Private economic development from upgrading the informal sector

Business registration still faces many difficulties

Dr. Le Duy Binh - Director of Economica Vietnam (an organization operating in the fields of development consulting, economic research, policy analysis and project management) commented that the structure of officially registered private enterprises has a structural imbalance. Of the 940,000 operating enterprises, the majority are still small and micro enterprises, while the number of medium-sized enterprises is still limited.

Specifically, about 97% of domestic private enterprises are micro and small in size. Large enterprises account for only 1.5% of the total. Notably, according to Dr. Le Duy Binh, medium-sized enterprises account for only 1.5%, creating an “abnormal” enterprise structure when compared to the structure of other enterprise sectors such as Japan, Taiwan (China) and South Korea. The phenomenon of “lack of medium-sized enterprises”, that is, the situation where medium-sized enterprises are very few in number, is a cause for concern.

Dr. Binh assessed that the “lack of medium-sized enterprises” is a sign that very few small enterprises have grown to become medium-sized enterprises. The reason is due to the limitations in the operational efficiency of small enterprises and the difficulties of the external business environment. Small enterprises lack the capacity as well as the motivation and ambition to grow in scale. The phenomenon of “lack of medium-sized enterprises” also shows that there will not be many medium-sized enterprises that will develop into large-sized enterprises in the medium term.

In addition, the informality of the private economic sector is still very high. Because besides 940,000 enterprises operating under the Enterprise Law, there are more than 5 million individual business households, hundreds of thousands of individuals doing business, trading, and small-scale production without registration. This is the group that is expected to be added to the enterprise sector to be able to reach the target of 2 million enterprises by 2030. However, "pushing" the business household and individual business sector into enterprises is facing many difficulties.

The biggest reason why millions of business households “refuse to grow” has been mentioned for many years, which is administrative procedures (AP). Recently, the Report on the survey of the current status of providing administrative services to enterprises in 2024 (abbreviated as the Report) by the Economic Development Research Board (Board IV) under the Prime Minister's Advisory Council for Administrative Reform further confirmed this. According to this report, difficulties in implementing APs and complying with legal regulations are among the three biggest groups of difficulties that enterprises face, with 44.4% of the total number of enterprises participating in the survey choosing.

There needs to be creative policies for business households to "grow up"

According to the report of Committee IV, one of the outstanding issues that enterprises reflected is that the administrative procedures for starting a business have not been implemented synchronously and consistently among localities. Although the Government has implemented many reforms to simplify procedures, business households and enterprises in Hanoi and many other provinces and cities reflect that they still face difficulties in the process of starting a business.

Faced with this reality, Vietnam has implemented a number of reforms. Accordingly, instead of carrying out 4 procedures at 4 different agencies, businesses will only have to prepare 1 set of documents, fill out 1 form, carry out procedures at 1 agency and receive 1 result. Agencies will share information with each other via an electronic network between each agency's data systems. As a result, in terms of regulations, the business start-up process in Vietnam has been reduced to a minimum of 3 procedures with a processing time of

6 days

However, according to the Report, the reality of enterprises when implementing this group of administrative procedures shows that there are still problems in the implementation stage, causing the time and cost of compliance to vary between localities and often not being guaranteed according to regulations. In particular, many small enterprises reflect that regulations on sub-licenses and business conditions are the biggest obstacle when starting a business. Having to apply for many licenses from many different agencies slows down the process of entering the market of enterprises, especially for small enterprises with limited resources.

Therefore, to promote the development of the private economy, there needs to be creative policies for business households in the informal sector to transform into enterprises, for small and medium enterprises to transform into larger enterprises, and for large enterprises to improve their capacity and become the driving force and growth nucleus of an industry, a region or a cluster of enterprises.

Dr. Binh assessed that the recent focus on the private economic sector seems to be mainly on officially registered private enterprises, especially large private enterprise groups. Therefore, in order to synthesize the strength and force of the private economic sector, policies for developing the private economic sector in the coming time need to pay more attention to small and micro enterprises, to the issue of developing medium-sized enterprises and to the economic base, business entities that are still considered informal or semi-formal such as business households and individual businesses. "Developing economic entities in this sector is equally important to promoting the role of large enterprises and large private corporations," said Mr. Binh.

Hoang Tu

Source: https://baophapluat.vn/phat-trien-kinh-te-tu-nhan-tu-nang-cap-khu-vuc-phi-chinh-thuc-post544058.html