Deputy Secretary General and Head of the Legal Department of the Vietnam Chamber of Commerce and Industry Dau Anh Tuan. Photo: Ngoc Quynh/Bnews/VNA

The private economy plays an important role in the socio-economic development of each country. In Vietnam, after nearly 40 years of implementing the renovation process, the private economic sector has become the main force promoting the growth of many industries and fields, contributing greatly to GDP, creating more and more jobs and increasing income, improving the lives of workers.

Regarding the role and contribution of the private economic sector to economic development as well as solutions to promote the strong development of this economic sector, VNA introduces an article by Deputy Secretary General and Head of the Legal Department of the Vietnam Chamber of Commerce and Industry Dau Anh Tuan:

In the integration process, especially when the whole society and the political system of the whole country are making efforts and unanimously promoting Vietnam to go further in the new era, General Secretary To Lam affirmed that the private economy is not only an "important driving force" but also needs to be facilitated to participate in strategic areas, in line with the spirit of Resolution 10, Central Conference 5 on the private economy.

Accordingly, it affirms “Encouraging and creating favorable conditions for the private economy to develop rapidly, sustainably, and diversely with high growth rates in terms of quantity, scale, quality, and contribution to GDP…; eliminating all barriers and prejudices, creating favorable conditions for the development of a healthy and properly oriented private economy”.

According to the General Statistics Office, the country currently has more than 940,000 registered enterprises, along with more than 5 million individual business households. The private economic sector is contributing about 45% of GDP, 40% of total investment capital, and 30% of total state budget revenue.

This economic sector has truly become an indispensable pillar, contributing to poverty reduction, helping to change the face of urban areas, modernizing many industries, creating strong changes in the fields of tourism, services and developing high-tech agriculture...

The private economic sector has also successfully participated in breakthrough infrastructure projects such as highways, large road tunnels, international airports, and many large-scale automobile manufacturing projects for the first time in Vietnam. In the retail sector, the old state-owned trading stores have now been replaced by supermarkets, markets, shops, and commercial centers across the country.

In the automobile transport industry, previously state-owned transport enterprises, now there are hundreds, thousands of taxis, passenger car, contract car, tourist car, container truck, and truck businesses serving almost all the needs of the people.

The private economic sector has also been seen in many large areas, playing a key role in the economy, including areas that are considered the “playground” of state-owned enterprises or public service units such as airports, seaports, transport infrastructure, aviation, electricity, healthcare, education, sports, cinema, notarization, conformity certification, etc.

Besides many encouraging achievements, Vietnam's private economic sector is still facing many challenges. Typically, high informality and low productivity.

Many studies by the Ministry of Finance, formerly the Ministry of Planning and Investment, and the World Bank have shown that Vietnamese private enterprises are mainly small-scale, hindering productivity growth and economic efficiency according to scale, specialization and innovation.

Vietnam has too few medium and large-scale private enterprises; especially in the manufacturing and production industry. Millions of household businesses today do not have much motivation to become enterprises because of concerns about cumbersome procedures, legal risks and inadequate management skills.

Compared to enterprises in many countries, Vietnamese enterprises are newer and younger. Many enterprises started from family scale, so their business organization and management activities are not systematic, relying heavily on convenience and accumulated experience.

Few entrepreneurs have received formal training, and many entrepreneurs' foreign language skills are even poor. The connection between Vietnamese private enterprises is quite weak, demonstrated by the lack of cooperation in the supply chain, limitations in building effective industry associations and the ability to leverage collective strength is very low.

The main cause of this situation comes from the fragmented business mindset, when many enterprises still operate according to the family or individual model, lack of confidence in strategic cooperation and fear of unfair competition.

Limited management and financial capacity also make it difficult for many small businesses to participate in long-term cooperation projects or large supply chains. Fierce internal competition in the same field makes businesses pursue short-term benefits instead of cooperating for mutual development. Dumping and bottom-up competition appear in many export industries.

Domestic private enterprises have also failed to connect successfully with FDI enterprises in Vietnam and the global production chain. Meanwhile, domestic production has not developed strongly and lacks effective support mechanisms. The law on investment and support for small and medium-sized enterprises currently only stipulates conditions to promote domestic production, but lacks the appropriate depth for the nature of each specific industry and field. Not to mention there are many, many other shortcomings and limitations that have prevented the private economic sector from making many breakthroughs at this time.

In the new context, to achieve the target of high double-digit growth, quickly bringing the country out of the middle-income trap, as expected by the Party, the Government and the people, the State needs to have many solutions to promote the strong development of the private economic sector.

Accordingly, with the group of solutions for institutional and policy reform, in the coming period, it is necessary to continue to remove barriers and open up resources. The current difficult economic context requires more powerful institutional reform solutions, in the direction of creating more favorable conditions, more markets, creating more open space for businesses and people.

The spirit of empowerment and increasing the role also needs to be promoted. It is possible to build a mechanism for ordering and assigning tasks to private economic groups and large enterprises to implement key national projects and programs such as high-speed railways, power plants, airports, seaports, etc.; Encourage and facilitate private enterprises to participate, invest, and receive technology transfers worldwide in many important fields such as defense industry, high technology, new technology, etc.

Even encourage private enterprises to invest abroad, invest or buy technology companies in the world, invest in industries and strategic fields for the country, such as contributing capital to international shipping lines, retail corporations in the world (to direct the flow of ships and goods into Vietnam, increase purchases from Vietnam), increase Vietnam's presence in important business chains in the world... On the other hand, encourage private enterprises to participate in public services in fields such as culture, sports, science and technology. The State should withdraw from some areas that the private sector can do well, such as notary, bailiff, conformity certification services, etc.

In addition, it is necessary to strongly shift to a mechanism of ordering private sector to provide public services such as waste treatment, clean water supply, wastewater, environmental sanitation, trees, etc. and a mechanism to implement models such as public investment - private management, private investment - public use, etc.

Innovation and capacity building are a group of solutions aimed at supporting businesses in an effective and market-oriented manner. The State organizes bidding and selects suppliers of business support services, instead of building its own support apparatus and providing low-quality services as it does now.

Investment activities need to be commensurate with resources for trade promotion and branding for industries and products; at the same time, there needs to be a mechanism to hire and order professional organizations in the world to perform.

Finally, the State should focus on upgrading and establishing new funds to support small and medium-sized enterprises to operate effectively, linked to the market to support capital for businesses; encourage the establishment and operation of venture capital funds, angel funds, etc. to promote the establishment of enterprises in the field of innovation.