VINASME’s Standing Vice Chairman: Private economy faces many unfavorable factors for growth

Standing Vice Chairman of VINASME had a speech at the forum.

At the XII Regional Forum on Business Cooperation – Connection and Development, Dr. To Hoai Nam, The Standing Vice President and General Secretary of Vietnam Association of SMEs (VINASME)had a speech with the topic "Assessment of domestic private economic development in the period of 2011-2020 and proposed some solutions in next time".

The private economy faces manyunfavorable factors for growth

Recently, since Vietnam integrated deeply and widely with the world through multilaterial and bilaterial agreements, such as CPTPP and EVFTA… Vietnamese enterprises have had many opportunities to adapt modern knowledge and technology into production and business. However, the downsides of this intergration is that Vietnam now becomes more vulnerable to international changes. All risk factors including geopolitical instability and the tendency of protectionism of some developed countries has somewhat restricted Vietnam's opportunities to attract external resources for domestic economic reform.

Inside the country, Vietnam has to deal with the restructuring of credit institutions, state-owned enterprises and public investment. Also with the mission to drastically change the domestic agriculture, industry and services towards modernization. For a long time, the incentive policies for private sector have always been consistent and continuous with a greater and stronger level of interest. However,They often take a long time to be practical and effective.

In Vietnam, the Law on supporting SMEs was issued much later than other countries (effective on January 1, 2018) and it is still on the way to completion. The problem with this law is that some policies indeed lack specific regulations for single industry or sector, while many general regulations are difficult to implement in pratice. This was caused by the negligence of the focal points in advising and drafting the law. Before it was issued, the focal pointes often recognized either specific or general issues from their own perspective and did not evaluate them comprehensively. Therefore, the law is now inapplicable for different stakeholders.

While the private sector, especially SMEs desperately need support from the authorities, they do not seem to take any significant action to make a movement. The majority of provinces and regions have not yet a plan to create a business connectivity, and they even lack connection between themselves.

Vietnamese SMEs are often smaller than those of other countries, including countries in the region. Also, they have not operated long enough in the market economy , so the definition of competitiveness are somehow unfamiliar. In addition, Vietnamese SMEs has not yet catched up with the world in terms of management level and technology, so their productivity and product quality are relatively low. All of these factors add up to a big disadvantage to Vietnamese enterprises when global integration becomes even more inclusive.

"We cannot have a strong business community unless a comprehensive reform is made." said Dr. To Hoai Nam.

Barriers must be removed to develop the private economy

According to Dr. To Hoai Nam, the average growth rate of Vietnam in 2013-2035 is forecasted at 6.1%, of which the processing, manufacturing, wholesale and retail and construction industries will increase the most. Vietnam is expected to become a modern industrial economy by 2035 with a GDP per capita of at least 18,000 USD. With the majority of Vietnam's population living in urban areas, the proportion of industry and services in GDP will be more than 90%. In the past few years, it can be affirmed that the benefits gained will be greater than the challenges if Vietnamese enterprises improve their competencies and productivity.

First of all, it is necessary to summarize and re-evaluate the results and limitations of the implementation of the State's action plans on renovating the growth model in the period of 2013-2020. The above-mentioned review and evaluation will be the foundation to formulate the plans for the following years.

Secondly, focus and prioritize the elimination of 15 existing issues which reduce the pace of private economic’s development. Thirdly, for new generation agreements such as CPTPP and EVFTA, Vietnam will surely benefit more than challenges if it is put in the context of the US-China trade war and a number of instabilities. US-China trade will give Vietnam advantages in terms of export and FDI attraction, so it is necessary to fully exploit this advantage by creating a clear and transparent mechanism in all aspects of investment or cooperation. It is expected that by 2025, Vietnam will have 25% of enterprises participating in direct export.

Fourth, the Intellectual property rights has been clearly stated in Article 32 of the 2013 Constitution of property rights, but the ability to actually enforce it is not yet effective. Therefore, the law needs to be amended, because if the property rights of individuals and businesses are well protected, they will have a stronger belief in the market and be able to concentrate on business.

Fifthly, in fact that the participation of ministries in drafting and revising the law is very important. However, it is also difficult to avoid "heavily dominated" industry interests. Therefore, it is necessary to review the rights and responsibilities of the ministries in the direction of enhancing the role of the National Assembly's Committees in law-making fuction.

Finally, the State should quickly promulgate the law on Associations to promote and develop professional associations with the extensive participation of private enterprises to form a stronger business community. Together with the State, business associations will join hands to contribute to the socio-economic development of the country as well as to fight against harassment, corruption and authoritarian…