The Vietnamese private sector has gone on a journey from “no” to “yes,” suffering stumbles to become mature.
Even though the Vietnamese private sector suffers from mistakes and losses, pioneers constantly appear, seeking ways for breakthroughs, and becoming mature, Dr. Nguyen Dinh Chung, Head of the Central Institute for Economic Management (CIEM).
Economist Pham Chi Lan said that after the national liberation, the private sector was not recognized. Only in the renewal period, the private sector was mentioned.
However, statistics showed that, after five years of reform, the private sector emerged outstandingly. Average growth rate of the non-state sector was 6.2pc. Meanwhile, the state sector only grew 1.9pc. The proportions of the state sector, non-state sector, and FDI sector are 31.8pc, 64.6pc, and 3.6pc, respectively. However, the number of private businesses remained modest amidst a range of economic barriers.
The Law on private enterprises and the Law on companies were introduced in 1990, making a turning point for the private sector. As of 1996, Vietnam housed 21,000 private companies, 9,000 limited liability companies, 210 joint stock companies. Meanwhile, the number of household businesses increased from 840,000 in 1990 to 2.2 million in early 1996.
However, the Law on Enterprises was released in 1999, marking a big leap in thinking of the State, serving to generate a new “wave” of the private sector. The Law was passed by the National Assembly in 1999, changing the face of the Vietnamese private economic sector, said Economist Lan.
Since 2000, the number of newly-founded enterprises yearly surged from 20,000 to 25,000, to 30,000, to 100,000 in 2015 after the Law on Enterprises was passed in 2014. Especially, the figures increased vigorously and set new records in 2016, 2017, and 2018 to 110,000; 126,000; 131,100.
The development process of private enterprises is on a pair with the national economic integration path. The 1999 Law on Enterprises was introduced, helping Vietnam to catch up with the Vietnam-U.S. Bilateral Trade Agreement. So far, the private sector is regarded as an important driving force for the economy, Ms. Lan said.
The private sector is strongly attached with a large number of trademarks. In the early period, famous brand names included Da Lan toothpaste, Biti’s footwear, My Hao dishwashing liquid, Kinh Do bakery. At present, well-known trademarks include Vietjet Air, VinGroup, FPT, TH True Milk, VPBank, Trung Nguyên. They have contributed to bringing Vietnam to speed up in the world economic map.
Statistics showed that the private sector accounted for 38-43pc of GDP in 1995-2017 period. However, the proportions decreased from 43pc in 1995 to 39pc in 2010, 38pc in 2017.
Mr. Cung assessed that the development of private enterprises with big brand names has created counterbalance with the State sector and FDI sector, serving to generate more competitiveness.
For example, the emerge of Vietjet Air has served to make the domestic aviation market more dynamic.
Some careers appear of which private sector plays a vital role including software, Internet, real estate, steel, coffee, food.
Vietnamese billionaires made debut including Mr. Pham Nhat Vuong, Ms. Nguyen Thi Phuong Thao, Tran Ba Duong, Tran Dinh Long who were listed in the Forbes list. Vietnamese brand names such as Truong Hai, Vietjet Air, Masan, FPT have reached the outside world.
What will the Vietnamese private enterprise sector look like?
So far, private enterprises have changed. A large number of Vietnamese trademarks appeared and disappeared. The hard and competitive market functions its selective competence. The Ministry of Planning and Investment reported that besides the record number of newly-established enterprises, there are temporarily suspended or dissolved enterprises.
Hence, it is necessary for Vietnam to own more powerful firms.
According to Mr. Chung, it is difficult to forecast which enterprises will up and which enterprises will down or whether enterprises are successful at present will look like in the future. However, institutions decide development of enterprises.
Mr. Cung suggested private enterprises focus on five issues namely costs, legal risks, business safety, fair competition, good administration.
He also recommended the Party and Government attach importance to generating a proper environment in favor of the private sector which is expected to become the key engine for the economy.