Private Sector- Motivations for Development

9:52:39 AM | 2/17/2021

Private sector plays an important role

Private enterprises play a very important role in many other countries and assume on many great functions. We heard that, in the United States, Space X successfully launched a rocket into space. This is completely a private enterprise that made a breakthrough success in a particularly sophisticated space technology - a realm deemed to have no room for a private enterprise. The private sector also produces weapons, operates prisons, stores and publishes legal documents and legal cases. Technological inventions and innovations that change the world also come from the private sector.

In Vietnam, the 35-year Doi Moi process led by the Party proved that opening the door to the private sector to supply goods and services to the society has brought many practical benefits. In the retail industry, we can see that State-owned commercial stores were replaced by supermarkets, convenient stores, markets, shops, and malls all over the country. The auto transport industry, once solely operated by State-owned transport enterprises, now engages thousands of taxi, passenger transport, container and freight transport companies.

The private sector engages in many industries, including those viewed as “playgrounds” for only State-owned enterprises such as airport, seaport, transportation infrastructure, aviation, electricity, health, education, sports, cinema, notarization, and certification of conformity.

Party and State policies advocate facilitating the private sector to become an important driving force of the development process.

Currently, except for 20 specific areas legally designated to State-owned enterprises, such manufacturing and trading explosives, producing gold bars, making postage stamps and printing banknotes, private enterprises are allowed in all fields. However, due to many technical barriers, they cannot be fully entitled to this right.

The State should gradually retreat from public services

In the public service sector, many services are solely provided by State agencies, sparking concerns of transparency (for example, an agency both grants licenses and inspects competences). Many legal provisions are distorted in practice. Many services are just defined as “registration” or “notification” but in fact turned into so-called “give-and-take” practice. Service requirements are issued by State agencies and also executed by such agencies. Compliance with public service requirements is also checked by such agencies.

Lifting State monopoly and subsidy in public service deliveries and mobilizing the private sector's participation in the provision of public services will bring many benefits:

First of all, the State should leave public services deemed unnecessary to have State involvement and reduce State apparatus to its core functions. The State apparatus focuses on institutional construction and improvement - the current top priority. Second, the State should make transparent and define delineate the delivery of public services by State agencies and public service delivery by private organizations and individuals to avoid overlaps and prevent conflicts of interest. Third, with private participation, the quality of governance and services is enhanced, enabling strong competition and public service improvement. This meets the needs of businesses and people to enjoy high quality public services, thereby helping enhance the competitiveness of the service industry, enterprises and the Vietnamese economy. Finally, a lot of resources are mobilized in society, from the private sector to invest in public services. Some areas have much important improvement thanks to private resources, including health, education, sports, notarization and registry.

Notably, a very important Part policy is Resolution 19 of the Party Central Committee. Issued in 2017, the Resolution emphasizes the goal of privatizing public service sectors and fields that the private sector can do and do well.

The State does not give up but just change the role

Global experiences as well as practices in Vietnam showed that letting the private sector deliver public services does not mean that the State does nothing, no longer plays any role.

According to a survey by the Vietnam Chamber of Commerce and Industry (VCCI) in collaboration with the World Bank (WB) more than five years ago, most respondents believed in the market economy where private enterprises played a major role in providing goods and services. However, the survey also showed many concerns about risks of private delivery of public services such as increasing service prices, quality, fraudulence, corruption and relation-based business.

Therefore, the State must set regulations and standards, supervise these regulations and standards, and resolve disputes. It must represent the people, the economy, and the common good to promote, monitor and manage service providers. Tasks of central and local authorities in the coming time are not to provide services, not to regulate and operate services as in the past, but to focus on building institutions for the market to operate effectively.

By Dau Anh Tuan, Director of Legal Department, VCCI