Private Enterprises Need Efforts to Go Global

9:12:00 AM | 2/2/2021

To improve the quality of Vietnamese enterprises, it is necessary to encourage the development of medium and large private enterprises and build strong brands of Vietnamese enterprises in the domestic and foreign markets, according to many experts.

As of the end of 2020, Vietnam had about 800,000 active enterprises. In 2020, the country had 134,900 new enterprises registering to invest more than VND2,235.6 trillion. In addition, 44,100 enterprises resumed operations, an increase of 11.9% compared to 2019, bringing the total number of new active companies to 179,000, an increase of 0.8% over the previous year. On average, each month, 14,900 were established or resumed operations.

In 2020, the Covid-19 pandemic, wreaked havoc on enterprises, many of whom had to suspend operations, went bankrupt, dissolved or downsized. According to statistics, 101,700 enterprises temporarily suspended operations, stopped working, waited for dissolution procedures and completed dissolution procedures, an increase of 13.9% over the previous year. On average, nearly 8,500 enterprises withdrew from the market each month. As a result, it was impossible to reach the goal of having one million active enterprises in 2020.

In the 2016-2019 period, the growth of newly established enterprises doubled that in the 2011-2015 period. Although the number of newly established enterprises already exceeded one million, due to the increase in bankruptcies and closures, the actual number of active businesses is below one million.

In addition to officially licensed companies, many business households did not want to become official corporate entities. With more than five million business households, which are considered the informal sector, this number is seven times larger than the formal sector. The speed of business transformation from small size to medium size is also very slow and the rate of successful transformation is also very low.

Although Vietnam now has world-renowned private enterprises capable of taking large projects like Sungroup with Van Don Airport, Vingroup with Vinfast and THACO, many micro, small and medium-sized enterprises (MSMEs) still prefer not formalizing their business operations. According to economist Pham Chi Lan, this reflects low and uncertain business confidence in the private sector of Vietnam.

Deputy Minister of Planning and Investment Tran Duy Dong said, policies on business development and support for small and medium-sized enterprises (SMEs) in the past have been quite adequate and comprehensive and initially produced certain encouraging results. However, frankly speaking, there is still a big gap between policy and enforcement in practice. The goal of the private sector contributing 48-49% to the GDP is also missed.

The Ministry of Planning and Investment said that in 2016 when setting the goal of one million active enterprises by 2020, the Government had high expectations on solutions and tasks of Resolution 35/NQ-CP but, in reality, policies are effective in theory rather than in practice. The level of access to and enjoyment of support policies by businesses is also limited. Hotlines and email addresses available for enterprises in localities are inactive - businesses send questions but get no feedback.

In addition, the policy that encourages household businesses to transform into corporate entities is not attractive enough, while this sector is expected to add a large force to the business sector.

However, the growth rate of the private sector has also increased. If this pace is in place, this target can be achieved in the coming period.

The Ministry of Planning and Investment also said that this agency recommended giving six groups of solutions: Supporting businesses affected by the Covid-19 pandemic; developing large-scale enterprises to play a leading role in some industries and create new growth pillars for the economy; promoting research and development, innovation in enterprises; developing high-quality human resources for businesses; strengthening business links and participating in value chains; improving the effectiveness and efficiency of State management over enterprise development.

In addition, according to many economists, in order to improve the quality and efficiency of Vietnamese enterprises, it is necessary to encourage the development of large and medium-sized private enterprises and build strong brands of Vietnamese enterprises in the domestic and foreign markets. There is also a need to create a favorable environment for private enterprises to invent, innovate, create and apply unprecedented business models, products and services; create a fair business environment among businesses; and develop effective and sustainable private sector, ensure a close, reasonable and harmonious combination of business and social responsibility, and protect natural resources and the environment.

Source: Vietnam Business Forum