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Private sector needs assistance

Released at: 12:01, 30/07/2015

Private sector needs assistance

Chairman of the Vietnam Association of Small and Medium Enterprises, Mr. Cao Sy Kiem, tells VET of three current issues facing private enterprises.

by Hoai An - Doan Tran

What is your opinion on concern among the business community about the State’s efforts at developing private enterprises?

Despite the global crisis and economic downturn in Vietnam the private sector has shown its important role in economic development. The increase in capital in the sector has proven to be sustainable.

Research also indicates that despite being smaller than the State-owned enterprise sector, the private sector makes more efficient investments and, relatively speaking, a greater contribution to the growth of the economy.

To develop the private sector the government needs to help them overcome three issues.

What are these three issues?

The first is capital and access to capital. The private sector is unable to develop its potential due to a lack of capital and an inability to access capital. Private enterprises in Vietnam are mostly of small scale with little capital for investment. Most lending to the sector is short term, while the capital needed for investment and production expansion requires long-term lending.

As a result, the private sector faces difficulties in production and business operations. Their competiveness in exporting to foreign markets or participating in global production chains is low.

The second issue relates to human resources. Private enterprises mostly use unskilled workers. In addition, the training of management employees cannot adapt to development needs. Consequently, corporate governance is mostly performed based on managers simply sharing their experience, without any structured training in place.

Meanwhile, there is no mechanism to encourage private enterprises to raise the quality of vocational training. Some enterprises expand training without appropriate plans that meet the requirements of the business. As a result, labor productivity is not high and profit is low.

Finally, the private sector currently faces major risks. They invest without understanding or researching the market. Sometimes they simply follow what others have done if it proves to be successful.

What does the State need to do to help the private sector overcome these issues?

The urgent issue now is how to create the conditions for private enterprises to access long-term funding so they can develop strongly, expand their business activities, and create more added-value and have the opportunity to join global production chains.

There is also a need for the State to provide support to improve the quality of human resources, by helping them with planning and applying new techniques. The State also needs to share experience in production and business operations as well as the business culture of foreign partners so they can expand their business.

As Chairman of the Association, which is a bridge between the business community and State authorities, what support does it need from the State?

I think the State should acknowledge the role of the Association and listen to its opinions to create the conditions for it to promote its role.

Activities supported by the State are always better and more cost-effective, meet the business community’s needs, and enhance efficiency.

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