Voice of Private Sector Echoes Government Actions

2:26:56 PM | 4/26/2019

Strongly believing that “the voice of the private sector and the action of the government” are always interrelated, Dr. Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI), pinned high hopes on positive progress in business community development as well as economic reforms of Vietnam in the coming time. On the 56th founding anniversary of VCCI (April 27, 1963 - 2019), Vietnam Business Forum Magazine has an interview with VCCI President Vu Tien Loc on this issue.

One barometer of reform and measure of local government efforts is the Provincial Competitiveness Index (PCI) launched by VCCI and USAID. How do you assess PCI’s impacts on changing local business environments, especially last year?

Now we are getting familiar with the vision and the message: The private sector is an important driving force, the private economy is key to sustainable and proactive economic development, we must be dedicated to developing the private economy. But when we launched PCI 14 years ago, it was a strange phenomenon.

PCI is a local institution - one of three growth spearheads: Institution, infrastructure and human resources. PCI is added to the Resolution of the Government of Vietnam, becoming an action program for grassroots reforms. PCI is scaling up good reform models. PCI is like a lighthouse for local reforms.

PCI 2018 made significant progress over previous years. The median PCI score reached an all-time high of 61.76 points. The rising median score and the narrowing gap between the best performing and worst performing provinces demonstrated more pervasive and inclusive efforts to reform and improve local economic governance capacity. Local reform orchestrates more harmonious and rhythmical results.

Informal charges (bribes) have continued to decline this year. The business environment also has become fairer. Preferences for State-owned enterprises and FDI enterprises over domestic private enterprises have decreased significantly. Provincial authorities have generally become more active and creative. Administrative reforms have kept progressing. In particular, overlapping inspection has reduced substantially over previous years. These illustrate that administrative reform and anti-corruption efforts have been working well.

Business optimism and confidence grow relatively high. 49.3% of domestic firms plan to increase the size of their operations, and 56% of FDI firms plan to do so.

The overall picture of the business environment is bright but several barriers still hinder business development. For you, what are these hurdles?

Although the overall picture of the business environment is positive, there are still many points of concern. Informal charges, though already shrunken, remain high. According to the recent PCI Report, 58% of domestic businesses still feel harassed. 54% still have to pay informal costs. The business environment is more equal but it is still rough. Up to 40% of respondents said that provinces still gave priority and favor to SOEs and FDI enterprises rather than the private sector. Market entry is still tough. Business post-registration procedures remain a burden. As many as 30% of respondents face difficulty in applying for business eligibility certificates and standard compliance licenses and other required documents. Administrative procedures remain most troublesome, particularly in land, tax, social insurance, market management and transportation areas.

Transparency, also according to business reflections, barely improves. The quality of human resources and business support services is not high. Private enterprises, especially micro, small and medium ones, still encounter hardships. To further develop the private sector, addressing above institutional and policy bottlenecks is still a top priority on the agenda of Government and all-level administrative agencies.

According to the recent PCI study, the room for reforms still vast. Easy reform steps and jobs have been already done by provinces and cities and more difficult, even fundamental, things, need to be addressed now, from institutions, from central level and ministerial level. Therefore, promoting socialization and decentralization, directing central agencies to perfect institutions and economic legal systems to open the longer way for local and grassroots reform efforts is an urgent need for the second wave of reforms. The 13th National Party Congress will kick-start and accelerate this process.

In the past 56 years, VCCI has always worked together with the Vietnamese business community and entrepreneurs. So far, many Vietnamese businesses and entrepreneurs have reached the world level. In a changing world economy and the digital age, what should Vietnamese businesses, particularly small and medium ones, do to do to advance globally?

Once being restrained from development, the private economy has been growing to be recognized for its important role in overall economic development and seen as a driving force of the economy. The private sector forms a large force, with about 700,000 businesses (according to the General Department of Taxation) and more than 5.2 million private business households.

In the past time, the economy has been volatile but the private sector remains stable. This sector currently contributes more than 40% of GDP - higher than the State-owned sector and even the FDI sector, about 30% of total industrial output value, nearly 80% of total retail revenue of goods and services, and 64% of total freight.

Never before has Vietnam faced such enormous opportunity as it does now. Vietnam's upcoming development pattern will be an innovative, inclusive and sustainable economy with micro, small and medium enterprises (MSMEs) as the driving force.

The backbone of every economy, like the U.S., Japan or the European Union (EU), is still MSMEs. And, MSMEs belong to the people. Developing the private economy is not only developing financial resources but also capitalizing on intellectual resources of the entire population. The people's knowledge and expertise is boundless. In the digital age, the key resource is brainpower, which is proprietary, not a public property.

Boosted by Industrial Revolution 4.0 and e-commerce, MSMEs will become the most competitive and innovative because they can utilize all resources for society and for development. When value chains are formed, MSMEs will be the key players.

In addition to efforts by every business, to advance globally, Vietnamese businesses not only need to be strong in their competency and expertise but also need to stay prestigious to foreign partners. A valuable experience for all businesses is when doing business with foreign partners, their information must be always transparent and public. This is considered a prerequisite condition to build long-term cooperation.

In addition, they need to improve their competitiveness, enhance management capacity and do business responsibly. They must pursue sustainable development, not only ensuring corporate profit targets but also taking care of economy, society, environment and community at the same time.

Thank you very much!