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Private sector facing difficulties

Released at: 11:34, 08/12/2014

Private sector facing difficulties

Vietnam should better support its private sector, according to VCCI report.

by Nguyen Quynh

Vietnam's private sector has struggled over the last few years, with many enterprises closing and those that survived being predominantly informal and/or of micro or small or medium scale. The government therefore needs to promote the development of the domestic private sector, according to a report entitled "Private Sector Development for an Economy with Sustainable Development and Independence, released by the Vietnam Chamber of Commercial and Industry (VCCI) at the Vietnam Development Partnership Forum (VDPF) 2014, especially small and medium-sized enterprises. It should support them to increase their competitiveness, enabling the sector to participate more effectively in global chains.

The private sector, the report stated, lacks medium-sized enterprises. Of all firms now active in Vietnam, larger companies only account for about 2 per cent of the total and likewise for medium-sized enterprises. The remaining 95-96 per cent are small and micro-sized businesses. Of these, micro businesses account for as much as 66-67 per cent. "Being small in size, most local firms are not competitive enough to export to other countries or participate in the global production network," said Mr. Vu Tien Loc, Chairman of VCCI.

The VCCI report also indicated that the size of the average firm has shrunk over the last few years. Domestic firms have not benefitted from the spill-over effects of foreign-invested enterprises and their integration into global value chains has remained fragmented and limited. According to Mr. Tomoyuki Kimura, ADB Country Director, continued reform of State-owned enterprises (SOEs) will be important for Vietnam to develop its private sector. "However, the ongoing reforms need to focus less on the numbers of equitization and more on their quality," he added.

Vietnam's private sector is facing many opportunities as well as challenges. The further deepening of trade integration through the ASEAN economic community, EFTA, TPP, and trade agreements with South Korea and others could provide opportunities for the sector.

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