Private sector has big role in HCM City’s economic development
Seeing the important role of the private sector to local development, Ho Chi Minh City will work to attract more private investment to carry out smart urban area projects and branch out Industry 4.0 services, said Secretary of the municipal Party Committee Nguyen Thien Nhan.
The city is home to 372,000 private firms, contributing 63 percent of local gross domestic product (GDP) and more than 41 percent of State budget collection, he said at the Vietnam Private Sector Economic Forum in Hanoi on May 2.
However, he said companies face many challenges when investing in the city, including complicated administrative and State management procedures and confusing laws.
He described capital shortage as main reason for low labour productivity, saying average investment in one worker in Vietnam is 20 times less than Japan and 6.5 times less than Malaysia.
Besides, tens of thousands of enterprises in the city have no access to necessary infrastructure and services, making them inefficient.
Nhan said Vietnam needs strong policies to back the development of IT and science and technology enterprises, driving the knowledge economy and service production, while authorities must see corporations’ satisfaction as an important indicator to evaluate the efficiency of administrative reforms.
As for private firms themselves, they should work with training establishments if they want high-quality human resources, he stated.
He expressed his belief that following the forum, the Government will outline rational policies to fit the demands of companies, and localities must join businesses’ efforts to develop the nation’s economy.
Vietnam's fiscal surplus jumps 3-fold y/y
Vietnam saw a budget surplus of VND44.6 trillion (US$1.91 billion) from the beginning of the year to April 15, a three-fold increase compared to a surplus of VND11.3 trillion (US$485.53 million) recorded in the same period last year, according to the General Statistics Office (GSO).
State budget revenues as of April 15 reached VND421 trillion (US$18.09 billion), equivalent to 29.8% of the year's estimate.
Of that total, revenues from domestic taxes and fees in the period stood at VND337.3 trillion (US$14.49 billion) or 28.7% of the year's estimate. Of the sum, the state sector contributed VND43.9 trillion (US$1.88 billion) or 24.7% of the year's plan, the FDI sector VND54.7 trillion (US$2.35 billion) (excluding crude oil) or 25.6%. Moreover, VND69.5 trillion (US$2.98 billion) was collected from non-state industrial, commercial and service taxes, equaling 28.8% of the plan, and VND12.9 trillion (US$554.3 million) from tax on environmental protection or 18.7%.
Revenue from trade jumped to VND67.7 trillion (US$2.9 billion) or 35.8% of the year's estimate, and that from crude oil exports totaled VND15.3 trillion (US$657.42 million) or 34.4%.
Additionally, the government collected VND37.1 trillion (US$1.4 billion) in personal income tax for the state coffers or 32.8% of the year's estimate, and land use rights VND29.8 trillion (US$1.28 billion) or 33.1%.
Meanwhile, Vietnam's state budget expenditures as of April 15 totaled VND376.4 trillion (US$16.17 billion), equivalent to 23% of the year's plan. Of the total, regular spending reached VND274.8 trillion (US$11.8 billion) or 27.5% of the plan. Capital expenditure reached VND65.3 trillion (US$2.8 billion) or 15.2%, and interest payment totaled VND35.1 trillion (US$1.5 billion) or 28.1%.
Sweden's largest business delegation to land on Vietnam for enhanced economic ties
Leaders from more than 50 Swedish companies and trade supporting organizations will arrive in Vietnam next week to explore business opportunities in one of the fastest-growing economies in Asia as a landmark free trade deal between Vietnam and the EU is poised to take effect soon.
The Swedish business delegation, the largest ever and led by Minister for Foreign Trade Ann Linde, will also include officials from Business Sweden and the Swedish Institute. They will join the Sweden-Vietnam Business Summit on May 7 in Hanoi.
The summit is designed to strengthen the position of Sweden and Swedish companies in Vietnam and to showcase Swedish companies’ products, solutions and ethical behavior and their positive effect for Vietnam. With the participation of major names such as ABB, Astra Zeneca, Atlas Copco, Ericsson, Electrolux, IKEA, Oriflame, SAAB, and Volvo Buses, the event will highlight world-class Swedish solutions in manufacturing, smart cities, smart living, transportation, energy, health, education and sustainability.
At the summit, there will be two exhibitions, with one showcasing individual companies and their products and solutions. The other exhibition by the Swedish Institute will focus on Swedish innovative and creative solutions in a number of fields.
The event will be opened by Crown Princess Victoria of Sweden, who will pay an official visit to Vietnam on May 6-8 on the occasion of the 50th anniversary of bilateral diplomatic relations.
In 1969, Sweden became the first Western country to establish diplomatic ties with Vietnam, which was in the middle of a bloody war to fight foreign invaders and reunify the divided nation.
In 2004, King Carl XVI Gustaf and Queen Silvia of Sweden made the first state visit of a Swedish head of state to Vietnam. The royal figures visited Hanoi, Ho Chi Minh City, Hue, Ha Long Bay and Phu Tho province where Vietnam’s first paper mill was built with Sweden’s assistance. The Queen also made a special visit to the National Hospital for Pediatrics in Hanoi.
As two complementary economies, Sweden and Vietnam are looking to enhance trade and investment relations.
The two countries signed the bilateral investment treaty in 1994, aiming to create fair and equal terms and opportunities for investments between the two countries. However, Swedish investment in Vietnam remains modest, with US$365 million in 68 projects to date, putting the European country at the 33rd place among 131 countries and territories investing in Vietnam, according to statistics of the Ministry of Planning and Investment.
With a population of nearly 100 million and the rapidly-rising middle-income class, Vietnam is an attractive market in the eyes of any foreign business, and Swedish companies don’t want to miss the huge opportunities here.
Apart from ABB, Electrolux and Ericsson, which have set their foothold in Vietnam for decades, a bunch of manufacturing and consumer goods companies have been pouring money in Vietnam, forming the second wave of investment from the Nordic country, particularly in the consumer goods industries.
Volvo started to bring its high-end cars to Vietnam in 2016 and is advancing plans to sell trucks and busses in this country. Meanwhile, fashion chain H&M has opened four stores in Hanoi and Ho Chi Minh City and has over 30 suppliers after two years of setting foot in Vietnam.
Well-known home furnishings retailer IKEA has shown rising interest here with plans to build a retail center and warehouse system in Hanoi with an investment of US$450 million, Nguyen Duc Chung, chairman of the Hanoi People’s Committee, said in January.
Tetra Pak, another Swedish giant, in 2016 started building another packaging plant worth US$110 million in Southern Vietnam. It is providing carton packs for major milk producers in Vietnam namely Vinamilk, TH True Milk and Vinasoy.
Impressive economic growth after more than three decades of opening up, growing affluent class and purchasing power are factors behind the fresh investment wave from Sweden, said Swedish Ambassador to Vietnam Pereric Hogberg.
That Vietnam moves up the value chain will also open up new chances for innovative Swedish companies, the ambassador added.
Higher interest from Swedish businesses also stems from the EU–Vietnam Free Trade Agreement (EVFTA), which is the most comprehensive free trade agreement that the EU has ever concluded with a developing country. The FTA is expected to be ratified later this year and come into force in the beginning of 2020, removing the majority of tariffs on imports between the two economies.
Revenue from 26 transport projects falls short of financial plans
Twenty-six transport infrastructure projects under the build-operate-transfer (BOT) format were found to have toll collection revenue lower than the estimates in their financial plans, according to the Directorate for Roads of Vietnam.
The directorate noted in a recent report to the Ministry of Transport that among the 57 BOT projects under its management, 27 had seen higher revenue in 2018 compared with their financial plans, while 26 others had witnessed the opposite. The four remaining projects have not been operational long enough to make an assessment.
The number of vehicles traveling on certain roads is higher than expected, leading to higher revenue for those roads.
The Phap Van-Cau Gie expressway project in Hanoi City took the lead, with revenue of over VND700 billion, followed by an expansion project for two National Road 1A sections running through the northern-central province of Quang Binh, at over VND220 billion. Their revenue was some 10% higher than the estimates.
By contrast, the lower-than-expected revenue of 26 other projects is ascribed to the fact that the number of vehicles passing through is much lower than expected, so the revenue growth rate is far below the predicted rate.
An expansion project for a National Road 1A section, linking Hanoi with the neighboring province of Bac Giang, saw an 87% decline in revenue, generating some VND460 billion.
Meanwhile, the Phu Gia-Phuoc Tuong tunnel project in the north central-coastal province of Thua Thien-Hue recorded revenue a staggering 90% lower than expected, at VND260 billion.
Further, the number of vehicles traveling through tollgates in certain projects is increasing steadily, but their revenue is still suffering a shortfall compared with their financial plans due to the unusually high number of drivers using monthly or quarterly fares.
Moreover, exemptions or reductions in toll fees are being applied, particularly for vehicle users living or working near the tollgates. Some notable examples are the Hanoi-Haiphong expressway project and an expansion project for a National Road 1A section running through the south-central coastal province of Quang Nam.
According to the directorate, declines in revenue among BOT transport infrastructure projects could disrupt their financial plans and raise the levels of non-performing loans or bad debts at commercial banks that have financed these projects.
HCM City boosts trade cooperation with southern provinces
Enterprises from the economic hub of Ho Chi Minh City have poured investments into 42 factories and 72 farms in provinces and cities in the southern region, according to the People’s Committee of Ho Chi Minh City.
Approximately VND30,112 billion (US$1.29 billion) hasbeen invested in provinces and cities in the Southeast and Mekong Delta regions, including an average VND3,000 billion (US$129 million) provided for breeding and vegetable farms annually.
The results were attributed to the 7-year implementation of the trade cooperation programme between Ho Chi Minh City and southern provinces. Thanks to the programme, Ho Chi Minh City and localities in the southern region have co-ordinated to carry out a number of trade promotion activities and establish links to develop distribution systems and supply chains for locallyproduced goods.
The participation of goods produced locally in southern provinces into the wholesale and retail distribution systems in Ho Chi Minh City not only meets theconsumption demand of city’s residents but also promotesgoods production in localities in the south, particularly the production of agricultural, forestry and aquatic products.
Through the cooperation programme, enterprises will beassured of investing in production and business activities and providing capital for farmers at farming cooperativesin southern provinces.
For example, Ho Chi Minh City signed deals with the southern provinces of Long An, Lam Dong, Tien Giang, Dong Thap and others to provide high-quality food withfarm-to-table traceability for the city’s residents.
AirAsia launches Can Tho – Bangkok air route
The first direct flight of Malaysia’s AirAsia from Bangkok (Thailand) landed in the Can Tho international airport in the Mekong Delta on May 2.
The Bangkok-Can Tho air route is the second international service operated by AirAsia to the Mekong Delta city of Can Tho. The first one, the Can Tho-Kuala Lumpur route, was launched in early April.
AirAsia conducts three return flights from Can Tho to Bangkok each week, on Tuesday, Thursday and Saturday. The flights take off at Can Tho at 13:30 and at Bangkok at 11:25.
On the occasion, the airline launched one-way promotional tickets starting from only 730,000 VND, including taxes and fees, for flights on the route from May 2 to September 30, 2019.
Laddawan Meesupwatana, head of products for AirAsia’s Indochinese market, said the new service will help tourism development in both the Mekong Delta and Bangkok.
With the new service, Can Tho became the fifth city in Vietnam connected with Bangkok by AirAsia’s direct air service. The other four are Hanoi, Ho Chi Minh City, Da Nang and Nha Trang, all are major tourist destinations in Vietnam.
Can Tho international airport, which has an annual capacity of 3 million passenger, was put into use in 2011. It served 815,000 passengers in 2018. AirAsia is the only international airline flying to Can Tho.
Quang Ngai solar plant debuts
|The central province of Quang Ngai has put into operation the first solar power plant in Mo Duc District after three years of construction, supplying 28 million kilowatts per hour to the national grid each year and saving 21,000 tonnes of carbon emissions. — Photo vnexpress.net|
The central province of Quang Ngai has put into operation the first solar power plant in Mo Duc District after three years of construction, supplying 28 million kilowatts per hour to the national grid each year and saving 21,000 tonnes of carbon emissions.
The 19.2 MW (megawatt) plant, which was launched last week, is the largest renewable energy project in the province with total investment of VND900 billion (US$39.8 million).
Chairman of the Thien Tan Group, the project owner, Huynh Kim Lap said the project was seen as a typical landmark of the future ‘clean and green’ energy in the province and central coastal Viet Nam.
He said it’s was the first solar power project in the province that aims to exploit potential renewable energy sources in coastal areas as well as cutting carbon emissions.
Novaland to focus on tourism
Property developer Novaland Group is studying new trends and demands in the hospitality segment to bring more value to shareholders, its general director, Bui Xuan Huy has said.
Speaking at the company’s annual general meeting (AGM) in HCM City recently, he said the hospitality market is developing strongly in the country and the company has been seeking to collaborate with professional consultants and operators to develop destinations for both domestic and foreign tourists.
It is developing NovaTourism, and hospitality would be one of its main focuses in 2019-23 in addition to housing and urban areas, he said.
NVL said 75 per cent of its 2,700ha of lands would be used to develop tourism projects, and the rest would be used for housing projects.
This year it promised to bring 2,000 hospitality products into the market.
The main projects it has been developing in recent times include the 1,000ha NovaWorld Phan Thiet in Binh Thuan Province.
In the housing segment, NVL said it would continue to focus on HCM City and neighbouring areas, launching 4,500 new housing products this year and handing over 5,900 others.
It tabled its 2018 results and plans for 2019 at the AGM.
Last year revenues were up 31 per cent to VND15.3 trillion (US$671 million).
Profit after tax surged 58 per cent to VND3.3 trillion.
Last year NVL handed over 4,589 condos to buyers, a 28 per cent rise from 2017, at giant projects such as The Sun Avenue, Sunrise Riverside, Richstar, and Wilton Tower.
The company targets revenues of VND18 trillion this year and profit of VND3.3 trillion, respectively up 17.7 per cent and 0.7 per from 2018.
Novaland has in the last 25 years developed over 40 projects in many segments like housing, office-tel and urban areas.
It entered the tourism sector recently.
Vietnam should strictly monitor zero-tax car imports from ASEAN: Thaco
Vietnam’s leading auto firm Thaco wants the government to strictly inspect zero tariff application on cars imported from ASEAN.
Pham Van Tai, CEO of the Truong Hai Auto Corporation (Thaco), said at the Vietnam Private Sector Economic Forum Thursday that the government must inspect whether cars imported from ASEAN and subject to zero percent tariffs meet the requirement of having a local content of at least 40 percent.
Under Vietnam’s taxation commitments with ASEAN, from 2018, cars imported from other ASEAN countries enjoy zero percent tariffs if at least 40 percent of their value is produced within ASEAN.
"This will help avoid trade fraud and tax losses [to the state]. The point is that to meet the 40 percent localization rate is very difficult, especially for high-end passenger cars," Tai said.
He cited statistics showing that cars imported from ASEAN into Vietnam in the first three months of the year went up to 39,000 units, or half of the 2018 total of 78,200.
"This is in the context of Vietnam’s domestically-made cars competing fiercely with Thailand and Indonesia, which have domestic consumption markets many times bigger than Vietnam."
These countries have been issuing policies to support car manufacturing for years, while this has only happened recently in Vietnam, Tai noted.
He added that Vietnam should remove special consumption tax on car parts produced in the country to strengthen the local supporting industry and reduce the prices of made-in-Vietnam cars.
Vietnam’s car imports last year fell nearly 20 percent from 2017 because of a government decree which set tough conditions for car imports, requiring traders to provide valid vehicle registration certificates issued by authorities from the countries of origin.
Vietnam’s supporting industry for car manufacturing remains weak compared to other countries in the region. There are only 358 such businesses in the auto industry in Vietnam compared to 2,500 in Thailand, according to the Ministry of Industry and Trade. The ministry has also said that Vietnam imports over 90 percent of its auto parts.
The Vietnam Private Sector Economic Forum, the largest of its kind in the country this year, is jointly organized by the government and the Central Economic Commission, in collaboration with VnExpress and the IEC Group.
Support programme improves Ben Tre start-up climate
In three years since it launched the Dong Khoi Start-ups and Enterprise Development Programme, Ben Tre Province has adopted many policies to support start-ups, leading to a rise in the number of businesses and jobs, and economic growth, officials told a review conference held recently.
Since 2016, when the programme was instituted, 1,602 businesses have been established – around 64.08 per cent of the target by the end of 2020 – Phan Van Mai, standing deputy secretary of the Ben Tre Province Party Committee, said.
Besides, 15,039 household businesses, 95 co-operatives and 605 co-operative groups have been set up, and hundreds of training classes have been held for dozens of thousands of start-up entrepreneurs and staff.
Funding worth VND1.76 trillion (US$75.8 million) has been provided to 1,554 projects and start-ups by the provincial start-up investment fund, the Adaptation in Mekong Delta project and banks.
Around 35,800 jobs have been created and 8,408 households have escaped poverty.
Ben Tre Province has been rolling out more and more enterprise- and investor-support policies and reforming administrative procedures to simplify procedures and streamline government services, and holding dialogues with businesses to understand their problems.
The Ben Tre Public Service Centre, which is being set up, will further aid processing of applications.
There are also policies to encourage investment in industrial parks and public projects, start-up contests, start-up consultancy, and networking opportunities.
But Mai admitted that the programme had some limitations such as poor planning leading to limited activities, mentors not helping new enterprises enough, poor encouragement for household businesses to formally register as businesses causing them to be daunted by the possible procedures, and difficulties for some start-ups in accessing the province start-up fund.
Ben Tre should continue to strive to become a start-up province with more innovative enterprises, better links between start-ups and mentors and funding entities and better training, business development and incubation programmes, he said.
Vo Thanh Hao, secretary of the Ben Tre Party Committee, said the province needed to realise the importance of facilitating start-ups and fuelling the desire to start a business.
Several memorandum of understandings were signed at the conference by the Department of Planning and Investment, the Information Technology Park, the Department of Science and Technology, and Saigon Innovation Hub to support start-ups in future.
A fair for Ben Tre enterprises to promote their products was held the same day.
Ben Tre's ranking in the Provincial Competitiveness Index improved to fourth last year from 12th in 2016, Nguyen Minh Canh, director of the Department of Investment and Planning, told the conference.
Improvements had been made in several areas such as competition and access to land, but some problems still persisted, including lengthy waiting periods for businesses to complete procedures and unofficial costs to speed up things and win contracts, he said.
"Improvements to the investment climate are not yet consistent, …. Ben Tre still needs to work on several areas or risk lagging behind," Canh said.
Speaking at a conference on successful start-ups held in conjunction, Cu Van Thanh, chairman and general director of Luong Quoi Coconut Processing Co., Ltd, said passion and a deep understanding of the industry is crucial for a start-up.
The ability to adapt to the current market and making constant technological improvements are also important as are a skilled workforce, good treatment of employees and a conducive working environment, he added.
Nguyen Thanh My, chairman of Rynan Holdings JSC, specialises in agriculture technologies, said that start-up ideas come from awareness of societal problems or market demands.
He said businesses should focus on unique ideas that would bring high value, register for copyrights, as well as improve their English and looking for overseas investment fund.
Truong Minh Huy Vu, deputy director of the Viet Nam National University's Information Technology Park, said Viet Nam's start-up eco-system would need improvements in terms of success stories and thus inspiration, mentors, funds for businesses to expand, and knowledge about start-ups in general.
Mai said: "The number of innovative start-up projects and start-ups that grow up to national or international levels is still small. The pro-activeness and professionalism of start-ups and their supporters need to improve."
Start-ups would need to pay more attention to packaging, application of modern technologies and general business skills as opposed to focusing solely on funding, he added.
Tax incentives can speed up cashless payment in Vietnam
Vietnamese banks are proposing tax incentives for businesses adopting e-payments as a way to boost cashless payments.
Dao Minh Tuan, deputy CEO of Vietcombank, presented this suggestion at the Vietnam Private Sector Economic Forum 2019 Thursday.
He said that most businesses were reluctant to purchase point-of-sales (POS) devices or establish e-payment services with the banks because there were currently no incentives to attract them.
"Incentives, especially in taxes, will attract more businesses to cashless payment, which will increase payment transparency and reduce tax evasion," he said
Vietnam has been trying to promote cashless payments in recent years. Last year, fintech startups raised $117 million, highest among all startup businesses.
But local residents remain more reliant on cash. Sixty percent of Vietnamese population are eligible to open a bank account, but a majority of them, 80 percent, prefer to use cash in daily transactions, according to the Ministry of Industry and Trade.
Although e-commerce has been growing fast at 25-30 percent a year in recent years, 80 percent of customers still use cash-on-delivery payment for products they order online, the ministry said.
Le Xuan Vu, board member of Military Bank, said that tax incentives and other incentives are needed to increase cashless payment not only for businesses but also people at large.
"Cashless payment remains unpopular in Vietnam because people prefer to see and touch products before paying for them. If local banks can guarantee to compensate customers for fraud and fake products, they will trust cashless payment and use them more regularly," he said.
A government resolution issued in January recommended that cashless transactions made viable for all urban household bill payments by the end of this year, prioritizing mobile payments and payment via card readers.
The State Bank of Vietnam has been asked to come up with solutions that would promote the use of electronic wallets, wherein users can deposit cash into their e-wallets without the need for a bank account.
Vietnam benefits from firms’ moving out of China
Vietnam, boasting complete infrastructure, abundant industrial property on offer and a line-up of inked free trade pacts, is an attractive destination for world’s leading corporations, who are shifting production out of China due to high costs, said real estate consulting company CBRE Vietnam.
The company reported an increase in production shuffle from China to alternative locations in Southeast Asia, including Vietnam, last year, citing the results of a survey conducted in November 2018 by the UBS Lab which collected responses from 200 manufacturing companies with significant export business or supply to exporters from China.
The survey said key drivers for moving export production out of China include lower labour cost, lower land cost, less trade barriers, easier access to supply chain, better infrastructure and more industrial policy support, among others.
According to CBRE, Vietnam may be well placed to benefit from this production shifting as the Government continues to make heavy investment into infrastructure, and help producers get better access to key export markets by participating in many bilateral and multilateral trade agreements (FTA). Besides, the country’s sound economic fundamentals like GDP growth, foreign direct investment and inflation rate become key drivers to Vietnam’s competitive and land acquisition cost and labour cost.
CBRE experts said that industrial parks in the country achieved good occupancy rate of between 70 - 90 percent, and infrastructure connectivity played a major role in the occupiers’ location decision.
Meanwhile, Vietnam has signed many bilateral and multilateral free trade agreements, comprising five within ASEAN, six others between ASEAN and its partners including China, the Republic of Korea, Japan, India, Australia and New Zealand -, and four bilateral free trade deals. As the pacts allow removal of duties among membership countries, they will help foreign manufacturers setting up production in Vietnam to enjoy tax benefit when they export to those markets.
CBRE’s survey showed that the number of factories in Vietnam named in Apple supplier list increased from 16 in 2015 to 22 in 2018, all of which are FDI companies. Recently, GoerTek, an Apple supplier, decided to move its AirPods production base (wireless earphones) to Vietnam.
Following the same trend, Samsung Electronics Co., Ltd announced last year that it would cease operations its mobile phone production plant in China. Currently, 29 Vietnamese companies act as Samsung’s Tier-1 supplier. The localisation rate jumped from 34 percent of total product value in 2014 to 57 percent in 2017.
Senior Director and Head of the Research and Consulting Services for CBRE Vietnam Duong Thuy Dung said that as for the remainder of 2019 and the full 2020, there will be an increase in industrial property supply across Vietnam to benefit from this production shifting from China.
Digitization could add billions to Vietnam GDP: official
Vietnam could add $162 billion to its GDP in 20 years’ time by turning its economy digital, says a deputy minister.
Deputy Minister of Planning and Investment Vu Dai Thang said this at the Vietnam Private Sector Economic Forum on Thursday morning quoting the findings of Data 61, an Australian data science research and engineering firm. Vietnam’s GDP is currently $223.9 billion.
He also cited the company as warning 38 percent of jobs could be lost to digitization.
Thang quoted Google and Singaporean sovereign fund Temasek as saying Vietnam's digital economy was worth $9 billion last year and is expected to reach $30 billion by 2025.
The digital economy is growing rapidly and permeating all aspects of socio-economic life in all countries, and would completely change the way in which production, organization, provision of services, consumption, and communication are done, he said.
"Enterprises are the keystone to this growth, and businesses should proactively look to apply digital technologies to smooth the transformation and lay the foundation for Vietnam’s digital economy."
Meanwhile, the Ministry of Planning and Investment is working on a national strategy to capitalize on Industry 4.0 to enable businesses to take advantage of opportunities presented by digitization, he added.
The Ministry of Information and Communications has said it has been tasked by the Government with drawing up a roadmap for the country’s digitization.
Deputy Minister of Information and Communications Nguyen Thanh Hung said the plan proposes having 50 percent of businesses carrying out business digitally by 2025 and the digital economy then accounting for 20 percent of the nation’s GDP.
It also sets a target for the government of having at least 80 percent of its interactions with the public and businesses carried out digitally by 2025.
The digital economy has been booming in the last few years. It grew by over 25 percent last year and the country can sustain this rate for the next two or three years, according to the Vietnam E-Commerce Association.
Opportunities and pitfalls within private sector development
Vietnam is likely to miss the window of huge opportunities to bolster its future development if it is unable to find a way to leverage the contribution of the private sector.
Micro and small - sized enterprises account for some 95 per cent of the total number of nationwide firms while those operating on medium scale hold just 1.7 per cent.
Prime Minister Nguyen Xuan Phuc has affirmed that the private sector is crucial to adding momentum to the economy as well as improving its competitiveness and flexibility amidst an ever-changing economic and technological landscape.
The Vietnamese Government is always paying close attention and taking specific actions in order to further the private sector’s development. The country is aiming to have some 1 million enterprises established by 2020, the majority of which will be private firms.
The private sector reportedly contributes a total of 44 per cent to the country’s annual GDP value. Yet its development still falls short of expectations due to a number of factors, most notably a lack of consistent policies.
Economist Tran Dinh Thien, former head of the Vietnam Institute of Economics, notes that the distortion in implementing legal institutions and economic reforms are among the key reasons that hinder proper development of private firms. Furthermore, business operations are largely based around close yet internal relationships.
Nguyen Quang Huan, vice chairman of the Vietnam Private Business Association, emphasized the private sector as a stimulus and one of the three key pillars to the development of the socialist-oriented market economy.
Huan said that Vietnamese enterprises and private ones in particular are enjoying good opportunities to make reforms and innovations that work for their common development.
He added that this year the Government will co-operate with the Party Central Committee’s Economic Commission to carry out a joint inspection of the implementation of guidelines and policies by agencies and localities. These are expected to give a boost for the private sector.
Efforts will occur alongside to perfect legal frameworks and regulations aimed to foster the development of the private sector, he noted.
Agencies and localities have reportedly pledged their best efforts to create favorable conditions in terms of capital and land in order to spur growth within the private sector. These could be seen as policy incentives for private enterprises to go ahead.
The vice chairman suggested that in order to tap into the potential advantages of the private sector, further support is required to help private firms grasp business and investment opportunities, and to improve their overall competitiveness.
Despite this, private firms are facing a number of challenges and complicated developments arising from the ongoing US - China trade tensions. The US have kept interest rates rising with the aim of depreciating the value of Chinese yuan.
This has therefore put an impact on the USD/VND exchange rate while hampering the production and export of many domestic firms. Exchange rate pressures have increased interest rates in VND, thus increasing capital costs for domestic firms, Huan analyzed.
Trade protectionism has been on the rise with increased tariffs on imports, rising requirements in terms of quality, origin of product, and hygiene, whilst import quotas have been slashed. These elements generally pose challenges to local firms’ export and therefore have narrowed their export opportunities, he said.
According to Nguyen Thi Phuong Thao, CEO of Vietjet, the country has received significant contributions from top private firms. On average, the private sector annually provides 1.2 million jobs, resulting in a great contribution to the nation’s GDP growth.
Thao called for consensus in terms of perception and actions among the government, all-level authorities, and agencies with regards to the future development of the private sector.
She underlined the need to quicken the restructuring and equitization of State-owned enterprises and commercial banks, aiming to ease negative impacts on macro-financial stability and growth outlooks.
The Government should improve their mechanisms and policies, as well as set forth measures to accelerate the growth of the private sector, with a view to optimizing the use of private sources to upgrade infrastructure items and making the most of opportunities arising from Industry 4.0.
The businesswoman has high hopes that private firms will receive equal treatment to develop them into spearhead corporations in the field of supporting industries.
Pham Dinh Doan, Chairman of Phu Thai Group, said private firms enjoy limited access to sources, whilst natural resources and other key sources are primarily exploited and used by State-owned enterprises.
There should be a shift in the source exploitation from State-owned companies to private firms. Most notably, many State-owned enterprises are acting on business activities and fields that could yield large profits. In order to create more opportunities for the private sector, fruitful business activities and fields should be transferred to the private sector if they are considered competent, whilst state agencies should only carry out its main task of management.
Micro and small - sized enterprises account for 95 - 96 per cent of the total number of nationwide firms while those operating on medium scale constitute just 1.7 per cent.
Private firms are vulnerable to market developments with 60,000 - 80,000 firms dissolved annually. Last year, the figure reached a peak of more than 90,000.