Private enterprises still develop passively, facing many barriers

Private economy creates jobs for more than 80% of workers

According to the General Statistics Office, the private economic sector currently contributes approximately 50% of GDP. Of which, officially registered enterprises contribute more than 10% of GDP, while the private business sector and other individual businesses account for about 40% of GDP.

According to Dr. Le Duy Binh, Director of Economica Vietnam, the private economy plays a decisive role in GDP growth. Of the total social investment capital expected to reach 174 billion USD by 2025, private investment will contribute about 96 billion USD, equivalent to 56%. Public investment will only contribute about 36 billion USD, the FDI sector about 28 billion USD, and other investment about 14 billion USD.

“Thus, a 1% increase in private economic investment will bring about an increase in absolute value equivalent to a 2.5% increase in public investment and a 3.5% increase in foreign investment,” said Dr. Le Duy Binh.

AB bank (22).jpg — The private economy is playing an increasingly important role.

However, according to Dr. Nguyen Dinh Cung - former Director of the Central Institute for Economic Management (CIEM) - private enterprises still develop passively and face many barriers, the biggest of which is institutional.

“In the new context, the era of national development, a clear strategy for developing the private economy is inevitable. This strategy must define the mission of the private economy as the pioneering and main force in implementing the country's industrialization and modernization, in implementing important national projects to enhance the position, competitiveness and resilience of the economy,” said Dr. Nguyen Dinh Cung.

Dr. Cung emphasized two pillars for developing private enterprises. The first is institutional reform. It is necessary to remove the “bottleneck of the bottleneck” and create “breakthrough of the breakthrough”.

“The legal system that is biased towards management, “if you can’t manage it, then ban it”, meaning “to the extent that the state agency has the capacity to understand it, then let it do it”, needs to be transformed into an open legal system, creating a truly free business environment, truly free to innovate, fair business with low compliance costs, and no legal risks in business activities”, Dr. Cung emphasized.

The second pillar, in terms of capital from enterprises, needs to create an environment for private enterprises to access capital, land, science and technology, data, etc. in a timely manner, large enough in scale and synchronously so that they can break through to a new level, from super small to medium, medium to large - a very difficult threshold for enterprises.

According to the General Statistics Office, of the 940,000 operating enterprises, 97% are still small and micro enterprises. The proportion of large enterprises and medium-sized enterprises each accounts for only 1.5%.

Dr. Le Duy Binh said that the lack of medium-sized enterprises shows that very few small enterprises have grown to become medium-sized enterprises, thereby affecting the competitiveness of the business sector in particular and the economy in general. The reasons are due to limitations in operational efficiency, lack of capacity and motivation for development, as well as difficulties in the external business environment.

In addition, the informality of the private economic sector is still very high. Currently, there are more than 5 million individual business households, hundreds of thousands of individuals doing business, trading, and small-scale production without business registration.

To promote the development of private enterprises, there should be policies to encourage these entities to transform into enterprises, for SMEs to transform into larger enterprises, for large enterprises to improve their capacity and become the driving force and growth nucleus of an industry or a region.

Strong decisions are needed.

To activate the great potential of the private economic sector, the Director of Economica Vietnam proposed that there should be policies to nurture the entrepreneurial spirit, so that the freedom of business can be further strengthened and businesses are truly allowed to freely do things that are not prohibited by law.

These decisions will create a foundation for the continued affirmation of property rights and freedom of business of the people and enterprises. The management method of the management agency relies more on market principles and tools than on administrative decisions.

Policies for the private economic sector need to provide guidance so that the legal system can be built in a way that not only serves the management goals of state agencies, but also plays a creative role in unlocking resources, building a favorable, safe, low-cost business environment that approaches international standards.

The legal system will encourage businesses to promote research and development (R&D), invest in science and technology, and apply innovation. This means it is necessary to establish legal mechanisms to support activities with high risks but bring breakthrough benefits in productivity and technology.

According to Dr. Binh, the legal system needs to encourage the spirit of adventurous investment, daring to accept risks and forming an ecosystem to support adventurous investment projects and business ideas of enterprises.

“Considering the private economy as the main pillar and main driving force also contributes to enhancing endogenous capacity and consolidating the self-reliance of the economy. The ambition of a prosperous, prosperous, powerful and economically self-reliant Vietnam will also be closer, more feasible and easier to realize with the cooperation of the domestic private economic sector,” said Dr. Le Duy Binh.

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