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Vietnam: Private sector revamp key for progress
Being the key mainstay of the economy, the Vietnamese private sector is set to enjoy a more favourable business and investment climate,
with hurdles to be removed for it to make rapid strides in supporting Vietnam to achieve the dream of becoming a developed country by 2045.
Minister of Planning and Investment Nguyen Chi Dung told last week’s conference on developing the private economic sector that his ministry (MPI) is drafting a hallmark programme on comprehensive renewal of state management for the sector’s development.
“This programme is being completed and will be officially submitted to the government and then to the Politburo. The draft has earned praise from the government,” he said. “After adoption, the programme will see a series of specific solutions to fuel the private sector, making it a really important impetus for the economy.”
The programme will concretise the spirit of the 13th National Party Congress’ resolution released just over a month ago. The resolution paves the way for the country to develop until the end of this decade, including a more equal space for enterprises of all economic sectors.
On March 6 the government also organised the country’s first-ever Dialogue 2045 event to promote the private sector’s role. Prime Minister Nguyen Xuan Phuc stressed Vietnam “needs to create more favourable conditions for the private sector to flourish, and have business giants capable of competing in the region and worldwide by unlocking all potential and strengths of our people living and working in and outside the country.”
Commenting on the government’s dream of Vietnamese global giants over the next decades, Hanoi-based economist Raymond Mallon told VIR that a series of solutions must be taken.
“I think that the key to having private giants emerge is to make it easier administratively for all private enterprises to establish, grow, and to engage and compete internationally.”
According to Mallon, the private giant of 2045 may now be an informal household business that is still nervous about going through the formalisation process to become an official private enterprise. The key will be to build on and extend the progress made over the last decade in improving the business, investment, and trade environment and also to renew the focus on building stronger market institutions including capital and finance markets, standards and contract enforcement mechanisms, and to generally create a level playing field for all firms.
A hallmark policy
Under the resolution of the recent 13th National Party Congress, the Party specified a number of strategic breakthroughs for the country to become a developing country with modernity-oriented industrial development by 2025 when per capita GDP will be $4,700-5,000; a developing nation by 2030 with modern industrial development and upper-middle income; and a developed economy with high income by 2045 – meaning a GDP of $2.5 trillion with per capita income of about $18,000 a year.
To this end, the first strategic breakthrough will be “creating a good system of laws, mechanisms, and policies, while establishing a favourable, healthy, and fair investment and business climate for all economic sectors, with the promotion of innovation and the mobilisation, management, and effective use of all resources for development – especially land, finance, and public-private partnerships.”
This breakthrough would mean the Vietnamese private sector will have opportunities to perform in a more transparent and equal investment and business climate.
The will of the Party in driving the private forward has also been reflected in its adoption of a report on summarising the implementation of the 2011-2020 Socioeconomic Development Strategy, and formulating the 2021-2030 strategy. In which, the Party stressed that the private sector “must be strongly developed qualitatively and quantitatively, effectively, and sustainably, and must be turned into a really important impetus for national economic development.”
All obstructions and prejudice must be removed, while all favourable conditions must be created for the private sector to develop, the report adds. “The sector must be supported in innovation, technological modernisation, human resources development, and labour productivity improvement. Major economic groups with strength and regional and international competitiveness are encouraged for development, and efforts are to be made to see at least two million operational enterprises which can create 60-65 per cent of GDP.”
In Vietnam, the private sector creates up to 43 per cent of GDP, 49 per cent of total development investment, 15.4 per cent of state budget, and 85 per cent of total labourers, according to the MPI.
Vietnam currently has nearly 800,000 operational enterprises, of which about 98 per cent are of small or medium size. In the 2016-2019 period, the country annually saw nearly 126,600 newly-established firms, registered at a total VND1.35 quadrillion ($58.7 billion), up 49.3 per cent in the number of enterprises and 24.8 per cent in capital as compared to those in the 2010-2015 period.
The country also has some big private enterprises such as Mobile World Co., Ltd., Truong Hai Auto Corporation, VietJet Air, Vingroup, Masan Consumer Group, Minh Phu Seafood Corporation, TH Group, and Him Lam Corporation among others.
Removing impediments
Minister Dung underlined that for the private sector to further develop and make bigger contributions to the country, “all hurdles must be eradicated, and all best conditions must be created. Enterprises and the public need a safer business climate.”
“If the private sector fails to receive further support, the country will be unable to reach high economic growth sustainably, and hit the goals set in the Party’s resolution. Even the country will be unable to overcome the middle-income trap without contributions from the private sector, especially given that the state budget remains limited,” he said.
Under the MPI’s draft programme on comprehensive renewal of state management for private sector development in Vietnam, one of the key solutions to spur on the private sector will be “removing all improper regulations and those contrary to the market law” and preventing the private sector’s development.
“A fair business climate will be creating regardless of forms of capital ownership and economic sectors. Enterprises’ rights to ensure assets and business will be secured. All markets for production inputs will be developed, with the promotion of innovation and startups,” the draft outlines.
“No criminalisation of all civil and economic relations, and no state interference into enterprises’ internal governance activities, are allowed,” it added.
Recently the Development Partners Group in Vietnam (DPG), whose members include representatives from 27 international organisations and nations, worked with local authorities on the country’s 2021-2030 Socioeconomic Development Strategy in order to make important recommendations for it to become feasible.
One of the biggest recommendations from the DPG is to unlock the great potential of the private sector and remove obstacles for it to develop further.
According to the World Bank, as Vietnam moves into the next national development strategy and development plan cycle, it is important that Vietnam boosts its unfinished reform agenda and reinvigorates its growth potential, not only in terms of quantity but most importantly in terms of quality and sustainability of growth. This is essential for the country to realise its aspiration of becoming a successful upper middle-income country.
The DPG has proposed six major groups of solutions to promote the private sector’s development (see box).
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Nguyen Thi Phuong Thao – Chairwoman, Sovico Group The government should create an equal business environment among all economic sectors and between enterprises. We also suggest it brings Vietnam onto a new level of international tourism with diversified services in entertainment, healthcare, culinary, and traditional culture. Together with these is to pour more investment into the infrastructure of inland routes, airlines, marine lines, and logistics systems. Vietnam also should become a new hub for supporting industries and a training centre of services for aviation, both regionally and globally. Thai Huong – Founder, TH Group Therefore we must develop green, clean, and organic agriculture to ensure the best foodstuff sources for the people. Apart from this, we must also develop traditional tourism in combination with eco-tourism and historical tourism. We suggest that the government promotes supporting industries that can assist farmers and enterprises in the development of agriculture-related services and products too. Also to further support the business community, the government also needs to have a transparent and detailed mechanism to help them develop and gain more achievements. Nguyen Thi Nga – Chairwoman, BRG Group Right now we must create a solid foundation and wide enough space for future generations to become a high-income country, in accordance with the spirit of the latest National Party Congress. Vietnam has the opportunity to realise those targets. From an economic perspective, the private economic community has a strong business environment with keen encouragement from the government. Strong evidence is shown with the leadership of the government, and our effective combat with the pandemic has ensured the sustainable development of the country’s economy, with Vietnam named the only country in ASEAN to be upgraded in the Global Soft Power Index 2021 released last month. Tran Ba Duong – Chairman, Truong Hai Auto Corporation We also exported over 1,200 vehicles and more than $20 million worth of spare parts, reaffirming our position as the leading company in the domestic auto market and for export. In terms of the future, it is imperative to focus on investment and development of high-quality human resources for sustainable development. So far THACO has cooperated with many related agencies to develop human resources such as universities with training courses to meet the needs of enterprises; and also building a platform for administration and the use of digital technology. Nguyen Mai Thanh – Chairwoman, Refrigeration Electrical Engineering Corporation The private sector in this country is the main provider that creates products and services supplied for the whole economy. Therefore it is worth it to be focused with more favourable incentives and policies. Furthermore, we need to see even more conditions created for development of the whole of the private sector. Through the current coronavirus pandemic we also must focus on environmental protection and supporting vulnerable sectors in which smaller enterprises are most impacted. At the same time, when setting up socioeconomic development indexes towards 2045, we need to focus on the happiness of people also – not just economic indexes. Dominic Scriven – Founder and executive chairman, Dragon Capital First would be that of environmental sustainability in harmonisation with GDP, creating sectors to reach sustainable development for the whole economy. Secondly, Ho Chi Minh City must continue to become the leading economic automotive hub for the whole economy with a boost in sustainable infrastructure system improvement. Finally, it is of paramount importance to promote financial knowledge to the Vietnamese people so that they can make sustainable financial decisions as they get older. Do Minh Phu – Chairman, TPBank We also suggest that the government does not criminalise economic and civil relations. The legal system must protect property rights and the freedom of business for private enterprises if they comply with the law. The private enterprise community meanwhile must focus on improving labour intensity and competitiveness, applying new technologies in manufacturing and management. Le Van Quang – Chairman, Minh Phu Seafood Corporation Minh Phu has developed a plan for developing a clean, organic, and carbon-balanced value chain. In particular, Minh Phu has combined AI technology and a blockchain platform to build a smart mobile application to manage shrimp farming. These solutions can turn Vietnam into the world’s top shrimp production and processing manufacturer, accounting for 25 per cent of the global shrimp market share with nearly four million tonnes of raw shrimp, worth $20 billion, by 2045. To achieve this, we need support from government and local authorities to create legal corridors as well as favourable mechanisms and policies to help projects get implemented. Tran Kim Chung – Chairman, CT Group For success to be met in the future, the Vietnamese government is required to solve obstacles in various areas – such as administrative procedures; completing a legal framework for high-technologies like fintech, flytech, and digital banking; and creating additional investment infrastructure for transport and education for the Mekong Delta region. Dinh Ba Thanh – Executive chairman, DatVietVAC In this area, the country does have strengths in cuisine, fashion, handicrafts, and beverages such as coffee. More distinct features can also be developed towards crafting a more diverse cultural and innovative economy. Along with separate support policies to develop this, Vietnamese authorities need to craft strong mechanisms to handle areas such as copyright issues. This is because currently, violation of cultural products is becoming a major problem, causing great damage to Vietnamese enterprises of all sizes. VIR |
Source: https://vietnamnet.vn/en/business/private-sector-revamp-key-for-progress-721781.html