Private Sector - Driving Force of Economy

 

This was confirmed by Dr Vu Dinh Hoe, Deputy Editor-in-Chief of Vietnam Economic Times in the Workshop on "Motivations for private economic development” which was held in Hanoi by the Vietnam Young Entrepreneurs Association in collaboration with Vietnam Economic Times.

 

He said that Vietnamese businesses, most of which are private, have greatly contributed to the nation’s economic development in 2011-2015. The private sector has played an important role in developing productive forces, promoting internal forces in socioeconomic development, increasing exports, increasing tax revenue and addressing social issues like employment and poverty alleviation. Private companies provide jobs for 51 percent of the workforce and generate 1.2 million jobs a year.

 

According to Dr Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI), when Vietnam initiated the reform 30 years ago, we used the term “multi-sector economy”, which was essentially a market economy, and later officially adopted the term “market economy” in Party documents. But, for the time being, the private sector is the key to unlock the biggest change to the market. Vietnam has accepted the change of its market economy and accepted the private economy as a motivating force.

 

He affirmed that market is an operating mechanism of economy while the private sector is the driving force of economy. If the economy of Vietnam is compared to a high-speed train, the rail track is a market economy and the private economic sector is a locomotive.

 

He also compared businesses to warring vanguards on the front of integration. To win, such vanguard soldiers must have a strong rear - that is the State. “Vietnamese businesses are not inferior to enterprises in any nation around the world if the State effectively plays it roles as a solid rear, a supporting bracket and a fulcrum for businesses," said Dr Loc.

 

Mr Nguyen Dinh Cung, Director of the Central Institute for Economic Management (CIEM), said that an economy will not be able to develop in theory if the private sector does not lead. The institutional perfection is the job of the State. Businesses use institutions and thus advance institutional improvement.

 

He said institutions comprise of official institutions (laws enacted by the State) and informal institutions (ethical, professional standards, etc.). In addition to institutions, Vietnam now has the "law of the jungle" with a strong effect on life. If formal and informal institutions develop strongly enough, they will be able to overwhelm the "law of the jungle" and vice versa. Therefore, businesses must work to be transparent and tolerant enough to lead the economic development.

 

In fact, Vietnam’s laws are almost unchanged but instructive circulars are very changeable. These changes directly impact assets, business and investment plans and cash flows of enterprises. Mr Cung said that such an institution will leave enterprises with uncertainties, risks, and extremely high compliance costs. It is impossible to make long-term investment and calculation in such an environment. Therefore, companies must actively change rather than wait for change.

 

Dr Loc added that the Law on Enterprises and the Law on Investment (amended) were already adopted but their enactments were delayed on lack of instructive guidelines. After the provincial competitiveness index (PCI) ranking, VCCI has actively asked the Government to rank ministries, using MEI Index (Ministry Efficiency Index). Most ministries scored 5-6 points, suggesting that ministries still have a wide room for institutional improvement.

 

He added that Vietnam is preparing for the first patriotic emulation movement of the private business sector. In the present context, “doing business is patriotic, patriotism means doing business." “I hope that the Party and State will place their trust in people and the private sector,” Dr Loc noted.

 

Starting with only 4,000 enterprises, Vietnam now has hundreds of thousands of enterprises. This growth affirms the role and status of the private economy. Vietnam started with a ‘rural market’ economy and gradually developed into a ‘supermarket’ economy. All these phases have seen the development of internal forces of the private sector.

 

Vietnam took a long jump in policies. The Law on Enterprises of 1999, which took effect in 2000, was considered a revolutionary for the business force as it created a major turning point for the economy. After just one year, the number of enterprises jumped from a mere 4,000 to 13,000.

 

We have talked a lot of breakthroughs in institutions, infrastructure and restructuring but, frankly speaking, domestic and foreign private enterprises play a big role and position in creating such breakthroughs.

 

The objective of having 2 million businesses by 2020 is modest as Vietnam always wants to conquer new highs.

 

In recent years, Vietnam's economy has very strong turnarounds. Vietnam has changed its thinking of development and integration. With creativity in place of experience, dynamism in place of scale, and efforts and speed to promote advantages of a latecomer, Vietnamese enterprises will definitely succeed.

 

Private enterprises have had a framework, a form and new thinking for development. Nevertheless, to enable private companies to thrive, the State must manage by planning and market rules as well.

 

The agricultural sector of Vietnam is considered backward and prone to high risks of natural disasters, epidemics, exchange rates, labour productivity, policies and access. As a result, agricultural investment is quite difficult.

 

But, the agricultural sector is now holding an advantage on account of technologies and declining agricultural prices. Besides, the world population is forecast to increase to 9.7 billion people by 2050 and the current food output will have to rise 70 percent. Nevertheless, land and water sources are limited and investments into other fields will push up food prices. In fact, food prices have changed very much in recent years. Counties at risk of food shortages like China, India and Singapore have already had strategies in search of farming land.