Domestic private sector contributes 43 percent to GDP

06:00 | 25/10/2020 Economy

(VEN) - With its strong development, the domestic private economic sector has become an important driving force of the Vietnamese economy while making a growing contribution to the country’s innovation and socioeconomic development.

domestic private sector contributes 43 percent to gdp
The private economic sector has major development potential

“Leading enterprise” model

There are about 800,000 domestic privately-owned enterprises in Vietnam, which are providing 12 million jobs and contributing 43 percent to the country’s gross domestic product (GDP). Notably, the domestic private economic sector has contributed more than 85 percent to the service industry’s GDP.

Many Vietnamese enterprises are pioneering in science and technology innovation and application. The biggest domestic conglomerates include VinGroup, Sun Group, T&T Group, Thaco, Vietjet, TH True Milk, and Masan. Many domestic private enterprises have achieved annual export value worth millions of US dollars. Twenty-nine Vietnamese enterprises have reached a capitalized value of more than US$1 billion each on the securities market.

If private investment (excluding that by individual household businesses) increases one percent, Vietnam’s GDP will grow more than 0.15 percentage points in 2020. Associate Professor, Dr. Dinh Trong Thinh from the Academy of Finance compares that to a “shock absorber” for the economy, especially when the domestic and foreign economies are still affected by uncertainties.

Major driving force

The domestic private economic sector has major potential, but economists say a number of problems hinder its development.

Economica Vietnam Director Dr. Le Duy Binh said complicated investment-related administrative procedures are still wasting enterprises’ time and money.

Associate Professor, Dr. Dinh Trong Thinh from the Academy of Finance said although the party and the state have guidelines and policies to simplify investment procedures, their efforts have not yet met expectations due to the inadequate legal framework for the domestic private economic sector and inefficient law enforcement.

According to Mac Quoc Anh, Vice Chairman of the Hanoi Association of Small and Medium-sized Enterprises (Hanoisme), Vietnam needs to form a regional-level financial center and take opportunities to attract investment capital flows moving out of China as a result of the US-China trade tensions. To do so, specific policies are required for all economic sectors to access fair and equal incentives. In certain cases, the government should enable the domestic private sector in key sectors to become competitive with foreign rivals.

Politburo Resolution 10-NQ/TW dated June 3, 2017 says the private economic sector is one of the three pillars of the Vietnamese economy. Through many ups and downs, the private sector has been recognized as an “important driving force for economic development”. This sector currently accounts for 43 percent of the country’s GDP and the contribution is expected to reach about 55 percent by 2025, and 60-65 percent by 2030.

Nguyen Hanh