For private enterprises to feel secure to invest capita and to truly see that the environment and institutions are increasingly friendly, ensuring investors safety must have 'rules of the game' clearly defined and transparently. The allocation of resources focuses on improving the quality and feasibility of preferential policies.

The linkage factors of the private business community, especially the quality
of human resources, arestill low. Source: Internet.

Only 21% of SMEs participate in global value chains

After more than 30 years of innovation, the awareness and scale of the private economic sector have made many important developments, making great contributions to Vietnam’s socio-economic development. Currently, the private sector accounts for the largest amountof the economic sectors in total investment and social job creation, paying the State budget and diversifying products, goods and services to meet domestic and export market demand. On average, in 2016-2019, the country hadmore than 126 thousand newly established enterprises annually with registered capital of VND1.35 million (up 49.3% in the number of businesses and up 24.8% and on the registered capital compared to 2010-2015).

However, the productivity and productivity growth rate of the private sector arelow and havemany limitations. Specifically, the average labour productivity of the private enterprise sector is only about 34% of the labour productivity of the State-owned enterprise sector and about 69% of the labuor productivity of foreign-invested enterprises (FDI).

In particular, the linksand cooperation between Vietnamese enterprises arestill weak. Vietnamese enterprises have not focused on improving linkages and competitiveness to participate in regional and global value chains. The ASEAN corporate governance scorecard report also showed Vietnam’s businesses had the lowest governance scores among the six countries. Currently, only about 21% of small and medium enterprises participate in a part of global value chains, 14% are successful in associating with foreign partners, while the number of FDI enterprises investing in Vietnam is high.

There are many reasons for the shortcomings and limitations of the private sector. In particular, there is a part stemming from limitations and weaknesses of the mechanism and mode of State management in the economy, especially State management in the development of private enterprises, creating favourable conditions for private enterprises.

From the perspective of representing small and medium enterprises in Hanoi, Mac QuocAnh, Vice President and General Secretary of Hanoi Small and Medium Enterprises Association, said in the current context, private enterprises must become key enterprises, only to become key enterprises can lead small and medium enterprises, microenterprise and start-up enterprises. State-owned enterprises should be the foundation throughout for private firmsto follow. Therefore, in the next fiveyears, the regulators must promote this bloc because the private sector contributes greatly to GDP.

However, the problem is that there are still many limitations in the business environment of private firms. The Law on Support for Small and Medium Enterprises, which has been enforced since 2018, has not been as effective as expected by enterprises. There is still "hot and cold" situation. In many localities, there is still no "carpet" for businesses to develop andbusiness harassment still persists. Along with that, legal documents between ministries and agencies are still overlapping, causing time consuming and costly for enterprises. Therefore, Mac QuocAnh hopes that, resolutions and policies on private economic development continue to have very specific action programmes on a monthly and quarterly basis and be assigned directly to ministries and branches for effective implementation.

Believe on the business

To develop the private business sector, according to economist Pham Chi Lan, the State needs to create a truly fair and healthy competitive environment. At the same time, promote the right development andactive roles of State-owned enterprises, FDI and large private enterprises to establish linksbetween domestic enterprises and international markets.

"The State needs to create a fair and healthy business environment. It must create a link between domestic and international businesses. There should be no widespread support, no clear goals. The State needs to trust and rely on businesses to implement, creating a competitive environment. If state agencies only design policies together anddo not put their trust in enterprises, it will be difficult to develop. Because big businesses need strong technology-oriented development policies for a new stage, while small or even small businesses only focus on profits and livelihoods. Therefore, it is impossible to equate development space for all businesses,"Lanemphasised.

According to Nguyen Van Than, Chairman of the Vietnam Small and Medium Enterprises Association, the linking factor of the private business community, especially the quality of human resourcesin the context of the digital technology is growing. The more popular, the higher quality human resources play an essential role. Accordingly, to support private businessesto develop and become the main driving force, it is necessary to focus on improving the quality of labor resources, meeting the needs of Industry 4.0. Regarding resource allocation, it is necessary to focus on improving the quality and feasibility of preferential policies, supporting enterprises on market principles, competition, equality and promoting the formation of value chains and links.