Removing 'bottlenecks', accompanying the development of the private economy

Associate Professor, Dr. Bui Tat Thang - Former Director of the Institute of Development Strategy (formerly Ministry of Planning and Investment), Chairman of the Vietnam - ASEAN Economic Cooperation Development Association (VASEAN)

In an interview with the Government Electronic Newspaper, Associate Professor, Dr. Bui Tat Thang - Former Director of the Institute of Development Strategy (formerly Ministry of Planning and Investment), Chairman of the Vietnam - ASEAN Economic Cooperation Development Association (VASEAN) provided an overview of the role and potential of the private economy, while also pointing out the challenges and shortcomings affecting the development of the private economic sector, proposing solutions to remove them so that the private economy can truly become the most important driving force of the economy.

"There must be economic groups of the Vietnamese people that are large enough and competitive enough."

According to Associate Professor, Dr. Bui Tat Thang, in theory, the market economy is a multi-form, multi-ownership economy that participates in the movement and develops together. When talking about the market economy, we must talk about the private economy, in a typical market economy, the private economy naturally accounts for a large proportion. However, for our country, due to the history of the nation, before the renovation, when we built a nationalized economy, state-owned and collective enterprises were still the two main forms of ownership in the economy, the private economy was restrained. After that, we developed according to the market economy, the issue of developing the private economy was raised again.

Currently, the private sector is the largest part of the economy. Our country's economy consists of three main sectors: State-owned enterprises, foreign investment and private sector. Of which, the private sector accounts for a large proportion in generating GDP and creating jobs. Without the private sector, the issue of employment alone would create great pressure on society. Therefore, the private sector must be ranked in an important position.

"In the resolutions of the previous National Congresses of the Party, the private economy is considered an important part, playing a leading role. In fact, from the perspective of the market economy, with the proportion of GDP, the proportion of jobs that the private economy creates for society directly related to the livelihood of the majority of people, this sector is the main force creating material wealth, creating jobs, and determining social stability. Thus, the private economy is the most important force", Associate Professor, Dr. Bui Tat Thang emphasized.

However, according to Associate Professor Dr. Bui Tat Thang, the private economy in Vietnam has some differences. In our country, the private economy includes private enterprises registered to do business in the form of a private company, an enterprise or a public service unit; this number is very important but not much. The largest private economic sector in Vietnam is the household economy, so it is very difficult to develop.

Our private enterprises are few and small, with limited capital; their ability to access the market and science and technology is weak and they have to go through a difficult period of development, so now we have to start from the smallest step. A typical market economy must include many large and strong private enterprises; even multinational enterprises and corporations must be strong.

Therefore, Associate Professor Dr. Bui Tat Thang believes that on the one hand, we must support the development of a relatively independent and autonomous market economy, in the sense that we are in control of our own economy. To do so, there must be Vietnamese enterprises and economic groups that are large enough and competitive enough to develop, followed by a system of medium-sized enterprises.

At the same time, we must have a limited-term, conditional support policy, from tax policy, land policy, social insurance policy... because the leap from household economy to enterprise economy is completely different.

"We are striving to have 2 million businesses by 2030. Where does this number come from, while currently there are only nearly 1 million officially operating businesses, and more than 1 million more; this number depends on the conversion from family businesses into companies, factories, and enterprises," said Associate Professor, Dr. Bui Tat Thang.

Sharing his opinions on the directions of General Secretary To Lam as well as the general policies of our Party and State on private economic development, Associate Professor, Dr. Bui Tat Thang emphasized that these are drastic, strategic and correct directions in the current period to remove difficulties and barriers, create motivation to promote the development of this sector, becoming a pillar of the economy.

Associate Professor Dr. Bui Tat Thang said that we had previously set a target of 1 million enterprises by 2020, but it was not achieved, while the position and role of the private economic sector are very important in many aspects as mentioned above: Creating GDP, jobs, and demand of the entire society. People in a market economy also have two aspects, one is the productive force, that is, the person who creates wealth, the second is the consumer, the force that creates aggregate demand. When aggregate demand is large enough, it will stimulate economic development, if there is no purchasing power, there will be no market, without a market, the producer will not be able to sell to anyone. Therefore, developed countries take care of the consumption aspect of people. They consider this a driving force for growth, and have policies to stimulate consumption.

Today, the most developed economies are all market economies based on the private economy. We are on the path to socialism led by the Party. The path we take will be measured by the prosperity of the country and the happiness of the people, social welfare is guaranteed, and having a political system that maintains peace and stability, then we have succeeded.

Why do Vietnamese businesses 'not want to grow'?

Associate Professor Dr. Bui Tat Thang also pointed out the weaknesses of the private economy in Vietnam when we have not developed the private economy for a long time. Now developing it is not easy because in doing business, tradition is also one of the important factors.

"Why are there areas where 'buying has friends and selling has guilds', producing many entrepreneurs, who are willing to take risks with their capital? Entrepreneurs must have both capacity and certain talent. The ancients said 'One person's worries are worth a thousand workers', which is a profound conclusion about the importance of thinking and calculating in work. Compared to entrepreneurs, people who know how to think, plan and manage properly are the key to success, not always labor is the deciding factor. Therefore, the team of entrepreneurs must be respected, supported and there must be policies to honor them", Associate Professor, Dr. Bui Tat Thang emphasized.

According to Associate Professor Dr. Bui Tat Thang, Vietnamese businessmen themselves are not yet developed, are still small, and have difficulty accessing financial resources. Their financial resources mainly depend on bank loans, while the stock market is not yet developed, so borrowing investment capital is not easy, and their own capital resources are not much. In addition, there are limitations in terms of access to information, access to domestic and international markets. On the other hand, limitations in the country's production traditions are also one of the weaknesses.

Associate Professor Dr. Bui Tat Thang said that we do not have many industries with a long tradition, including very old industries in the world such as automobile manufacturing; the ability to be self-sufficient in science and technology is still weak. Most of the private businesses that have developed are associated with real estate activities, while there are not many product manufacturers and product service businesses. However, we still need to have policies and regimes to encourage private businesses, focusing more on investing in the production of products with potential in the future. Gradually, the image of the Vietnamese market economy and the image of Vietnamese entrepreneurs will develop. If there are no supportive policies and conditions for the business community to grow and become more numerous, it will be very difficult for us to keep up with the world.

Discussing the issue when there is an opinion that the private economy needs to be treated fairly like other economic sectors, Associate Professor, Dr. Bui Tat Thang shared that there is a reason to mention this issue because often comparing some specific policies that prioritize FDI enterprises but Vietnamese enterprises have not been like that. Many regulations are binding, causing difficulties for Vietnamese enterprises, so many Vietnamese enterprises "cannot grow, do not want to grow", if they grow up and the difficulty in policies is greater, they do not want to grow anymore.

Officials need to accompany businesses

Associate Professor Dr. Bui Tat Thang said: "I have observed other market economies, the support of the whole society for any newly established business is very large. In Western countries, even if a person intends to open a flower shop, the Industry Association will come to support from consulting whether it is convenient to open in this location or not, which flower segment to place, how to arrange the shop, consulting and supporting very specific things but without charging. In Vietnam today, there is no such support. The Industry Association system is very important but in reality has not helped businesses much. In reality, businesses really need such support".

Mechanisms, policies and actions must truly support and promote the development of the private economy. The documents of the Party Congress emphasized that a developmental state must not only facilitate but must also accompany businesses and through that process also demonstrate the capacity of its officials.

We are building a state that facilitates development, however, when businesses encounter problems, the current way of doing things is that officials still wait for businesses to bring their requests before considering and accepting them. Meanwhile, in some other countries, those officials have to go down to find out where businesses are having problems, and then solve them there. That is what it means to accompany businesses, from which we can evaluate the capacity of the officials in building institutions, creating, and supporting business development.

Proposing solutions for private economic development, Associate Professor Dr. Bui Tat Thang said that there are two important parts to the system, the first part is the quality of legal documents itself, which currently has many overlaps and contradictions between different laws. To solve a project, sometimes to satisfy the provisions of this law but not satisfy the provisions of another law, it must stop and the process is prolonged. There are processes that last from ten to twenty months, taking several years, which is very wasteful.

The second is the capacity of human resources in the state administrative apparatus. We should abandon the mindset of "if you can't manage it, then ban it" and be consistent with the idea, as the Prime Minister emphasized, "what the law does not prohibit, let the people and businesses do". To do this, officials must have the qualifications to be able to do it.

Our Party is carrying out a revolution in streamlining and rearranging the apparatus and cadres. This is a very large revolution, radical and highly determined, so it is hoped that the results will be highly effective; the difficulties and obstacles that businesses encounter will be resolved for the common development of the country. In fact, the process of innovation to a market economy has really begun. With the new era of development through this comprehensive revolution, there will be the development of a series of economic sectors in which the private economy plays an important role; the difficulties and obstacles that businesses encounter will be resolved for the common development of the country.

Diep Anh