''Untying the knot'' for private investment to improve GDP growth rate

To improve GDP growth, Vietnam needs to remove bottlenecks for private investment, creating favorable conditions for this important sector to contribute more positively to the economy.

Private sector investment improves slowly

Private sector investment accounts for 55-60% of total social investment capital. The recovery and development of this sector will lead to economic growth recovery. However, in the first quarter of 2024, according to the General Statistics Office, the total realized social investment capital at current prices is estimated at 613.9 trillion VND, up 5.2% over the same period last year (in the same period in 2023, it increased by 3.7%).

Of which, state sector capital is estimated at VND162.7 trillion, accounting for 26.5% of total investment capital and up 4.9% over the same period last year; non-state sector reached VND340.7 trillion, accounting for 55.5%, up 4.2%; foreign direct investment sector reached VND110.5 trillion, accounting for 18% and up 8.9%. Thus, the realized investment capital of the private sector in the first quarter of 2024 was the lowest among the three sectors.

Private sector investment is improving but remains below potential.

Quarter II/2024, capital invest The private sector's performance improved significantly compared to the previous quarter. Specifically, total social investment capital reached VND834.3 trillion, up 7.5% over the same period last year. Of which, the state sector reached VND228.7 trillion, up 4.4% over the same period last year; the private sector (non-state sector) was estimated at VND456.4 trillion, up 7.9% and the foreign-invested sector reached VND149.2 trillion, up 11.4%.

In the first 6 months of 2024, the total realized social investment capital is estimated at 1,451.3 trillion VND, up 6.8% over the same period last year, including: State sector capital reached 392.1 trillion VND, accounting for 27% of total capital and up 4.8% over the same period last year; non-state sector reached 799.6 trillion VND, accounting for 55.1% and up 6.7%; foreign direct investment sector reached 259.6 trillion VND, accounting for 17.9% and up 10.3%. Thus, the investment capital of the private sector in the first 6 months of the year has improved significantly compared to the first months of the year, surpassing the state sector with an increase of 4.8%, but there is still a large gap compared to the foreign investment sector with an increase of 10.3%.

Previously, in 2023, according to the General Statistics Office, the total realized social investment capital was estimated at VND3,423.5 trillion, up 6.2% over the previous year, of which the state sector increased by 14.6% and the foreign direct investment sector increased by 5.4%. However, private sector investment increased by only 2.7%, the lowest in recent years. According to economic experts, this is an important reason why Vietnam's GDP growth in 2023 did not meet expectations.

Unlocking private investment resources to become an important long-term growth driver

Making private investment the engine of growth

The Government has just adjusted the growth target to the upper limit of 6.5-7% in 2024 instead of the target of 6-6.5% set at the beginning of the year. This is still considered an extremely challenging target, in the context of the world economy still having unpredictable developments, affecting the supply chain and affecting Vietnam's growth target.

Sharing with reporters and economic experts, Dr. Le Duy Binh – Director of Economica Vietnam said: To achieve a growth rate of 7% in 2024, Vietnam needs extraordinary efforts to increase domestic private investment at a rate of over 10%-15%, and maintain this growth rate for a long period.

“This will be a key factor that will make a difference in growth in 2024 and for many years to come.” – economic expert Le Duy Binh affirmed.

In addition, to promote domestic private investment, according to Dr. Le Duy Binh, the Government and ministries, sectors and localities need to make special efforts to continue improving the business investment environment, so that the Vietnamese economy continues to have breakthrough improvements in the rankings of the global business environment, innovation capacity, economic freedom and many other rankings.

According to economist Le Duy Binh, investment activities of large and small private enterprises are showing signs of slowing down. In particular, large projects are still entangled in many legal factors, making it difficult for investors to make investment decisions, while small enterprises are also affected by an unfavorable business environment, which has not created momentum for the business community to operate.

To remove the "bottleneck" of private investment, economist Le Duy Binh said: The factor of a safe, favorable and low-cost business environment still plays an important and fundamental role. Because even small investment projects, up to projects with capital up to hundreds of billions of VND, all depend on the investment and business environment. Accordingly, improving the investment and business environment is the fundamental and decisive factor for Vietnam to achieve its high growth target in 2024 and the following years.

Agreeing with the above viewpoint, lawyer Bui Van Thanh - New Sun Law Office, who is also an experienced consultant for many businesses and investors in implementing investment projects, said: To promote investment in the private sector, the business environment is the most important. Because the problem of private enterprises is not simply the state reducing 2% value added tax for businesses from which stage to which stage, but the most important thing is to build a transparent and equal business environment.

"In which, the concept of equality here is reflected in access to resources, equality in access to policies, equality in access to land and capital" - Lawyer Bui Van Thanh stated.

Sharing the same viewpoint of promoting private investment, Dr. Nguyen Bich Lam - former General Director of the General Statistics Office said: Along with promoting public investment and attracting FDI capital, the Government and localities need to focus on restoring and promoting investment from the non-state sector through specific mechanisms, policies and solutions in the context that the non-state sector has great limitations in terms of capital; management and integration skills; management capacity and experience; and knowledgeable and skilled human resources.

“The government needs to reactivate and unleash private investment resources to become an important long-term growth driver” – Dr. Nguyen Bich Lam emphasized.

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