Private sector important for national development

January 26, 2019 - 12:08

Economist Dr Nguyễn Minh Phong speaks to Thế giới & Việt Nam (Việt Nam & the World) newspaper about the important role of the private sector in national development

Nguyễn Minh Phong. — Photo

Economist Dr Nguyễn Minh Phong speaks to Thế giới & Việt Nam (Việt Nam & the World) newspaper about the important role of the private sector in national development

What are your assessments on contributions by the private sector to the national economy in 2018?

In 2018, the private sector became an important part of the nation’s economy. Entering 2019, I’m confident the sector will continue to achieve much more.

At present, there are more than 700,000 private enterprises in operation, of which 96 per cent are small and medium enterprises, and 2 per cent are super-small enterprises and 2 per cent are big enterprises. These enterprises use only about 30 per cent of the land allocated for business operations, but they employ more than 51 per cent of the nation’s labour force. These enterprises contribute to over 40 per cent of GDP and 30 per cent of the State budget; over 30 per cent of the country’s export revenue, 33 per cent of industrial gross output and more than 90 per cent of agricultural output.

Investment in the private sector in 2018 saw an increase of 18.5 per cent compared with 2017 and contributed 43.3 per cent of total social investment.

Also in 2018, more than 131,000 enterprises were established with total registered capital of almost VNĐ 1.5 trillion ($86.5 million) – an increase of 3.5 per cent in the number of enterprises and some 14 per cent against the registered capital in 2017.

What were the driving forces behind these achievements?

The most important driving force for the fast development of the private sector should be attributed to changes in the national institution. Official documents from the 12th National Party Congress all highlighted the Party’s resolve to facilitate conditions for the development of private enterprises, particularly Resolution 19 – an important driving force for the national economy to develop into a market economy. The Resolution is a set of policy goals for Vietnamese ministries to improve the business and investment environment. The Resolution also calls for simplifying 50 per cent of requirements for businesses and reducing the number of imports and exports subject to multi-ministry inspections by 50 per cent.

The Government’s resolve to reform the business environment has served as a driving force for the national economy to develop. As a result, Việt Nam’s ranking in the world has jumped to 69/190 economies.

Some people say there are problems in the private sector. How do you respond to such complaints?

I couldn’t agree more. I think our private sector has two main problems.

The development of our private economy has not yet reflected its true potential. According to statistics, contributions by the household economy at present account for about 32 per cent, State enterprise 27-28 per cent, FDI enterprises 20 per cent and private enterprises less than 8 per cent.

The production scale of private enterprises also remains very low. Some 95 per cent of private enterprises are either household or individuals with average capital registration of VNĐ8 billion (US$ 345,000).

This reality means the Government needs to adopt more lucrative policies to encourage/enable the private sector to have more motivation to develop.

What policies should the Government adopt to encourage the development of private enterprises?

In 2019, the Government has come up with a proposal focusing on six words: “disciplinary, thrifty, action, creativity, effectiveness and breakthrough.”

With instructions from the Government, the whole country must focus its efforts on reviewing all existing legal documents and institutions to remove any barriers facing production/business. The Government has resolved to do away with red tape and bureaucracy.

The Prime Minister has also ordered the simplification of all paperwork to facilitate conditions for enterprises to operate.

According to Prime Minister Nguyễn Xuân Phúc, 2019 is a pivotal year for the country to implement its five-year plan (2016-2020) and its 10-year strategy (2010-2020). In these plans, the business investment environment and private economic development are the driving force for national economic growth. Let’s hope institutional breakthroughs will help the private sector to grow. — VNS