Private sector expansion, a driving force for growth

11:17 | 12/03/2018 Economy- Society

(VEN) - The private sector in Vietnam continues to grow and contribute to the country’s socioeconomic development, bolstered by the efforts of the central and local governments to improve the business and investment climate.

private sector expansion a driving force for growth

Strong development

The emergence of a dynamic private sector is one of the most remarkable achievements of Vietnam’s economic reforms since the government launched the doi moi, or renovation process, in 1986.

The list of Vietnam’s 500 largest businesses (VNR500) in 2017 continued to reflect the rise of the private sector. Over the past decade, the number of private businesses has increased tenfold, accounting for nearly 50 percent of the number of firms on this year’s VNR500 list.

The accelerated pace of private sector expansion was reflected in its contribution to the economy, which rose from 27 percent of GDP in 2016 to 32.3 percent in 2017.

The role of the private sector in the economy has been increasingly positive. Prime Minister Nguyen Xuan Phuc indicated that the Communist Party and the state have identified the private sector as an important driving force of economic growth, pointing to the party resolution that highlights the necessity of eliminating all barriers to private sector development, and creating favorable conditions for it to grow in a healthy manner. “The key to growth lies in the private sector. A major principle is that the state should facilitate the operations of private businesses in fields where they can show their good performance,” PM Phuc said.

Vietnam Association of Foreign Invested Enterprises (VAFIE) Chairman Nguyen Mai said that the business expansion reflects increased confidence in the economic situation and business environment, which makes investors willing to pour capital into the establishment of firms. The number of new firms set a record high of nearly 127,000 in 2017, boosting optimism about achieving the target of one million new firms by 2020.

Vietnam Chamber of Commerce and Industry (VCCI) Chairman Vu Tien Loc said that a series of petitions from businesses and associations have been sent to the government and have been resolved through resolutions and documents. This prompt response to the concerns raised by business firms has encouraged companies to contribute more to the country’s socioeconomic development, he said.

Additional solutions needed

Although the role of the private sector in the economy has been recognized, and investment policies in localities have been more open, private business still faces difficulties due to small scale, scattered production, backward technology and low competitiveness. To develop a dynamic private sector, Vu Tien Loc stressed that businesses need to see more actions from the government, ministries, departments and localities in line with public commitments on business development.

To create a breakthrough in the development of the private sector, the state needs to further improve the legal framework and support policies, strengthen infrastructure construction, increase access to resources, promote innovation and develop human resources. In particular, strengthening state management capacity and boosting administrative reforms to help businesses reduce costs and enhance investment effectiveness are mentioned as necessary.

Businesses should also promote the application of technology in the process of digitization. This will help them access the global supply chain, expand market share, increase labor productivity and reduce business costs.

Speaking at the Vietnam Private Sector Forum in 2017, Prime Minister Nguyen Xuan Phuc stressed the consistent efforts to build an enabling and action-oriented government, accompany businesses and protect the legitimate interests of investors in accordance with WTO rules and bilateral and multilateral free trade agreements. In addition to efforts by the government, ministries, departments and localities, businesses must constantly strive to improve competitiveness in order to contribute more to the country’s socioeconomic development, he said.

Thanh Tam