Economist Bui Kien Thanh spoke with Hai Quan (Customs) newspaper about new laws aimed to help the nation's private sector become more competitive.
In 2013, the number of newly established enter- prises in Viet Nam significantly increased, along with a large number of enterprises that lessened their inventories. Is this a sign that businesses are recovering?
I think that businesses that halted operations are able to recover when fiscal and monetary policies are reasonable and more flexible in helping enterprises borrow capital.
Many banks have offered to lower lending rates to help businesses gain access to bank loans. However, though lending has been loosened, most enterprises still find it difficult to raise capital.
Although an increase in the number of newly registered businesses was seen in 2013, we need to carefully consider whether they are really new businesses or simply "dead" enterprises.
In fact, Vietnamese enterprises still face many difficulties in operations, and most of them are content to just survive, rather than expand.
Reports from agencies have not provided a true reflection of the health of businesses. For example, a rise in export volume in 2013 of businesses supported through foreign direct investment (FDI) found that joint venture enterprises accounted for a large portion, while domestic enterprises are still trying to find a way out of their difficulties.
Also, capital difficulties have been due to not only high interest rates, but also to the banking sector's rigid credit rules that have barred access to loans for many of them.
How do you assess the effectiveness of the Government's measures, as well as the efforts of businesses to overcome the difficult economic times?
I think that the Government has issued many preferential and support policies to deal with the difficulties businesses are enduring. However, businesses have not really received benefits from those policies.
For example, in some countries, such as Japan and America, businesses are able to borrow capital from banks at an interest rate of 1 per cent per annum. Meanwhile, Vietnamese enterprises have to pay over 10 per cent per annum in interest rates to Vietnamese banks, which has a major impact on the competitiveness of businesses.
In addition, foreign companies have advantages of available markets and sources of low interest rate loans, which help them easily beat Vietnamese competitors. In contrast, domestic businesses still face difficulties in selling products and having access to capital, as well as requirements to immediately pay export duties.
One major challenge for Vietnamese enterprises is the fact that Viet Nam has no mechanisms and policies, as well as any bank to support enterprises in late payments.
Meanwhile, paying suppliers late is common across the European Union. Only 20 per cent of enterprises are paid promptly after selling products, while 80 per cent of enterprises agree to long payment terms with payment times being 80 days or more.
In the coming years, what will be the main solution to improve capacity and the competitive power of businesses?
I think that even with Viet Nam's increasingly deep integration into the world, domestic firms' capacities and efforts will still not be enough to compete with foreign companies.
State management agencies need to provide better legal frameworks and policies for businesses, to support them in the "business war".
It is important that Party leaders learn from the experiences and macro-economic policies of other countries, and apply them effectively in Viet Nam. In particular, monetary, credit and interest rate policies should be more open and convenient to help enterprises overcome difficulties. Special preferential policies should be applied to import and export goods.
What do you think about the future of Vietnamese enterprises in 2014?
Generally, there will not yet be many bright spots in the picture of Vietnamese enterprises in the future. However, we hope changes from Party leaders and state management agencies will bring about positive signs for economic growth.
Solutions regarding monetary and credit policies should be a first step to help during this difficult economic situation, and then changes in mechanisms to manage import-export activities will be needed in the future. — VNS