Entrepreneurs - Vanguards on Economic Front

2:32:06 PM | 31/12/2019

On December 23, Prime Minister Nguyen Xuan Phuc chaired a business meeting which represented a community of more than 700,000 businesses. The gathering was themed “Developing strong enterprises - Integration, effectiveness, sustainability.”

At the conference, Prime Minister Nguyen Xuan Phuc emphasized, “A powerful nation would never exist without a powerful business community. It is impossible to have a big economy without well-renowned brands. It is impossible to have a great business without outstanding individuals and businesses.”

In the era of globalization and technological disruption, business is the most important driving force of economic development because the business sector creates main added values for the economy, cultures the strongest competitive motivation and innovation to generate the strongest development force, and serves as the pioneering force to bring science and technology to life, the Prime Minister said.

Position asserted

Briefly presenting the remarkable economic achievements in 2019, Prime Minister Nguyen Xuan Phuc assessed that, in the context of regional and global economic downturn, Vietnam still managed to achieve growth of above 7%, one of the best performers in Asia and the world. The business environment was solid and inflation was low. Trade surplus ballooned to over US$9 billion. For the first time, Vietnam’s import and export value reached the target of US$500 billion. Foreign exchange reserves climbed to an unprecedented record. The budget deficit and public debt decreased significantly and the State financial capacity was strengthened, with the public debt falling from over 64% in 2016 to 56% of GDP now. International investment inflows continued to rise, topping US$32 billion, and disbursed foreign investment value exceeded US$17.7 billion, highest in recent years.

The business community, a pioneering force on the economic front, is growing, with more than 126,000 new entities established each year. Particularly, 136,000 new companies are estimated to be founded in 2019 with a total registered capital of about VND1,700 trillion (US$74 billion), bringing the total of active businesses to 760,000.

Business restructuring is on a right track. The share of medium-sized enterprises tends to increase while the share of micro-enterprises is on the fall.

In recent years, in addition to State-owned corporations and giant FDI firms, more and more gigantic enterprises are appearing in the private sector and engaging in influential fields on the country’s socioeconomic development like infrastructure development, information technology, and advanced manufacturing. Typical private companies include SunGroup, FLC, Vingroup, Truong Hai and Vietjet.

Enterprises are tending to shift investment from pure extractive industries to processing, manufacturing and service that add value to products; and develop inclusive and sustainable business models towards low-income people and disadvantaged groups in society.

Commitment to business support

Vietnamese enterprises and entrepreneurs have an important role in socioeconomic achievements in 2019, as well as throughout more than three decades of renovation. However, Prime Minister Nguyen Xuan Phuc emphasized “In the spirit of business support, the enabling Government must constantly seek ways to reduce risks and costs for businesses, especially risks caused by its institutions, policies and bureaucratic nuisances in administrative apparatus.”

Prime Minister Phuc also pointed at many difficulties and obstacles faced by local enterprises the way of development. The Government realized that thousands of companies get dissolved, suspend operations and go bankrupt every year. Many major businesses and famous brands of Vietnam are being eliminated by the market

The Prime Minister asked businesses to utter difficulties, obstacles and problems in business affairs, planning, access to land, production ground, credit capital, employment, market entry, access to technology, administrative procedure, tax, customs, and electricity and water supply. Especially, prolonged overlapping inspection upsets businesses. Even, State agencies threaten them when they express their opposite opinions or criticize policies.

The Prime Minister also stressed that there is a need to specify irrational, contradictory, overlapping, obstructing and improper documents, including their issuers, for business environment and international practices. And, there is also a need to promote competition in line with international commitments. There is a need to name agencies that cause harassment and troubles, local or central.

Amidst global economic downturn and trade war, the Prime Minister proposed putting forth challenges, pressures and difficulties for businesses. He asked the business community to advise the Government on measures to exceed socioeconomic targets in 2020 and in the 5-year development plan of 2021-2025, put forth groundbreaking mechanisms to encourage businesses to apply technology and increase the localization rate in value chains.

Enterprises can also recommend improper policies in the local context, propose solutions to help unlock all resources and remove all barriers to promote development.

He affirmed the commitment to join, support and talk with local enterprises, remove obstacles and difficulties against them to make breakthroughs in 2020 and beyond.

For businesses, he hailed their enterprise to make breakthroughs but warn them not to do without care or violate the law. Meanwhile, inspectors, investigators, auditors, police and court truly respect human rights, civil rights, business rights and property rights according to the Constitution and the law to unleash enterprises and facilitate them to develop healthily and sustainably.

Vietnam will have many major events in 2020, including the completion of the 5-year socioeconomic development plan of 2016-2020. For the business community, 2020 is also the year that many medium-term development goals, plans and strategies must be fulfilled. “So, I believe that 2020 will be the fruitful year as many important foundations will have to be established for the next quarter century. Whether we can rise to that historic milestone or not depends largely on achievements and the foundations that businesses have created,” the Prime Minister emphasized.

Business development and contribution underplays

Mr. Nguyen Chi Dung, Minister of Planning and Investment

In recent years, the number of medium-sized enterprises increased from 2.5% to 3.5% of total enterprises and the number of micro-enterprises declined from 70% to 63%. This shows significantly improved position and economic potential of Vietnamese enterprises. Some private enterprises have grown giant in scale and potential.

However, frankly speaking, the development and contribution of enterprises to the cause of national development is below their potential. They are still facing numerous difficulties and shortcomings, especially development bottlenecks. All need to be focused to figure out causes, develop and execute solutions to remove those problems and promote business development.

Firstly, it is necessary to have an enabling policy mechanism for business development to form a large-sized enterprise force that plays a key role in the economy and creates strategic products for the nation. These large-scale companies need a bond, a mechanism to get united to create a synergized force; become a policy contributor; and represent the Vietnamese business community to join large international playgrounds.

Secondly, it is necessary to promote mechanisms and policies on sector restructuring, take manufacturing and processing as a focus to embrace all opportunities of the Fourth Industrial Revolution to restructure the business towards sustainability and creativity.

Thirdly, there is a need to develop and complete policies to train high-quality, skillful and knowledgeable human resources equipped with international qualifications and professional work experience. It is important to make more use of the high knowledge network of Vietnamese people at home and abroad, living and working in many developed countries around the world, and establish a mechanism to train high quality human resources at many degrees and levels.

Fourthly, it is essential to improve the effectiveness and efficiency of State management of enterprise development. Especially, investor rights need to be further strengthened to encourage more people to start doing business, not criminalize economic affairs to contribute to national socioeconomic development.

And finally, the business community itself needs to proactively change the mindset; improve governance, productivity, quality and competitiveness of products and services; and standardize business processes to meet requirements and criteria of international markets.

Inconsistency of legal documents is hindering business development

Dr. Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI)

We cannot trade off the natural environment for business, but we need to create a sound business environment for companies. According to a survey by VCCI, up to 20 conflicting points are found in legal documents in current business laws of Vietnam. These points are mainly found in the construction industry, including planning, investment, construction, environment and bidding. Conflicts of legal documents are hindering businesses. We need to use one law to fix many others and use one decree to mend many other decrees to pave the way for development investment. If legal inconsistences are removed, a project will take only six months to complete instead of 2-3 years. With this progress, the economic growth would likely reach 8-9-10% instead of 7%.

VCCI advocates adding five million business households (first of all, 2 million registered business households) to the scope of application of the Law on Enterprises. Each business household is registered by an individual representative. In essence, this is a single-owner business in the world. In terms of economics, law and practical nature, business households are a type of enterprise but they are not yet categorized as an enterprise. Many business households currently have a larger scale than companies. This is the biggest shortfall in the current corporate legal system. Under the current regulations, rights and obligations of business households - which hire millions of people and contribute more than 30% of the country's GDP - are the same as enterprises by nature. Business households are only allowed to operate within the locality where they are registered and subject to a range of business restrictions.

The State can hold stake in and grant investment and business rights to the private sector

Mr. Dao Xuan Lai, Assistant to UNDP Resident Representative in Vietnam

The Government needs to create a transparent and fair competitive environment for all types of enterprises, not giving too much priority for foreign direct investment (FDI) enterprises or State-owned enterprises (SOEs).

Priorities and resources are focused for increasing investment efficiency and productivity and for fields that can make transformational changes. Prioritized sectors include land planning and management, energy, construction, and transportation. For example, in land management, increasing the land term limit will pave the way for large commercial production, connection and value chain development.

“Agricultural restructuring for higher value-added and sustainable development” is a success that needs to be scaled up. The Government has given its message, commitment and roadmap and supervise execution and assessment to achieve success. The Prime Minister’s message on combating ocean plastic waste delivered at the G7 Summit in Canada and the G20 Summit in Japan as well as domestic campaigns is a successful example of providing clear directions for enterprises to invest and implement. It is necessary to set an electricity pricing roadmap, adopt a more effective electricity pricing, make clear renewable electricity development goals, and apply tight and transparent auctioning mechanisms. This will not only result in robust investment flow but, more importantly, attract private investment at the most competitive electricity cost and price relative to regional and international levels while ensuring renewable electricity development for all regions, not just some places with natural endowments.

Limited budget is used to leverage and attract private investment. State budget is not used for areas where the private sector can invest. The government can still hold shares to increase revenue for the budget but empowers the right to invest and do business to the private sector.

Huong Ly (Vietnam Business Forum)