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Economic Sector

Last updated: Monday, December 17, 2018


Important Impetus for Economic Growth

Posted: Monday, October 16, 2017

Since 2010, the private sector has contributed over 43 per cent of the country’s gross domestic product (GDP) while the State sector has contributed about 28.9 per cent.

Not only that, a recent study showed that the private sector’s ICOR is three times better than that of State-owned enterprises (SOEs). The private sector accounted for 30 per cent of industrial output value, nearly 80 per cent of retail and service value, 64 per cent of commodities made and 100 per cent of commodities transported. For that reason, this sector is becoming a driving force to accelerate Vietnam's economy.

The private sector’s key roles and positions to growth are officially recognised by Resolution 10-NQ/TW on private economic development issued by the Central Party Congress in June 2017. Wherein, the private sector will become an important driving force of the socialist-oriented market economy.

Particularly, the private sector employs nearly 85 per cent of the active workforce and generates about one million new jobs a year for workers, including jobs for lay-offs from State agencies (due to apparatus streamlining) and SOEs (due to equitisation) as well as jobs for rural non-farm workers. In this respect, the private sector has played an important role in economic restructuring.

Inherent weaknesses
However, there are still many obstacles on the way that the private sector has to pass to become an important driving force to spur the Vietnam’s economy. Those obstacles come from the private sector itself, from the perception of authorities and from policies.

Dr To Hoai Nam, Vice Standing Chairman and Secretary General of the Vietnam Association of Small and Medium Enterprises, said, the private sector is primarily constituted by business households (accounting for about 95 per cent) and micro and small businesses (about 90 per cent with less than VND1 billion of investment capital), which are typical of low technological levels, slow innovation, weak financial viability, low labour productivity, and poor business performance, low management level, weak cooperation, and weak access to domestic and international value chains.

A report on start-up women published by MasterCard in April remarked that many Vietnamese women started up their business because they had no other option for their living and they usually focused on business fields that required little knowledge.

And environmental barriers
Ms Pham Thi Ngoc Thuy, Deputy General Secretary of the Vietnam Private Sector Forum (VPSF), said, Vietnamese businesses in general and private businesses in particular continue to face with barriers to the investment and business environment, that is to say, uncertainty of and sudden changes in policies, and lack of transparency in relation to all such changes. Obstacles also come from official taxes as well as informal expenses, which account for up to 10 per cent of corporate expenses, according to the survey by the Provincial Competitiveness Index (PCI) 2016. These factors give rise to give and take mechanism and corruption.

Worse still, behaviours, attitudes and relations between the government and the business are major barriers for operations of private enterprises. The 2017 Business Sentiment Survey showed that up to 44 per cent of respondents said they missed out business opportunities due to the barriers listed above.

Government of action
On September 30, 2017, an unprecedented policy dialogue between Prime Minister Nguyen Xuan Phuc and leaders of 14 corporations representing the private sector was held. This meeting carried a clear message that the Government is willing to listen and is consistent with its policy that it will create favourable conditions for the private sector to develop.

“Why has the private sector in Vietnam not developed strongly? Do the causes lie in business environment or tax or treatment? What should the State do to enable the private sector to prosper? What do the government have to do in the present time and what do enterprises need to do?” were raised by the Prime Minister and he listened sincerely and responsibly to concerns and aspirations of private corporations.

The meeting with leaders of 14 private economic groups was another important step in the spirit of the enabling and acting government to raise the share of the private sector in the economy from 43 per cent to 60 per cent of GDP as expected by the Prime Minister at the 2017 Vietnam Private Sector Forum two months ago.

Nguyen Thanh

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