The government is committed to assisting the private sector in becoming a key part of the economy.
The Vietnamese Government is strongly committed to supporting the private sector given that State-owned enterprises (SOEs) are unlikely to lead the economy in the way that was expected.
Deputy Prime Minister Vuong Dinh Hue confirmed the government’s support during a speech to the Vietnam Private Sector Forum (VPSF) on June 3 in Hanoi.
Private enterprises and startups will enjoy a business environment that is more equal and transparent, he said, with favorable conditions for development.
Resources will be committed following market mechanisms and be monitored regarding efficiency, he added. In order to do so, “the government will increase the SOE equitization process, allowing the private sector to participate in sectors where they have strengths and the political mechanism will be completed to allow private enterprises to become involved in suitable projects,” he confirmed.
Vietnam now has around 500,000 private enterprises that employ 51 per cent of the country’s workforce and contribute over 40 per cent to GDP, according to Mr. Bui Van Quan, Chairman of VPSF.
In the first quarter of 2016 total national investment reached VND273.6 trillion ($12.21 billion), according to figures from the General Statistics Office (GSO), of which VND96.8 trillion ($4.32 billion) come from the State, accounting for 35.4 per cent, while non-State investment was VND100.5 trillion ($4.48 billion), accounting for 36.7 per cent. Foreign investment contributed VND76.3 trillion ($3.4 billion), or 27.9 per cent.
SOEs still hold the majority of Vietnam’s resources as enterprises with more than 50 per cent State ownership have total assets of VND5.408 trillion ($241.30 billion), according to the Central Institute for Economic Management (CIEM). “They have significant resources and used to be considered the ‘iron fist’ of Vietnam’s economy, but SOEs are also considered inefficient, corrupt, expensive and poorly managed due to a lack of supervision and opaque responsibility,” said Mr. Pham Quoc Trung, Deputy Head of the Enterprises Department at CIEM.
SOEs have received many benefits in the hope that they will lead the economy. But they have lost the position they held previously, according to Mr. Le Phuoc Vu, Chairman of the Hoa Sen Group.
Lean on private sector
By 2035, Vietnam is to be a modern and industrialized nation moving towards becoming a prosperous, creative, equitable, and democratic society, according to the Vietnam 2035 (VN2035) report, issued by the Ministry of Planning and Investment and the World Bank Group.
One of the most important transformations that will help Vietnam achieve its goals by 2035 is enabling economic modernization with a competitive private sector firmly in the lead.
According to the report, public investment is not as efficient as it needs to be because of uncoordinated and often incoherent investment decisions by a fragmented State structure. There also is little doubt that most SOEs are inefficient. Widespread inefficiencies in State investment perpetuate weak productivity trends in the economy. But they do not fully explain the decline in productivity growth, the reasons for which are especially worrisome, it noted.
Restructuring and equitizing SOEs will remain important but the nascent and weak domestic private sector commands even greater policy attention. State-market relations will have to be characterized by a clearer division between the public and private spheres.
Specifically, the report stated, government agencies involved in economic regulation should not engage in business of any kind, to avoid the appearance and reality of conflicts of interest.
From the government’s perspective, “this is the first time we have written in a Directive that private enterprises are the driver of economic development,” Mr. Le Manh Ha, Deputy Chairman of the Office of the Government, told a conference in late May when talking about Resolution No. 35 on support for and the development of enterprises, signed by the Prime Minister in the middle of May.
According to Mr. Ha, the business environment will be better after the removal of unnecessary administrative procedures, as the frequency of checks and verifications on enterprises make doing business difficult, and enterprises will also have the right to reject such checks and verifications if they are not done within the law.
Resolution No. 35 creates favorable conditions and ensures transparency and equality for enterprises. “Enterprises are treated equally, regardless of how they were established,” it states.