Inspiring Entrepreneurship

CIEM released the Macroeconomic Report for the Third Quarter of 2014. The report was created with the following objectives: Update macroeconomic developments and macroeconomic policy adjustments during the quarter, assess macroeconomic outlook in the fourth quarter of 2014, and recommend macroeconomic policy adjustments in the fourth quarter and following years. On November 14 in Hanoi, CIEM organised a consultative workshop on this report chaired by Dr Nguyen Dinh Cung, Director of CIEM.

At the workshop, Dr Nguyen Dinh Cung presented main report contents, including macroeconomic developments in the third quarter, prospects and some important policy adjustments. It is the best to have actual institutional reform to remove bottlenecks to pave the way economic reform (second reform wave) and redefine the State and market roles. But, another good plan is to focus on implementing newly enacted policies and with good contents (Law on Enterprises, Law on Investment, Resolution 19, etc.), reforming business licences, import and export specialised licences and completing basic rules of market institutions.

 

The previous time (in the 2000s) was the market opening where the State gradually withdrew its presence on the market. The first wave of investment appeared. This time is much more difficult when the second wave of investment requires the State to change its operation ways. So perhaps, the most feasible plan is to carry out solutions to improve the business environment, said Dr Cung.

 

Remarking on the report, Dr Le Dang Doanh said that it is necessary to focus further analysis on budget pies, spending deficit, public debt and issues that are directly affecting the "health" of Vietnamese economy such as credit, bad debt and collateral. He also raised his concerns about the quality of bank supervision and management. He suggested reforming the legal system concerned, including laws and institutions of credit and this process must be made public and transparent. “For the time being, we are talking a lot about competition with growth momentums and enterprise quality. While international integration deepens and broadens, competitive advantages will disappear very fast if they are missed. If growth momentums are not changed soon, Vietnam's economy will be questioned: How to compete,” he frankly said.

 

At the meeting, economist Pham Chi Lan, former Vice President of the Vietnam Chamber of Commerce and Industry (VCCI), shared her concerns about economic reform process in Vietnam like the progress of State-owned enterprise (SOE) equitisation, the formation of a level playing field for all economic sectors, and the creation of conditions for the development of private sector. She used the image of ‘pity’ to portray small and medium enterprise area. “Enterprises get smaller and tumble down. But frankly speaking, this is not entirely caused by market rules but also caused by policy changes. Maybe, policy changes come from the desire to make big blows for growth but we cannot do this by leaving implications for small businesses."

 

It is said that there are biased judgements on FDI sector and overwhelming impacts. “I do not want to see the growth of FDI sector in exchange of the decline of domestic investment sector. In fact, policies and documents do not make prejudiced in owner’s equity source but treatments are unfair,” she noted.

 

Whether the economy actually recovers or not is still controversial. Some said that it is gradually reviving while others argued that the recovery is struggling.

"I think the economy has improved but not revived," said Nguyen Dinh Cung. He analysed that old growth momentum is weak and there are no alternative motives, it cannot be the recovery.

 

Most specialists shared the opinion that the economic recovery is very fragile and entrepreneurship is very low. Dau Anh Tuan, Director of Legal Department of VCCI, pointed out that corporate closures soared 57 percent in October 2014 compared with the previous month. However, he said that “The room for business environment reform remains huge when lots of business conditions and conditional business sectors conditions are being reviewed. Even the long-standing cap on advertisement is proposed to be removed by the Ministry of Finance. The key here is the thinking of policymakers for businesses.”

 

Most economists agreed on the need to inspire business spirit of enterprises and recommended the Government, ministries and branches take the lead in transforming government - business relations from "managing entity - managed entity" to "development partnership in solving social issues." Cung also suggested that "The solution that can be taken immediately is the Prime Minister, ministers, heads of branches and localities must take the lead and accompany enterprises to stimulate entrepreneurship which is weakening and dampening down. I think the signal transmitted from messages of business condition and administrative reforms will be now the best indicator for investors and businesspeople to regain their inherent dynamism."

We must ask the question of why Vietnamese enterprises are now weakening. Is the answer policies, improper ways of doing business, or something else? The straightforward answer will help make straightforward solutions.

 

Meanwhile, the FDI sector made up 68 percent of the country’s export turnover and accounted for 70 percent of industrial production value in the first 10 months of 2014.

 

This is worrisome because it is not true that Vietnam only has FDI enterprises. We do not want to have big State-owned economic groups but we must have big private enterprises.

The domestic business sector is very problematic. At present, when I work with localities I do not see big private companies that I met 6-7 years ago at the meetings with provincial leaders. Where are they? Does their entrepreneurship weaken?

 

The room for the Government to take reform is very broad. Businesses look at reform results, not what is talked or shown.