Toanotherextent,withthebottomupapproach,therearemanyviewsthatSocialEnterprisescanonlybestemmedfromprivatesector.ThisunderstandingmayleadtonumerousdebatesiftherewasintentiontotransformsomegovernmentrelatedorganisationstoSocialEnterprises.IntheUK,therehavebeenviewsfromSocialEnterprisessectoropposingtheintentionofMinisterofHealthtotransformaHealthprogrammeandFundtoaSocialEnterprise.

Openandconnected:OperatingintheSocialsector,SocialEnterprisesareveryopenandwillingtoconnect.Withlimitedresourcesandeagernessofimplementingfeasiblesocialideas,SocialEnterprisesshareatypicalfeatureofopenness.Theyareopentowardschanges,oppositionsandespeciallyopportunitiestoaccessnewfunding.Theyarealsodynamictowardssharingknowledgeandexperienceaswellascollaborationamongthemselvesorwithotherstakeholders.PerhapsSocialEnterpriseshavebeenamongtheearlygroupsthathaveadoptedSteveJob’sphilosophyof“connectingdots”.

Leading role of Social Enterpreneurs: We can say that most Social Enterprise development have closelyinfluencedbytheroleofthefounders,thesocialenterpreneurs.Differenttopublicliabilitycompany,individualrolesofSocialEnterpreneurshavehadthoroughimpactonitsoperatingphilosophy,workingandorganisationalstructureandinallofitsoperation.ThisisnotbecauseSocialEnterpriseisfoundedbySocialEnterpreneursbutitsdevelopmentdependsalotonthewill,enthusiasmandthetalentoftheSocialEnterpreneurs.

Social Enterpreneurs often possess necessary skills and competences of traditional enterpreneurs. They arecreative,opentochanges,responsible,optimistic,resilient,willing,dynamicandarenotboundbyconstraintsandlimitedresources.Morethanthat,socialenterpreneursareempatheticandseriouslyconcernedaboutsocialissuesthanothers,theyfindtheirresponsibilitiesinsortingoutsocialissues.Theydonotspendmanyeffortsondevisingtheoriesbutratherfocusonactionswithrealisticandfeasibleresults.

SocialEnterpreneursaremodest,friendlyandclosetopeoplethoughtheyareabletodeveloptheirbusinessverywellwithexpansionofproductionline,shopsorvaluableassets.Traditionalenterpreneurshavetotacklelotsofexternaldifficultiesandchallenges tomaintainanddevelop theirbusiness; it isevenharder forsocialenterpreneursastheyhavetocompeteequallyinalessfavourableconditionoflackingoffunding,infrastructure,humanresources,knowledge,healthandrecognitionofthesocietyandrelationshipwithgovernment.

Not tomention thatmanypioneer- Social Enterpreneurs in new sector have to invest heavily in “educating”consumersontheirnewproducts.Organicandlifestyleproductsaretypicalexamples.

ThedependencyonSocialEnterpreneurscanbeconsideredasaweaknessofSocialEnterprises.Forexample,issue relating to the inheritance of the business. Will the following generation of leaderships of the socialenterprisesmaintainitsvision,missionandspiritofthefoundinggeneration?ThispresentsabigquestiontoquiteanumberofSocialEnterprises.

StaffsofSocialEnterpreneursaresocialworkers.ThoughSocialEnterprisesattractlotsofvoluntarycontribution,theirstaffs including foundersareprovidedsalaries for theirworkas if theyworked inotherorganisationsorenterprises.

Therefore, staffsof socialenterprisesarenotvolunteers. Internationally, socialwork isa specific joband theconceptofsocialworkershasbeenquitepopularforalongtime.Inaway,staffworkinginSocialEnterprisescanbeconsideredaspartofthisprofession.

1.1.4. SocialEnterprisesintherelationwithotherorganisationsandsocialtrends

In theprocessof raisingawarenessandpolicydevelopment for Social Enterprises, there is aneed for cleardistinctionbetweenSocialEnterprisesandotherprofitmakings,nonprofitmakingsandsocialmovements/trends.

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Pure profit

Traditional enterprises

EnterprisesthathasCSR

Social enterprises

IncomegeneratingunitinsideNGO

Traditional NGO

Puresocialbenefits

Sources: http://www.centreforsocialenterprise.com/

NGOs

Legalstatus

Mission

Solutions/tools

Impact

Financialresources

Liabilities

Useofprofit/funding

NGO,NPO,Charities

Solelyforsocialbenefit Voluntary/charityactivities

Creatingsocialvalues

Donation/sponsorship

Sponsors,beneficiariesandpublic

Todirectlydeliversocialactivities

OrganisationsorEnterprises

Socialmissionascore

Businessactivities

Creatingbothsocialandeconomicvalues

Combinationofsponsorshipandbusinessrevenues

Socialinvestors,customers,beneficiaries,communities

Toreinvestintotheorganisationtoscaleupactivitiesandcontributiontothecommunities

Limitedcompanies,Jointventures,Collectives,Privatecompanies,Maximisationoffinancialbenefit

Businessstrategies

Creatingeconomicvalue

Businessrevenues

Shareholders,owners,customers,communities

Profitanddividendsforownersandshareholders

SocialEnterprisesTraditional enterprises

Positioning Social Enterprises in relations to Traditional Enterprises and NGOs

SocialEnterprisescanbeseenasstandingrightinthemiddleoftraditionalenterprisesandNGOs,thetwomostcloselyrelatedtoSocialEnterprises.OnoneendareenterprisesoperatingformaximumfinancialbenefitandtheotherendareNGOsestablishedtosolelydeliversocialbenefits.Increasingly,moreenterpriseshavebetterunderstandingoftheircorporatesocialresponsibilities(CSR)andhaveembeddedCSRintheirbusiness.

Thoughthemainfocusofenterprisesarestilltomaximisefinancialbenefit,theycommittoadaptCSRastheirbusinessprinciples,payingattentiontoenvironmentalprotection,andmakingcontributiontothecommunitiesaspartofthebusiness.Ontheotherhands,NGOshaveestablishedarm-lengthbusinessorspecificprojectswithintheirstructure.Theseparts,thougharenotthecoreoperationoftheNGO,theyareevidencesofthedynamismofNGOstogetovertheirpassivenessintheirrelationwithsponsorsandotherNGOstogeneratemorefundingfortheiroperation.

Image 3 : Positioning Social Enterprises

Rightinthemiddle,SocialEnterprisesaremodelsthateffectivelycombineboththeessenceandfeatureofthetwotypesoforganisationstofocusonthecorebusinessbutnotsolelyforthepurposeofearningbenefitbuttoaddressaspecificsocialissue.

Table 1: Comparison between Social Enterprises, NGOs and traditional enterprises

ĐánhgiáhiệuquảhoạtđộngcủaDNXHnhưthếnàolàmộttrongnhữngcâuhỏiquantrọngnhấtđốivớicáchnhìnnhậnvềvaitròcủaDNXHtừphíacôngchúngcũngnhưnhữngngườilàmchínhsách.

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1typicalenterprise1mediumsizeofsocialenterprise (underthecompanyform)

Capital:1,6billionVND

51employees(include18disablepeople)

Impactto2,262beneficiariespeople

400millionVNDprofit/15billionrevenue

Othersocialvalueandenvironment

Accordingtosocialenterprisesmappingexercisein2011byBC,CSIPandSpark

Capital:16,8billionVND

36employees

Profit320millionVND/13,4billionVNDrevenue

AccordingtowhitebookSMEsVietnam2011

Source: contribution from Nguyen Hoa Cuong (2012)

Image 4: Assessment criteria of impact of Social Enterprises

Successoftraditionalbusinessesisassessedannuallybytheirnetprofitasstatedexactlythroughthebottomlineoftheirbalancesheetattheendoftheyear.AchievementsofNGOscanbeassessedthroughthenumberofpoorstudentswhohavegivenrelevantschooling,thenumberofremoteareasvillagesthathavegotaccesstocleanwaterorthenumberofpeoplehasattendedpromotionaleventsonclimatechanges... Assessmentoftheeffectivenessofsocialenterpriseswillneedtobebasedonbothcriteriaofthesocialandeconomicvaluestheycreate.ItwillbeaseriousshortfallifassessmentofSocialEnterprisesthatprovidevocationaltrainingstodisadvantagedchildrensuchasKOTO,orprovidingITtrainingtopeoplewithdisabilitiessuchas“theWilltoLive”centre,ortheonethatoffergoodenvironmentforautismchildren,ororganisationthatprovideemploymenttopeoplewithaidsornewlyreleasedprisoners,wassolelybasedonrevenuesornetprofitsoftheorganisations.BloomMicroventures,Ecolife,MarineGifts,PTTâyBac,MaiHandicraftandMekongQuilt...maynotgainhighprofitmarginssuchasotherenterprisesoperatinginthesamemarket,however,thesocialimpactthattheseSocialenterprisescreate(suchassupportinghundredofruralfamiliesgettingoverpovertylinewithsustainableearningtools)isnotquantifiedeasilyintofinancialgain.ThisnatureofSocialEnterprisesiswidelysharedamongtheSocialEnterpreneurs,thefoundersofSocialEnterprisesandsocialinvestors,butmoreworkneedtobedonetoincreaseawarenessandappreciationamongthepublicandpolicymakersofthischaracteristicofsocialenterprises.

Table 2: Comparative social impact index between Social Enterprises and traditional enterprises

Sources: http://www.enterprisingnonprofits.ca/what-social-enterprise

Social Enterprises seek a Blended Return on Investment

SocialReturnonInvestment

ReturnonInvestment

FinancialReturnonInvestment

BlendedValueReturnonInvestment

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Advantages of Social Enterprises in relation to NGO

SocialEnterprisesareoftencomparedwithnongovernment,non-profitmakingorganisationsandcharity.TheconceptofNGOswasestablishedafterthesecondWarWorldtoemphasistheneutralpositionoftheorganisation,distinctthemselvestoparticipatingorganisationsthatareinfluencedbygovernmentssuchasUN,WTO,andEU... Non-profitmakingorganisation (NPO)arepopularconcept in theUSA todistinct thoseorganisationswith forprofitmakingenterprises.While,philanthropiesandcharitiesarethosewhoprovidenon-returnfinancialsupportforcharitypurposes.Thesethreetypesoforganisationsareverysimilarbutnotexactlythesame.WithSocialEnterprises, itscharacteristicsofnon-profitortobemoreexactnotforprofitmakingneedtobeemphasisedmost;however,inVietnam,NGOshasbeenwidelyacknowledgedingovernmentdocumentationsandpolicies,representingthewholecommunityofnon-profitandcivilsocietyorganisations.Therefore,inthissection,NGOswillbeusedasageneralconceptincomparisonwithSocialEnterprises.

BelowarethefourcommonweaknessesthataresharedbyVietnamandinternationalNGOs:

Dependence on donation: Most NGOs are heavily dependent on sponsors and donors (individuals andorganisations)inboththeirvision,directionandoperationareas.AnumberofNGOssuchasWorldVision,WWF,Plan International, Oxfam have developed their own vision and mission as well as their business approach,however,thisautonomyrequiretheNGOstooperateata largescalewithawiderangeofsponsors. Inthesecase,sponsorsanddonorsmakingcontributionwithappreciationandagreementtotheNGOvisionandculture.

Ontheoppositeside,smallNGOsareheavilydependentonsponsorsordonorsfromdevelopingtheirobjectives,operationalapproachtotheselectionofprojectsandidentificationofprojectbeneficiaries...Lackofautonomy,theseNGOsbecomeverypassiveandbeingconstrainedwithintheirownoperationandinitiatives.Theycouldnotexpandtheirprojectsifnotacceptedbysponsorships.Inanotherwords,NGOsinthesecircumstancesexistvirtuallyasvehiclesforfundingdisbursementofthedonors.

Lackofsustainability:MostNGOprojectslacksustainabilityevidencedintheirprojectapproachaswellaslimitedsponsorship.Allprojectsaredesignedbasedonspecificresourcestodeliverspecificobjectives.Astheycannotgeneratemorefundingfromthecorefunding,regardlessofwhethertheprojecthassuccessfullydelivereditsobjectivesornot,theycannotcontinuebeyondprojectlives,unlessprojectownersweresuccessfulinattractingmoresponsorshipforextension.

Mostprojectsareoneoffsandindependent;thereforeimpactoftheirsocialsolutionsarenotmaintainedbeyondtheboundariesandlivesoftheprojects.Forexample,whentheLMPAprojectfundedbyDenmarksupportingpoorpeopleinNhaTrangseaconservationareasfinished,allthebeneficiariesareabandonedwithriskofhavingnosustainableearningtoolsorapproach.

More importantly,NGOsapproach in thesecase areoften “ oneway” and “free” thereforehavecreated thetendency of dependence and passiveness of the beneficiaries. Projects approaches do not encourage thebeneficiariestoimprovetheirstatuswithmoreautonomyaswellasearningtools.

Box5:Congratulationsforbeingclassifiedaspoor

InternetcommunitiesinHoNamprovince,Chinaareconcernedwithaphotoofanadvertisement“selfflat-tered”ofalocalareaintheprovincethatisclassifiedaspoor.Inthephoto,thereisanelectronicwording“CongratulateTanThieudistrictforbeingclassifiedasthemostneededareaofthecountry,becomingthekeyfrontlinethattheGovernmentwillneedtoprovidesupportinthecomingstage”.Thesamecontentissharedinthedistrictofficialwebsitewww.xinshao.gov.cn.Whenquestioned,thedistrictpropagandaunithasexplainedthatthiswasaspontaneousactoftheadvertisingcompany.

Source: Ngoc Bi- www.thanhnien.com.vn, 01/02/2012.

Theabove is an illustrationof thedependenceof the local communityonGovernment support. Thoughnotexactlythesame,webelievethesameattitudeisnotlesspopularinVietnamandregionalNGO.

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Box6:Tears...Charity

...Recently, there havebeen a trendof doing so call “charity’” activitieswherepeople clings to theword“charity”topositionthemselvesforeitherfame,statusorprosperity... AccordingtoGovernmentregulation,thereisonlyonecompulsoryfundthateveryonehastocontributetothatistheFloodandStormpreventionfund,allotherfundsarevoluntary.Individualsmaketheirownjudgmentofwhethertojointhefundandhowmuchtheywouldliketocontributetootherfundssuchas“Gratitudefund,Childrenprotectionfund,PovertyreductionFund,Socialwealthfarefund,EducationEncouragementFund,FundfortheElderly,DrugPreventionFund,Fundtosupportinfrastructuredevelopment...

Inadditiontotheabovefunds,therearemanyotherfundsthatwereestablished“spontaneously”throughotherorganisations.ManyindividualshaveabusedthesekindsofcharityfundstopolishtheirbrandaswellastoPRforthemselvesjustfortheirownbenefit. Bignamesandsingerswithverbalcharitycommitments

There were so manymedia articles regarding the “Miss Earth and Businesses care of People in CentralVietnamGala”organisedbyHoChiMinhCityCrossedfederationincollaborationwithGiaGiaPreciousGemsjointventurein2010.Theeventgeneratedahugecontributionof74billionscontributedbymanybignamesthroughauctionsession.However,aftertheevent,manyofthebignameshaveavoidedtocontributethepromisedfundingastheywouldnotgainmuchfinancialbenefitfromthataction.

Regarding the wrong use of charity fund, recently, Prime Minister Nguyen Tan Dung has issued a Note 253/TTg-KTTH, dated 29/02/2010 required 8 provinces: Binh Dinh, HaGiang, Lai Chau, Nghe An, Phu Yen, Quang Nam, Quang Ngai, Thanh Hoa to seriously review and draw lessons on their wrong report of casualties caused by natural disasters and plagues in 2009; the issue of slow disbursement of fund; the wrong use of fund; and wrong beneficiaries and lack of compliance of regulations and rules.

Charityfundgotowrong/evilplaces

...ThemostrecentlydisclosedcaseinthelasttwomonthswasthecaseofNgoTrongBinh-ChairmanofKhanhHoaCrossfederation,cumDirectorofKhanhHoacommunityFirstAidstrainingcentre,whohadusedfundraisedtosupportchildrenwithheartoperationforawrongpurpose.

Specifically,atotalof1,6billiondongwasraised,however,only840millionwascashedintothefund,therestwastransferredtotheHumanityPromotionMediaAgency,aneventorganisingcompanywith50%ofthefundusedtopayforthepromotionactivitiesaccordingtocontractbetweenthecompanyandtheFederation.Notonlythat,Mr.NgoTrongBinhusedthedevelopmentfundgrantedbytheCentralCrossfederationtobuymotorbikesunderhisnameforhisprivateuse.

Le Hai Chau(memberofVietnamFatherlandFrontCentralCommittee)

Sources: http://suckhoedoisong.vn (15/3/2012)

Low productivity: Attention should be drawn to the fact that, not only the beneficiaries lack motivation ofbecomingindependentortrytohavematchingfundwhenapproachsponsors,inmostcases,eventNGOsdonothaveselfesteem tocomeupwithsustainablesocial solutions.AnumberofNGOshavebecomepassivedisbursementchannelforsponsors.Infact,beneficiariesdonothavemanyopportunitiestodirectlysharetheirwishes,theirneedsandbenefitswiththesponsors.

NGOs have therefore become invisible barriers between sponsors and beneficiaries. This is called “broken -feedbackloop”. Inthesecases,thebenefitsoftheNGOsmightbecloselytiedtotheintentionofkeepingthebeneficiariesstaywheretheyare(intermsofbeingpoor,havingdifficultiesandneedsupport)sothatNGOscanmaintaintheirsponsoredprogrammes.

Atthesametime,notallsponsorsreallycareaboutthebeneficiaries.PressuretodisbursefundingontimehasdeprioritisedsocialimpactinthepriorityladderofbothNGOandsponsors.Inthisaspect,NGOsoperationcanbeconsideredasaprominentindustry.

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Box7:BritishAmbassador-ODAforVietnamwilldecrease

InadditiontothedecisionofstoppingfinancialaidtoVietnamin2016,BritishAmbassadorinformedODAwillalsobedecreasedfromnowtotheendoftheprogramme.

Inthepressbriefingon2/3/2011inHanoi,BritishAmbassador,andDr.AntonyStokesannounceddecisiontostopODAtoVietnamin2016aftertheBritishSecretaryofStateforDevelopment(DFID)reportedresultsoftheAssessmentoftheimpactofmultilateralandbilateralaidprogrammeson1stMarch.Inparallelwiththecutofthefundingin16countriesincludingVietnam,theUKwillre-focustheirsupportinother26countries,mostareinAsiaandAfricasuchasEthiopiaorBangladesh.

“AsVietnamhasreachedmiddleincomestatuswithadynamicemergingeconomy,wewillceaseourofficialaidtoVietnamin2016tofocusoursupportonpoorerandmoreneededcountries”statedbyBritishAmbassador.

Source: www.vnexpress.net/, dated 2 March 2011

Of course,manywill share the views that the above are justminorities, a very fewcases in thewholeNGOcommunity.Itisright,however,itisclearthatlackingofstructuredsupervision,commercialeffectivenessarestillchallengesinNGOoperations.Thatnottosayyetabouttheotherexpensesincurredinintermediaries,especiallyinprojectconsultation,M&Econsultationswhichareundertakenatfacialvaluenottoaddrealvaluetotheprojectcomparedtothoseincommercialsector.

TrendofreducedinternationalaidstoVietnam:WhenVietnamreachgoodeconomicgrowthrateandbecomeamiddle incomecountry (year2010),officialODAandprivatesupporthasstarted todecrease.AnumberofcountrieshavedeclaredtheirroadmapofreducingofficialaidsfromVietnamtoturntomoreneededcountries.

ComparedwithNGOs,SocialEnterprisescanaddressmostoftheabovementionedshortfalls.Firstofall,SocialEnterprisescanimprovetheindependence,autonomyandsustainabilityoforganisationsaswellastheirsocialsolutions.

ThemorerevenueSocialEnterprisesgenerated,thebetterpositiontheyhaveestablishedinrelationwithdonors.SocialEnterprisescanpursuetheirownobjectivesanddelivertheirinitiativesintheirownways.Moreimportantly,theycanwidentheirtargetaudiencesandbeneficiariesasmuchastheywant.

The most important factor is that Social Enterprises always approach social solutions in a sustainable way.Beneficiariesaretrainedprofessionally,providedemploymentandsupportedwithsustainableincomegeneratingbusinessthattheycanoperateautonomously.KototraineesaftertwoyearstrainingwillbegrantedwithanofficialcertificatefromBoxHill,Australia.Thisisacrediblecertificateforrestaurantandhospitalitybusinessandisfullyrecognisedallovertheworldincludingfivestarhotels(BoxHill isamongthetop40TAFEvocationaltraininginstitutioninAustralia).Infact,manyKototraineesarenowworkingaschiefsandrestaurantstaffin5starshotel.

Intermsofefficiency,operatingasabusiness,SocialEnterprisesseektooptimiseitsbusinessasfortraditionalbusinesses.BeneficiariesofSocialEnterprisesarealsotheiremployeesandcustomers;thereforetherearecloserelationshipsbetweenthesestakeholdersandfoundingmemberoftheSocialEnterprise.Moreover,asmajorityofSocialEnterprisesselfdelivertheirinitiativeaswellasfullyresponsibleformonitoringandevaluatingbusinessthereforetheycanbypassexpensesrelatingtotheuseofintermediaries.

Asdiscussedearlier,inthecontextofreducedinternationalsponsorships/aids,SocialEnterprisescanbecomeanalternativemodelforNGOprojectsinVietNam.

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Source: A.Carroll (1999)

Ethical Philanthropics

Ethical Responsibilities

Legal Responsibilities

Economic Responsibilities

Social Enterprises and CSR

SocialEnterprisesareoftencomparedwithCorporateSocialResponsibilities(CSR).ThetruthisthattheyareoftenmistakenasCSR.Infact,thesearetwodifferentconceptswiththefirstasabusinessmodelandthesecondisatrendofmobilisingsocialsupport.

Image 5: Components of CSR

CSRisaselfgeneratingmovement,toimproveawarenesswithinenterprisestoensuretheirbusinessisoperatedaccordingtocommonbusinessethicsandstandards.CSRmovementrequiresenterprisestoapplyresponsiblebusinessapproachtowardsemployees,clients,communitiesandenvironmentasacorporatecitizenship.

AccordingtoA.Carrollmodel(LuuMinhDuc,2008),CSRexitsinfourlayers.Intermofthemostbasicresponsibility,enterprises need to ensure stable income for its employees, and profit for shareholders. Second, enterpriseneedstoberesponsibleinfullycomplyingwithlegalregulationwheretheyhaveregistered.However,thesearejustthebasicresponsibilitiesthateverybusinessneedtorespect.

Thethirdresponsibilitywhichisalsocentraltoanybusinessthattheyneedtocomplytoisbusinessethic,workingconditions for their employees, quality of services andproducts, environment protection and for communitybenefits.Finally,charityisoftenconsideredasoptionalresponsibility.However,manycompaniesusethisasaPRtool,whilehavenotcompletedtheirbasicresponsibilities.

ACSRconceptistriplebottom-lines.Accordingly,today’senterprisesshouldnotonlyfocusonpursuingeconomicprofit(Profit),butalsomustensurethat‘profit’relatingtopeople(People)andenvironment(Planet)areachieved.ThesearethethreemeasurementsofCSRcommitmentofabusiness.

Thus,wecanseeCSRandDNXHaretwodifferentandindependentconcepts.EnterprisesthatcommittoCSRactivitiesarestilltraditionalenterprises.Inotherwords,CSRonlymakesthebusinesslookgoodwithoutchangingitsnatureandmodel.Meanwhile,SocialEnterprisesarebusinessmodelsthathavedifferentoperatingnaturethantraditionalbusinesses.

However,SocialEnterprisesoffereffectivebusinessmodelsandchannelsforbusinessCSRagenda.InIndonesia,thestate-ownedenterprises(SOEs)andforeigninvestmententerprises(FDI)arerequiredtospendacertainamountoftheirprofit(by2.5to5%profitasCSRtax)tosupportsocialandcommunityobjectives.Seizingondemand,SocialEnterprise,Provisihasbeenverysuccessfulincollaboratingwithanumberofforeigninvestedenterprises,suchasChevron,BP-RioTintotospendtheseCSRtaxesonprojectssupportingeducationofpoorchildreninIndonesia.

Social Enterprise and Fair Trade

SocialenterprisessharemanysimilaritieswiththeFairTrademovement(FairTrade).FairTradeisawellorganisedsocialmovement,withamarketbasedapproachsupportingmanufacturers,peopleofdevelopingcountrieswithbettertradingandmoresustainabledevelopmentconditions.FairTrademovementencouragemultinationalcompaniessuchasNike,Gap,Nestle,Unilevertoabandonactsofpricepressure,facilitatingamoreequitabletradeforsmallproducersandthepoorindevelopingcountriestoobtainmoresustainablegrowthandmutualbenefitinthatvaluechain.

FairTrademovementisledbysomeglobalNGOssuchasFairTradeLabelOrganization(FLO).FLOassessqualityofproductsandproductionprocess to issueFairTradestamp forproducts that satisfyFairTradestandards.

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Productswith Fair Trade stampguaranteebigger sale asWesternEuropeandAmericacustomerspaymoreattentionstosocialandenvironmentalstandardsoftheproducts(moralConsumerism).

Image 6: Some typical Fair Trade trademark

Source: www.wikipedia.org

FairTrademovementisledbysomeglobalNGOssuchasFairTradeLabelOrganization(FLO).FLOassessqualityofproductsandproductionprocess to issueFairTradestamp forproducts that satisfyFairTradestandards.Productswith Fair Trade stampguaranteebigger sale asWesternEuropeandAmericacustomerspaymoreattentionstosocialandenvironmentalstandardsoftheproducts(moralConsumerism).

Currently,theFairTradeconcepthasbeenintroducedtoVietnam.However,thenumbersofenterpriseswhoseproductsarelabeledFairTradearestillverylimited.Onthebasisofsharingsimilarsocialgoals,SocialEnterprisesandFairTradecandevelopsidebyside.

SocialEnterprise,MaiHandicrafthavecreatedemploymentsforacommunityofpoorwomenintheSouthCentralCoasttoproducehandicraftproductswithFLOcertificationsandFairTradestamps.BecomeamemberofFLOhaveofferedMaiHandicraftwith great advantagesof having free support of design andpatterns aswell asmarketingtheirproductstointernationalmarkets.

Scale of Social Enterprises

Asmentionedabove,inprinciple,scale,durationandthepossibilityofreplicationofsocialenterprisesarenotlimited.Therefore,atpresent,inVietnam,SocialEnterprisescommunitymightstillbequitemodestthatwehavenot fullyrealisedthepotential fordevelopmentof thismodel;howevermanytheorieshaveprovedthegrandscaleanddeepmeaningofSocialEnterprisestothesocietyinthefuture.

Image 7: Social activities matrix

Sources: Roger L. Martin & Sally Osberg (2007)

Direct

NatureofAction

Outcome

SocialServiceProvision SocialEntrepreneurship

SocialActivismIndirect

Extant SystemMaintained and Improved

New EquilibrumCreated and Sustained

PURE FORMS OF SOCIAL ENGAGEMENT

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The authors Roger L.Martin and SallyOsberg (2007), as boardmembers andCEOof the Skoll FoundationhaveintroducedafamousSocialEnterprisematrix;accordinglytothematrix,threetypesofSocialactivitiesarecatergorisedaccordingtotheirapproachincreatingdirectorindirectimpactsandtheendresultsifsocialissuescanbehandledsustainablyornot.

(i) Toprovidesocialwelfareandcharity:isdonedirectlybyNGOsanddonors.Theycontributetosolvingsocialproblemsdirectly.However,theissuesareonlyresolvedtoacertainextent.

Therestillexist,inotherwords,it’s‘equilibrium’(equilibrium)thatsocietyhavetocompromisewhilenotyetabletodeliverfundamentalchanges.ExamplesuchasBoDepagodainGiaLam,Hanoi,famousforitsgestureofadoptingabandonedbabies.Clearly,thenobleactsbringabouttangiblemeaninganddirectlysupportthosechildreninparticularandsocietyingeneral,butthepagodacannotsolveawiderproblemofabandoninginfantsinasustainableway.Similarly,charityprojectSympaMealscanofferlotsofpoorpatientsofKhospitalwithfreemealsandmilkbuttheprojectcannotsolvetheproblemofincreasingnumberofKpatients.

(ii) Thesocialmovementsledbysocialactivists:examplesincludetherevolutionledbyReverendMartinLutherKingforequalrightsoftheblackorCSRmovement,FairTrade...Thesemovementshavecreatedwidespreadimpacts,solvedsocialproblemsinasustainableway,leadingto’equilibrium’ofsocialacceptance.However,thepotentialofdevelopingsuchsocialmovementsarestillveryfewandtheyaretimeintensiverequiringfavourableexternaleconomicandsocialconditions,inparticular,thesemovementscanonlybeimplementedindirectlyviaaffectedcommunities(intermsofCSRthatmeansenterprises)tocreatechanges.

(iii)WhilstSocialEnterprisecansolvesocialproblemsdirectlyandsustainably.AlsoprovidingsocialbenefitssuchasNGOsbutSocialEnterpriseshavemoreadvantages in termsofpossibilityofscalingupandreplicatingmodels.KotoisdevelopinginthedirectionofreplicatingitsmodeltootherlocalitiesinVietnamandoverseas;atthesametime,KotoencouragethegenerationofF2,F3,graduatesofKototrainingprogrammetoreplicateKotomodel(typicallyPots&PansrestaurantwasopenedinHanoibyaformerstudentofKoto).

Moreimportantly,SocialEnterprisesapproachsocialissueswithfundamentalsolutionsandsustainabilitythereforehaveobtainedbetteranddeeperimpacts.IfSocialEnterprises,“HelpCorporation“populateitsmodelofeffectivehealthpreventionimprovingbetterlivingstyle,thennumberofKpatientswillbereduced,notincrease(accordingtoHelp,80%ofKpatientsresultedfromunhealthylifestyle).

Abovematrixcomparetypicalandgenuinetypesofsocialactivities. Infact,distinctionsbetweenthemarenotalwaysclear.However,throughthis,wecanacknowledgethatSocialEnterpriseshaveadvantagesresultedfromtheirapproachesaswellasthenaturesofthismodel.Ifthesestrengthsaredeveloped,SocialEnterprisecanbringaboutextensiveandpowerfulsocialimpact.

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1.2. THEDEVELOPMENTOF SOCIALENTERPRISESINVIETNAM

InVietnam,althoughhaveneverbeenofficiallyrecognised,activitiesusingbusinessastoolstoservethepublicinterest,particularlydisadvantagedcommunitieshaveexistedforalongtime.ArecentstudybyCSIP,theBritishCouncilandSpark(2011),foundthatamongthe167organisationsidentifiedwithallcharacteristicsofsocialenterprisesinVietnam,thelongestestablishedorganisationistheHumanitarianCo-operativewhichbelongedtoHanoiDisabledPeopleAssociation,foundedin1973.ThedevelopmentofsocialenterprisesinVietnamcanbedividedintothreemainstagesasfollows: (i) prior Innovation ‘Doi moi’ (1986),socialenterprisesassociatedwithcollectiveownershipandoperatein

theformofCooperativeservingtheneedsofvulnerable/disadvantagedcommunities; (ii) from 1986 to 2010,socialenterprisesassociatedcloselywithNGOsandfundingmainlyfromforeignorganizations; (iii) now,sinceVietnambecameamiddle incomecountry,socialenterpriseshaveoperatedaccordingto

marketprinciples;shiftingfundsfromexternalfinancingtoincomefrombusinessactivities.

1.2.1.BeforeDoiMoi(1986)

Inthecentralizedplanningeconomicsystem,thestate is theonlyentityresponsible forensuringprovisionofsocialservicestocitizens.Theformationandoperationofthesocio-politicalorganisationssuchastheWomenUnion,YouthUnion...werealwaysputunder the leadershipof theCommunistParty, tied tostatemanagementsystemandtheseorganizationsweretheonlychannelsforindividualstoparticipateincommunityactivities.Duringthisperiod,variousformsofsocialorganizationsoperatingindependentlytogovernmentsuchasNGOsarenotallowedtooperateinVietnam.Besides,onlythestateeconomyandcollectiveeconomywererecognisedastwokeyeconomicsectorsofthecountry.

Inthatcontext,cooperativesweretheonlysuitableformofeconomic-socialorganisationsestablishedtomeetsomespecialneedsofitsmemberswithcommunityspirits:Cooperation,sharingandformutualbenefit.Cooperativeswereconsideredasbelongtocommunityownership,atthesametimeoperatingasindependenteconomicunits.Therefore,thecooperativemodelcanberegardedastheearliestsocialenterprisemodelinVietnam.Intermofpolicy, the state had adoptedpolicies to encourage the development of cooperatives from the early years ofbuildingupasocialismcountryintheNorth.By1987,thenumberofcooperativesacrossthecountrywasuptonearly74.000operatinginvariousareascontributingtomeetingpressingneedsofthecommunity.

Box8:HumanitarianCooperative

HumanitarianCo-operativewasestablishedin1973withalonghistoryofproduction,jobscreationformanypeoplewithdisabilitiesmostlyblindpeople.Themainactivitiesofcooperativesincludingmassage,acupres-sure,toothpicksandbroomsproducingandtrading...HumanitarianCooperativecontributedtostabilizationoflivesformanypeoplewithdisabilitiesandalongwiththeStatetosolvesocialproblems.

Source: CSIP

Among the cooperatives thatwere established in this period, a big numberwere established to create jobsandtosupportvulnerablegroups,mainlypeoplewithdisabilitiestoobtainbetterqualityoflives,.Mostofthesecooperatives operated in cottage industry and handicraft, such as rattan and bamboo, embroidery, knit andgarments...becausethisisconsideredasappropriatejobfortheirhealthandworkingconditions.

1.2.2.From1986-2010

Although Social Enterprises had emerged in the form of cooperatives for a long time, business activity forsocial objectives with all basic characteristics of social enterprisesmodel only started to develop since theimplementationofDoiMoipolicyin1986.

Thiswasamilestonemarkingtherecognitionofneweconomicsectorssuchasstatecapitalisteconomy,privatecapitalisteconomyandsmallbusinessowners5.Thus,theactiveroleofindividualsandcommunitiesinprovidingandexchangingservicestomeetpeople’sneedshavebeenrecognizedanddeveloped.

5 After25yearsDoimoi,Vietnamcurrentlyhave500,000Enterprisesintheprivatesector,9,500Cooperativesandahundredthousandofcollectivegroupswhichareoperatingandcontributingtothenationaleconomicgrowth.

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Theopendoorpolicyledtospectaculargrowthofforeigndirectinvestment(FDI)andinternationaldevelopmentassistance (ODA). These activities not only bring huge capital supporting country development, but also theexchangeandsharingofexperienceandknowledgeofsocialdevelopmenthasbroughtinnewmodelsandmethodthatVietnamcouldadopt.AftertheU.S.embargowasliftedin1994,hundredsofhumanitarianandinternationaldevelopmentorganisationscametoVietnam,withhugevolumeofnon-refundhumanitarianaidandnon-refundableODA.Onlyintheperiod2005-2010,thetotalcommittedODAforVietnamwas31billionU.S.dollars6.

Duringthisperiod,thestateadoptedmanyopenpolicies,createdalegalframeworkforthedevelopmentofnonstateeconomicandsocialorganizations.DecreeNo.71/1998/ND-CPongrassroots leveldemocracyandotherlegaldocumentswereissuedin1998,forthefirsttime,officiallyencouragedtheparticipationofsocialorganizationsandcitizensintheprocessofbuilding,implementingandmonitoringpolicyimplementationinthecommunity.

Topromotepeople’sparticipationintheprocessofbuildinganddevelopingcommunity,thestatetookpositivestepstopromotecooperationbetweendifferentorganisations,particularlythroughthestrengtheningofsocialandpoliticalorganizations(massorganizations).Decree35-HDBT(DecreeofCouncilofMinisters)(1992)launchedanumberofsolutionstopromotetheestablishmentofscienceandtechnologyorganisationsbyindividuals.

Decree177/1999/ND-CPandDecree148/2007/ND-CPthendevelopfoundationfortheestablishmentofsocialfunds,charityfunds...Theroleofcommunityorganisationsareparticularlyemphasisedintheprovisionofbasicservicestothecommunitysuchaswaterresourcemanagement,povertyreduction,primaryhealthcare,generaleducationandenvironmentprotection.TheStatepaidspecialattentionandencouragedcooperationbetweennationalandinternationalNGOsincountryandoverseaandlocalgovernments.

Theabovepolicieshaveenabledmassivegrowthoforganisationsandcommunitydevelopmententerprises.Statisticsshowedthatthereweremorethan1,000NGOs,320nationalassociationsand2.150associationsoperatingonvoluntaryprinciplesandautonomyatthecentralandlocal levels.MostoftheseorganisationsreceivedfinancialsupportfrominternationalNGOsanddonorstomaintainoperationsandprovideservicestothecommunity.

Moreover,inVietnamtherearethousandsofcommunityorganizationssuchasculturalhouses,clubs,businessstrandofmassorganizations(e.g.womenunion,veteransassociation,associationofpeoplewithdisabilitiesetc.)andthousandsofothersunitsareprovidingsocialwelfare(providepublicservicessuchaswaste,watersourcesmanagement,etc.).Theseorganisationshavecertaincharacteristicsofsocialenterprisesandcanbetransformedintosocialenterprisesinthefuture.

Alongwiththeopendoorpolicyandcomprehensiverenovation,thestatealsoimplementedreformsinthefieldofpublicservicesbyadoptingsocializationapproach,callingfor investmentandparticipationofalleconomicsectors, individualsandcollectivestosharetheburdeninprovidingpublicservices,particularly inthefieldofpovertyreduction,educationandhealthcare.

Alargenumberofnon-stateeducationalinstitutions,healthcare,cultureandartsorganisationswasestablishedfollowingthispolicyhadpartlysolvedsocialproblemsandsatisfypeople’sbasicneeds.

Box9:ResearchandTrainingCentreforCommunityDevelopment

TheResearchandTrainingCentreforCommunityDevelopment(RTCCD)wasestablishedinMay1996byDrTranTuanwiththeparticipationoffourscientistsandsocialactivists.Atfirst,thecentreoperatedunderthelegalpatronageofanotherorganisation.BySeptember1998,RTCCDwasofficiallyrecognisedasanon-profitindependentscientificandtechnologyorganisationforthepurposeofcommunitydevelopmentinVietnam.Themainactivitiesoftheresearchcentreincludingtraining,consultancyandimplementingofpilotmodelsinthefieldofmentalhealth,disorderprevention,nutritionandpreventionofmicronutrientdeficiency,develop-inghealthcaresystemsinanequitableandeffectivewayandimprovingsocialrelationstoservethecom-munitydevelopmentobjectives.

Source: www.rtccd.org.vn

6 http://www.khoaqhqt.edu.vn/news/172-Nhin-lai-nen-kinh-te-Viet-Nam-sau-25-nam-doi-moi.html

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Box10:HoaSuaTourismEconomicsHighSchool

In1994,“HoaSuaPrivateHouseworkTrainingSchool”wasestablishedwith20students.Sixfemaleretiredteachers(Ms.PhamThiVy,Ms.DoanKhue,PhamKimAnh,NguyenXuanTrinh,PhanTuyetLan,Ms.ZhangBaoLan) hadchosen “Charity job training fordisadvantagedyouth as a life-changingopportunity for thedisadvantaged and unfortunate.” With support from a number of French NGOs and UNDP, the schoolimplementedtrainingprogrammesinEuropeanCooking,Breadandcakemakingandrestauranttableservicesandfindingjobforyoungpeoplewhoareindifficultsituation.

Todate,theschoolhasthreerestaurants,twoshopsandaminihotelintroducespracticalproducts.Theschoolnowhasitsownpremises,residentialquarterforstudent’saccommodation,workshopareas(Stateland,financialsupportforconstructionfromtheSpanishandFrenchEmbassies).In2006,HoaSuacontinuestoestablishtheembroideryandtailoringdepartmentforyoungpeoplewithdisabilities.Currently,theschoolhasbeenallowedbytheMinistryofEducationandTrainingtodelivertrainingsat3 levels:elementaryoccupations,vocationalsecondaryandprofessionalsecondary.2/3trainingtimeshallbedeliveredattheschoolworkshoparea.Morethan7,000disadvantagedstudentshavebeentrainedbyHoaSuaandtheyallhavestablejobsaftergraduation.Revenuegeneratedfromrestaurants,shops(occupied65%ofoperatingcosts)enableHoaSuaschooltobeindependentinfinanceandmaintainfreetrainingprogramstodifficultanddisabledpeoplesustainably.

Source: www.hoasuaschool.com

Ingeneral,innovationwasafertilegroundforthedevelopmentofnonstateenterprisesandsocialorganisationsincludingSocial Enterprises. However, the separation of economic activities and social activities, both inmindset and actualoperation,haslimitedtheintroductionofthehybridmodelasSocialEnterprises.Whenitcomestobusiness,peopleonlytalkaboutnetfinancialreturn,andcommunityactivitiesorganizedbytheenterprisesoftenusedforindividualreputationandtheseactivitiesareconsideredaspurecharity.Meanwhile,socialorganisationsareoftengroupedtogetherwithothertypesofcharitableorganisations,basedonthemobilizationofresourcesfromexternaldonors:ThisnotonlyinhibitssocialinitiativesbutalsooffersSocialEnterpriseswithlimitedchoices:eitheroperateascharitableorganisations,orasanormalenterprise.Inthecontextofabundantexternalfundingforcommunitydevelopmentactivities,povertyreductioninVietnam,mostorganisationschoosetooperateasNGOs.Onlyasmallnumberoforganisations,formanydifferentreasons,havebravelydecidedtooperatewiththeirownresources.Theybelieveinthesustainabilityandeffectivenessofapplyingbusinessmodelstosolvesocialproblemsandsupportthecommunity.

Duringthisperiod,sometypicalsocialenterprisesappearedandactivelyoperatedundervariousformssuchasHoaSuaSchool,KOTORestaurantinHanoi,andMaiHandicraftCo.,LtdinHoChiMinhCity...

Althoughnotyetflourishedinnumberandprovedtheirfullpotential,theexistenceanddevelopmentofthesetypicalsocialenterprisesinthelast10yearshavedemonstratedthepossibilityofsuccessfullycombinebusinessmodelwithsocialdevelopmentobjectives,eliminatethegapbetweeneconomicandsocialsectors,openingupathirdareaofsocialenterprises.

1.2.3.From2010-todate

AsVietnamenteringthethresholdofalowaverageincomecountryanewdevelopmentopportunityhasopenedupforthenation.ThatmeansVietnamhasbetterandactivecapitalcapabilities,povertyhasbeensignificantlyimprovedformajorityofthepopulation.However,thisalsoledtopolicychangesinhumanitarianassistanceandsocialdevelopmentofothernationalandinternationalorganisationsinVietnam.

We have witnessed the departure of a number of bilateral development organisations such as SIDA, FordFoundation, or the declining of ODA funding to has opened up Vietnam, to be shifted to poorer countries(Denmark,UK).Ifwecontinuetodependonexternalaid,Vietnamwillfacetheriskofseriousshortageofcapitalfor community development activities in the coming time.Meanwhile, themobilisation of funds fromdonorsand thecommunity inVietnam is rather limited.A recent studyby theAsia Foundation (2011)oncharitablecontributionsinVietnamshowsthegreatpotentialcontributionfrompeopleandenterprises,butduetolackofofficialcharitablechannelsandlackofappropriatepolicies,mostcharitableactivitiesarespontaneous,small-scaleandlimitedwithinsmallcommunities.LackofoperationalfundsplacesseriouspressureonthousandsofVietnameseNGOsandcommunitydevelopmentprojectsinthenearfuture.

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Box11:TheCentreforSocialInitiativesPromotion(CSIP):

Establishedin2008,CSIPisaVietnamNGOwiththemissiontocontributetobuildingofafair,prosperousandsustainablesocietythroughthepromotionofbusiness initiativeswhichbringaboutdeepsocial impact.CSIPdirectlysupportSocialEnterprisesatstartupphase,andattractedparticipationofstateagencies,businessesandcommunitiestopromotesocialenterprisesmovementinVietnam.ItcanbesaidthatCSIPisthefirstorganizationofficiallypromoteandbuildsocialenterprisesmodelinVietnam,enablesmall,separateanddiscreteoperationsofsocialenterprisestocollateintoanorganizedmovementandnetworkforequitableandsocialdevelopment.

Since 2009, CSIP and its partners operated twomajor assistance programs annually: Start-up and Take-off. So far, 43 Social Entrepreneurswith29 Social Enterprises havebeen selected through a survey andthoroughappraisingprocesstoreceivefinancialandtechnicalassistance(trainingonSocialEnterprisemodel,organisationalmanagementskills,financialmanagement,marketing,etc...).

The social enterprises currently contribute to solving social issues such as environmental protection,vocationaltrainingandjobscreationforpeoplewithdisabilities,poorwomen,andpeople livingwithHIV/AIDS,communityhealthcare,psychologicalhealthandcareforchildrenwithautism...andinitiallytheyhaveobtainedremarkableachievement.

Thefirst19socialenterpriseprojectsalonehavehelpedtoimprovequalityoflifefor17,000peopledirectlyand200,000people in disadvantaged communities indirectly. Among them, there are four initiatives andsocialdevelopmentmodelsthathavebeenreplicatedinotherlocalitiesandhaveraisedadditional4USDforevery1USDinvestedbytheprogram.

InMarch2012,CSIPhascooperatedwithauditingcompanyDeloitteVietnamopensthefirst incubatorforSocialEnterprisesinVietnam;thisprovidesbasicofficefacilitiesforSocialEnterpriseideasatstart-upstageoryouthprojectsthathavepotentialtobecomeSocialEnterprises.

Source: www.doanhnhanhxahoi.org

Box12:TheWilltoLiveCentre

Vietnamhasupto6.1millionpeoplewithdisabilities(PWDs)accountedfor7%ofthepopulation,whichlargelydependenton support from the family (95.8%).Nearly33%of householdsof peoplewithdisabilities, livebelowthepovertyline.Noticedandunderstoodtheneedsofpeoplewithdisabilities,empty-handed,NguyenCongHunghasestablishedbyhisownandledtheWill to livecentresinNgheAnandHaNoiwithsteadydevelopmentinthelast7years.

Thepurposeof thecentre is to supportdisabledpeoplewith full integration through trainingactivitiesofinformationtechnology,vocationaltraining,jobplacement,andconnectionwithproductionfacilitiestofindout-putsforproductproducedbypeoplewithdisabilities.

Socialenterprisesatthistimewereoriginatedfromthethreemaingroupsasbelow:

(i) The NGOs:transformtheoperatingstrategyoftheorganizations,ortoestablishstrandasaSocialEnterpriseto: · generateincometoincreasefundingsources;and · moreeffectiveuseandmanagementofresourcesinprovidingpublicservicebasesonmarketmechanism.

In thiscontext,Center forCommunity InitiativesPromotion (CSIP)withpartnerssuchas theBritishCouncil (BritishCouncil)andSparkCentre,haveactivelypromotedandintroducedsocialenterprisesasanewsolutions,analternativeorganisationalmodelthatfitthecurrentsocialandeconomiccontext.Thestrengthofsocialenterprisesistheabilitytoapplybusinessmodelbasedonmarketprinciplesanddemandstoaddressmarketfailuresandsocialproblems.Inotherwords,SocialEnterprisescansolvebothsocialandeconomicobjectivesinwhichsocialobjectivesarekeygoals.Achievingeconomicobjectivesisthemeantoachievesocialobjectivessustainablyinalarge-scale.

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(ii) Group of companies pursuing shared value:inwhichthecreationofeconomicvalueisdoneinawaythatitalsocreatesvalueforsocietybyrespondingtosocialneedsandchallenges.Here,thesharedvalueisnotsocialresponsibility,charityorevenforthepurposeofsustainabledevelopment,itisanewwaytocreateeconomicsuccess.ThesocialvaluesareembeddedintheADN(thecorevaluechain)ofenterprisesasanindispensableelementinthecompetitivecapabilityofenterprises7.Somedevelopmentorientationsoftheseenterprisesare: · Fair Trade:EnterprisessuchasMaiVietnamHandicraftinHoChiMinhCitysupplyhandicrafts,farmforest

products,create jobsandprovide incomealongwitheducationalopportunities forhundredsofpoorwomeninmanypartsofthecountry.

· The business group target at the Base of the Pyramid Group (BoP):identifybusinessopportunitiesthroughmeetingtheneedsofpoorcommunitieswithaffordableservice.

· Enterprises aim to resolve issues related to society and the environment.

Box13:MaiVietnameseHandicrafts-MVH

MVHisasuccessfulsmallenterpriseestablishedbytwosocialofficersin1990inHoChiMinhCity.Builtonthebeliefthatsocialdevelopmentshouldbelinkedcloselytoeconomicautonomyfordisadvantagedcom-munities,MHVhasaccessedandworkedwithartisan(70%arepoorwomen)inremoteruralareastotrainandcreatejobsforthem,andtomodernizeandincreasethevalueofVietnamesegoodsandhandicraftsintheinternationalmarket.

AsoneofeightVietnamesemembersoftheWorldFairTradeOrganization(WFTO),MVHisworkingwith21groupsincludingmorethan1,100craftsmenmainlyinthesouthernprovinces(withanaveragesalaryof3.4millionVietnamesedong/person/month).

Source: Case study-Mai Vietnamese Handicrafts, Growing Inclusive Markets, UNDP 2011.

(iii) Group of new social enterprises:AftertheSocialEnterprisesconceptwasintroducedintoVietnaminrecentyearsandisencouragedandsupportedbyintermediaryorganisationswithSocialEnterprisesdevelopmentrolesuchasCSIPandSpark,moreindividualshavestartedtheircareerbyestablishingSocialEnterpriseswhichcanoperateinmanydifferentforms(NGOorlimitedcompany,joint-stockcompany).TheseSocialEnterprisessharesomecommonfeaturesas: · FoundedandledbySocialEnterpreneurs(individualorpartnership)withhighautonomy. · Provideinnovativesocialsolutions · Social environmental objectives are core to the organisation. These are reflected throughout the

operationwithtransparency. · Highlycompetitivewithmarketorientation. · Optimisingnotmaximizingprofit.Majorityofprofitsisusedforreinvestmentandenhancingimpactnotto

bedistributedtoinvestors. · Collectiveandcommunityownership,withdemocracyandparticipationofpeoplesharingneedsand

goals. · Accepthighrisk.

Since 2009, Hung established the “Will to Live” centre and Technology Vision and Solutions Joint Stockcompanytodevelopbusinessactivitiestogeneraterevenuesandcreate jobsforthosewithdisabilitiesatthecentre.Formanyyears, theWill toLivecentrehasbeenawarded thecertificateofmerit for thebestinformationtechnologytrainingforpeoplewithdisabilitiesbytheMinistryofInformationandCommunications.

Nguồn: www.doanhnhanxahoi.org

7 MichaelE.Porter,MarkR.Kramer,CreatingSharedValue,HarvardBusinessReview,2011

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1.2.4.AbriefonthestructureofSocialEnterprisesectorinVietnam

InformationaboutthestructureofSocialEnterprisemovementinVietnamarebasedonasinglestudytodateinthisfield-‘VietnamMappingofSocialEnterprise‘undertakenbyCSIPVietnam,theBritishCouncilandSparkin2011.Basedondatacollectedfrom167SocialEnterprisesfrom25provincesparticipatedinthesurvey,thestudyshowedthatthemajorityofSocialEnterprisesconcentratedinHanoi(41%)andHoChiMinhCity(13%).ImpactsofSocialEnterprisesintheremaining38provincesareminimal,duetolowawarenessandsupportofdevelopment.

Organisational forms and legal status

SocialEnterprisesoperateundervariousorganizationalformswithdiversifiedlegalstatus,rangingfromordinaryenterprisetoclubsandassociations:

Image 8: Organizational forms/ legal status of 167 Social Enterprises participated in the mapping exercise

Source: ‘Vietnam Mapping Social Enterprise project’ (2011)

0

10

20

30

40

50

60

Centre Companies Club/Association

Co-operative Others

5550

25

1720

ItwasclearfromthechartthatthemostcommonformofregistrationofSocialEnterprisesis“Centre”becauseitcanenjoymanyadvantagesinVietnamlegalproceduresintermsofestablishment,taxsupportandaccesstofunding.Here,itshouldbenotedthatcentresarepopularoperatingformsofNGOs,wereformedasaresultofimplementingdevelopmentprojects.

Scale and economic efficiency

The table below shows that companies are organizations that have the biggest beneficiaries among majorcategories,onlyafterothertypessuchasfunds,localagenciesandinstitutions.

Box14:ToHestockcompany

Realizingcreativepotentialofchildren,especiallydisadvantagedones, thathasnotbeenencouragedanddeployed effectively, TO HE is a Social Enterprise established in 2009 to promote creative activities forchildrenwithspecialneedsthroughtheprovisionofplaygrounds,teachingmaterialsanddrawingtrainingforchildreninspecialchildcareestablishments.

Paintingsofthechildrenareusedtoproduceenvironmentallyfriendlyfashionitems.ToHenotonlycreateopportunitiesforthesechildrentoplayandrealizetheirpotential,thecompanyalsohelpedtobringthemabetterfuturethroughscholarshipprograms.Moreimportantly,theiractivitieshavehelpedtochangeparents’understandingofthepotentialoftheirchildren.

Source: www.doanhnhanxahoi.org

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Notably,theeconomicvalueofvarioustypesareputinsimilarorderasbeneficiariescriteria.SocialEnterprisesoperateasCentreobtainedthe lowesteconomicvalue incomparisonwithothertypes.Meanwhile, theSocialEnterprisesoperateintheformsofcompanydemonstrateahighereconomicefficiencywiththeaveragecostperbeneficiaryofonly1/3ofthecentreformandnearly-ofotherforms.

Table 3: The size and average economic efficiency of different types of organisations

Operating areas

Thereportshowedthat68%ofSocialEnterprisesinsomewayworkingtowardscontributingtopovertyreduction,lifestabilityandincomeimprovementthrougheducation,vocationaltraining,enhancingskills,providingequipmentandupdatingknowledge.

Inaddition,upto48%ofSocialEnterpriseshaveenvironmentalobjectives,suchasprovidingenvironmentallyfriendlyproductsandservices,operatinginenvironmentallyfriendlymannerandincreaseawarenessincommunityonenvironmentalissues.

Morespecifically,thechartbelowshowsthemostpopularyetdifferentareasthat167socialenterpriseshaveoperatedin:

Image 9: Top five social enterprise operating areas

Source: ‘Vietnam Mapping Social Enterprise project’ (2011)* The economic value expressed in U.S. dollar exchange rate: 20.764VND/USD.

Averagebeneficiaries/benefitingorganizations. Averageeconomicvalues/organization(revenueandsponsorship)

Expenses/beneficiary*

CentresTypeoforganisations

1,624

$42,700

$80

2,865

$74,950

$26

Companies

2,343

$62,700

$27

Clubs/Associations

142

$67,950

$478

Cooperatives

4,204

$172,650

$41

Others

Source: ‘Vietnam Social Enterprise Mapping project’ (2011)

0%

10%

20%

30%

40%

50%

60%

Education and Training

Arts andcrafts

industry

Healthcare Publiccommunication

Environmentprotection

56.3%

37.7%

20.4%

9.0%6.6%

Thoughareasofoperationarediverse,mostSocialEnterprisefocusonnichemarketandmarketsthatbusinessesgenerallyignoredandhavenotapproachedbypublicservices.

UptodatedataonSocialEnterprisesinVietnamthoughnotyetcomplete,stillcanprovidecertainevidencesforconfidenceinthepotentialanddevelopmentofthesectorincomingtime.

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Locatedinthefavourablegeo-economicconditions,themovementofSocialEnterprisesinVietnamisbeingmotivatedbymovementofSocialEnterprisesintheworldingeneralandinSoutheastAsiainparticular.ThereisabigchanceforSocialEnterprisesmovementinVietnamtocatchupfortheirowndevelopmentandcontributiontonationalbotheconomicandsocialdevelopmentasthereisabigwaveofinvestmenttoSocialEnterprisesinSoutheastAsia,alongwithpoliciesofsupportingSocialEnterprisesmovementthatsomeregionalgovernmenthaveadopted.

1.3. ORGANISATIONALFORMSANDLEGALSTATUSOFSOCIALENTERPRISESINVIETNAM

In management practices and support of social enterprise in Vietnam and overseas, the concept of socialenterprises is usually defined very openly andmainly focused on factor of social impact. For example, thedefinitionoftheSkollFoundation(2010):“social enterprise is an innovative approach with market-orientation to solve underlying causes of the most intense social and environmental problems. It creates systemic changes and offer sustainable solutions”.Therefore,socialenterprisescanbefoundinmanytypesoforganisationswithvariouslegalstatuses.Notably,socialenterprisescanexistinpublicsector,privateandcivilsociety,thoughthisisthesubjectofintensedebate.Someviewsrequiresocialenterprisestocomefromprivatesectorandcivilsocietybecauseof their specific ‘bottom-up’approachandsomeeven requiresocialenterprises to register fornewcompanystatustobeconsideredas“enterprise”,andsomeotherssaidthatmanyorganisationswhichprovidestatewelfarebyapplyingbusinessskillsandthuscanfollowsocialenterprisesmodel.

Aimingtoinstitutionalizeanddeveloppoliciesforthissector,thereportwillreviewandanalyzesomeformsoforganizationsthosearethebaseformanysocialenterprisesandorganizationswhicharepotentialtobecomesocialenterprisesinthefutureiftheconversionisnecessary.Understandingthepositionofsocialenterprisesinthewholesocialandeconomiccontextwillhelptoclarifymotivationfortheirestablishmentanddevelopment,aswellasotherfunctionsofthesemodels.ThiswillinformefficientapproachtoState’spoliciesforeachorganizationalform.Specifically,therearesixorganizationalformsthatneedtobestudiedasfollows: · NGOs; · puresocialenterprises(followsocialenterprisesmodelsinceestablishmentandoperateinaformofacompany); · mixstructurebetweenbusinessandnon-profitorganisation(inwhichbusinessactivitiesareimplemented

primarilytosupportnon-profitactivities); · thenon-publicorganisations(semi-public,peopleownedandprivate); · agenciesofstate-ownedenterprisesthatprovidespublicservices; · stateorganizationwith incomegeneratingactivities,statesocialorganisations (associations, research

institutes,hospitals,schools).

1.3.1.Typesofsocialenterprises

(i) Non-profit Social Enterprises

Thenon-profitsocialenterprisesusuallyoperateintheformof:centre,association,fund,club,voluntaryorganization/groupsofpeoplewithdisabilities,peoplelivingwithHIV/AIDS,womensufferingfromviolence...Almostnon-profitsocialenterpriseswereoriginatedfromNGOs,butbesides,therealsohavebeenanumberofsocialenterprisesdefining their models right from establishment. Thus, although very similar to traditional NGOs, the differencebetweenNGOandthenon-profitsocialenterprisesistheabilitytoprovidenewandinnovativesolutionstosolveproblemsofsocialconcerns.Inotherwords,socialenterprisesoffercompetitivesolutionstoaddressspecificsocialneeds,sothattheycanattractcapitalinvestmentfromindividualsandsocialimpactinvestors.

Thenon-profitsocialenterpriseshaveplayedagoodroleofcatalysttomobilizecommunityresourcestoimprovelifefordisadvantagedcommunities.Thesesocialenterprisescanbedividedintothreegroupsbaseonformsofoperation,objectivesandsocialimpactandfunds:(i) Socialenterprisesprovidehighlyeffectiveservicesandproductsinsolvingsocialproblems,andusuallybefunded

byathird-partythatoftenarecommunityorsocialinvestors.Inotherwords,thistypeofsocialenterprisesactsasanindependentemployerwithautonomyandplaysacatalystroletoconnectresourceswithsocialobjectives.

(ii) Social enterprises aim to provide goods / services tomost economically disadvantaged and vulnerablepeople, those who do not have access or can not afford services at normal prices. The goal of these

27

enterprisesistomeettheneedsandrightsofpeoplewhohavebeenbypassedbythecurrentbusinessmodelandmechanism.Whileensuringtherightsofpeopleparticularlyvulnerablecommunitiesisthesupremegoal,social enterprises oftendirectly involve in theprovisionof services andgoods tomeet thedemandsofabandonedneeds,insteadofpropagatingandmobilizingotherpeopletodothis8.

(iii)Socialenterprisescreatejobsfordisadvantagedandmarginalizedgroupssuchaspeoplewithdisabilities,peoplewithHIV/AIDS,releasedprisoners...MostofthesesocialenterprisesweretransformedfromNGOsbyestablishingabusinessunitwithintheorganization,orestablishanenterprise,withprofitsbeingusedtofinancepartofthecostsoftheorganisation.Thehybridstructureexistinginthesameorganizationofthisgrouphascausedlotofdebates,asifweviewedthesetwoseparatelywewillfindthatthebusinessunitmakesprofitbutthewholeorganisationisanonprofit.Sohowpoliciesforthisgroupofsocialenterprisesbedevelopedproperly?Shouldthebusinessunitsareconsideredassocialenterpriseoronlytheparentorganisationshouldbeconsideredsocialenterprises?KOTOInternationalCentreand“TheWilltoLive”Centreareexamplesforthiskindofnonprofitsocialenterprises.

Box15:Clanbookcasemodel

ClanlibraryandParentsBookcasemodelfoundedbyNguyenQuangThachisatypicalexampleforthistypeofnon-profitenterprises.Thachidentifiesoneunderlyingcauseofpovertyinruralareasisthelackofknowledge.ThedeclineoflearningandreadingeagernessinVietnamruralareaisinastateofemergency.StudyingtheexistinglibrarymodelandthedevelopmentoflineagesinrecentyearshasmotivatedThachtoestablishanewlibrarymodel,basedonclanresourcesandinvolvementinraisinggeneralknowledgeoftheiryounggenerationsandfarmersinthevillage.TheClanbookcaseprojectwasfirstestablishedin2007andsofarhasbeensetupin22provinceswith92bookcasesand30,000books,toprovideopportunitiesforknowledgeimprovementforatleast80,000peopleinruralareas.Inparticular,thenumberofclansthathaverequestedconsultancyondevelopmentofClanbookcasehasexceeded100.ThisisexclusiveofbookcasesthathavebeenbuiltbyfamiliesfollowingThach’sadvice. Parentbookcaseshavealsobeensetupwiththesamemodelofresourcemobilisationandcommunityparticipation.From2010todate,71parents librarywereestablishedin21schools,with6,100booksbeingusedby6,000students.Initialassessmentsshowthatthebookcaseshavehelpedcommunitytoimprovethebooksshortagein92hamletsinruralvillages.Inparticular,QuynhPhuEducationDepartmentplanstoexpandparentbookcasesto78PrimaryandSecondaryschoolsacrossthedistrict.Withastrategyofawakeninglocalresourcestoenhancecitizens’responsibilityinsharingforownandcommunitybenefits,sothatbookcasesareconstructedwithatleast50%ofcontributionfromthefamiliesandparents.Theremaining50%ofresourceshavebeenmobilizedfromdonors,bookscontributedbypeople,personalmoneyandespeciallyrecentlyisthespecialcontributionfromthe“bookforcountryside”actiongrouponFacebook.EachFacebookandemailusersupport20,000/monthandafter4months,thegrouphavecollected110millionVNDtobuildbookcasessystemforruralareasinVietnam.

Source:www.doanhnhanxahoi.org.vn

8 ElkingtonJ.,HartiganP.,Thepowerofunreasonablepeople,Social-Labourpublishinghouse,2008.

Box16:KOTOInternational

Foundedin1999,KOTO(KnowOne,TeachOne)isasocialenterprisemodeloperatesasarestaurantbusinessandvocationaltrainingcentrewithamissiontochangethelivesofdisadvantagedchildreninVietnam.KOTOtrainingcenterisanon-profitcenter(NGO)establishedtosupportvocationaltrainingforstreetanddisadvantagedchildren.In24months,studentslearnskillstoserveinhospitality(cooking,waitress,bartender),businessEnglishandotherlifeskills.Inaddition,theyarealsoprovidedwithperiodicalhealthexamination,immunization,uniforms,residentialarrangement,healthservicesandtrainingallowancemonthlyatthetrainingrestaurant.Sofar,KOTOhastrainedmorethan20courses(2coursesenrolmenteachyear)withthenumberofgraduatesuptonearly350children.

KOTOrestaurantisatrainingrestaurant,inwhichtraineescanpractiseinarealbusinessenvironment.Currently,morethanhalftheCentre’soperatingcostsisfundedfromtheprofitsoftherestaurant.ServingsocialobjectivesoftheCentre,however,KOTOrestaurantstillhavetocompeteequallywithotherrestaurantsoperatinginthesamestreet,evenpaymoretaxesasaccountingmanagementoftheorganizationmustbetransparentanddisclosedondonor’srequest.

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Table 4: Social enterprises “Nest” in Vietnam

Source: CSIP

EstimatedquantityTypeoforganistaion

NGO

Associations

CommunityVoluntaryorganisationsthathavenolegalstatus(includ-ingcooperatives)

Newsocialenterprises

Cooperatives

SMEs

Total

1,000

6,900

140.000

200

9,500

8,000

165,600

Socialandenvironmentmission,rightofthepoor,disadvantage

SupportandprotectformembersbenefitsMeettheneedsofCommunityparticularlywhomcannotapproachthepublicservices

Provideservicesandcreatejobsfordisadvantagepeople,solvingthemarketfail

Balancebenefitsbetweeneconomic-society

Non-profit

Notforprofit

Notforprofit

Notforprofit

MainlytousetheprofitforCommunityandmembers

Maximisetheadvantagebutnotmaximisetheprofit

Aims Profitdistribution

(ii) Not-for-profit Social Enterprises

Mostofthesesocialenterpriseswerefoundedbysocialentrepreneurswithsocialmissionsannouncedclearly.Atthebeginning,theenterpriseshaveclearlydefinedthecombinationofsocialgoalsandeconomicobjectiveswhiletheeconomicobjectivesareameantoachievethesupremegoalofsocialdevelopment.Profitsareusedprimarilytore-investortoexpandsocialimpactofthebusiness.Theintroductionofinnovativesolutionsapplyingmarketleveragetosolvecomplicatedsocialproblemsandenvironmentalchallengesisthedifferenceofsocialenterprisecomparedtocharitableorganisationsornormalenterprises.Mostoftheincomecomesfrombusinessactivitiesorservicesofferedbytheenterprises.Wecansay,thisisthe‘essence’ofsocialenterprisesector.

NotforprofitSocialEnterprisesoftenregisterasalimitedcompanyorjointstockcompany,andoperateundertheEnterpriseLaw.Oneofthereasonsforsocialenterprisestochoosethisregistrationformisthattheydonotwanttobeseenasasocialunitthat‘beg’forcharitablesupportfromthecommunity.Theysawachancetocreatematerial value from thehumanitarianwealthof goods and services theyprovide to the community. Besides,operatingascompanyhelp them toaccessmorediversifiedcapital sourcesandbusinessopportunities thannormalcharityorganizations.However,becauseofthesocialmissionthattheypursue,thesesocialenterprisesfacesometypicalchallengescomparedtootherordinarybusiness:

· Socialobjectivesdonotallowthemto‘maximum’theprofitbyallmeans.Instead,theirapproachisto‘optimise’profit.

· Besidesexpensesasusualbusiness,socialenterprisesoftenhavetospendhuge‘socialcosts’.Forexample,thecostofprovidingvocationaltrainingandskillsdevelopmentforlow-skilledlaborwithspecialcircumstances,thecostsoforganisingsmall fragmentedgroupsandcommunities intoacommunitytoraisevoiceandtoincreasetheiropportunitiesinoverallvaluechain,costofsalesinplaceswheregeographicalandresidentsconditionsarenotfavorablesuchasremoteareas...Thisrequiressocialenterprisestobeverycreativeandinmanycasesleadtoincreasingsocialcostsandreducingnetprofitincomparisontosimilarbusinesses.

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· Duetoits‘mixed’nature,socialenterprisesoftenhavequitediversifiedfundingsources.Besidesthegeneralcommercialcapital,theymayalsoreceivepreferentialcapitalaslong-termloansatlowinterestrate,socialequity,ornon-returngrant.However,thelackofclearregulationonreceivingfundingandconcessionalloansfromsocialinvestorshascreateddifficultiesforsocialenterprisesintaxjustificationandbusinessaccounting.In addition, legal statusof a company also limits their ability to access fundingcompared toNGOs, eventhoughthesocialimpactsmaybethesame.

· SocialEnterprisesapplydifferentperformancemeasurestoordinarybusiness.Nexttothematerialvalue,thesocialvalueithasbroughtabouttothecommunityissupremeandshouldbemeasuredandrecordedindetails.

(iii) Social Business Ventures/Profit social enterprises

Thismodel isparticularlypopular in the fieldofmicrofinancewithexamplesas theGrameenBankandBRACin Bangladesh, SKSMicrofinance in India, Bina Swadaya in Indonesia, Kiva in America ... In Vietnam, we alsohavethousandsofmicro-financeinstitutionswithmosttypicalorganisationsliketheTYMFund(VietnamWomensUnion)andCEP(HCMCLaborFederation).Belowaresomecharacteristicsofthistypeofsocialenterprise:

· Different to non-profit andNot-for-profit social enterprisesmodels, social enterprises in this third type ofcategoryatthebeginninghaverecognizedopportunitiesandplantobuilditselfintoaprofitableenterprisewithamissiontocreateforcesforpowerfulchangeinsocialorenvironmentalprotection.

· Thoughstillmakingprofitsandprovidingshareholderswithdividends,thesesocialenterprisesarenotdrivenbyprofit.Inotherwords,itsmainpurposeisnottomaximizefinancialincomeforshareholders,insteadthesocial/environmentobjectivethathasbeensharedandvaluedbyallshareholders.Asignificantportionofprofitsisusedforreinvestmentortosupportgroupswithlowincomepositioningthesocialenterprisesmoreaccessibleandbeneficialtomorepeople.

· Enterprisesoftenfindinvestorswhoareinterestedinbothfinancialandsocialbenefits.Theyrarelyusethenon-refundablegrantsformainactivitiesoftheenterprise.

· Socialenterprisesofthistypetypicallyoperateundertheforms:Company,cooperatives,micro-financeorganization...

Box17:Microfinance-CEPFund

Access tocapital isachallenge for thepoor inbothruralandurbanareas.Founded in1991,CEPstandsfor“CapitalAidFundfortheemploymentofthepoor”bytheLabourFederationofHoChiMinhCitywiththemissionofoperatingforthebenefitofthepoorandthepoorest,tohelpthemachievelong-termstablelivesthroughtheprovisionoffinancialandnon-financialservicessustainably,honestlyandefficiently.

In2011,CEPhasprovided238.062loansto193238customerswithanaverageloansizeof403USD/person.52%oftheloanisformemberstooperatesmalltradingactivities,11%isusedforthepurposeofimprovinghousing,buildinglatrines,13%forthepurposeofbreeding,agricultureandfisheries,and24%forotherpurpos-essuchasservices,handicraftproducts,procurementofproductiontools,payingtuitionfees,medicaltreatmentandsettlementofheavyinterestloans.Bytheendof2011,CEPhasanetworkof26branches,371employees,withaninvestmentscapitalavailableforloansof939billionandcontinuestoself-fundforitsoperation.

CEPoperationhasbeensustainableovermanyyearsbecausetheydonottreatthepoorascharitableobjectsbuthavecomeupwithcreativeandappropriatewaystoprovideopportunitiesanddevelopcapacitiesforthepoor.

Sources: www.cep.org.vn

BelowaresomeotherareasofsocialorientedactivitiesofsocialenterprisesinVietnamtoday:

Newenvironment,newenergy: Inthecontextthatnormalbusinessarereluctantto invest inareassuchascleantechnology,recycling,renewableenergyduetohighrisk,largeinvestmentandprofitnothasnotbeenasexpected,thereareenterprisesthatplacesocialandenvironmentalgoalsaboveimmediateprofitandboldlytaketheleadinthisarea.

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Box18:AnDienbatteryfactory

Pollutionfromwastebatteriesandaccumulatorsisoneof10leadingenvironmentalproblemsintheworld.InVietnam,thereare28millionmotorcycles,1.4millioncarsthatrequireperiodicalchangeofaccumulatorsfrom1-3years.Therefore,thevolumeofmillionsofleadbatteriesandaccumulatorswastewhicharenotprop-erlyhandledpresentamajorthreattotheenvironment.Moreover,batterymanufacturersinVietnamhavetoimport100%ofleadmaterialsfromabroadcostmillionsofdollarsinforeigncurrency.

AnDienBatteryFactoryisanambitiousprojectofayoungsocialentrepreneurPhamPhuongLinh.Asanenvi-ronmentalexpert,shehaswitnessedtheeffectsofhazardousofleadwasteandthemanualrecyclingofleadbatteriesandaccumulatorsonmanypeople’shealth.Linhalsoseethepotentialforleadrecyclinginordertomeetthedemandforleadinthecountry.ProjectforbuildingAnDien,amodernfactorytorecycleleadbatteriesandaccumulatorshasstarted.ThereisalongwayaheadbutthisisatestamenttothedevelopmentprospectsforprofitablesocialenterprisesinVietnam.

Sources: www.doanhnhanxahoi.org.vn

Socialhousing:Toaddresshousingneedsforpeople,especiallylow-incomepeople,recentlyVietnamCooperativeAlliancehaspilotedcooperativehousingprogramsinHanoiandHoChiMinhCity.Cooperativehousing,withanatureofpeople’sorganization,wasfoundedonsolidarity,self-reliance,self-helpandself-responsibility, is thebestmodelforhousing,bestsuitedtoaddresshousingproblem,especiallyintermsofmeetingtheincreasinghousingneedsofthepeople,includingsocialhousingforlow-incomepeople.

Thecooperativesareeconomicsocialorganizationswhichwerefoundedwiththepurposeofprovidingcontinuousandlong-termhousingforcooperativemembers,whohavehousingneedsbutlackoffinancialcapacity.Unlikeothereconomicorganisations,housingbusiness,housingcooperativesestablishedbythepeople.Theirmembersare both owners and managers of the cooperative houses following principles of democracy, fairness andopenness.InVietnam,housingcooperativeshavepotentialtodevelopintwoareas:

· Newhousingcooperatives:Establishedforthepurposeofraising,combininghumanandmaterialresourcesfromcooperativemembersandsocietytobuildhouses,apartmentswithqualityandpricethatsuittheneedsandfinancialcapabilityofmembers.

· Thecooperativehousingconversion:setupbythehouseholdsinapartmentsblockorpublichousingtohelpthemmanage,maintain, undertakemaintenanceandprovideessential services suchas security, sanitary,electricity,watersupply,internet,telephone,shops,amusementparks,entertainment...inthelivingquarters.

Primaryhealthcare:preventivehealthcareisakeytoensurethehealthofthecommunity.Understandingthis,Mr.TaMinhTuanhasestablishedHELPCorporationtobuildahealthcaresystemhelpingcommunitytoadoptapositivelifestyleandtopreventillness.Familydoctorswillmonitor,providecounselingonpreventivehealthcareandresolve90%ofthecommondiseasesrightintheearlystage.Thusonly10%ofseriousillnessshouldbetreatedatahigherlevelhospital.AgoodorganisationofafamilydoctorsystemwillhelpsolvingthecurrentproblemofovercrowdinginhospitalsinVietnam.

Cooperative(Co-ops):Establishedveryearly,cooperativeisconsideredoneoftheoldestmodelsofsocialenterprisesinVietnamaswellasintheworld.Cooperativesarecollectiveeconomicorganisationsestablishedbyindividuals,households,legalpersonsinneedwithcommoninterestsandvoluntarycapitalcontribution.Togethertheyplaytothecollectivestrengthofeachparticipatingcooperativememberstohelpeachothertoeffectivelycarryoutproduction,doingbusinessandimprovetheirmaterialandspiritual life,contributingtoeconomicandsocialdevelopmentofthecountry.Cooperativesoperateasa formofenterprise,having legalstatus,sovereignty,andareresponsible forall financialobligationswithinregisteredcapital,accumulatedcapitalandothercapitalsourcesaccordingtothelaw.(CooperativesAct2003).

Cooperativegroupsalsoknownasinterestgroups,labourexchangeteam,networkinggroup,clubs,orsimplyreferredtobynameasthewaterlineservices,seedingetc...“isformed,onthebasisofcontractsofcooperationcertifiedbythelocalpeoplecommittee,between3peopleandabove,contributepropertyandlabortooperatecertainactivitiesonmutualbenefitandmutualresponsibilitybasisandaresubjectsofcivilrelations“(CivilCode,2005).

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Cooperativeshavesomefeaturesasfollows:· Cooperativemembersareco-ownersandmanagethecooperativefollowdemocraticprinciplesandthese

membersarealsotheonewhousecooperativeservices;· The cooperative was established to meet some special needs of its members. The ultimate goal of the

cooperativeistoprovidebestservicestomeettheneedsofcooperativemembers.Inotherwords,thefunctionofcooperativesistomeetthecommonneedsofcooperativememberswhoalsoarecooperative’scustomers;

· Asset generated from the cooperative activities is non-shareable property of the cooperative (nontransferable).Thisisavitalnatureofthecooperativewhichhighlightcommunityvaluesofthecooperative.Commonproperty is formedanddevelopedwithno individualobjectivesbutaimstoeffectivelyservethecommonneedsofcooperativemembers;

· A proportion of cooperatives profits are used to established funds, that is divided tomeet the needs ofeducation,training,informationprovisionformembers,satisfyingtheneedsofculturalandsocialactivitiesoflocalcommunity...Otherproportionoftheprofitisdistributedbacktomembersontheextentofserviceusage.Thisisaspecialhumanityandculturalnatureofthecooperative.

InVietnamaswellasintheworld,CooperativeGroupsandCooperativesdevelopmentisconsideredanimportantstrategytogathersmallproducersandfarmerstocreategreatereconomicscale,toreducethedominanceofintermediategroupsandtocreategreatervalueonthemarket,contributingtoeconomicdevelopmentandsocialjusticeforpoorandsmallproducers.Innature,cooperativemodelisquiteclosetosocialenterprisesandisapopularmodelintheworld.

Social enterprises -Cooperatives - operate in agriculture, trade, transport, industry, handicraft, construction...In the agricultural sector, there aremany social enterprises - cooperatives - supportingmembers inmarket,distributionofgoodsorsupply.Theselfsustainedgroupsorcollectivegroups,includingpoorwomenandotherdisadvantagedgroupsoftenassembledtoformcooperativestosupportthediversifiedneedsofmembersrelatedtotrade,healthoreducation...

However, fora long time,co-operatives linked tocollectiveownership isunderstoodwronglyandnegatively,inwhichmembersdonot see thebenefits fromparticipating in thecooperatives.Benefitwasaveragedandmotivationofparticipatingmemberswassuppressed.Failureinrecognisingbenefitsfromjoiningthecooperativeleads to lack of confidence and loyalty of members when dealing with cooperatives. Especially, lacking ofdemocracyincooperativemanagementwaspopular.Failureofagriculturalcooperativemodelbeforeinnovationwasabiglesson.However,intheoppositeside,misunderstandingofthenatureofcooperativeprofitdistributionaccordingtocapitalcontributioncanunderminethespiritofco-operation;enhancedesireforprofit,whichcanturnthecooperativemodeltoenterprisesor jointstockcompanies.Atthispoint,cooperativenolongerhaveuniqueadvantagesinencouragingaspiritofcooperationinthecommunity.

Thegrowingnumberofsocial-orientedenterprisesinwhichsocialorenvironmentalobjectivesareembeddedinthecorevalueoftheenterpriseisafastgrowingtrend.Regardlessofoperatingfieldssuchascleantechnologies,environmental friendly,microfinanceormeeting theneedsof thebaseof thepyramid (BoP)consumers, theseenterprisealwaysfindinnovativeandcreativesolutionstocreatevaluesandbenefitsforthecommunity.Thebiggestchallengeforthiskindofenterpriseistoensurebenefitsforstakeholders.Thetaskofbalancingbetweensocialobjectivesandfinancialgoalscancreatetensionswithintheshareholdersandaccountabilitytoexplaintobusinessstakeholders.Thismakes leadershipmoredifficult.However, this is thekindthatgeneralbusiness findeasier tounderstandandaccept,soithasabetterchancetocooperateandmobilizeresourcesthanothersocialenterprises.

Insummary,socialenterprisesinVietnamoperateundervariousformsoflegalentities.Thoughthereisnoexactstatisticofnumberofsocialenterprisesineachform,thenumberoforganizationsandbusinesseswithpotentialtobecomesocialenterprisesinVietnamisupto400,000units,ofwhich35,000unitshavelegalidentities.Thisisasignificantfigureinquantityandinthecontributiontheybringtothecommunity.

1.3.2.Sometypeoforganisationsthatcanbetransformedtosocialenterprisesmodel

(i) State-owned agency providing public services:

AccordingtothepreviousLawonStateownedEnterprises(SOEs),theyweredividedinto2groups:SOEbusinesswithactivitiesprimarilyaimedatprofitmakingandtheotherstoprovidepublicwelfareactivitieswith“production activities, providing public services in implementing state policies or directly performing the duties of national

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defense and security.”.However,alongwiththeprocessofequitization,SOEsoperatingforprofithavelessandlessreasontocontinue.ThekeypointofviewnowisjusttokeeptheSOEsoperatinginsomeessentialsectorsoftheeconomyandinproviding‘publicgoods’.

SOEs are now operating under the Enterprise Law (with corporatemanagement as regular businesses) andcomplywithDecreeNo.31/2005/ND-CPdated03/11/2005oftheGovernmentonproductionandsupplyofproductsandpublicservices.Accordingly,acompanyprovidepublicservicesis“state-owned companies which are designed, invested, set up to implement a major regular and stable objectives which is production and supply of public products and services which ordered and planned by the state”.However,moreandmorepeoplethinkthatpublicservicesarenot“inclusiveresponsibility”oftheState.TheStatecanfullyoutsourcespublicserviceandproductstoothercompaniesandorganisationsinprivatesector.

Box19:SOEsdoingpublicwork:“Disabled”market

Insteadofusingeconomicconceptsof“publicgoods”,“capitalgoods”,“foreigninfluence”,...toclarifywhatarepublicduties,wemaybesatisfiedwiththelistofactivitiesthatareoftenassociatedwithpublictasks:buildinginfrastructuresuchasroads,bridges,ports,electricity,telephone,watersupplysystem,sewagetreatment,streetcleaning(garbagecollection,wastetreatment,cleaningofpublicplaces),education,health,...World-wide,allthosetaskscanbedonebyfor-profitenterprisesorpublicenterprises(theycanbeownedbyprivateorstate).Thususingthereason“forpublictasks”totransfermoneytoSOEsisnotentirelyaccurate.

Many“publictasks”likethosecanbedoneentirelybyprofitcompanies,forinstance,constructionoftelecom-municationnetwork,evenroads,sosayingthatprivateenterprisesdonotdothisisnotcorrect.Theissueiswhetherthereisenablingenvironmentforprivatecompaniestoparticipateintheseareas.

Itisalsoarguedthatthestatehavetoprovidepubicservicesasitisnotdonebyprivatesector.Thatisalsoamisunderstanding.Theremaybethingsthatthegovernmentshouldorganise(intheformofoutsourcing)ratherthanimplementing.Forexample,urbansanitation.Thelocalgovernmentmayestablishsuchacompany(suchasURENCOinHanoi).Thecompanyperformsthosepublictasksandthelocalandstatepurchasethatcompany’sservices.ThatisthewaythattheStatesetupitsowncompanytodeliverpublictasks,thestatecanalsopurchasetheseservicesonthebasisofcompetitivebiddingforacertainperiod(forexample3-5years).Thecompetitivebiddingtopurchaseservicesmaybemoreeffectivewhilefreethestatefromhavingtoworryaboutitscompanymanagement.Thisapproachisverycommonindevelopedcountries.

Dr. Nguyen Quang ASources: VietnamNet (19/11/2010)

Infact,Decree31alsoopenedgatesforprivateenterprisesandcooperativestoparticipateintheproductionandsupplyofpublicproductsandservices,usingdifferentmethods:bidding,ordering,anddeliveryofplans.However,theimplementationinpracticehasnotmadesignificantprogress.Mostofthesupplyofpublicproductsandserviceswasorderedorallocatedby theStatemanagement to thestatecompaniesdirectlyunder theirmanagement.Enterprises,cooperativesbelongtoprivateandcollectivesectorarestillbystanders.Thelackofcompetition,conflictsofinterestoftenleadtolowefficiency,highcost,lackoftransparencyandaccountability.

Wecansay, judgingfrommanyangles,SOEsperformpublictasks isthestatesocialenterprises.Throughtheaboveanalysiswecandrawtwosolutionstoreformpublic-services-SOEssector,thatarerelevanttotheroleofsocialenterprisestoimprovethestatesupplyofpublicproductsandservices:

(i) Incase,anewtypeofenterpriseisadded,similartotheCICorL3CcompanyinEnglandandAmerica,thepublicservicesSOEscanfullyre-registerundernewformswiththeonlydifferenceistheirstateownership.There-registrationdoesnot in itself improvetheefficiencyofpublic-servicesSOEs, if theydonotactivelyinnovates,butthere-registrationdoesofferthefollowingpositiveeffects:

-Firstly, to create common legal ground for public-services SOEs, private enterprises, cooperatives to competeequallyforstateorders.Currently,thereisnorealmarketforfaircompetitionfortheprovisionofpublicproductsandservices.c.Bởihiệnnay,thựctếvẫnchưacómộtthịtrườngcạnhtranhbìnhđẳngchocácsảnphẩm,dịchvụcôngích.

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-Secondly,expandtheaccesstocapitalfromsocialinvestorsinandoutsidethecountryratherthanrelyingonindirectrevenuesfromthestatebudgetasnow.

-Thirdly,applyingsocialenterprisesmodelwillfacilitatepublic-servicesSOEsparticipationtoalargenetworkofsocialenterprisewhichincludetheexchanges,sharingofknowledgeandexperiencethatwillacceleratethecreativeprocessincompanyactivities,ratherthanbeingpassiveasnow.

(ii) Needtoexpandaccesstoarealandequalparticipationofsocialenterprisesinprovidingpublicproductsandservices.Theprocessoforderingorallocatingplanshouldbelimitedandreplacedwithacompetitivebiddingapproach.

(ii) Non-public establishments:

SocialisationoftheprovisionofpublicservicesisapolicyofthePartyandStatetomobiliseresourcesincultural,socialandenvironmentaldevelopment.Currently,theGovernmenthasadoptedpreferentialpoliciestoencouragedevelopmentofnon-publicestablishmentsinthefieldofeducation,health,culture,sportsandenvironment.

Before2005,non-publicorganisationswereestablishedandoperatedunderDecreeNo.73/1999/ND-CPdated08/19/1999oftheGovernment;accordingly,non-publicorganisationsincluding3typesofsemi-public,peoplefundedandprivate.Thenon-publicestablishmentswereentitledtoincentivessuchasfreelandtax,VAT,incometaxincentives,wavingofcorporateincometax.

By2005,theGovernmentadoptedResolutionNo.05/2005/NQ-CPon04/18/2005onpromotingthesocializationofeducation,health,cultureandsport,inwhichitwasstatedclearly: “Vigorously develop non-public organisations with two types: people owned and private... progress to

stop having semi-public type. Each non-public establishment may operate under the non-profit or profit mechanism. Under the non-profit mechanism, apart from the profit is used to secure the reasonable interests of investors, implement social policies of the Party and State, assistance for the poor, most of the profit is used for development investment. Under the profits mechanism, the profits can be distributed to individuals and taxable. The State encourages the development of non-profit establishments.”

Next, the Government issued Decree No. 53/2006/ND-CP dated 05/25/2006 on policies to encourage thedevelopmentoforganisationsthatprovidenon-publicservices.ThisDecreeappliestonon-publicestablishmentsoperating in the fields of education - training, health, culture, sports, science and technology, environment,society,population, family,childprotectionandchildcare.Accordingly,non-publicestablishmentsconsistsofonlytwogroupswhicharepeoplefundedandprivate(orprivateschoolsineducation-training).SomeincentivesarespecifiedintheDecreeincluding: · Incentivesforconstructionlandasstatelandwithoutcollectinglandusefee; · Eligibleforincometaxrateof10%duringoperation;VATincentives; · Canparticipateinpublicservicesfunded,orderedbytheState,andparticipateinbiddingforcontracts

andprojects;

By2008,Decree69/2008/ND-CPdated30/5/2008oftheGovernmentregulateincentivesforadditionalobjectssuchasorganisationsandindividualsoperatingundertheEnterpriseLawwithinvestmentprojects,jointventuresorsettingupestablishmentsinthesectorsthatarebeingsocialized.

Thankstothesepreferentialpolicies,thesystemofnon-statepublicservicesprovidershasgrown,creatingjobsandsatisfyingasignificantproportionofsocialneeds.Sofar,educationisconsideredanareathathasthemostsignificantchangeswiththenetworkofschools,traininginstitutions;non-publicvocationaltrainingsexpandedatalllevels.Thenon-statelocalhealthfacilitiesareestablishedandoperatedmainlyintheformofhospitals,clinics,healthcounselingcenters,familydoctorservicesandprivatepharmacies,contributingtoreleasingburdenonpublichealthcareandatthesametimecontributingtotheeffectiveimplementationofpeoplehealthinsuranceroadmap.Similarly,non-statefacilitiesinthefieldofculture,sportplaysmoreimportantroleinsociety.

The non-state establishments may operate under the non-profit or profit mechanism, and the Resolution05/2005/NQ-CPclearlystatedthattheStateencouragesthedevelopmentofnon-profitforms.However,sofar,criteriaforthesetwoforms,relatingtopropertyownership,natureofprofitornotforprofit,responsibilitiesofinstitutionsandformsofsocializationineachfieldhavenotbeenspecified.Therefore,thecurrentlegalframework

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andpoliciesapplythesametreatmenttothenon-stateestablishments(whetherforprofitornotforprofit)andenterprises operating in the same fields of providing public services, leading to disadvantages for the non-profitestablishments. In fact,amongthosewhoownandoperateprivateestablishmentsatpresent, therearepeoplewhoareenthusiastictocontributetosocialobjectives,butthereisnolegalframeworktofacilitatetheirmobilizationofresourcestoimplementthatgoal.Incontrast,businessthatprovideprovisionofpublicservicesarebenefitingfromincentivesofthestate(10%incometaxrate,preferentialtreatmentincapitalloansorinlandallocation...),andmayenjoysuperprofits.

Under thecurrent interpretation,asocialenterprise isanorganisationalmodel thatdeliverssocialobjectivesthroughbusiness activities.Different to normal business that operates for profit; social enterprisesoftenuseprofitstoinvestbacktotheirownsocialgoals.Whensocialenterprisesdevelop,societywillbenefit.Onthatbasis,wecansay“non-profit non-state establishments and social enterprises are similar”.

Ifweconsidernon-publicnon-stateestablishmentsaresocialenterpriseswhoareservingthepublicinterest,theStatecandistinguishdifferenttypesofnon-stateestablishmentsasfollows: · The non-state establishment for profit are private establishments (or private schools for education -

training),belongtoprivateownership,withprivatecapitalinvestmentforconstruction,operateforprofit.Profitsandassetsoftheprivateestablishmentsunderprivateownershiparedistributedproportionatelytocontributedcapital.TheestablishmentsoperateundertheEnterpriseLawwithanumberofcertainincentives.

· Thenon-statenon-profitestablishmentsarepeoplefunded,maybesetupbyagroupoffoundersandwithinitialcontributionofcapital,butdoesnotapplytheprincipleofhuman-capital,andassetsoftheorganisationisofcollectiveownershipofthepartnerswhocontributedcapitalaswellasthecommunity.Peoplefoundedtermcanbeusedtoindicatethenon-statenon-profitestablishments.

To analyze the differences in non-profit and for profit objectives between people-founded and privateestablishments,thisresearchstudythefieldofeducation.AccordingtoEducationLaw(2005),theconceptofpeoplefoundedschoolsisestablishedbyresidentialcommunities,andprivateschoolsisestablishedbysocialorganizations,social-professional,economicestablishmentorindividuals(Article48).Thismeanspeoplefoundedschoolsundercommonownershipofthecommunity(notforprofit);privateschoolsundercommonownership(not for profit) or private ownership (for profit). However, Article 67 states: “property and finance of peoplefoundedschoolsareunderthecollectiveownershipofthecommunities,propertyandfinanceofprivateschoolsownedby the shareholders “. Thus,people foundedschoolsmaybeunderstoodasanon-profit, andprivateschoolsasfor-profit.

(iii) State units delivering public services and state scientific and technological organisations

Stateunitsdeliveringpublicservicesare“organized by the competent authorities of the State, political organizations, political - society organizations and established under the provision of law, has legal status, to provide public and state management service.”(Officerlaw2010).

Currently,therearetwotypesofunitsthateitherhaveorhavenotbeenallocatedautonomy,however,thetrendofadministrativereform leadingtocompleteautonomyfor thestateunitsdeliveringpublicservices (referredtoas‘donvisunghiep’)toperformtasks,finance,organizationalstructureandpersonnel.AccordingtoDecree43/2006/ND-CPdated25/4/2006,thegrantofautonomytotheseunitsaimtoachievethefollowingobjectives:(i)enhanceabilityof theunits toprovidehighqualityservices tosociety, increasingrevenuesand improvingincomes foremployees, (ii) to socializeandmobilize thecontributionofcommunitiesandsociety todevelopbusiness activities, gradually reducing subsidies from state budget. Article 4, Decree 43 states: “The State encourages ’don vi su nghiep’ to transform to enterprises, non-state forms ... The converted units are entitled to preferential policies on tax, land and state invested assets in accordance with regulation”.

Basedonincome,theseunitsaregivenautonomyandaresplitedintotwogroupsthatcanfullyorpartlyself-funditsoperatingcosts.Notably,withthemechanismofbeingautonomy, the lawallowstheaboveunits toobtainloansfromcredit institutions,tomobilisecapital fromemployeestoexpandinvestmentandimprovebusinessoperations,atthesametimetheyareresponsibleforrepayment.Intermsofusageoffinancialresults,annually,afterdeductingactualcosts,taxes,thedifferenceinrevenuesandexpenditures,thebusinessunitswilldeduct25%tocareerdevelopmentfund,payextraincomeforemployees,settinguprewardfundandwelfare...

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Similarly,ScientificandTechnologicalorganisations(referredtoastheS&Torganizations)arebeingconvertedto autonomy, self-responsible organisations. According to Decree 115/2005/ND-CP of 09/05/2005, S & Torganizationsare“scientific research institutions, research organisations and technology development organizations, S & T services agency established under decision of State management units”.ThepurposeofgivingautonomytoS&Torganisationsisalsoaimingtoenhanceresponsibility,initiativeandcreativityoftheorganizationsandtheleaders,toimproveperformanceandpromotesocialisationinthefieldofscienceandtechnology.

S & T organisations are selected to transform to one of twomodels: (i) self-funding S & T organizations, (ii)scienceandtechnologyenterprises.S&Torganisationshaveaccesstoloansandfundingfromorganizationsandindividualsinsideandoutsidethecountry.Inadditiontobidding,takingorders,signingS&Tcontracts,theseorganisationsareabletoproduce,trade,importtechnologyandexportcommoditiesinregisteredprofessionalfields.Theuseoffinancialresultsofscientificandtechnologicalorganizationsissimilarto‘donvisunghiep’,butthepercentageofprofitsetasideforcareerdevelopmentfundis30%.

Wecansee‘donvisunghiep’andscientificandtechnologicalorganizationsaretransformingtoamodelsimilartoState-ownedpublicserviceunits.LegaldocumentsclearlystatethatStateencourages‘donvisunghiep’totransformtoenterprises,ornon-stateestablishments;scientificandtechnologicalorganisationsintoscienceandtechnologyenterprise.ItshowstheprocessofStateadministrativereformwithawarenessoftheneedstoincludebusinessactivities,businessmodels,entrepreneurship intostatenon-businessunitsandS&Torganisations, toenhanceefficiency,initiative,creativityandself-sustainabilityoftheseorganisations.

In addition, the socialization of provision of products, public services and socialwelfarewill bring about thefollowingpositiveeffects: · Sharedstateresponsibility,reducetheburdenonthestatebudget; · Attractanddiversifyresources,communityinvestmentandforeignanddomesticeconomicsectors; · Tocreateanequalcompetitivemarkettoimproveefficiencyindeliveringpublicproductsandservices.

Thus,besides thebiggestdifference lies in theownership, socialenterprisesabsolutelycanbeacompellingmodelfor‘donvisunghiep’,scientificandtechnologicalorganisationstoconvertto“statesocialenterprises”.However, in reality, thedifference inownership isahugegapbetween the twosectors.Because legally, theconversioncanbedonecompletely,butstillthechallengeofclarifyingmotivationforstatesocialenterprisestobeasdynamicandcreativeasnormalsocialenterprises.Thesocialenterprisesledbysocialentrepreneurswithclearmotivationandcreativeapproachoftheleadingsocialentrepreneurs.Thereisanopenquestionofwhetherpublicsectorenvironmentwouldfacilitatethedevelopmentofsuchsocialentrepreneurs.

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PART IIHOW TO DEVELOP SOCIAL ENTERPRISES IN VIETNAM?2.1.INTERNATIONALEXPERIENCESINSETTINGUPLEGALFRAMEWORK AND SUPPORTING SOLUTIONS FOR SOCIALENTErPrISES2.1.1.TheUnitedKingdom

SocialEnterprisesintheUnitedKingdomhavehadalonghistoryofdevelopment.Overthelastthreecenturies,manymodelsofSocialEnterpriseshavebeenexperimentedintheUKsuchassocialhousing,self-helpgroups,vocational trainingand jobcreation, fair trade,or income-generatingactivities forcharities,microfinance,andoutsourcingofpublicservices throughcontractwith theUKgovernment ...SocialEnterprises in theUKhaveoperatedundermany formsanddifferent legalstatus, including:Community InterestCompany,LimitedStockCompany,creditfunds,selfemployedbusinessesGroup,cooperatives,developmentfunds,housingfederation,socialcompanyandauthorizedfunds...

TheaboveSocialEnterprisemodelscanbedividedinto4keygroupsasfollows: · Community Interest Company - CIC: This is a business model that was designed specifically for Social

Enterprise (but the law does not require all Social Enterprises to register under this model). · Industrial and Provident Society - (IPS): mainly consists of co-operatives and other kind of collaboration

for community interest operating on principles of democracy and community ownership.

· Company Limited by Shares or Guarantee: This is a popular model and many Social Enterprises choose this model because of its flexibility. However, in order to define if the company is a Social Enterprise, it's objectives for community interest should be clearly shown in its charter and the company has to commit in re-investing their profit for social objectives.

· Group structures with charity status, among those there are non-profit operations: This is the most popular Social Enterprises model operating in the UK as there are more and more charitable organisations switching their traditional fund raising model to obtain sustainability. Moreover, incentive policies on tax exemptions have also been a factor that influences Social Enterprises decision in choosing this model.

Recognizing trendsanddevelopmentpotential of Social Enterprises inBritain, since late1990sanumberofdeepresearchesandintermediaryorganizationswereestablishedtosupportSocialEnterprises,suchasSocialEnterprisePartnershipinEngland(1997),orSocialEnterpriseLondon(1998).Initially,theseorganizationswereestablishedon thebasisofcooperationbetweencooperativesand thecooperativesupportunits.Then, theyquicklydevelopedintoorganizationstosupportyoungSocialEnterprisesinbusinessdevelopment,expandsocialenterprisetrainingprogrammesinuniversities,andpromotesocialenterprisesprogrammethroughJournalSocialEnterprises.Uptonow,therearehundredsofintermediariestosupportSocialEnterprisesintheUK9.Currently,SocialEnterpriseCollationUKisanorganizationwiththewidestnetworkandbiggestimpactinthissector.

PressingbySocialEnterprisesandintermediaryorganizations,thestatebeganofferingsomefinancialassistanceprogram for Social Enterprises, first to promote sustainability of voluntary organizations through businessactivities. In2002, theBritishgovernment firstly launched thestrategyondevelopmentofSocialEnterprisesandestablishedtheSocialEnterprisesUnit(SEnU)undertheMinistryofTradeandIndustry(DTI).TheunithasresponsibilitytocoordinateSocialEnterprisesactivitiesinEnglandandWales.In2006,theunitbecameapartof

9 TheYoungFoundationandNESTA,GrowingSocialVenture,2011

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theOfficeoftheThirdSectorwhichisbelongedtotheCabinetOffice.In2010,theOfficeoftheThirdSectorhasbecomeOfficeforCivilSocietybelongstotheCabinetOffice,lookingafterallvoluntaryorganizations,charitiesandSocialEnterprises.

AccordingtothestatisticsoftheBritishgovernmentin2005,therewerearound55,000SocialEnterpriseswithrevenue up to 27 billion pounds, accounting for 5%of the Enterpriseworkforce, and contributes 8.4 billionpoundseachyeartoUKeconomy10.Duringtheeconomiccrisisinthesedays,SocialEnterprisesintheUKhaveprovenitssuperioritycomparedtootherformsofcharitiesandsmallbusinesses: · Social Enterprisesmaintain thedevelopmentbetter than small businesses. Thegrowth rateof Social

Enterprisesinthecrisisperiodwas56%,whilethiswasonly28%inSMEs. · SocialEnterprisescanmakeprofit.2/3ofSocialEnterpriseshaveprofit,16%SocialEnterprisesachieved

breakeven. · Incomparisontocharitableorganisations,SocialEnterprisesobtainhighersalesandequivalenttootherSMEs. · 70%SocialEnterprisesusetheirprofitstoreinvestintoothercommunitydevelopmentactivities. · SocialEnterprisesoftenhavepositivethinkingduringtheeconomiccrisisthanSMEs.

SomeothercharacteristicsofSocialEnterprisesintheUK: · Operatinginvariousscales,withafewatverylargescales,thevastmajoritiesareatsmallscalewhich

annualrevenueatÊ175,000. · MostSocialEnterprisesoperatinginsmallcommunities.Upto2/5SocialEnterprisesoperateswithin1-2

smalllocalareas.Onlyabout10%ofSocialEnterprisesoperateinregionalandnationalscales. · ThepublicsectoristhemaincustomerofSocialEnterprises.Upto39%SocialEnterprisesparticipating

inthesurveysaidthatmorethanhalfoftheirrevenuesarecomingfrombusinessactivitieswithlocalauthoritiesandcentralgovernment11.

IntheUK,thedevelopmentofSocialEnterprisesalwayshascloserelationshipwiththestatethrough: · The view and vision of the state in providing the public services:SocialEnterprisesoftendonotdevelop

stronglyinthecontextof‘welfarestate’(theperiodbefore1979).Sincethe80softhelastcentury,theBritishgovernmentrealizedshortfallsinthestatedirectlyprovidingpublicservices(differenttoprivateandstatessectors),whileSocialEnterprisesaremotivatedanddevelopedeffectively.

· Leverage Policy: specifically to support and encourage Social Enterprises to develop, particularly toencouragecommunityautonomy,tovolunteer initiativestoresolvetheirproblems.TheStatesupportthrougheconomicleverage,mainlyencourageSocialEnterprisestoparticipateinsupplychainofpubicservices. Currently, revenues generated from contracts of providing public services, accounting formorethan50%ofthetotalrevenuesofSocialEnterprisesinBritain.Besides,thestatealsooffersmanyprogrammesandotherfinancialsupportforcivilsocietyorganizations,includingSocialEnterprises.

ThedevelopmentofSocialEnterprisesintheUKinthelastdecadescouldbedividedinto2mainstageswithincentivepoliciesfromthestateasfollows:

(i) From mid 1990 - 2006 DevelopingSocialEnterprises throughsocialentrepreneurs incubationandsupport.Thebasic formulaof thisstageis:

There are many social entrepreneurs = more social enterprises + well managed Social Enterprises = to bring about more social impact.

StrategytodevelopSocialEnterprisesatthisstagehasbeenaffectedbythebusinessdevelopmentmodeloftheU.S.(SiliconValley),inwhich,individualentrepreneursplaycrucialrolesintheformationofnewbusinessesandopenupaperiodofexplosivegrowthofhigh-techcompanies.Atthisbeginningstage,SocialEnterprisesusuallyassociatedwithnon-profitorganizations,orabusinessbranchofcharitableorganisations.SocialEnterpriseshavebeenfoundedbysocialentrepreneurs.Therefore,thegovernmentfocusedtheirsupportinsocialentrepreneurswithahopethattheywillestablishmoreandmoresocialenterprises,andwhentheyhaveopportunitytoaccesstocapitalandmarkets,theywillgeneratemoresocialimpact.

10 JPAEuropeLtd.,TheSocialInvestmentMarketintheUK:aninitialoverview,201011 TheStateofSocialEnterpriseSurvey,2009

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In2002,theBritishgovernmentfirstlyintroducedtheSocialEnterprise:astrategyforsuccess,withastrategicview thatadynamicandsustainablegroupofSocialEnterpriseswillpromote thegrowthandsynergyof theeconomy.TheBritishgovernmentbelievesthatthesuccessofSocialEnterpriseswillplayanimportantroleinimplementinggovernmentobjectives,particularlythrough: · increasingproductivityandcompetitivenessoftheeconomy; · contributingtocreatingnotonlymaterialprosperitybutalsosocialvalues; · supportingindividualsandgroupstocooperatetobuildabettercommunity; · introducinganewwayofprovidingpublicservices; · buildingafairsocietyandpromotingcitizen’sactiveness.

DevelopmentstrategyforSocialEnterprisessetoutthreemainobjectiveswiththefollowingimplementingpolicies: (1) To develop an enabling environment through i) strengthen the role and official participation of the

government, ii) ensure that Government legal regulations do not undermine the growth of SocialEnterprises,iii)promoteparticipationofSocialEnterprisesinpublicservicesprocurement.

(2) ToenableSocialEnterprisestobecomebetterbusinesses.Governmentiscommittedtocollaboratewithcapacitybuildinginstitution(privateorpublic)tosupportdevelopmentofbusinesscapabilitiesforSocialEnterprises.Inaddition,theGovernmentalsohasspecificsolutionstomaintaincapitalsourcesforSocialEnterprises.This istoenableSocialEnterprisestoshift frombeingdependentonfinancialsupporttobeingfinanciallyautonomythroughtheirbusinessactivities.

(3) TocreatevaluesforSocialEnterprisesthrough:i)carryingstudyresearchtodeterminethescaleandimpactofSocialEnterprises,ii)officiallyrecogniseandpromoteSocialEnterprises’contributionsthroughtheMedia,iii)setupanassessmentsystemtobuildcredibilityandtrustinthesocialandeconomicvaluesthatSocialEnterpriseshavecreated.

Toinitiallyacknowledgeanddevelopaspecific‘brand’forSocialEnterpriseswhodon’twanttoregisterintheformofcharity,in2005,theBritishgovernmentintroducedanewcorporateform:CommunityInterestCompany-CIC.Thisisthefirsttimeinthelast100years,anewtypeofenterpriseandanewlegalstatushasbeenaddedintheBritishEnterpriseLaw.CICisthetypeofcompanyforSocialEnterpriseswhodesiretore-investtheirpropertiesandprofitsforsocialobjectives.CICareeasytosetup,withflexiblecharacteristicssimilartoothertypesofenterprises,however,theyalsohaveuniquecharacteristicstoallowthemtooperateforthebenefitofthecommunity.

The launching of CIC has helped to solve an existing problem in the current legal system affecting SocialEnterprisesthathaveregisteredascommercialcompanies.ItisdifficultfortheseSocialEnterprisestoconvincethattheyusetheirprofitsforsocialobjectives.CIChelpsSocialEnterprisesdemonstratingtheirtransparencyandhonestywiththecommunity.However,CICfirmsarenotentitledtotaxincentivessuchascharitiesandNGOs.SofarintheUK,thereareabout2,500socialenterprisesregisteredunderthisform.

Throughseriesofpolicymovement,theBritishgovernmenthassucceededincreatingmoreSocialEnterprisesandattractingother stakeholders into thisnewlyexplored field.SocialEnterprisesmovementsbecomemorevibrantandcomplexwithmanySocialEnterprisesandinvolvementofotherstakeholders.Bythisstage,policyofattractingmoreSocialEnterprisesisnolongerapriority.Instead,theBritishgovernmentshiftedthefocustopromoteefficiency,scaleandsustainabilityimpactsofSocialEnterprises.

(ii) From 2007 - present

ThisisthestagethatSocialEnterpriseswereplacedinalargerecosystemwithmanystakeholderstakingparttocreateeffective impact and sustainability. The question is how to increase Social Enterprise’ efficiency and sustainability,to better meet demands of the communities. The British Government believes that this can be achieved throughcooperationbetweenSocialEnterprisesandotherorganizations,privateenterprisesandtheState.Moreover,theBritishgovernmentalsoholdsaviewthatanumberofsocialdevelopmentobjectiveswouldbeachievedthroughCorporateSocialResponsibility(CSR)programmes.Someotherobjectivesbeingachievedthroughvoluntaryactivitieswouldbemoreeffective.Therefore,theexchangeandcooperationbetweenthesesectorsareextremelyimportant.Again,thegovernmentplaysacrucialroleinworkingouthowbesttoenhancetheimpactofSocialEnterprisesinthenewdecade.TheBritishGovernmentiscurrentlypromotingsocialenterprisesmodelinthefourmainorientationsasfollows12: · To support Social Enterprises in scalingup their activities throughcapacitybuilding andconnecting

themtogetherthroughcollaboration,strengtheningtheirnetworkandexpandingtheirmodelusingtheapproachoflicensing;

12 CharlesLeadbeater,Socialenterprisesandsocialinnovation:strategiesforthenexttenyears,2007

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· Toencourageasharingcultureandresponsibilitytowardthesociety,particularlythroughsupportingtheSocialEnterprisesandtocontributetovoluntaryactivitiesinordertoindirectlysupportthedeliveryofpublicservices;

· Tooutsourcepublicservicespromotingsocialinitiativesandit’sefficiency; · Toencourageandrequire(asneeded)theimplementationofCSR.

Withthisapproach,in2006,theBritishgovernmentlaunchedtheSocialEnterprises’ActionPlan,whichinvolvedtheparticipationof12ministriesandothersectorssuchas:DepartmentofBusiness,EnterpriseandInstitutionalReform;MinistryofHealth,MinistryofChildren,MinistrySchoolsandFamilies,aswellastheofficeoftheThirdsectortopromoteandsupportSocialEnterprises.TheBritishGovernmenthasprovidedthefollowingincentivestowardSocialEnterprises: · ContinuingtostrengthenSocialEnterprises’culturethroughcapacitybuildingprogramme,topromote

communication,researchandassessmentonsocialimpact(SROI); · StrengtheningconsultationandinformationfortheestablishmentanddevelopmentofSocialEnterprises:

ThegovernmentcommittedtodevoteresourcestosupportSocialEnterprisesactivitiessuchasbusinessdevelopment (6millionpounds),buildingconsultativeskillsandproviding intensivesupport (6millionpounds)andsupportSocialEnterprisesmodernizationintimesofcrisis(8millionpounds);

· Createopportunities forSocialEnterprises toaccess tocapital and todiversify formsof investment.ApproximatelyÊ315millionhasbeenmobilisedtosupportSocialEnterprisesthrough:

o 215millionpoundswasusedtobuildcapacityforSocialEnterprisestoprovidepublicservices; o 10millionpoundswasusedtoestablishVenturecapitalfunds; o Social impact InvestmentProgrammeprovidescapitaland increase liquidity for intermediary

organizationswhoareinvestinginSocialEnterprises; o EncourageinvestmentinSocialEnterprises; o Organisetrainingcourseonfinancialmanagement.

· FacilitateopportunitiesforcooperationbetweenSocialEnterprisesandtheGovernment:carryingoutaresearchtoidentifysectorsthatSocialEnterprisescanmakebestcontributionsuchasHealth,communitydevelopment,businessdevelopmentindisadvantagedareasandrehabilitationofprisoners.Basedonthis,theBritishGovernmentdesignedastrategicpartnershipprogrammewithSocialEnterprises.

Image 10: Ecosystem of the UK social enterprises

State

·Policy·Humanresourses·Finance·Encourage,recognition

Intermediary organisation

Policyadvocacy

Capacitybuilding

Linkagetogether,resources

Awarenessraising

Incubation

Financial organisations

·Sponsors·Loancapital·Shared

Socialenterprises

Education

·TrainingorganizationsNCNL

·Consultation·Research·Resources

Communication

·Awarenessraising·Recognition/·Networking

Source: CSIP

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In2010,TheUKPrimeMinisterDavidCameronlaunchedaSocialVisionoftheBigSociety.ThisisakeypointinhiselectioncampaigntobecomePrimeMinister.BigSocietyistohelppeopleworkingtogetherandimprovetheirlives.ItalsodemonstratestheGovernment’sdeterminationtoempowerpeoplemorethaneverbefore.ThisisconsideredamajoreffortofthecurrentgovernmenttoredefinetheroleoftheStateandpromoteentrepreneurialspiritinthecommunity.CivilSocietyBureauoftheCabinetOfficewillhelpcoordinatingrelevantministriesanddepartmentsandimplementingtheGovernment’spolicythroughthefollowingprograms:

· Big Society Capital bank:March2012,TheUKPrimeMinisterapprovedtoestablishtheBigSocietyCapitalFundstospendanamountofÊ600millionfromallaccountsthathadn’tbeenusedinthelast15years.Thoseamountswerecurrentlyfrozen inbanks, (Dormantaccounts)willbemobilisedto invest inSocialEnterprisesprogramme.Theseprojects,oncehavebeenfullyoperationalwillpaybackbasiccapitalfunds,interest rates andprofits for the Funds. This is oneof visible actionsof the State in supporting SocialEnterprisesinaccessingtofinancialsourcestodevelopactivitiesforthebenefitofthecommunity.

· National Citizen Service - NCS willgatherallyoungpeople(over16yearsold)fromdifferentlivingconditionstocarryoutcommunitydevelopmentactivities.Insummer2011-12,thereareabout10,000youngpeopleparticipatedintheprogramme.

· The Community Organisers program:During aparliament term,5,000peoplewhodesire to improvecommunity will be educated and supported to gain better understanding of community needs andbecomekeychangeagents.

· Community FirstisanewFundtoencouragethedevelopmentofsocialactivitiesforpoorpeoplewhoarestayingatthedisadvantagedandunderdevelopedareas.

Withtheencouragementfromthegovernmentandeffortsofintermediaryorganisations,SocialEnterprisesandotherrelevantstakeholdershavecreatedan“eco-system”fortheirdevelopmentintheUK.ThiscanbeseenasagoodmodelforVietnaminthefuture.

Overall,despitealonghistory,SocialEnterprisesintheUKhasreallydevelopedstronglyinthelast15yearswithsupport fromtheStateandtheestablishmentofhundredsofprofessional intermediaries.TheStatehastakenaroleofpromoting,supporting,nurturingaswellaskeycustomersofSocialEnterprises.This isan importantdifferencebetweenthedevelopmentsofSocialEnterprisesintheUKwithothercountriesincludingtheU.S.Therearesupportingviewsaswellasoppositionstowardthispolicy.WefoundthatselectionofmodeltodevelopSocialEnterpriseswillbeheavilydependentonoperatingcontextanddemandofeachcountry.Intheregion,Thailand,SingaporeandAustraliaarefollowingUKmodelthatwewilldiscussfurtherinfollowingpartofthereport.

2.1.2.UnitedState

Inthe1960s,themodel‘welfarestate’waspopularintheU.S.,withbillionsofdollarswasinvestedinachievingobjectivesinpovertyreduction,education,healthcare,communitydevelopment,environment,artthroughthenon-profitorganization(NPO)13.However,theeconomicdownturnfromthelastdecade1970-1980pressurisedthegovernmenttocutmostoftheaboveprogrammes,excepthealthcaresector.ThetechnicaltermofSocialEnterprisesbecamepopularatthisstagereferringtobusinessactivitiesundertakenbyNPOs.ThesebusinesseshelpedtoimproveNPOsfinancialautonomyandtocreateemploymentfordisadvantagedgroups.NPOstartedtorealizethatSocialEnterpriseswouldbeanalternativesourcetoreplacethesupportfromgovernment.ThetechnicaltermofSocialEnterpriseswasthendevelopedwithbroadermeaning,includingmostofthecommercialactivitiescommittedtopursuingsocialobjectives.

The organizational model

TherearetwowaystoclassifySocialEnterprisesmodelsintheU.S.include:

Thefirstviewusuallycomefromtheacademics,theythinkthatSocialEnterprisescanoperateinawiderangefrompurelyNPOorganizationstoprofitablebusinesses,including: (i) The NPOs undertaking business activitiestoprovidefinancialsupportforsocialservices,thereforethey

operatewithmoreautonomyandlessfinanciallydependentonexternalfunding.

13 ConceptofNPOhasbeenpopularinUSinordertodistinctbetweenStateandPrivatesectorsintermsofprofit.Inthemeantime,theconceptofNGOhasbeenusedmoreintheUK.

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(ii) Social Enterprises with profit simultaneously pursue business and societal objectives.Theirresourcesarenotlimitedandtheyadoptasimilargoverningstructuretotraditionalenterprises.

(iii) The third way is a hybrid; combiningadvantagesoftheabovetwoforms. The second point of view is popular among businesses, inwhich Social Enterprises are classified into threegroups14: (i) The Corporate Philanthropies: SocialEnterprisescanbeprofitableandtheycommittouseresourcesto

solvesocialissuesorcontributeinmanywaystotheoverallprogressofthesocietyorcommunities. (ii) Social Purpose Organizations are Social Enterprises with self-defined objectives of achieving social

progress. Such organizations are often dominated by their social mission rather than profit targets.However,generatingrevenuefromtradeandbusinessactivitiesareconsideredasastrategytoraiseincometocarryouttheirsocialmission.NPOsareamonginthisgroup.

(iii) Hybrid organisations: isrecentlyapopulartrendofdevelopmentofenterpriseswhentheysimultaneouslypursuittwoobjectives-generatingprofitsforbusinessownersandcontributingtosocialprogress.Intheory,thoseSocialEnterpriseswouldreduceprofitratiotomeetcriteriaforsocialdevelopmentsuchas:environmentprotection(useofrecycledmaterials,environmentalfriendlyproducts);ensureasocialfairness (provide employment for or use of products produced by peoplewith disabilities or ethnicminoritiespeople,etc.);ortheywillusealargepercentageoftheirprofitstosolvesocialissuesinsteadofdistributingallprofitstobusinessowners.HybridSocialEnterprisesareoftenoperatedbyentrepreneurswhoreallyconcernedaboutsocialissues;theyconsiderastrategytooptimizetheirvaluebyachievingbotheconomicandsocialobjectives,insteadofsolelypursuingprofittargetasbefore15.BillGatesisatypicalexample.ThoughMicrosoftisnotaSocialEnterprise,butthefounder-BillGatesdecidedtousemostofhispropertytofundresearchesonHIV/AIDSandpovertyreductioninAfrica.

Intermsofoperation,SocialEnterprisesinAmericaoperatesinmanyformssuchas: · Non-profitorganizations(operatingundertheprovisionsofparagraph501(c)(3)oftheLawonincome; · SoleProprietorship · Corporation · Partnership · Co.,Ltd(LimitedLiabilityCompany) · LowProfitCompanyLimited(Low-ProfitLimitedLiabilityCompanies-L3C).

Since2008,low-profitlimitedcompanies(L3C)arepermittedtoestablishandoperatebysomestatesinAmerica.Thisisanewformofenterprise,combiningsocialobjectivesofNPOswithdiversifiedformsofownershipsuchasCo.,Ltd.,thatallowsprofitsharing.However,thedifferenceofL3Ctotraditionalbusinessesisthatmakingprofitisnottheirprimaryobjective.TheL3Chavetopaytaxfortheirbusinessincomeasusual,however,theyhavecreatedamotivationandnewsourcesofinvestmentforSocialEnterprises,wheresocialinvestorsacceptlowerreturnrateon investment togeneratesocialvalues, insteadofhavingnoprofitofeven loosingmoneywheninvestinginNPOs.

The government’s policies to promote and support the development of Social Enterprises

The government has clearly demonstrated efforts in promoting the development of Social Enterprises, firstly byestablishingtheOfficeofSocialInnovationandCivicParticipation-SICP.SICPisworkingprimarilywithNPOsinbothprivateandpublicsectortoorganize,promotesocialinitiativesandtosetupprocedurestoenablethegovernmenttosolvesocialchallenges.SICPactivitiesbasedonthreeobjectivesandkeyareasofactivitiesasfollowed: (i) To promote the development of community leaders. Thisisatooltoattractparticipationofyoungpeopleto

shareresponsibilityinsolvingsocialchallenges.Theseeffortsareillustratedthroughthefollowingprojects:(a)AmeriCorpsisanorganizationco-ordinatingvoluntaryresourceswith75,000peopleinvolvedincommunitydevelopmentprojects,(b)VolunteerGenerationFundcreatetoolstosupportNPOstoexploittheirpotentialthroughprovisionofexpertise,humanresourcesservicesordevelopingmanagementskills...

(ii) To increase investment in community initiatives for community with clear impacts. Thisisapartnershipbetween the federalgovernmentandothersectors tocreatean infrastructuresystemsuchas funds,rewardingmechanisms,socialcapitalmarkets,etc.,toprovidecertainsuccessindicatorsinpromotingthe

14 http://www.jonaspiela.com/files/2010/03/jonaspiela_socialentrepreneurship.pdf15 http://www.community-wealth.org/_pdfs/articles-publications/social/paper-young.pdf

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developmentofSocialEnterprises.Forexample,theestablishmentofSocialInnovationFundwithroughly50millionUSdollars(for2010fiscalyear)investinginthebestprojectsandreplicatingsuccessfulmodelstoothercommunitieswithsimilarchallenges.TheFundstargetnon-profitprojectswithgreatsocialimpactandinfluence,toensurethehighestefficiencyofgovernmentfunds.

(iii) Development of new forms of cooperation. This is an important element in creating a foundation forpromotingthebestcooperationbetweenprivatesectorandpublicsectoraimingtosolvecommonsocialissuesandtocreatepositiveimpactsforthecommunity.Forexample,Let’sMoveprojectsisacollaborationbetweenPhilanthropicFunds,privatecompaniesandNPOssharingthesameconcernandcommitmenttosolvetheproblemofchildobesity;orText4Babyprojectisthecollaborationbetweenprivatecompaniesandstateinsendingmessagestopregnantwomentoprovideinformationandknowledgeonhealthcareformothersandbabies.

Intermsoflaw,intheUnitedStates,therehavenotbeenanylegaldocumentsforSocialEnterprises,excepttheinclusionofanewtypeofcompany(L3C)asmentionedabove.TherearestilldebatesonwhetherthecurrenttaxlawshouldbeappliedforSocialEnterprisesorthereneedtobeaseparatelawforSocialEnterprises.However,theGovernmenthasamendedandsupplementedsomeregulationsonsupportingSocialEnterprisesasfollows: · Policies to support new taxes (New Market Tax Credit) are implemented continuously since 2000 to

provide15billionUSdollarsoftaxsupportforinvestmentincommunity’sactivitiesfrom2000to2007; · To amend tax regulations (2004): AllowsNPOs(thatdonotneedtopaytaxes)tocollaboratewithforprofit

jointventure16.

Impact of Social Enterprises to the economy and society

DatafromtheNationalStatisticsCentreofcharityactivitiesshowsthatnumberofSocialEnterprisesintheU.Swillcontinuetoincreasefast.Businessactivitiesinthelast20years(1982-2002)notonlybecamethemainrevenueforNPOsbutalsohavegainedsignificantgrowthrateat219%,comparedtothecontributionfromprivatesectorof197%andthefundsfromgovernment169%.Itshouldbeemphasisedthattheproportionoftotalrevenuefromnonprofitbusinessincreasedfrom48.1%in1982upto57.6%in2002.Meanwhile,thecontributionsfromtheprivatesectorincreasedmarginallyfrom19.9%to22.2%andfinancialsupportofthegovernmentisslightlyincreasedfrom17%to17.2%(Kerlin&Pollak,2006).ThisprovedthatSocialEnterprisesplayanimportantroleinimprovingfinancialself-sustainabilityofNPOsintheU.S.inthelastperiod.

2.1.3.Korea

The development of Social Enterprises in Korea has closely associated with the 1997 financial crisis. Whenunemployment crisis occurred in Korea, difficulties were compounded as the Government social welfareprogrammecouldnotsatisfybasicneedsofpeople.Itcreatedapressureonthegovernmentrequiringanurgentactiontosolvethisissue.Inthatcontext,thecivilsocietyorganizationsinKoreahaveexercisedtheirdynamisminsupportingtheGovernmenttocreatenewjobs,inordertomeetthesocialmissionduringtheperiodfrom1998-2006.SocialEnterpriseLawwasenactedin2007,thusSocialEnterprisesactivitiesinKoreaarebettershapedandcontinueundertakepositivechanges.

The main types of current Social Enterprises17

(i) The Social Enterprise operating under the Social Enterprise Law: This is the best defined type that has been recognized by Social Enterprise Law. The Social Enterprises Committee under the Ministry of Labour is responsible for appraising and giving permission for the operation of Social Enterprises.

Conditionsforbeingrecognised: · Organizationswithbusinessproductsandservices forsocialobjectives, to improvequalityof life for

disadvantagedgroups throughemployment or provisionof social service,with at least 50%of thebeneficiariesgrouporemployeesorstaffofvulnerablegroups.(Article2).

16 MargieMendell,SocialenterprisesinNorthAmerica,200717 SocialenterprisesinSouthKorea:HistoryandDiversity,EricBIDET(AssociateProfessor,LeMansUniversity,France)andEUM

Hyung-Sik(PhDcandidate,LiegeUniversity,Belgium).

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· Organisationswithappropriatelegalstatus:forexampleAssociativeCorporationareworkingundertheCivilCode,companiesunderCommerceLaw,nonprofitprivateorganisations,consumercooperatives,Societywelfareunitsregisteredundertherelevantlaws.(Article8)

(ii) The Social Enterprises related to the Basic livelihood National System (NBLS): TheseSocialEnterpriseshaveoperatedwithinNBLStoprovide07financialornon-financialaidpackages(forthehealthsector,education,housing,employment...)forpoorfamiliesunderabsolutepovertyline(incomebelowỮ1.200U.S.$/familyof4people).Thisisafollowupprogrammecalled“Promotingself-sustainability”thatwasimplementedsince1996.TheprogrammewasthecollaborationbetweentheGovernmentandothercivilsocietyorganisations.Amongthose,selfsustainedSocialEnterprisesplayimportantroleinensuringstableemploymentforthepoor.

Keyfeaturesofself-sustainedSocialEnterprisesinclude: · atleastonethirdofworkersbelongingtopoorhouseholdsandtheyareNBLS’stargeted; · capabilitytoself-sustainedfinancially; · collectiveownership.

(iii) other types of Social Enterprises: arethoseorganisationsthoughnotyetberecognised,butaccordingtogeneraldefinitionofSocialEnterprises,ingeneral,theyarestilladoptingSocialEnterpriseapproach.Thesemayincludethefollowingorganisations:

· ClubforElderlypeople; · Manufactoryforpeoplewithdisability; · Projectteamswhicharepreparingtoformupsustainablebusinessorganizations(pre-socialenterprises

model)

Government’s policies to promote and support the development of Social Enterprises

Asnotedabove,thedevelopmentofSocialEnterprises inKorea istherelationshipbetweentheeffortsofthegovernmentinfindingsolutionsintermofpolicywithsupportfromCivilSocietyorganisationssincethefinancialcrisisin1997.Specifically,theseeffortsinclude: · Thefirstphasefrom1998:itwasapilotinitiativebetweencivilsocietyorganizationsthatweresupported

byGovernmentfundingfrom“NationalCommitteeonsolvingunemployment”tocreatetemporaryjobsandstableincomeaswellasreduceunemploymentforpoorhouseholds.

· Bymid-2003,“TheSelfsupportPolicy”wasissuedintheframeworkof“Nationallawonsecuringbasiclivelihood”.ThishadimpactedsignificantlyontheinstitutionalizationofSocialEnterprises’jobcreationprojectsintwodirections;eithertomeettheneedsofthemarketorforcollectivebenefits.However,unemploymentandpovertyrateswerestillhighincomparisontotheratespriortothecrisis.Thiswasbecauseprogrammes/policiescouldonlyreachtoasmallpercentageofthepoor.Thevastmajorityoflow-incomehouseholdsdidnotreceiveanysignificantsupport.

· Therefore,from2003to2006,theGovernmentdecidedtoimplementthe“SocialEmploymentCreationScheme - SECS. Thus, therewere not only civil society organizations operating in the field of socialwelfare,butalsonetworks/associationssuchasenvironment,women...participatedinthemovementofcreatingjobscombiningwiththeiroriginalsocialobjectives.Forprivatesector,SECSprogramalsoattractedCSRsagendathatwouldimproveimagesandbrandsofthebusiness.Somegiantcorporationshavepartneredwithcivilsocietyorganizationstoimplementtheprogramme18.

· In2007,the“SocialEnterprisePromotionAct”wasestablishedtosupportthebusinessactivitiesaimingatresolvingsocial issuesthroughjobcreationandproductsandservicesfordisadvantagedgroups.The organisations may be business, NGOs, or Association. Benefits to Social Enterprises that havebeenrecognised,istheaccesstogovernmentfundinginthestartupstage;theyweresupportedwithmentoringonmanagement,taxexemptionandenjoyprioritywhenbiddingforpublicservicescontracts19.Currently,thereareabout300SocialEnterprisesreceivingthissupportfromthegovernment.

18 KimShin-Yang,ThedynamicofSocialEnterprisesinSouthKorea.19 Chapter5:SocialEntrepreneurshipinJapan,ChinaandtheRepublicofKorea:Acomparison,KatsuhiroHarada,SeniorStaffWriter,NIKKEIincandProfessorMeiji,GakuinUniversity.

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Impact of Social Enterprises to the economy and society

ThestrongsupportfromtheGovernment,particularlytheestablishmentofalegalframeworkforSocialEnterprises,havecontributedsignificantlytoreducingthesocialpressuresonissuesuchascarefortheelderly,employmentforyouthandthepoor.Notably,infacttherearemoreandmoreyoungpeopleembracingvisionofbecomingsocial entrepreneurs.According to statistic in July2009, therewere7228employeesworking in251SocialEnterprises.Amongthese,110SocialEnterprises(43.8%)areoperatinginemploymentsector,followedby71SocialEnterprises(29.2%)operatingashybrid,theremaining37SocialEnterprise(14.7%)adoptingothermodels.ToJanuary2010,accordingtoofficialstatistic,Koreahas288registeredSocialEnterprises.

RegardingSocialEnterprisethatarerelevanttotheLawonNationalBasicLivelihoodsystem(NBLS),accordingto2007statistics,therewere509selfsustainedSocialEnterprisescreatingjobsforabout3,245workersinareassuch as construction, health care, sanitation, agriculture,manufacturing, etc. Approximately 406other SocialEnterpriseshaveoperatedclubs for theelderly,manufactures forpeoplewithdisabilitycreating14,122 jobs(Source:Eum,2008).

2.1.4.Thailand

In South East Asia, Thailand is a pioneering nation in the development of Social Enterprises. Amendment ofThailandConstitution(1997)hasstronglyencouragedtheparticipationofcivilsocietyandthepromotionofsocialinitiatives(socialinnovation).Thailandconsidersthisasafoundationtodevelopacreativeeconomyandminimizenegativeimpacts(directorindirect)oftraditionalenterprisestosocietyandtheenvironment.Withthatpointofview,manybusinesseswithspecialinterestinsocialexpensesandtheenvironmenthavebeenestablished.Thesebusinesseshavebeendesignedcreativelybysocialentrepreneursinordertobalancetheeconomicandsocialbenefits20.

Since 2009, Thai government has implemented many action plans to promote the development of SocialEnterprises.Amongthosewastheestablishmentof‘ThesocialenterprisesCommittee’operatingdirectlyunderthePrimeMinister’sOffice.TheCommitteeistaskedtodesignstrategicpoliciesandprogramstoencourageSocialEnterprises,playtheroleofstatemanagementandprovideplanforprovisionalbudgetforrelatedadministrationindevelopingSocialEnterprises.ThedevelopmentofSocialEnterprisesinThailandisconsideredtobeappropriatetothephilosophy-“JustandSufficienteconomy”oftheKingofThailand(inlate1990sandcontinuestodate).Itemphasizes3keycomponentsoftheeconomyincludingmodernization,wisdom,andcapacitybuildingtocopewiththerisksthatmaycomefromchangesofexternalenvironment. Social Enterprises models in Thailand

AccordingtotheThaigovernment,“Social Enterprises are private or people owned enterprises, which generating income from sale, production of goods or services. They are established with clear objectives from the beginning that be added or changed latter aiming to solve social issues and /or developing communities, tackle issues on social and / or the environment. They do not operate to maximize profits for stockholders or the business owners”21.

Legal documentation including the draft Law on Social Enterprises share agreement on the following sixcharacteristicsthatThaiSocialEnterprisesshouldhave: (1) manufacturingprocess, full operation, productsor services tonot create anybad social, health and

environmentalimpactinthelongterm; (2) operatingwithgoodmanagementandorganization; (3) havingtheabilitytosustainfinanciallyinthelongterm; (4) majorityofprofitisreinvestedbacktobusinessexpansioninordertofulfillitsobjectivesortothesociety

andservicesusers; (5) applyingdiversifiedbusinessandorganisationmodels; (6) applyingtheeconomicphilosophybyThaiKing-JustandSufficienteconomy22.

Infact,SocialEnterpriseshasemergedinThailandforalongtime,mainlyintheformofcooperativesandcommunity

20PlanningDevelopmentStrategyforSocialEnterprisesinThailand(2010-2014)21 OrdinancefromThailandPrimeMinisterOfficetopromoteforbusinessactivitiesforsociety,SocialEnterprisesDevelopmentStrategy(2010-2014)22Article4.4-supportingSocialEnterprisesofTSEO,2012

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enterprises. Depending on geographical conditions, culture and political economy that Social Enterprises indifferentareashavedifferentcharacteristics.SocialEnterprisesinNorthernThailandareworkingcloselyinthesectorofagriculturaleconomy,thepoor,improvingspirituallifeandcultureofethnicminorities;WhileSouthernThailandthat issurroundedbythesea,agoodconditionforSocialEnterprisestowork inthefieldofmarineconservationandenvironment...Accordingtogovernmentstatistics,thereareabout116,000organisationswhomaybeconsideredasSocialEnterprisesinwhichmajority(>100,000organizations)aregroupsandnetworksoperatinginthecommunities.However,accordingtoThaiSocialEnterprisesOffice(TSEO),thereareonly500organizationsandbusinesseshavebeenidentifiedandfullyoperatedbythestandardsofaSocialEnterprise,withdifferentaimsandmotivation: · Groups and community organizations: were founded aiming to promote the autonomy of communities, to

meet the need of the people that State provision can not reach to; · The Social Enterprises established by NPOs: to strengthen their self financial sustainability and operational

efficiency for social objectives; · The new Social Enterprises established by social entrepreneurs: to implement social initiatives and to

create a sustainable financial base for the next generation; · The Social Enterprises established by the government and businesses: to encourage accountability and

transparency for social objectives.

Becauseof thediversityandcomplexityof thesemodels,Thaigovernmentplans todevelopcriteria tomarkSocialEnterprises.DependingonlevelofdevelopmentandcompliancetostatedcriteriaofSocialEnterprisesthattheycanbenefitdifferentlyfromsupportprogramsoftheGovernment.

Intermsofoperation,ingeneralThaiSocialEnterprisesoperatesinthefollowingareas:

Environmentalfield:· Alternativeenergyatcommunitylevel;· Environmentprotection,biodiversityandlocalforest;· Designfortheenvironment(GreenDesign);· Recyclingandmanufacturedgoodsfromscrap.

Socialsectorandqualityoflife:· AlternativeEducation;· Museumsandculturalpreservation;· Educationaltoolstoencouragechildren’screativityorsocialawarenesseducation;· Goodsandservicesforpeoplewithdisabilities;· Healthcareandcommunityhealthservices(e.g.communityhospital);· Low-incomehousing;· Skillsdevelopmentandjobcreationforunemployed,disadvantagedandhomelesspeople;· Psychologicalrecoveryandskillsdevelopmentforprisonersscreweduppeopleinordertopreventrecurrence

ofcrime;· Goodsandservicesdedicatedtosupportingthedevelopmentofsocialorganizations.

Localeconomicforsocietyandsustainability:· FairTradeforproducers· Sustainableagriculture,agriculturalmicrobiology;· Tourismservicesforcommunityandbycommunity;· Localmicro-financeinstitutions;· Communitybusinesses.

Government’s policies in promoting and supporting the development of Social Enterprises

AlthoughthenumberofrealSocialEnterprisesinThailandisstilllimited,Thaigovernmenthasrecognizedtheirpotential.Therefore,inrecentyears,ThaigovernmenthasinvestedeffortsininstitutionalizingStatemanagementinthissectorbyissuingseriesofimportantlegaldocumentation,establishingStatemanagementsystemandinitiallegalframeworkforSocialEnterprises.

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Image 11: Some milestone in policies of Thai government for Social Enterprises

Set up systems to encourage the development of Social Enterprises

(i) ThaiSocialEnterprisePromotionCommittee:On November 5, 2009, the Prime Minister Office - Abhisit Vejjajiva issued an ordinance 246/2552 on theestablishmentoftheCommitteetoencourageSocialEnterprisedevelopment(calledtheCommittee)todevelopstrategicpoliciesandmodelstopromoteSocialEnterprisesanddevelopprovisionalbudgetforrelevantsectors.

CommitteeunderthePrimeMinister’sOfficeconsistingof23members: · ThePrimeMinisteristheCommitteechairman; · 02 Vice chairmen: Chief Administrator of the Prime Minister’s Office is the first Vice chairman; 01

independentexpertisthesecondVicechairman; · 09membersappointedbyPositions:PermanentViceministersofrelevantMinistriessuchasFinance,Society,

Agriculture,Health;DirectorofThaiHealthFunds,andChiefAdministratorofSMEsdevelopmentoffice. · 04representativesfromSocialEnterprises; · 06 appointed members based on the following standards: people who have been recognized with

expertise,ability,andexperiencesinrelevantsectors.Nomorethanonememberfromeachsector,nomorethan3fulltimegovernmentemployees.

· DirectorofTSEOisamember,cumsecretarywithnomorethan3assistants.

Main functions andduties of theCommittee is to study, propose and advise theCabinet office on policies,strategies, supportingprogramsandpromotionofbusinessactivities for society (SocialEnterprises);developandcompletelegalframeworkandcoordinatewithotheragenciesinimplementingprogramstoenhanceSocialEnterprisesactivities.TheCommitteeshallreporttotheCabinetOfficeatleastonceayear.

(ii)ThaiSocialEnterpriseOffice-TSEOThecommitteeistofacilitatethecoordinationanddecisionmakingattoppolicylevelforSocialEnterprisessector.However,TSEOisthecentreforpolicydevelopmentandmanagementofSocialEnterprises.Foundedin2010,inthelast3years,TSEOhasdrafteda5yearsstrategy,01decree,01provisionalActsforSocialEnterprises.Notably,theCommitteewascreatedunderanordinanceofthePrimeMinistersothatithasaStatutoryBoard.Meanwhile,thoughTSEOareentitledtoactasstateagency,itisundertheThaiHealthPromotionFoundation,inshorta‘Fund’,withparticipationfrombothgovernmentandprivatesectors.Thisisabignon-profitorganization,wasestablishedbyaseparatelawtocoordinateprogrammesandresourcesofboththeGovernmentandprivatesectorformanyhealthandsocietysectors.

TSEOisplacedinthestructureoftheFoundationbecauseTSEOdonotreceiveStatefundingbutbeingsponsoredbytheFoundationwithfundingcomefrom3%SinTaxoftobacco, liquor,barsanddiscothequeindustry.TheFoundationearmarked105millionBahtforTSEO(U.S.$3-4million)inthreeyearssinceitsestablishment.Inturn,TSEOare implementingsupportprogrammesforSocialEnterprisesthrough intermediaryorganizationswhosehavemission to develop Social Enterprises such asChange Fusion. Currently, Thailand has4-5 intermediaryorganisationswitharole‘incubating’SocialEnterprises.

11/2009

Establish for Social Enterprise Promotion Committee under Prime Minister Office

1/2010 1/2010 4/2011 2012

Cabine approved:Social Enterprises Development strategy for 2010-2014

Establish Thai Social Enteprises Office under the Thai Health Fund

Decree issued by Prime Minister Office encouraging businesses for society at national level.

Draft Act on Social Enterprises promotion: National Committee on Social Enterprises, SE promotion office

Source: CSIP & CIEM

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Draft Act on Promotion of Social Enterprise

ADraftActforSocialEnterprisesiscurrentlybeingcirculatedbyTSEOofficeforcommentsandplannedtobesubmittedtotheCabinetOfficeandNationalAssemblyforapprovalthisyear.Basedonthecurrentdraft,wecouldseesomenewchangesasfollows: · Debatingapproach:thedraftproposalclearlystatesthat“Social Enterprise is an organization with a legal

entity operating under the Civil and Commercial Law, and it must register under this Law". However,thereisaviewthat "the characteristics of Social Enterprises tend not to gain surplus to maximize profits for business owners. This is against business principles stated in the Civil and Commercial Law. Therefore, it is necessary to regulate legal status of Social Enterprise similarly to non-profit organizations.”

· Socialenterpriseisanewtypeofenterprise,learningfromtheCICmodelintheUK.Registrationdossierincluding:businessname,needtohavethephrase“SocialEnterprise”;applicationformforestablishmentof a legal entity which defined clearly responsibility of the businesses; documents about the SocialEnterprise’smission.Continuingtomaintainthe6criteriatoidentifySocialEnterprises.

· Expanding the Committee to a National Committee on Social Enterprises, increasing the number ofmembers up to 30 people, including increased number of industry representatives, and to include03representatives from localcommunities.ThenewCommitteewill follow themodelof theNationalCommitteeonHealthPromotionFund.However,ingeneral,thecontentdoesnotdiffersignificantly.

· There need to be a chapter regulating the operation of TSEO. Accordingly, TSEO will become astatutorybody,independentofThaihealth-promotionFunds.TSEOwillbefundeddirectlyfromSinTax.EstablishmentofNationalSocialEnterprisesencouragingfunds.

Building a legal framework: issues relating to certification and criteria of Social Enterprises

SocialEnterprisesareconsideredasspecialorganizationsoperatingasahalfpublicandahalfbusiness,therefore,ThailandplanstoprovideclearregulationsthroughtheestablishmentofstandardstosupportSocialEnterprises.ThisissimilartospecialregulationsforSocialEnterprisesadoptedinothercountriessuchasCommunity-InterestCompany(CIC)oftheUnitedKingdomandtheLow-ProfitLimitedLiabilityCompany(L3C)oftheUnitedStates;Accordingly,ThaiGovernmentwillapplyexistingLawonmanagementofnormalbusinessesandLawonstatemanagementofphilanthropicorganizationandfundstoSocialEnterprises.ThaigovernmentregulatestwomainprinciplesforSocialEnterprises’propertyasfollows: · Profit sharing: The profit sharing or dividends to shareholders must not exceed 20% of annual net

profitstoensurethattheenterprisesdonotaimtomaximizeprofitforshareholders,andtosupportthereplicationofthesemodelsorusingmostofitsprofitstoreinvestinactivitieswithsimilarpurposes.

· The decommissioned of assets when Social Enterprises close down: In case Social Enterprisesdecommissionedaftersolvingalldebts,theremainingassetsbeyondinvestment,theaccumulatedprofitwillbeusedasdesiredbythebusinessowners,inwhichthereisacontributiontotheSocialEnterprisesencouragementfunds.

However, TSEO comment that regulating 80% is correct, but it will excludemany organizations which havethepotential tobecomeSocial Enterprises. Therefore, TSEOare settingamechanism to identify andclassifySocialEnterprises.Accreditationprocesscanbeseenas“SocialEnterprisesjourney”,consistingofthreesteps:Registering-Marking-Accrediting. · Step 1: organizations are considered as Social Enterprises based on 6 criteria, operating under any kind of

(NGOs, companies, cooperatives...) can register.

· Step 2: Social Enterprises will be classified A, B, C or with traffic light from red to green color, similar to Fair Trade. There are many criteria, among these; the ratio of reinvested profits back to social objectives is the most easily recognised. For example: the highest reinvested profit of 80% will be graded A, the lowest was 50% is graded C. There may be approaching to "labeling", such as "Thai SE Good", similar to Fair Trade Label. Labeled goods will be sold better, and there will be regulation requiring State enterprises and Government agencies to give priority to purchase all goods which have been labeled Social Enterprises. State Enterprises will also have to pay a certain fee to maintain the labeling.

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· Step 3: for example Social Enterprise that can re-invest back to social objectives of over 80%, will be certified. And the Government will support the certified Social Enterprises in this stage.

TheoverallpointofviewsisSocialEnterprisescanparticipatedirectlyinSocialEnterprisesjourneyatanysteps,aslongastheysatisfythecondition,accordingtotwofactors: · non-negotiable factors: ithas tosolvesocial,communityandenvironment issues.Therearebusiness

activities,notpurelyreceivingsponsorship. · negotiable factors: Therateofprofitreinvestingbackcanrangefrom50to80%.Ifonsocialimpacts

criteriacanbemeasured,thisclassificationcanbeappliedsimilarly. Thai Social Enterprises support programme

StrategicdevelopmentofSocialEnterprisesinThailand(2010-2014)offersthreemainapproaches: · RaisingawarenessonSocialEnterprisesinThailand; · CapacitybuildingtopromotemodelsandimpactscopeofSocialEnterprises; · CreatingopportunitiestoassessfinancialinvestmentmarketandotherresourcesforSocialEnterprises.

SomespecificmeasurestosupportSocialEnterprises,including:1. ToannounceallspecialprivilegesforSocialEnterpriseswhichoncecertifiedbyTSEO,operatinginsectors

encouragedbyTSEO’s.2. TopromoteallpreferentialrightsforSocialEnterprisesinvestinginsocialactivitiesandmakingcontributionto

SocialEnterprisesencouragementFunds;3. TosupportCommunityDevelopmentFinancialInstitutions:CDFIoftheMinistryofFinancethrough: · Capacitybuildingoflocalmicro-finance,linkingwithThai’sNationalBankindevelopingtheexistingcredit

funds,toimprovecapacityfortheFundsandtransformthesefundsintomicro-financefundsforlocaldevelopment.

· Trainingandimprovingoperationskillsandprovidingtoolsforlocalmicro-financefundslinkingwiththestatefinancialinstitutions,privatefinancialorganizationsandfinancialexpertsinfinancesector.

· There isamechanismtocheck theoperationofmicro-finance institutions for reliability ratingand toevaluate the efficiency of the micro finance funds. These will be used as indicators for investmentdecisionsofagenciesandorganizations.

4. TodevelopaSocialEnterprisestrainingcentreundertheOfficeofSMEsPromotion,MinistryofIndustry.5. MinistryofAgricultureandCooperativesisresponsibletomodifysomeregulationsinorderforthecooperatives

tonetworkintocooperativeassociations.6. NationalBankofThailandtooperatespecialcreditprogrammesforSocialEnterprises: · Buildingcooperationwithothercreditinstitutions/commercialbanksthroughincreasingunderstanding

andcooperationofcreditinstitutionstoraisefundsandsupportforSocialEnterprises · Policysupports tocreate local financial investmentmarketvia localbankswhile theNationalBankof

Thailandwillberesponsibleforregulatingconditionsforlocalinvestmentthroughlocalbanks7. ToadjustoperationofCommercialinformationcentreandcommercialregistrationoftheMinistryofTrade. · Adjust,addanitemofSocialEnterprisesintotheCommercialinformationcenter.Updateinformationon

SocialEnterprisesintothesystemtopromote,monitorandrespondtopubliconinformationonpolicies. · ConsidertoaddanewitemofcommercialregistrationforSocialEnterprises.

Overall, Thailand applies the top-down policy to promote the development of Social Enterprises. However,mostprogrammesandnewpoliciesareindevelopmentstagesandpiloting,sotherehavenotbeenanyformalassessmentsofitsimpactonSocialEnterprisesinThailand.Socialenterpriseswhichhavecreatedbigimpact,infact,havehadmanyyearsofexperiencesandcontinuetocontributepositivelytothecommunitydevelopment.Besides,therearenewSocialEnterprises,applyingnewtechnologiesandtechniquestobringaboutchangestothecommunity.

2.1.5.Singapore

Singapore isasmallcountry inSoutheastAsiabut isadiversifiednationwithmanyethnic includingChinese,Malaysian, Indianand immigrants fromneighboringcountries. Fasteconomygrowthhas increasedeconomicgapbetweencitizenclasses.TheSingaporegovernmenthastomobilizesupportfromallothersectorstosolvetheseissues.Inwhich,thecivilsocietyorganizationshaveplayedavitalroleinthismovement.Singaporehasmanybigcharityorganizations,butthedevelopmentofSocialEnterprisesisstillverynew.However,thissector

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hasreceivedattentionfromthegovernment.Besides,basedonthenationalposition inSoutheastAsia,SocialEnterprisespromotionorganizationshasavision todevelopSingaporeasacentralpointand leadinghubofSocialEnterprisesmovementintheregion.

Government policies to promote and support the development of Social Enterprises

In2006,theMinistryofCommunityDevelopment,YouthandSportsestablishedaSocialEnterpriseDivision.Thedivisionreceivedassistancefromboththegovernmentandprivatesector, intelligenceandothercivilsocietyorganizations to support social development in Singapore. Result of this combined effort was the businessdevelopmentstrategyforSocialEnterprisesthathasbeenfocusedonthefollowingthreeissues: · Promotecorporatesocialresponsibilityactivities(CSR)inenterprises; · DevelopsupportingtoolsforSocialEnterprises; · ReplicateSocialEnterprisesmodelsandawarenessraisingonSocialEnterprises.

TheSocialEnterprisesinSingaporearecurrentlyoperatingunderthefourbasicmodelsasfollows: · Integration model: These Social Enterprises provide skills training and employment opportunities for

marginalizedgroups,helpingthemintegrateintothecommunityandenhancetheirownindependence.Themarginalizedgroupsincludepeoplewithcriminalrecords,theelderly,singlewomen,thementalorphysicalabusedandthevulnerableyouth.Forexample:BelieveNJStoreCaféhastaughtadolescentswithautismtomakepastryandbread.TheCafé’isaplaceforpracticeandarealbusinessplaceforthestudents.

· Reinvested profits model:ObjectiveofthesekindsofSocialEnterprisesistogenerateprofitstore-investinsocialprogrammes,whichistheirsub-branchofsocialactivitiesorprovideinvestmentforthecharityorganizations.Thismodelhelpsvoluntarywelfareorganizations(VOWs)andcharitableorganizationstobefinanciallysustainedandreducetheirdependenceondonationfunds.Forexample,OdanceSchoollocatedinahighrisebuildingwiththeupperfloorsusedforhip-hopdanceattractingthousandsofyouthinthecommunity(theseactivitiesaresimilartothoseinaChildren’sCulturePalace),thegroundflooroffercheapvenueforchildren’ssecondhandshops,souvenirs.Incomefromtheseactivitieswillbere-investedbacktoamotherSecondaryschoolwheretheyofferscholarshipstopoorstudents.

· Subsidized services model:providesubsidizedservicesfordisadvantagedpeopletoensuretheservicescostsareproportionedaccordinglytokeycustomers.Thismodelensuresaffordabilitywillnotlimitanyindividualtoreceivingtheservices.

· Social needs models:aredesignedtoservesocialneedsorsolveanysocialproblem.

Intermsoffinancialresources,thereare5optionsforSocialEnterprises: · Self start: anentrepreneurcanraisefundsforhis/herbusinessactivitieswithoutbeingdependenceon

externalaid; · Government financial programme: isafinancialsupportforappropriateentrepreneursandenterprises

withoutreturn.SingaporegovernmentbasesonspecificcriteriatochoosethemostappropriateSocialEnterprisesforinvestmentwithinacertaintimelimit.Forexample,thegovernmentsubsidized50%ofsalaryforpeoplewithdisabilityworkinginaSocialEnterprisesforthefirst2-5years.

· The private charities: Alegalentityestablishedbyanindividual,familyorgroupforcharitablepurposes,suchas:CaritasSingaporeCommunityCouncil,LienFoundation,TanChinTuanFoundation;

· Financial liabilities: acompanyreceivesaloanandcommitstopaylater; · The Social stock market: acompanycanbelistedtoreceivecapitalfromsocialinvestors.Singaporeisthe

onlycountryintheregionhasasocialstockmarket;however,thesizeofthismarketisstillverylimited.

ThebiggestcontributionfromSocialEnterprises inSingaporeismainlyoncreatingemployments.Specifically,94surveyedSocialEnterpriseshavecreated1212full-timejobsand341part-timejobs. Intermsof inclusiveemploymentforpeoplewithdisability,thereare254peopleworkingfulltimeand236part-time”.23

23StateofSocialEnterprisesinSingapore,managementreport-preparedbyLienFoundation,August2007..

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2.2.ANALYSISOFSOCIALENTERPRISESSITUATIONINVIETNAM

2.2.1.DifficultiesthatsocialenterprisescurrentlyfacinginVietnam

Socialenterprisesarestillaverynewsector inVietnam,this leadstoseriesofdifficultiesandchallengesthatsocialenterprisesare facing.The followingsectionwillanalysesomemainproblemsboth from internallyandobjectivelyofthecurrentsocialenterprisesinVietnam.

Limited Awareness of social enterprises

Todate,socialenterpriseisanewconceptwithoutofficialrecognitionfromtheState.Notonlythat, formanydifferentstakeholdersfromordinarypeople,themassmediatotraditionalbusinesses,socialenterprises’approachaswellastheirrole inVietnameconomyandsocietyhavenotbeenunderstoodandacceptedproperly.Thisresultsinthecommonconsequencesofmanydoubtsaboutthenatureandpurposeofsocialenterprises.Foryears,intheunderstandingofthecommunity,thereisacleardistinctionbetweenbusinessactivitiesforprofitandsocialactivities,non-profit.Inotherwords,thesocietyhasbeensofamiliartotheviewthattheabovetwotypesofactivitiescannotco-existinoneorganization.

Misunderstandingbymixingsocialenterpriseswithcharities,humanitarianorothertraditionalsocialprogrammescan lead topsychological dependenceor stagnancy from thecommunity,while thepartnershavenotbeenreadytoaccepttheimprovementsofoperationwitheconomicmotivation.Ontheotherside,socialenterprisescanalsobemisinterpretedwithskepticismabouttheirsocialobjectiveswhileoperatinginaformofenterprisetogeneraterevenueandprofits.Manysocialenterprises,afterregistrationintheformofcompany(shiftingfromafoundationorcentre),immediatelyfoundtheirdonationdrop,asthedonorsthinkthatthoseorganisationsopennewcompaniesastheyhaveenoughfundingandhavetransformedintoacommercialentity,therefore,theystopdonation.Oneofthefoundersoftheabovesocialenterprisessaid:“In fact, it is not enough to consider a social enterprise as a charity, and it is wrong to view social enterprise as a normal business”.

Thelackoftrustandacceptanceofthecommunitypresentscertainbarrierstosocialenterprisesinworkingwithotherrelevantstakeholders,toincreasecostoftime,resourcesandopportunitiesandtolimittheirabilitytocreatepositiveandsustainableimpact.Socialenterprisesfacelotsofcommonchallengesofthelackofenthusiasminworkingwithlocalauthorities.Asreflectedbyasocialenterprise,theywouldnotevenregisterintheformofacompanyasfearingof“the local authorities do not know about social enterprises, they will be very demanding when working with enterprises.”Oneothersocialenterprisesendawrittenrequesttoalocalagencytoaskfortheircollaboration inprovidinga free trainingvenueand invite localauthoritiesandbeneficiaries (children indifficultcircumstances)toattendainductionsectiontrainingprogrammeofferedbyasocialenterprise.Itwasresultedinadelayof3monthsfortheenterprisetoreceivetheresponsefromthatdistrict.Andtheopeningofthetrainingwaspassedbythen.

Notably,theimpactofsocialenterprises’activitiesshouldbeassessedonbotheconomicsandsocialsides(evensometimesitisveryabstract).Lackofcomprehensiveunderstandingofsocialenterprises’characteristics,whenaforeignsocialenterprisewouldliketocooperatewithlocalauthoritytoimplementaproject,thefirstquestionfromthelocalauthoritywas:“How much money will you give us?”,”will the project budget big?”,butnotquestionsonthepotentialsocialimpactoftheproject,suchas“howmuchsupportwillbegiventohouseholds,howmanyjobswillbecreatedforthelocality?”

Limitedawareness isalsoexisted incharityandphilanthropicsector.WhenasocialenterpriseapproachesaChildsupportCentretocooperateinorganizingprogrammes,playgroundforchildren,responsefromthecenterisusuallyhesitantduetofearofbeingseenasundertakingcommercialactivities.Therefore,theyoftenlimitthescopeofcooperationinamoderate,half-hearted,non-officialarrangement.Evenwhenaskedtosignalong-termagreementonissuesrelatedtoscholarship,intellectualpropertyforthebenefitoftheCenteranditsstudents,noonedarestosignbecausetheirfearofresponsibility.

Internationalexperiencesshowsthat lackofa formaldefinitionwithspecificregulationsonappraisingcriteriaand accreditation of enterprises as social enterprises has negatively impacted on the development of thissector.Lackingofcomprehensiveunderstandingonsocialenterprisesisoneofthereasonsforthelackoflegal

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frameworkforsocialenterprises;itcreatesbarriersinattractingandaccessinvestmentfundandothersupports,incentivesonpolicies,lackofappropriatehumanresources...

No legal framework for Social Enterprises

Currently,thereisnolegislationregulatingsocialenterprises’activities,aswellasthereisnotaspecifictypeoralegalstatusforsocialenterprises.Thelegalformsofcurrentsocialenterprisesaredividedintotwomaingroups:(1)EnterprisesoperatingundertheEnterpriseLaw,and(2)socialorganizations(NGO)operatingfollowingsomelegaldocumentsconcerningvoluntaryorganization,societies,charities,socialfunds,thescienceandtechnologyorganization24.

Thechoiceto followaspecific legal frameworkasenterprisesorNGOentity for thehybridsocialenterprisescausemanyobstacles in theprocessofestablishment,operationanddevelopmentof the socialenterprises,particularly:

ChallengesinestablishingasocialenterpriseFirst,thelegalframeworkforasocialmodelinVietnamisnotcompletedyet,therearemanyoverlappingregulationscausingdifficultiesforindividuals,groupstoestablishasocialorganizationinVietnam.Therearemanykindsofdifferentsocialorganizationswithdifferentnames,tobeappraisedandapprovedbydifferentorganisations.Registrationofasocialorganization isverycomplexprocesses,withregulationsonfoundingboard,managementboard,numberofmembers, thecapacity requirementsof the founder,geographicalareasactivities ... thatnoteasy foranyneworganisationtomeet,especiallyforsocialinitiativeswhichshouldbe‘incubatedflexibly,simplybuteffectively’.

Registrationasanenterpriseissimplerbutasaresultrequiressocialenterprisetounifyandmeettheinterestsofvariousinvestorswithdiversifiedobjectives.Infact,therearemanysocialenterprises,havebeeninthesituationthattheshareholdersareinconsistentonreinvestingprofitforsocialobjectivesandorganizationaldevelopment.Atthestart-upstage,duetolackofcapital,socialenterprisesoftentakingloansfromfamily,friendsandtheycanbesocialinvestors,butmostofthemdonotclearlyunderstandaboutthesocialenterprisesmodel,soitisdifficulttobeassociatedwithsocialmissioninthelongterm.Inotherwords,inprinciple,theyarestillthetraditionalinvestors,notsocialinvestors,sotheriskhereisveryhighindeflectingsocialenterprisesinthewrongtrackatthisstage.

Somesocialenterprisesmaychoosehybridmodel,combiningNGOsandbusinesseswithadesiretooptimizetheadvantagesandbenefitsofeachmodel.However,withoutclearregulationonownershipandoperationbetweenthetwomodels,socialenterprisesarenotallowedtoregisterasahybridorganization.Currently,thestatedoesnothavespecificregulationsonwhetheranNGOcanownaprofitmakingunitornot?

Instead,theygenerallyhavetoregistertwoparallelorganizations:oneistoperformbusinessoperationsandtheotherisanNGOwhichareworkingonthesocialactivities,subjecttotwodifferentlegalsystems.Eveninsomecases,onlythebusinesshasformallegalstatus,allothersocialactivitiesarecarriedoutinformally.Establishingahybridorganisationisparticularlydifficult fortheyoungsocialenterprises lackingresourcesandreputation.Anissueisthatthebusinessstrandofsocialenterprisestillneedstopayenterprisetaxasnormalbusiness,evenwhentheirrevenueisfullyreinvestedbacktothesocialenterprisebranchinthesamesocialorganization.Shouldwedeveloptaxincentivesforbusinessactivitiesinthiscase?Obviouslythisisacontroversialissue,anditisanurgentissuetoSocialEnterprisesistosolvethisissuetransparentlyandcomprehensively.

Difficultyinoperatinganddevelopingsocialenterprises:Socialenterprisesthemselvesareveryconfusedandfacingmanyproblemsinoperatingacombinedmodelofsocialobjectivesandbusinessactivities inanincompletelegalenvironment inVietnam.This isclearlyseeninfinancialrelatedissues;regulationsonreceivingaids,sponsorship,funding,policiesandregulationsontaxationandfinancialmanagement,accesstoincentivesandstateregulationsconcerningspecialpeopleinthesociety.CurrentlytheStatedoesnothaveanyrestrictionforbusinessestoreceivegrants,aidsbuttheState’sregulationsonlyallowbusinessestobeexemptedfromtaxwhenusingthegrantstocarryoutcharitableandhumanitarianactivities in the areas of education, health, scientific research, arts in some humanitarian agencies, school...approvedbytheState.Thislimitstheflexibilityandproactivenessoftheenterprisewhenusingthisaidtopartnerwithnon-stateorganisations,orusingthegrantstodevelopcommunity’sactivities.Ifthegrantsisrecordedas

24HandbookforsocialenterprisesandsocialentrepreneursbyCSIPandInvestconsultandMSD,2010.http://doanhnhanxahoi.org/document/cam-nang-phap-ly-dnxh-2010.pdf

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aregularrevenues,theenterprisemayhavetopaytax,butthistaxisunreasonablebecausethegrantsisnotasourceofincomefrombusinessactivities,butbynature,itisasocialinvestment,non-profit.

FinancialmanagementMechanismsisacomplexproblemcausedmanydifficulties.Currently,thereisnoclearandconsistentlegalframeworkfordifferenttypesofsocialorganizations.TheStateonlyhasfinancialmanagementrulesseparately for the twomodels: social funds, charity funds (Decision10/2008/QD-BTCdated12/02/2008of theMinistryofFinance)andthesocialprotectionAgencies(Decree68/2008/ND-CPandCircular07/2009/BLDTBXH).

Thereisnoseparateregulationforothertypesoforganizations.Thesocialorganizations,NGOsarestillallowedtocarryoutactivitieswhichgenerateincomeandtheseincomesaretaxableundertheprovisionsofthestate.However,theguidanceontaxationforthisorganizationisunclear,andthemanagementbodiesofstateontaxalsodon’tprovidespecificguidance.SocialenterprisesthatareNGOs,arealsofacingdifficultiesinunderstandingthemechanismof internal financialmanagementandreporting.Therearemanyorganizationsaresanctionedadministrativelybylackoftaxpaymentwithoutknowinginadvance,mis-understoodguidelines,andin-consistentadvicefromtherelevantauthorities.

The issueof financialmanagement forNGOsevenmorecomplex in case theseorganizations receivegrants,non-governmentaidfrominternationaldonors.Apartfromtheissueofmechanismforreceivinggrantasmentionedabove,thesocialenterprisesarealsofacingdifficultiesincompliancewithboththedonors and Government’s financial systems. The two regulation systems may present many differentperspectives,oroverlappingleadingtothelargeinvestmentofresourcesonaccountingadministrationerrorsstillexist.

ForsocialenterprisesoperatingundertheEnterpriseLawortheLawonCooperatives,duetothenatureofsocialenterprises-combiningsocialandbusinessactivitiestogeneraterevenuesotheenterpriseincurlotsofbusinessexpenseswhicharenoteligibleforreductionwhencalculatingcorporate incometax.BacktothecaseofTohecompanyasmentionedabove,Toheisatradingandmanufacturingenterprisetoproducehouseholdproducts,usingcreativedrawingsofchildrenwithdisabilitiesanddisadvantagedchildren. A large proportion of Tohe profit is used to organise creative activities for children such aspaintingclasses,clubactivitiesforchildrenatCentreofsocialprotection,childreninremoteareas,buttheseexpensescannotberecordedaslegibleexpensesofthebusiness.Theyarenotrawmaterialcosts,labourcost...orthecostofproductionandotherdistribution.Therefore,theyarenotcountedaslegibleexpensesthatwouldbedeductedfromtaxablerevenueofthecompany.

Atpresent,theStateofferincentivepoliciestoagencieswhosefollowingthepolicyofsocialisationaccordingtotheDecree69/2008/ND-CPonpoliciestoencouragethesocializationinthesectorsofeducation,vocationaltraining,health,culture,sportsandenvironment.Accordingly,organizationsprovidepublicservicesforcommunitybenefitsareentitledtoincentiveoninfrastructure,landpolicyandlandrental,taxincentives,preferentialcredit25...

Enterpriseoperatingininvestmentincentivisedsector,employpeoplewithdisabilities,women,ethnicminorities,workersindifficultcircumstanceswillbeofferedsometaxincentivesaccordingtothestateregulation.Intermsoftheirmission,operatingsectorsandtargetedaudience,socialenterprisesaresuitabletoreceivetheaboveincentives.However,thereisstillagapbetweenadministrativeregulationsandrealimplementation.Regulationsonassessmentcriteria,approvingmechanismsandprocedurestooffertheaboveincentivesisverycomplex,so itbecomesocostlyand timeconsuming for socialenterprises. The implementation is alsodependentonlocalauthorities’awarenessaboutsocialenterprises,localflexibilityandtransparentsupportingmechanism.Atpresent,understandingaboutsocialenterprisesinlocalauthority’slevelisquitelimited.Socialenterpriseshavenotbeenofficiallyrecognizedbythegovernmentandstatesoevenlegal/justiceorganisationsdonotunderstandandbeingconfusedinguidingtheenterprisesinapplyingfortheseincentives.

Lackofacriteriasystemandflexiblestandardsforsocialenterprises:Inrecentyears,wewitnessthedevelopmentofsystemsofpolicies,regulatoryframeworkaimatstandardizingsocialsector,education,healthandculture.However,clearly,thespecialobjects,suchaspeoplewithdisabilities,

25Nghịđịnh69/2008/NĐ-CPvềchínhsáchkhuyếnkhíchxãhộihoáđốivớicáchoạtđộngtronglĩnhvựcgiáodục,dạynghề,ytế,vănhoá,thểthao,môitrường;Thôngtưsố135/2008/TT-BTCngày31tháng12năm2008củaBộTàichínhhướngdẫnNghịđịnh69/2008/NĐ-CPvàQuyếtđịnhsố1466/QĐ-TTgcủaThủtướngbanhànhngày10tháng10năm2008quyđịnhdanhmụcchitiếtcácloạihình,tiêuchíquymô,tiêuchuẩncủacáccơsởthựchiệnxãhộihoátronglĩnhvựcgiáodục-đàotạo,dạynghề,ytế,vănhoá,thểthao,môitrường.

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Own capital (20.3%)

Funding (5.3%)

Capital from profit (45.5%)

Others (28.8%)

165.619.088.615

43.432.738.635

371.715.203.379

235.454.716.450

Source: Report on survey results of social enterprises (2011)

childrenwithspecialcircumstanceshavenotreceivedadequateattention.Asocialenterprisesharethattheywouldliketoregistertheirorganisationasvocationaltrainingcentresinordertoissueofficialcertificatesforstudentsbuttheycannotmeetthestandardrequirementsoflocalauthorities;becausethecentrefounderisapersonwithseveredisability.Hehadtostopgoingtoschoolsohowshouldheobtaintheformalqualifications,limitedcapacityalsopreventthecentretoexpandtohavesufficientfacilities,space,equipmentasspecifiedinthestateregulations,though700disabilitiesstudentshavereceivedfreetrainingthisorganisation.Consequently,hecontinuestoopensimilarkindsoftrainingclassesfollowing“spontaneous”and“informal”approach.Andbecausetheorganizationhasnoofficialcertification,graduatedstudentshavehaddifficultyinfindingjob.

Lack of capital and limited capability in accessing financial resources

Thefinancialresources,herereferstobusinessstart-upandenterprisedevelopmentcapital,animportantelementforanybusinessandorganizationdevelopment.Capitaldemandisevenmorecrucialforsocialenterpriseswhicharethepioneers,developingatotallynewmarket.Thecostof“educating”customer,“creating”habits,newtastesareextremelyexpensive.Forexample,intheproductionoforganicproducts(organic),socialenterpriseshavetoputlotsofeffortinraisingawarenessforcustomersaboutpositiveeffectofhealthyproducts,thesocialenterpriseevenorganizemedicalcheckup,consultationfortheircustomersaspatients.Othersimilarexamplesuchassocialenterpriseprovidingfamilydoctorsprovidingconsultationonpreventivemedicineanddailylifeimprovement;Socialenterprisesproduceda“stylist”productneedtodevelopanewcustomersegmentandraisingawarenessfor themonhealthy lifestyle, recommendthemtouseproductswhicharemadefromenvironmental friendlymaterials,tocreatejobsforpoorwomeninruralandpreservemarineareas,orofferinglearningopportunities,playgroundforchildrenwhohavespecialcircumstances ...Meanwhile, thechallengesofasocialenterprisesarelackoffundsandlimitedaccesstofinancialresourceseventhosesocialentrepreneursarecomingfromtheprofessionalandmiddleclasses.

Lackofcapitalandlimitedcapabilityinaccessingcommercialinvestment:SocialenterprisesinVietnamarequiteyoung,mainlyestablishedfromindividualideaswhosehavesocialmissionsotheirinitialcapitalaremainlyselfinvestmentofthefoundersinasmallscale.Socialenterpriseshasatypicalcharacterofnotforprofit,operatinginhigh-riskmarket,withlowreturnoninvestmentrateandarenotbeingattractivetocommercialinvestors.Therefore,opportunitiesforthemtoaccesscommercialinvestmentincludingstart-uporbusinessdevelopmentareverylimited.Socialenterprisesfinditdifficulttomobilizebankloansbecauseofsomefollowingreasons: · Nopropertyormanufactoryformortgagebecausemostofsocialenterprisesareoperatinginsmall-scale; · Bankinterestrateismuchhigherthanprofitabilityofsocialenterprises. · Paybackperiodislongerthannormalprojects.

Image 12: Assets structure of social enterprises

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Surveyresultsonassetsstructureofsocialenterprisesshowedthatcapitalofsocialenterprisesaremainlyequitycapital(upto20.3%)andaccumulatedcapitalfromproductionandbusinessactivities(45.5%),asmallfundingfromsponsors(5.3%).Commercialloansareonlyapartofothersourcesofcapital(bankloans,loansfamily,andfriends)withatotal28.8%.Whileforcommercialbusiness,commercialloanisanimportantmobilefundtopromotebusinessdevelopmentbutforsocialenterprises,thissourcedoesn’thavethecontributingratiotothetotalcapitaltheyhave.

Social capital market in Vietnam is still young and notmeeting the needs of social enterprises, in themeantime,Vietnamisstilllackingstrongsocialenterprisesreadytoreceivesocialinvestmentcapital:CapitalmarketforsocialenterprisesinVietnamisnotyetdeveloped,reflectedinthelackofcapitalandlackofsuitable scale and channel for social enterprises development at different stages and in different areas. Until2012,thereareonlytwoNGO-CentreforSocial InitiativesPromotion(CSIP)andCentreforsocialenterprisesdevelopmentSparks,haveprogrammestoprovideinvestmentforsocialenterpriseswithtotalfundingincashof200,000USD/year.Thisisaverymodestcapitalcomparingwiththeneedsofcurrentsocialenterprisesandisjustinitialseedfunds,tokickoffideasandprovidecapacitybuilding,notyetsufficientcapitalforbusinessdevelopment.

Socialinvestment(impactinvesting26)istheappropriatefinancialresourcesforsocialenterprisesbutitisstillanewconceptandthereisnoprofessionalsocialinvestmentfundsactivelyinvolvedandinvestinsocialenterprisesinVietnam.Recently,InternationalSocialFundshavestartedexploringinvestmentopportunitiesforsocialenterprisesinVietnaminrecentlyyearsbutmostofthemarestillatmarketresearchorexperimentalphase.Therehavenotbeenanysignificantdirectinvestmentsforanysocialenterprises.

26Socialinvestment:http://en.wikipedia.org/wiki/Impact_investing27 http://www.lgtvp.com/ivap

Box20:LGTventurePhilanthropies

In2010,theLGTventurePhilanthropies(LGTVP)cametoVietnamtodoasurveyandsearchforinvestmentopportunitiesforsocialenterprises inVietnamwithascalefrom400,000-1,000,000USD,butaftermorethanayearofsearchingandsurvey,theorganizationcouldnotfindappropriatesocialenterprisesreadytorespondimmediatelytotheirinvestments.Therefore,thisVenturehaslaunchedanewstrategyin04South-eastAsiacountries,includingVietnam,byimplementingprogrammestopromotethedevelopmentofsocialenterpriseswithagoaltosupportpotentialsocialenterprises(atearlierstage)todevelopcapacity,builduporganisationalprofiletobereadyforthecallandreceiptofgreaterinvestmentfromLGTVPandothersocialinvestorsintheregion.

Source: CSIP

A number of stakeholders or potential participants of financialmarket for social enterprises in Vietnammayincludegovernmentagencies,internationaldonors,corporate(mainlythroughCSRactivities),havenotexpressedinterestsordevelopanyspecificactionplantosupportlong-termfinancialorinvestmentforsocialenterprises.Therearemanyreasons,includingthefactthatVietnamdoesn’thaveofficialrecognitionandlegalframeworktosupportsocialinvestmentactivities.InvestmentforsocialenterprisesisnotentitledtoGovernmenttaxincentives.Regulationsonreceivinggrantfornon-commercialactivitiesarenotclear,causingconfusionasanalyzedabove.Donorsthereforeoftenfindasolutiontochanneltheirinvestmentthroughanintermediaryincurringhighercostsandreducingefficiencyoftheinvestment.

Lackofchannelsfordisbursementoffund,intermediaryorganisation,mechanismofflexiblestatemanagementandtransparencytocreatethefinancialmarketsforsocialenterprises-isahugechallengenow.Whenlackofcapital,socialenterprisesdon’tknowwheretogo,wheretolookforinvestmentsuitabletotheirspecificactivities.Ontheotherside,Investorsalsospentalotoftimetolookforsocialenterpriseswhichhavesuitabledemandandpotentialfortheirinvestments.Besides,animportantissueisthecapabilityofcurrentsocialenterprisesinVietnam;theyarestillnotstrongenoughtoreceiveinvestmentfromaprofessionalsocialinvestor.Consequently,manysocialenterprises,aftermanyyearsarestillgrowingatanaveragelevel,smallscalewithlimitedimpactoroperatingina‘maintaining’stagefacinglotsofmarketvolatilityandchallengesandpressurefromincreasingsocialissues.

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Weak on management capability and lack of appropriate support services for capacity building for social enterprises

MostofsocialenterprisesinVietnamareyoungorganisations;therefore,lackingoforganisationalandmanagementexperience,particularlyoncombiningskillsformanagementofbusinessactivitiesandSocialmissiontocreatesustainablesocialimpact.Typicalcompetitivecapabilityofsocialenterprisescomefromtheircloserelationshipwithlocalcommunitiesandauthorities(mostlydisadvantagedgroups),andmotivationfornon-profitactivitiesandopportunitiesfromabandonednichemarkets.

Inordertomaximisetheseadvantages,socialenterprisesneedtoenhancecapacityforstrategicmanagement,long-termvision,abilitytoidentifyandexploitmarketopportunities,innovativemarketingstrategies,organizationalskills towork effectivelywith the community andexcellent ability of financialmanagement. Therefore, SocialBusinessrequiresmuchbettermanagementskillsthanoperatinganormalbusiness.

Thegapinmanagementcapacityofsocialentrepreneurs:Withsocialenterprisesfoundedbysocialworkers,ortransformedfromothersocialprogramsandprojects,theirfundamentaldifficultyisthelackofcapacitytomanagebusinessdevelopment,specifically:productdevelopmentforsocialserviceswithmarketorientation,marketingcapabilities,financialmanagementcapacity,organizationandmanagementofbusinessproduction... themostvisibledifficulty is toswitchfromtraditionalmanagementthinkingofsocialprojectstobusinessmanagementstrategy,acceptingcompetitionandrisksrelatedtobusinessoperation.Thisprocessrequiresalongtime,practicalexperiences,orevenfailuresaswellasappropriatesupportandservicesforsocialenterprisestoimprovecapacity.

For social enterprises at community, when start-up social enterprisesmodels in local area (for example themodelofself-helpfordisabilities,peoplewithHIV-AIDSorlivelihoodsforethnicminorities...),besidesthestrengthof organizing and interactingwith the community, business capacity andmanagement experiences is a vitalelementforthedevelopmentofthebusiness.However,mostof“communityleaders”havemanydisadvantagesinlivingconditions,educationalbackground;difficultiesresultedfromrealcircumstancesoftheindividualsandcommunitywheretheylivesotheircapacityisverylimited.Thereareveryfewopportunitiesfortraining,capacitybuildingandexperimentationfortheirdevelopmentaswithsmallsocialenterprises,theydon’thaveresourcestoinvestincapacitybuildingactivities.

For thenewlyestablishedsocialenterprisesgroupestablishedbyyoungpeoplewithsocialdesireandbeingtrained professionally on management or having practical experience, then the problem they face is beingabletounderstandandconnectwithcommunitytodesignorganizationalsystem,interactionandworkwiththecommunityeffectively,closely fit to realneedsof thebenefitingcommunities,havinga long-termstrategy toachievebothsustainableeconomicandsocialimpact.

Besides,manysocialenterprisesareeasilyfallingintoviciouscycleofsolvingshort-termfinancialdifficultyandlong-terminvestmentforbusinessdevelopment.Enterprisesfocusonsolvingimmediateproblemsonbusinessoperation,onmaintainingfinancialresourceswithoutrealisingtheimportanceof,aswellasthelackofadequateresourcesofinvestingonstrategicdevelopmentactivities,businessdevelopment,intheverycomplexandriskycontextthatsocialenterprisesareoperating.

Amarketofsupportingservicesandcapacitybuildingisnotyetdeveloped:The development of amarket to provide support and capacity building serviceswhich is suitable for socialenterprisesisnecessarytosolvetheaboveproblems.ThisisagainamissingpointinVietnam.Although,training,supporting and counseling services have been established in Vietnam for a long time, serving both privatebusinesssectorandNGOs,butstill lackingofproviderswhoprovidetailoredservicessuitabletotheneedsofsocialenterprises.

Currently,CSIPisthepioneerorganisationtoprovideanumberoftrainingcoursesdedicatedtosocialenterprisesincludes trainingonoverall social enterprisedevelopment, skills todevelopbusinessplan, social enterprisesleadership,personalcounselingandadvice forsocialenterprisesdevelopment...However, theability tomeetspecific needs for each social enterprise is still limited. In themeantime, there aremany organizations andenterpriseswithpotentialtotransformintosocialenterprisesbutthereisnoprovisionofappropriatetrainingandcounselingservices.

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Challenges related to human resources

Socialenterprisesoftenworkwithdisadvantagedcommunitiesaspartners,beneficiariesormembers,employeesormembersofsocialenterprises.Typicalcharacterofsocialenterprisesintermofhumanresourcesresultinginanumberoffundamentalchallengesasfollows:

Low-qualityofhumanresources,lackofstability,lowlaborproductivitySocialenterpriseslaborresourcesworkingwithdisadvantagedgroups, lessfortunate,whoarespecialobjectsofthesocietyaspeoplewithdisabilities,ruralwomen,disadvantagedchildren,aresourceoflowqualitylabor,lackofstabilityduetoawareness,mentalhealthandlivingcontext,aswellaslowlabourskills.Soitisimpossibletorequirehighlabourproductivity in initialstateofrecruitment, inaddition,socialenterprisesneedtohaveacontingencyplantocopewiththeinstability,jobquitting,orfailuretomeetworkrequirements.

Greater investment forpersonnel thanaverage includesactualcostof raisingawareness,provide training,organizationsworkforstaff,healthcareexpensesandopportunitycosts.Forexample,socialenterprisesworkingwith ethnic minority people to develop sustainable livelihoods of local communities, have to spent most oftheirtimeandresourcestocarryoutcapacitybuildingactivitiesbecausetheveryweakbaseofthemembersandcommunity;andcapacitybuildingandempowermentof thesecommunities isalsoamajorgoalofsocialenterprises,inparallelwiththedevelopmentofproductsorservices.Forsocialenterprisesworkingwithspecialsocialbeneficiariessuchasreturningtraffickedwomen,peoplelivingwithHIV-AIDS,peoplewithdisabilities...incurmorecostsbecausethesocialenterpriseshavetopayattentiontohealthcare,physicallyandspiritwell-being,andlivingconditionsofthesepeople.Inaddition,theriskofinstabilityonhumanresourcesmayrequiremorefunding for social enterprises to develop newpersonnel.Opportunity costs resulted from the investment onhumanresourcesarenotsmall.

ThedifficultyinlookingforsuitablehumanresourcesforsocialenterprisesIn the context of today human resourcesmarket, recruiting a qualifiedManagement staff is a headache fornormalbusinessingeneral,forsocialenterprisesit isevenmorechallengingasitrequiresstafftohavegoodunderstanding and appreciation of the mission and social value of the business, having goodmanagementcapacity,andabletocombinebusinessmanagementskillsandsocialwork.Evenstaffofsocialenterprises’alsomeetsthisdualrequirement”.Meanwhile,fundingtoinvestinseniorstaffofsocialenterpriseisverylimited.Therearenotmanysocialenterprisescanaffordtopayforhighlyskillsstaffatpresentmarketrate.

Besides, thecurrenthumanresourcesgraduated fromuniversitiesmainly focusedonspecificareasof trade,business,financialorsocialdevelopment.Inductionprogrammesonsocialenterpriseshavenotbeenembeddedintouniversityprogrammes;youthawarenessofsocialenterprisesislimitedsounderminedpossibilitytoattracttheyoungwelltrainedworkforcetoworkinsocialenterprisesinVietnam.

OperateaneffectivehumanresourcessystemSocialenterprisesneedtocombinevoluntaryandofficialhumanresources.Although,officialhumanresourcesis limited,manysocialenterpriseshaveadvantages inmobilizingsupportofprofessionalvoluntarycounselingfromexperiencedexpertsinsomespecificareaswhocouldnotcommittimetoworkmoreprominentlyinsocialenterprises.Thedevelopmentofaneffectiveworkingmechanismtomobilizerespectiveandpropercontributions,totakefulladvantagesofthesegroupsisachallengetothemanagementcapacityofsocialenterprises.

ReceivenopoliciessupportonhumanresourcesAs noted above, the state does not have specific and effective policies to encourage employers to employpeoplewithdisabilities.Therefore,eventheyweretrainedbysocialenterprises,itisstilldifficultforthemtofindsuitablejobs;whetherintermsofability,manytypesofdisabilitiesdonotaffectqualityoftheworkthattheyareresponsiblefor.Difficultiesinoutcomeinevitablyreducethelevelofinterestinparticipatinginsocialenterprises’training.

Inaddition,thereisnopolicysupportforthosewhoworkatthesocialenterprises.Manysocialenterprisesfacechallengesinrecruitingteacherswhocanteachchildrenwithspecialcircumstances,childrenwithautism,andchildrenwithdisabilities.Althoughtheyarenotvolunteers,buttheyareworkingonsocialfieldsanddonotenjoyattractivebenefitscomparedwithothercommonareas.Therefore, tocompensatefor thesegaps, inordertoencouragepeoplewho involve in socialwork sector, the state canencourage teacherswhowork for socialenterprisesthroughsalariesincentives,houserental,furthertraining...

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Thebiggestchallenges:thedependenceofsocialenterprisesonsocialentrepreneursMostsocialenterprisesdependtooheavilyonthesocialentrepreneurs.Evensomesocialentrepreneurssaid:“socialenterpriseswouldnotdevelopabovethesocialentrepreneurs. Itonlymoves forwardwhenthesocialentrepreneursmoveforward”.Thisistrue,socialentrepreneursarethefoundersofsocialenterprises,inspires,motivates,andbeing thesoulof theorganizationandoperationofsocialenterprises.Amatterof inheritanceofsocialenterpriseoperationneedstobecarefullythoughtoutbysocialentrepreneurs. Istheorganizationalstructure,workingculture,staffenthusiasmsufficienttosustaintheinitialsocialmissionofthesocialenterprises?

Some other issues

Lackofan“ecosystem”topromotethedevelopmentofsocialenterprisesNational and international networking is not strong enough to support development of social enterprises inVietnam,andawarenessofpotentialcooperationbetweendifferentsocialenterprises,aswellasthosebetweenbusinesssectorandsocialenterprisesornormalsocialorganizationsisstill limited.Socialenterprisesarenowunlikelytohaveaccesstoinfrastructure,moderntechnologyduetolackoffinancialinvestmentaswellassupportfromthestate.Socialenterprisesmuststillcompetefiercelywithbusinessesinthemarketandcomplywithlegalframework,whereas,theyareoftenfacedwithmanychallengesforoperatingindifficultareas,lowprofits,workingwithvulnerablegroups,highcostsandhighrisks.

LackofevidenceonsuccessfulSocialenterpriseswhichhavestrongfoundationtoscaleupforbiggersocialimpactatlocalandnationallevel.Currently,forexample,KOTOandHoaSuaSchoolareknownassuccessfulsocialenterprisesinprovidingvocationaltrainingprogramsandeffectiveeducationforstreetadolescentsinVietnam.OrMaiHandicraftsVietnamhelpstoimprovequalityoflifefordisadvantagedwomenwithfairtrademodelforthetraditionalhandicraftsproductsinVietnam.However, in order for social enterprises to strongly advocate to thegovernment as an effectivedirectiontocreatesustainablesocialimpact,itisnecessarytohavemoretypicalsuccessfulexamples.Thelackoftypicalsuccessstoriesisalsoachallengeinraisingawarenessofcommunityandgovernmentagencies,relevantstakeholdersingeneraltosupportsocialenterprises.

2.2.2.SocialissuesandresourcesinVietnam:OpportunitiesandChallenges

The relatively high economy growth rate in the last two decades is an undeniable achievement of Vietnam.However,becausethegrowthisbasedonalowstartingpoint,sointermofeconomicdevelopment,Vietnamisstilladevelopingeconomyandamongthelowaverageincomenations.Intheregion,VietnamstillneedstogoalongwaytocatchupwithmanyneighboringcountriessuchasChina,ThailandandMalaysia.Assuch,Vietnamnotonlyhavetosolvearangeofsocialproblemsinherentinapoorcountrybutalsohavetofacewithincreasingnumberofnewissuesasaconsequenceofeconomicgrowth.

Obviously, thiscanbeconsideredas ‘prices’ forgrowth.However,currently ithasbeen increasinglypopularto separate the concepts of “growth” and “development”, inwhich growth is only a “sufficient” condition, toachievedevelopmentrequiresastrong,harmonious,cohesiveandsafesociety.AimingtoachievesustainabledevelopmentrequiresVietnamtoaddresssimultaneouslybotheconomicgrowthandproblemsposedbysociety.Inthissection,wetrytoenumerateandanalyzesomeprominenteconomicandsocialproblemsaswellasthenationalpotentialresourceswithaviewthateffectivelyconnectingresourcesandsocialobjectivesistherolethatthestateexpectssocialenterprisestotake.Therefore,thisistheopportunitiesaswellaschallengesforbothsocialenterprisesandpoliciesoftheStatetoencouragedevelopmentofthesector.

Social problems

PovertyreductionandwealthdisparityAccordingtotheMinistryofLabour,InvalidsandSocialAffairs,bytheendof2011,Vietnamstillhas12%poorhouseholds,decreased2.4%from2010,baseonnewlyappliedpoorbaseline(400,000VNDand500,000VND/person/monthforruralandurbanareas)28.Thus,thecurrentpoorbaselineinVietnamisonlyonedollar/day/person,whileaccordingtotheWorldBankpoorbaselineof1.25dollars/so,Vietnam’spovertyrateisupto21%(2008)29.

28In2012:Therateofpoorhouseholdis12%-www.molisa.gov.vndated18/1/2012.29“Vietnamneedtobeavoidedofthenewpoor”-www.vietnamnet.vndated7/1/2012.

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Iftheaverageincomeofthebaseofthepyramidgroupisunder2dollars/day,thepercentageofpopulationfallingintothisgroupinVietnamwasevenhigher.Thus,wecanestimatethenumberofpoorpeopleinVietnamismorethan10millionsandabout5millionspeopleinpoorthresholdoratriskofpoverty.Obviously,reducingpovertysustainablycontinuestobeoneofthefundamentalchallengesforVietnaminthenearfuture.Andthemosteffectivesolutiontoaddressthisproblemistocreatesustainablelivelihoodsforthepoor.MaiHandicrafts,MekongQuiltscreatesjobsandprovidevocationaltrainingforpoorwomeninNinhThuan,BinhThuan,HauGiang,MicroventuresBloomoperatesintourismandmicro-creditinBacGiangaretypicalsocialenterprisesworkinginthisarea.

Creating1.6millionjobsayearistheobjectivesetoutintheEmploymentStrategy2011-2020.ThisisaveryhightargetbecauseVietnamhasayoungpopulation,eachyear;morethan1millionyouthparticipate in thelabourforce.Inaddition,thereisademandtoshiftlabourfromagriculturetoservicesandindustrialjobs,fromruraltourbanareas.Jobcreationisnotonlymeaningfulintermofeconomicbutalsoplayakeyroleintermsofsocialimpact,becausehighunemploymentwillleadtopoverty,socialevils,instabilityandviolence...Thisexplainswhythegovernmentofmanycountriessolelyfocusonemployment issueswhendevelopingpolicyforsocialenterprises.Finlanddefinesocialenterprisesasanybusinesswith30%ofemployeesarepeoplewithdisabilityorbeinglong-termunemployed.Singaporeprovidesdirectsupporttosocialenterprisesbasedonthenumberofjobsthattheyhavecreated.Koreaplacesdirect‘order’withsocialenterprisesonjobcreation.Intheareaofjobcreationandjobtrainingtocreatesustainablelivelihoods,socialenterprisesinVietnamcantargetthosegroupswhoaredisadvantagedandmarginalized.

PeoplewithdisabilitiesCurrently,Vietnamhasabout6.7millionpeoplewithdisability,accountingfornearly7.8%ofthenationalpopulation.Ofthese,69%ofthemareatworkingage,butonly30%havejobsandstableincome.Clearly,thissituationpresentsmajoreconomicproblemforpeoplewithdisabilitiesthemselvesandtheirfamiliesaswellasstatewelfarepolicies.Thisalsoawasteofhumanresourcesasmajorityofpeoplewithdisabilitiescanundertakeworkthatisappropriatetotheirconditionswithoutaffectingthequalityoflabour.Infact,manyemployersarewillingtorecruitpeoplewithdisabilities,buttheyalsodonotknowwheretostart.

PeoplewhohavebeenreleasedfromprisonsSupporting thesepeople in rehabilitating into the communitywas left open formany years. Each year thereare tensof thousandsof prisonerswere awardedamnestyor completed their sentences.While the averagerecidivismrateintheregionis15-20%,inVietnamitis27%.Theyneedsupportforemployment,career,legalcounseling,communityintegration...

PeoplewithHIV/AIDSInternationalorganizationsestimatedthatinVietnamthereareabout280,000peoplelivingwithHIV/AIDS,andeachyearmorethan40,000peoplewerenewlyinfected.Jobandexpertiselossesarecostlytobothworkersandenterprises.Thus,bothneedadvice,communicationandcreationofnewjobs.

ChildprotectionCurrently, across the country, there are approximately 4.28 million children with special circumstances,accountingfor18.2%ofallchildrenandincluding1.5millionchildrenwithdisabilities,2.75millionpoorchildren,153,000orphansandabandonedchildren,287,000childrenaffectedbyHIV/AIDS,26,000childrenaged8-15areworkingashardlabororbeingexploited.Meanwhile,numberofchildrenwhoreceiveallowanceoftheStateisonly66,000.Protectingandassistingchildrenclearlyisamajorchallengeforthesociety.Socialenterprisescanoperateinmanyfieldssuchasconsultants,representatives,teaching,vocationaltraining,informationconnection,housing,clothing,food,medicalcare...

CarefortheElderlyAccordingtodatafrompopulationsurveyin2009,thenumberofelderlypeopleinVietnamisgrowingfasterthananyotherpopulationgroup.Therateofelderlypopulationhasincreasedto9.4%(2010).Estimateddependentrateof60yearsorolderelderlyin2014willbe12.2%.Notably,theproportionofelderlypeoplewhohavenowife,nohusband(alone)upto61.0%,andinelderlysubgroups,femaleelderlyisalwayshighermale.ItcanbepredictedthatagingpopulationwillalsobeoneofthemajorsocialproblemsforVietnaminthenearfuture.

Thesearejustsomeprominentsocialissues,however,gatherthesetogether,wewillseedirectlyaffectedobjectshasrisentoabout24millionpeople,accountingfor28%ofthepopulation. Inaddition, therearemanyothersocialissueswhichhavestartedemerging;withseriousimpactprobablynoneofuscanbeoutsiders,suchas:

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· SchoolViolence · Domesticviolence · Youngoffenders · Childrenwithgameaddiction · Childrenwithautism · OverloadofEducation · Overloadedhealthcaresystem · Education,healthcareforremoteareasandislands · Publichealth,diseaseprevention · Reproductivehealth,abandonedinfant · Mentalhealth,stressofurbanresidents · Preventivehealthcare,healthylifestyle · TrafficSafety · Safefood,organicvegetables · Legaladviceforthebottomgroup · Socialhousing · Preventdeforestation · Environmentalpollution,waste,recycledmaterials · ClimateChange · Energysaving,cleanenergy · Thelivelihoodofthepeoplelivinginprotectedareas,migration,andsiteclearance · Culturalconservation,heritageconservation.

Image 13: The connecting role of Social Enterprises and state policies

State

Social issues

Social Enterprises

NGO Organisation

Enterprises who has CSR

Pontential resources

· NumberofGraduates&Engineers·Entrepreneurialspirit·Philanthropicresourcespossessedbypeople

·ForeignSocialInvestmentfund·NetworksandIntermediaries·Infrastructure,IT·Naturalconditions·Marketeconomicpolicies, integration

·Legalframework

Beneficiaries:

Poorhouseholds,remoteareas,peoplewithdisabilities,peoplereleasedfromprisions,peoplewithHIV/AIDS,streetchildren,childrenwithcrimeandgameaddiction,autisticchildren,familyhappiness,students,patients,

urbanpopulation,lowincomepeople,ecologicalenvironment,culturalandheritage...

Social issues

·Livelihoodsforpoorwomen·Employmentforpeoplewithdisabilities

·Protectionofchildrenunderspecialcircumstances

·Preventionofdeforestation·Wastemanagement·PreventiveHealthCare·Preventionofsocialviolence·CareforElderly·Culturalpreservation

Impact

Source: CIEM

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Social resources

HumanresourcesCurrently,eachyear,Vietnamhasaround260,000studentsgraduated.Overall,theincreaseinthenumberofuniversities,colleges,newtrainingprograms,andmoreopenenrollmentcriteriawillcreateahighernumberofbachelorsandengineers.Although,therearemanywarningsaboutthequalityoftrainingaswellastheriskofexcessivehighereducation incomparisonwithvocational training,wecannotdeny thathighereducation isincreasinglymorecompetitive,betterregulatedandwithmoreattentionpaidtoenhancingreputation.Thelabourmarkethasoperatedmoreefficiently,andthereforeitistrustedthathighereducationhashadbetterquality.

TheincreasingmobilityanddynamismofstudentsinVietnamshouldbenoted.Itcanbeseenclearlybyobservingthe increasingnumberofstudentswhoworkas internsandvolunteersatNGOs,socialenterprises.About10yearsago, thiswasquiterare. Inaddition,studentstodayareproactive inaccessingforeign information,withbetterforeignlanguagesproficiency,activelytakingpartinseminars,events,clubs,sotheycanaccessmodernknowledgeoftheworld,includingsocialenterprises.Thisisthesourceof“communityleaders”forsocialenterprisesinthefuture.That’snottomentionthenumberofstudentsstudyingabroad,bringingbacktoVietnamupdatedknowledgeoftheworld.TypicallyisthecaseofMs.PhanYLy,aCheveningscholarstudiedMasterdegreeintheUK,afterreturninghomehassetupaprojectoncommunityart(ArtLife)inthespiritofasocialenterprise.

EntrepreneurialspiritEachyear,Vietnamhasmore than80,000enterprises register forestablishment.Thenumberofenterprises inVietnamisstillmodestbutkeepsgrowing.Thecurrenteconomicdifficultiescanunderminebusinessinvestmentintheshortterm.Butoverall,entrepreneurialspiritofyoungpeopleofVietnamisalwaysstrong.However,itisdifficulttosaythenumberofenterprisesabovecanbecome“input”forsocialenterprisesasthetwomodelsdiffergreatly.Aspreviouslymentioned,socialenterprisesmightnotbeabletoaddressthedesireof“individualsgettingrich’.Thenumberofnewlyregisteredenterprisesonlyshowtheuseofbusiness,entrepreneurshipspirit(creativity,adventure,dynamism,persistent)whichhavebecomepopularandthe‘value’ofyoungpeopletoday.Togetafewhundredoutof80,000businesspeopletobecomesocialenterpreneursrequiresotherpromotionalfactorssuchaseducation,communication,supportofintermediaries,incubatorsofuniversities,government,statepoliciesetc...

SocialinvestmentcapitalIngeneral,social investmentcapitalmarket,charity fundareabundant inbothdomesticandforeignmarkets.For the attraction of social capital from foreign institutions, the problem liesmostly in the capacity of socialenterprisetoabsorbcapitalandprestigeofthesocialenterprisesincountry(asmentionedinthedifficultyofSocialEnterprises).Infact,somesocialenterpriseshaveattractedandmanagedinternationalcapitalverywell,typicallytheHoaSuaSchoolandKOTORestaurant.Tobuildreputationwithforeignpartners,socialenterprisesmust possess professional networking skills, modern management processes, demonstrating accountability,openness, transparency.... Notably, external resources are not only finance. Technical assistance, capacitybuilding,certificationplayimportantroles.MaiHandicraftsreceivedfreesupportfromWFTOonproductdesign,KOTOintheirearlyestablishmentreceivedforeignvolunteerstoteachcooking,andespeciallytobecomepartnerthatreceiveBoxHillinternationalcertificationfortrainingcourses.

Besidesthelargeexternalcapitalmarket,thedomesticphilanthropiccapitalisalsoquitepotential.Oncehavingrealcapabilityandreputationinprofessionalorganisation,openandtransparentanddemonstraterealsocialeffect,manyorganisations/charitableprojectsattractedlargefunding.Accordingtoourestimates,theaveragegrantamounteverymonthin2011forSympaMealsprojectwhichprovidecouponforfreemealandmilktopoorpatientsatHospitalKismorethan130millionVND/month.Atagreaterscale,CharityfundofDanTri(anonlinenewspaper)receivedanaverageof467million/week(from3rdweek,12/2011-,3rdweek3/2012).Thus,thematterliesintheway,thatsocialenterpriseoperate,theircreativityandtransparencywilldeterminetheirabilitytosuccessfullyaccessfund.

SomeotherresourcesSocialEnterprisescanseize theopportunity fromthepolicy frameworkandstate laws inattracting foreign investment(directandindirect),economicintegrationpolicies,bilateralagreementsandmarketeconomy.Thestatepreferentialpoliciesavailabletovarioustypesofcooperatives,non-stateestablishments,statepublicservicesenterprises,non-businessunits,scienceandtechnologyorganisationsshouldbringaboutfavorableconditionsfortheoperationoftheseorganisationsandsocialenterprises(incaseofconversion).Inaddition,theinfrastructureofVietnamhasalsobeensignificantlyimproved.Thepopularisationofinformationtechnology,InternetandtelecommunicationsinVietnamwithlowcostisanadvantage.Besides,intermsofnaturalconditions,ourcountryislocatedatagoodintersectionpointinSoutheastAsiaenablingsocialenterprisestoexchange,connecttosocialenterpriseandintermediariestopromotethesectorintheregion.

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2.3.RECOMMENDATIONSONMECHANISM,POLICIESFORDEVELOPMENTOFSOCIALENTERPRISEINVIETNAM

2.3.1.FindinganofficialconceptforSocialEnterprisesinVietnam

Of course, therewill always bedifferent anddiversifiedpoint of views about social enterprises.However, tolayagoodfoundationfor institutionalizationofpolicyandsupportforthedevelopmentofsocialenterprise inVietnaminthefuture,itisessentialtodevelopanofficialconceptwithhighlevelofconsensusamongrelevantstakeholders,onsocialenterprisesinparticularcontextofVietnamandtobeusedforspecificpolicies.

Inordertodevelopanofficialconcept,thefollowingissuesshouldbeaddressed: · social enterprises is a concept, model or a specific category of organisation? · which are specific objectives for social enterprises from the State standpoint? · social enterprises are only suitable for private sector or it may involve state owned entities? · the concept of social enterprises must be very clear. What are the key characteristics which are compulsory?

which are flexible criteria?

Withinthisconsultativereport,followingweprovidesomesubjectiveanalysisandrecommendations,notopposing,butopenforfurtherconstructivepolicydiscussionswithacoherentpolicyorientation.

Social enterprises should be a concept, organizationalmodels applied flexibly fromNGOs to traditionalbusinessesAlthough,intheprocessofinstitutionalizationofthismodel,wecancreateaseparatetypeofbusinessforsocialenterprises,butsocialenterprisesarenotrequiredtoregisterortransfertothislegalform.WehighlyrecommendreferencetotheUKandThailand’sexperiences inthisarea. In fact, formanyyears,someorganisationshaveattemptedtoseparatesocialenterprisesoutofNGObutfinally,theyalsohavetoacceptthatsocialenterprisescanoperatebasedonanNGOplatform.

InGovernmentpoliciesforsocialenterprises,theStateneedstofocusonefficiencyandsocialimpactsthatsocialenterpriseshavecreatedItshouldbeacknowledgedthattheStatesupporttodevelopsocialenterprises,inreturn,socialenterprisesassisttheStateinimplementingsocialobjectives.MsPennyLow,founderofSocialInnovationParkofSingaporehasraisedamodernperspectiveon“nationalbalancesheet”(seebelow),wheretheStatemusteffectivelymanagetheir“readyavailableassets”,whichishumanresources,financialcapital,infrastructure,naturalconditionsandpolicyframework,legislation,andtheir“liabilities”orinotherwordsitisthefunctionandmandateoftheState,includingsocialcohesion,socialwelfare,socialjustice,whichcanbemeasuredandexpressedthroughtheHumanDevelopmentindex(HDI)andthenationaleconomiccompetitiveness.Onthatbasis,peoplewillbe“shared”,tobenefitfromnationalachievement,undertwotypesof“financialjoint-stock”and“Societyjoint-stock”.

Notably, in many areas, social enterprises can help the State to implement social objectives (as mentionedpreviously),itisimportanttoemphasizethetwosuperioraspectsofsocialenterprisesasfollows: · Social enterprises associate with social initiatives.Astakingadifferentjourneywithtraditionalbusiness,

mostbusinesssolutionsofsocialenterprisesareverycreative.Theyfoundmaterialsthatwasneverbeenused,connectingpeoplewhohavenotbeenconnected,toexploitignoredmarkets,evencreatingentirelynewmarkets fornewproducts.Therefore,promoting theroleofsocialenterprises issynonymous toeffectiveexplorationanduseofabundantresources,orpotentialresourcesofthesocietyandeconomy.

· Social enterprises associate with sustainable solutions. Sustainable social solutionsare themissionofsocialenterprises.Sosocialenterprisesbringabout long-term impact, fundamentalchanges.Suchaschanging habits, lifestyle, customs and skills. In addition, social enterprises can create large impact,whichisresonantandwidespread.Therefore,theStateshouldhavepoliciestoexploitanddevelopthesestrengthsofsocialenterprises.

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Image 14: Modern perspectives on national balance sheet

SocialenterprisescanbelongtoStateownershipIntheUK,thereisalsoongoingdebateonthisissue.WhiletheMinisterofHealthwantstotransformsomehealthcareprogrammestosocialenterprises,manyothershaveopposedthisintention.Infact,ifwehaveaseparatelegalframeworkforsocialenterprises(similartotheCICmodelintheUK),thenpublicEnterprises,Stateserviceunits,andScienceandTechnologyOrganisations(whichhadbeenencouragedtoswitchintoenterprises)canbetransferredtooperateundersocialenterprisesmodel.

However, thekey lieswithsocialcreativity.Thestrengthofsocialenterprisesderivedfromspecificapproach“bottomup”.Socialentrepreneursestablishedsocialenterprisesbaseonrealdemandfromlocalcommunitytoaddressveryspecificandpracticalsocialobjectives.Meanwhile,representativesofstateowners,managersofstateorganizationsaretoofamiliarwiththestructuraldynamics“top-down”,sounlikelytohaverealcreativity.However, one of the feasible solutions is to expand the opportunities for social enterprises to participate inequalandtransparentbidding,orderplacing,outsourcingwithotherorganizationsofState tocarryoutStatesocialwelfareprogrammesandpublicservice.Atpresent,we’vehadmanylegalregulationsonthis issue,buteffectivenessofimplementationisstilllimited.

SocialenterprisesarerequiredtohavesocialobjectivesSocialmissionmustbeputatthetop.Thisisakeypointtodistinctsocialenterpriseswithotherorganizations,anditisalsothereasonfortheStatetopromotetheroleofsocialenterprises.Businessapproachesarejustsolutionsandtoolsofsocialenterprises.However,itisverydifficulttomeasureandevaluatessocialobjectives.Ifcriteriaforsocialenterprisesarenotdefinedclearly,normalenterprisesmightevadethelawtoacclaimthemselvesassocialenterprisestobeentitledtoincentivesfromtheState.Therefore,itisneededtoestablishapercentageofprofitthatisusedtore-investinthedevelopmentoftheorganizationsandsocialobjectivestoidentifyclearlyandtransparently the levelof theorganization’scommitment tosocialenterprisesmodels. InThaicase, thereisregulationrequiresmorethan50%ofprofittobere-investedandsocialenterprisesareassessedatvaryinglevels,respectively.

Basedonaboveanalysis,weproposetwooptionsfordefiningsocialenterprisesinVietnamasfollows: “Social Enterprise is an organisational model applying creatively business principles, dynamism and

principles of the market to solve specific social issues, in a sustainable way. Most profits are re-invested back to the development of the organizations, communities, or social objectives. Social enterprises can belong to many different economic sectors.”

“Social enterprises are organizations established to pursue innovative and sustainable social and environmental solutions using business activities. Most profits are reinvested to expand the scope of the organization and social objectives.”

National Balance Sheet

EquitiesFinancialequitySocialequity

Assets

Humanresources

Financialcapital

Policies,legalframework

Infrastructure

Thenaturalconditions

Liabilities

Sociallinkage

Socialwelfare

Socialequality

HDIindex

Competitiveadvantages

Source: Penny Low’s presentation at I-genius Workshop (Thailand, 2012)

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Source: CSIP

Socio-economics(Thirdsector)

Government NGOandsocialenterprise

Newsocialenterprises

Enterprises whohasCSR Privatesector

2.3.2.InstitutionalizationofsocialenterprisesinVietnam

Throughthestudycarriedoutbytheresearchteam,wefoundthatsocialentrepreneursaresimplebutstrongwithinternalpower.Theyarethepeoplewhodon’tprefertheoriesbutlovetotakespecificaction.Mostprominentlyistheirpassionandwillingnesstonotonlyovercomedifficultiesandobstaclesthatsocialenterprisesarefacing,whicharealwaysmorethannormalbusiness,buttheyalsoneedtobepowerfulenoughtosolveconflictsbetweenbusinessandsocietyobjectives.

Iftheyaredriventoomuchbybusinessactivities,socialobjectivesmightbedigressed;viceversaiftheyweretoofocusedonsocialaspects,socialenterpriseswillbefinanciallyunsustainable.Theyimmersethemselvesinsocialinitiativeswithstrongdesirethatwemaythinkthattheycanoperatesocialenterprisesanywhere,inanycondition,even in theabsenceof incentivesor supportof theState. In Indonesia, thesocialenterprises feel“better”whentheStatehasnoincentivessupport,becausethelegalenvironmentofthecountryisstillinadequatesoimplementationofpoliciesarelesseffective,andalwayscarrywithitsphenomenonandcorruption.

Therefore, it is necessary to build a consistent perspective of State for social enterprises in the process ofpolicyformulationaboutthepositiveroleofsocialenterprisessectorasanefficientstrategicpartner,apowerfultool - “helping-hand”of theState in implementingsocialobjectives.Underpressuresof reducingpublicdebt,tighteningspending,buildinganefficientgovernment,improvingcompetitiveadvantages,wecanenvisagefutureinstitutionalisationtoinclude:

A compact public sector, efficient + dynamic and growing economic sector + dynamic and growing civil society sector

Statewill only focus in some key functions such as defense, security, foreign affairs, ensure the rule of law,buildingvitalinfrastructure,andcreatepolicyframeworkandinstitutionforgrowth,facilitatingscience,education,health,economicdevelopment...Forprovisionofsocialwelfare,addressingsocialissuesandtheenvironment,thestateshouldshareresponsibilitywithpartnersfromcivilsociety,inwhichsocialenterprisescanplayacentralrole.TheStatemustalsoplaya‘helping-hand’fortheseareasbycreatingalegalframework,providingcatalystconditionsforsocialenterprisesdevelopment,bothinquantityandscale.

Image 15: State needs to develop the third sector, including social enterprises

It is necessary to issue a decree on social enterprises

First,aseparateframeworkshouldbeestablishedforsocialenterprisesandfortheoperationofsocialenterprises.Atthisinitialstage,webelievethatissuingalegaldocumentinaformofGovernmentdecreeisappropriate.Thisisatthesametime,thefirstbricklaiddownintheprocessofinstitutionalizationofsocialenterprises,andalsoanexploringsteptopreparelegalisationofthissectoratalaterstage,whensocialenterpriseshavemassivelygrownwithprofoundpracticalevidences.

Official recognition by defining social enterprises’ concepts and criteria

Decree on social enterprises should give an official definition of social enterprises in Vietnam. Criteria oncompulsoryandflexiblecharacteristicsofsocialenterprisesshouldbeclearlydefined.Throughit,issuesintermsofpositioningsocialenterprisesinprivatesectororgovernment,belongingtoNGOorbusiness,orboth,andthe

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possibilityofconversionofothertypesoforganisationswillalsobeaddressed.ThisistheofficialrecognitionoftheStateforsocialenterprises,theresultthatsocialenterpriseshavebeenlongingfor.

Whenweaskedsocialenterprisesabouttheirmostdesire,what is their toppriority forexpectationfromthestate’spolicy,theyallrespondedthattheyneedanofficialrecognitionoftheGovernmentandsociety,todefine‘whotheyare?’;fromthatstage,theycanoperateformallywithofficialnamesandrecognisedroles.

Preferential policy, incentives to support social enterprises

Thedecreealsoneedstoofferspecificpreferentialpolicy,incentives,supportstosocialenterprisesaswellasprocessandresponsibilitiestoapplythesepolicies.Here,weneedtohaveaninsightfulreferencetoopinionssayingthatsocialenterprisesshouldbeplacedinthegenerallegalframeworks,operatingonthesame‘playingground’, competing fairlywith other organizations, other enterprises. The state should only havepreferentialpolicyforacertainnumberofareas,whichtheStatedeemsnecessarytoencouragedevelopmentorparticipationoftheseorganizations.Socialenterpriseswillenjoypreferentialpolicieswhenoperatinginthoseareasandthisisageneralpolicy,not just forsocialenterprises.Thisopinion iswellworthconsideringassocialenterprisesshouldbeviewedcloselywiththeirsocialimpact.Socialenterpriseoperatingatsizes,inmanydifferentareas,andthereforenoteverysocialenterprisecanbringaboutsocialimpactthattheStatecanactuallybeconvincedthatincentivesarereallynecessary.

Need to establish a department / agency to implement state management, to promote and support social enterprises

In termofpublicadministration, thedecreemaystipulate theestablishmentofadepartment/agencywithinaministrythatisresponsiblefortheadministration,encouragementandsupportofsocialenterprises.Basedonthefocalnatureandcross-sectorsoftheMinistryofPlanningandInvestment,werecommendtheestablishmentofaUnitresponsibleforsocialenterpriseswithinthestructureoftheEnterpriseDevelopmentDepartment,MinistryofPlanningandInvestment.

Another possible option is to set up an Independent organisation in the structure of a state socio-politicalorganisation to carry out assistance programmes for social enterprises. This is the lessons learned fromThailand.However, the traditionofusing toolsas intermediaries,mixedorganisation inVietnam is still limitedand lesseffectivebecausethe independentstatusof theseorganizations, insteadofhavingtheadvantageofbeingdynamic,itoftencreatesgapsinresponsibilities,makeitdifficultyingatheringresourcesofstakeholders,especiallystateagenciesandlocalgovernments.

Thus,thefirstchoiceismoreconvincing.Andtoimprovetheefficiencyoftheiroperations,thededicatedagencyforsocialenterprisesshouldimplementprogrammestosupportsocialenterprisesthrougha3rdpartywhichisintermediaryorganizationwhocandevelopsocialenterprisesthroughopencompetitivebidding,outsourcing,ordering,whiletheagencywillberesponsibleforsupervision,monitoringandevaluation.

Supplement to Law and the possibility of converting some units, public organizations

Concept,criteriatoidentifysocialenterprisesneedtobeaddedintherevisionoftheEnterpriseLaw,InvestmentLawinthecomingtime.Atthisstage,theremaynotbesufficientconditiontoaddanewtypeofenterpriseforsocialenterprisesbutthisissueshouldbediscussedduringtherevisionoftheLawonEnterprises.

Currently, if consider social enterprise as an organisational model, undertake business activities for socialobjectives,thatcanbeappliedtomanydifferenttypesoforganizationsbothprivateandstate,thennon-profitnon-state entities, state public service enterprises and scientific and technological organisationswhich haveoperated intheformofenterprises(accordingtostatepreferentialpolicies)canfullyapplysocialenterprisesmodelwithoutconversion.Onlywhen,socialenterprisesareaddedasanewtypeofenterprise,theseorganizationsmustconvertandre-register.Incase,thatsocialenterprisesmodelisnotmandatory,suchorganizationsmaynotneedtoconvert.

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2.3.3.MeasurestoencourageandsupportsocialenterprisesinVietnam

As mentioned above, programmes and policies to encourage, support social enterprises should be donethrough intermediaries, to achieve greater efficiency thanks to its competition and avoidance of conflicts ofinterest and corruption. Social Enterprises also have the opportunity to feedback directly, objectively to theStatemanagementagencyinassessingqualityandserviceoftheseintermediaryorganisations.Atthemoment,therearetwointermediaryorganisationsinVietnamthatareCSIPandSpark.Itshouldbenotedthatintermediaryorganisationshavemissionsofdevelopingsocialenterprises.TheyarefundedbyinternationalNGOsandsocialinvestors.Therefore,theymustalsohavetheirownsocialenterprisesnetworks.ThatwillenhancetheStateandtheirsupportprogrammesfurther,andthemainbeneficiariesaresocialenterprises.

To encourage, promote growth of social enterprises in Vietnam both in quantity and scale, following policysolutionscanbetakenintoconsideration:i. Promotecommunicationinvariousformsrangingfromthemassmediatosupporters,totransmit,disseminate

andexplaintheconceptsandissuesrelatedtosocialenterprises;

ii. Awardingandhonoringsuccessfulsocialentrepreneurswhohavedevelopedsocialenterprisesinalargescale;

iii. Organisingcompetitiontoseekssocialenterprise initiativesto identifypotentialsocialentrepreneursandprojectstofundstart-upcapitalinthefirststageofestablishment;

iv. Providedirectfinancialsupporttosocialenterprisestoexpandsocialimpact,throughacloselyselection,classification,monitoringandevaluatingprocess

a. Notably,financial instrumentsheremaybenon-refundablegrantsorlowinterestloans,butapplyinacertaintimeperiod(3-5years)tobuildresilientsocialenterprisesavoidingpossibledependence.

b. Thefinancialassistancemustbetiedtotheeffectivenessofsocialimpact.Forexample,providesupportof50%ofsalaryforeachpersonwithdisabilityemployedbysocialenterprises,decreasegraduallyin5years;provide50%supporttohouserenting,basiclivingexpensesforteachersinvolvedinvocationaltrainingprojectforyoungstreetchildren,peoplereturnedfromprisons.

v. In order to develop sustainable financial sources to support social enterprises, a Social EnterprisesDevelopment Fundneeds tobeestablished. TheFundwill be financedbyStatebudgeton thebasisofextractingacertainpercentage(e.g.10%)fromtheSpecialsalestaxrevenues.Notonlylimitedbythestatebudget,theFundcanexpandcooperationopportunitiestoreceivefundingfromvoluntaryorganizationsandsocialinvestorsathomeandabroad.

vi. Taxexemptionsorreductionsforsocialenterprisesinsomeprioritypublicsectors.Someopinionsarethatassocialenterpriseshavesupportedorundertooksomestate’srolesinanumberofsocialwelfaresectors,whichtheStateshouldhaveusedtaxrevenuestocarrydelivertheirresponsibilities,soitwillbelogicaliftheStateexempttaxforthesesocialenterprises.

vii. Itisnecessarytostandardise,classifyandevaluatesocialenterprisesinaconsistent,specific,clear,openandtransparentsetofcriteria.Thisisimportantstage,butalsothemostdifficultforstateagencies,becauselackofconsistentcriteriawouldleadtoinequality,legalevasion,conflictofinterest;butsocialimpactandtheno-profitmotifareverydifficulttomeasure.Notably,thecriteriashouldbedesignedreflectingcloselysocialenterprisesoperation.Toohighcriteriamightunderminemotivationforsocialenterprisesandwillthereforehinderencouragementandattractionofnewsocialenterprises.Asystemshouldbedevelopedtoquantifysomekindsofsocialimpactthatsocialenterprisesgenerated,tocomparewithinvestmentcosts,opportunitycostsandefficiencygain.Theapplicationof financialauditandsocialauditshouldalsobeappliedmorewidely.

viii. Supportforcapacitybuilding,trainingofbusinessmanagementskills,finance,personnel,marketingforsocialenterprises;

ix. Needtodevelopandpayattentiontotheroleofintermediaryorganizations,encouragesocialinvestors;mayestablishanAssociationofsocialenterprisesinVietnam;in-depthconsultationwiththeseorganisationsintheprocessofmakingpolicytosocialenterprises;

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x. Needtoconductpubliccompetitivebiddingsothatsocialenterprisescanparticipateinprovidingproductsandpublicservices,suchaswastedisposal,environmentalprotection,education,publichealth,sustainablelivelihoods...

xi. Mayadoptpoliciesregulatingstateagencies,publicsectororganizationstoprioritizetheuseofproductsandservicesofsocialenterpriseswhenmakingpublicprocurementoroutsourcing;

xii. Socialenterprisesshouldbeencouragedandfacilitatedtoaccessinformation,stateinfrastructureorusedatpreferentialrates;

xiii. Developinggroundforsocialenterprisestoenjoycheaprenttosetupoffice,training,practice,salesvenue...

xiv. Implementationofsocialhousingprogramsfollowsocialenterprisesmodel;

xv. Developmentofvarioustypesofcooperatives,microfinancetowardsensuringdemocracyandfairnessinorganizationalmanagementanddistributionofprofitstothecommunity;

xvi. Developnetworksandfacilitateconnectionbetweensocialenterprises,andintermediaries,socialinvestorsinandoutof thecountry.Socialenterprisesare facilitated toparticipate inhigh-levelmissionsoverseas,participation in fairs,exhibitions,product introduction, registrationcontacts, informationanddata for thepromotionofforeigntrade;

xvii. Develop trainingprogramsat theundergraduate levelandpostgraduateonsocialenterprises.Establishsocial enterprises incubating model at universities. Promote common knowledge of social enterprisesandstudentmovementencouragingyoungpeopletoraisetheirdreamofstartingtheircareerwithsocialenterprises.

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CONCLUSIONIn fact, in the last 10 years, Vietnam has actively implemented socialization in education and health. This demonstrates a change in the perception of the State on sharing a number of areas which have been considered as inclusive responsibility of the State with non-state entities consisting mainly private enterprises and non-public organisations. However, it is apparent that we don’t have a comprehensive methodology for socialization. Consequently, in many places, socialization have been converted to intensive marketization; leading to chaotic competition, lacking of standardised and effective management system, poor services and decrease of trust in the roles of the State as well as the market.

In another aspect, a change in perception has been documented in the administrative reform of the public sector. The State encourages public services organizations to transform into Enterprise model, State Science and Technology organizations have been converted into Science and Technology enterprises, create opportunities for private sector and non-state organisations to involve in providing public services through competitive tendering to achieve greater efficiency. This shows that the State is in agreement with a trend of applying business models, market principles for the implementation of its social functions. However, there are many areas that have not been socialized, or can not be socialized under traditional approach (because it is not attractive to private sectors in term of potential profit). These areas include job creation for disadvantages or marginalized groups. In addition, there are many other issues, such as: support for children with special circumstances and reintegrate people released from prison, people living with HIV/AIDS, protection of ecological environment... In fact, implementation of policy on transforming some public services organisations, Science and Technology organisations into business and expanding markets to provide public services have not gained significant progress.

It is clearly that it will not be adequate to rely on the two public and private sectors to fulfill demands and to solve social issues. That’s not to mention economic down-turn, requirement on restructuring, reducing public debt, State fiscal tightening at the present, while the grants from International organisations for Vietnam is declining gradually. In this context, we see the role of social organizations; community development in general and particularly the emergence of social enterprises are very suitable to fill the gap.

Social enterprises are hybrid organisations, undertaking business activities to achieve social objectives. They operate not for profit. In fact, social enterprises are catalyst that promotes innovation and initiatives for the society. They go into the niche market which no one has entered. They even create new market, or meet the needs of a neglected group, or address the social and environment issues that have arisen during the economic growth of the country. The social entrepreneurs hold high interests in social issues; particularly they have to overcome many difficulties and obstacles in order to maintain social enterprises model in order to compromise between the sustainable objectives and extreme challenges of the market.We can say that this is a ‘piece of jigsaw’ which is missing in a picture that has the place in the public sector, private enterprises and NGOs. This is a ‘win-win’ partnership, provided invaluable support to the State in the implementation of social objectives. Each of the above area has its own advantages and strengths, however, social enterprises can be seen as solutions or tools to complement the weaknesses of the remaining areas including the promotion of social initiatives, mobilising potential resource both intellectually and physically from the people, promoting effectiveness and sustainability of social measures...

It’s time, the State had an official recognition of social enterprises model and the role of social entrepreneurs. Mechanisms and policies need to be developed to create a stable legal framework for the operation of social enterprises, creating favorable condition for social initiatives to be implemented easily, encourage and promote the strong growth of social entrepreneurship in Vietnam.

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SOCIAL ENTERPRISE IN VIETNAM CONCEPT, CONTEXT AND POLICIES

HANOI 2012