Private sector growth too sluggish, experts say

14:16 | 21/08/2018 Economy- Society

(VEN) - Resolution 10-NQ/TW issued by the Vietnam Communist Party Central Committee on June 3, 2017 was expected to pave the way for private sector development. After one year, however, implementation of this resolution has not yielded the desired results.

private sector growth too sluggish experts say
It remains difficult for small and medium-sized businesses to access capital resources

Land, capital access

At a recent forum held in Hanoi to discuss further improvement of the environment for private sector development, Do Dinh Hieu, Vice President of the Business Association of Thanh Hoa Province, said major difficulties facing businesses are related to land and capital access. Government Decree 35/NQ-CP regarding support for business development until 2020 requires shortening the time for completion of administrative procedures related to land rent to a maximum of 77 days. In fact, however, it takes at least six months for investors to get their investment plans accepted. Businesses also encounter difficulties in accessing loans, although commercial banks have abundant capital.

Dao Trung Chinh, Deputy Director of the Ministry of Natural Resources and Environment’s General Department of Land Administration, said businesses still have to implement overlapping procedures when renting land. For example, they have to apply for permission to change the land use certificate if their investment projects are to be based on land which used to be rice fields or forests, even when their projects have been accepted. This, in turn, complicates the process of compensating farmers for site clearance.

Explaining private companies’ difficulties in accessing capital resources, economist Dr. Can Van Luc said businesses, management authorities and commercial banks lack clear information about each other, leading to a gap between supply and demand. Moreover, government programs providing guarantees and support for capital access by small and medium-sized enterprises remain ineffective. Many credit institutions are still unwilling to provide loans for private companies due to their inefficiency.

Solutions

Surveys carried out by the Vietnam Chamber of Commerce and Industry (VCCI) show that large-sized companies account for less than two percent of all private businesses in Vietnam, medium-sized enterprises account for two percent, whereas 96 percent are micro and small enterprises. The Vietnamese economy is facing a serious lack of medium-sized businesses that can join global value chains and access the international market. Small size, informality, weak management and low technology are common disadvantages of most Vietnamese private companies.

To surmount these limitations, in the opinion of VCCI Vice Chairman Hoang Quang Phong, along with reforming economic institutions and improving the business environment, the state needs to propose policies that can promote private sector development. At the same time, favorable conditions should be created for private companies to access capital resources.

It remains difficult for private companies to grow, and most of them are not interested in learning about sustainable development models. Dr. Nguyen Duc Kien, Deputy Head of the National Assembly Economic Committee, said capital, taxes and conditions required for businesses to join a specific sector are barriers but not the biggest problem. To achieve breakthroughs, private companies need to change their thinking and investment methods.

Dr. Nguyen Duc Kien, Deputy Head of the National Assembly Economic Committee: A gap in awareness still exists

leading to the differentiation between the private sector and other economic sectors. Therefore, changes in

awareness are necessary to promote private sector growth.

Nguyen Hanh