How many ‘crony’ businesses exist?

A VCCI (Vietnam Chamber of Commerce and Industry) report released in late 2019 showed that the privileges to ‘crony’ businesses have decreased, but not enough to ensure equal competition among businesses.

The report on the implementation of the government’s Resolution No 02/2019 and Resolution No 35/2016 pointed out that the preferences to businesses decreased slightly from 77 percent in 2015 to 70 percent in 2018.

How many ‘crony’ businesses exist?



In the last four years of monitoring, the proportion was never lower than 70 percent.

According to Le Cao Doan from the Vietnam Economics Institute, it is very difficult to assess the scale and activities of ‘crony’ businesses. There is no official definition about ‘crony’ businesses, or ‘back-door’ businesses, and there is no official research work about the size of the group of businesses.

The report on the implementation of the government’s Resolution No 02/2019 and Resolution No 35/2016 pointed out that the preferences to businesses decreased slightly from 77 percent in 2015 to 70 percent in 2018.

By nature, ‘crony’ businesses are understood as the enterprises which live in the shadow of state-owned or private enterprises to hide relations and collude with state management agencies to obtain privileges that other businesses cannot obtain.

 


The activities of ‘crony’ businesses, like the ‘underground economy’, are carried out in the dark, so it is difficult to discover them.

However, Doan affirmed that ‘crony’ businesses exist, creating the discriminatory treatment among businesses.

This generates hindrances and distorts the market. They are dangerous because they do not encourage economic development based on the development of science and technology and good management, but on the basis of relations with management agencies.

The existence of these ‘crony’ businesses will result in the loss of resources, while cumulative value of the economy cannot be generated, because the benefits from ‘crony’ businesses won’t be transferred to the state budget, but fall into the pockets of interest groups.

Doan pointed out that the bigger the proportion of privileges for ‘crony’ businesses, the bigger negative impact they will have on the economy.

In developed economies, cronyism also exists, but it is considered illegal and like the behavior of evading tax, it is heavily punished.

Bui Ngoc Son from the Institute for the World Economics and Politics Research Institute commented that though there is no official definition about ‘crony’ businesses, everyone believes that this type of businesses is very popular in Vietnam.

“They are so popular that there is a saying that it is necessary to establish relations first before establishing businesses,” he said.

Many private enterprises in Vietnam develop thanks to the privileges they can enjoy in exploiting natural resources, such as forests, minerals and land. The legal loopholes and the mismanagement give the opportunities to these enterprises to get rich at a ‘lightening speed’.

The growth of the enterprises is based on relations with management agencies which grant them privileges, not on their real capability and creativity.

Linh Ha

Twelve SOEs report losses in 2019

Twelve SOEs report losses in 2019

The Ministry of Finance has revealed that twelve out of 136 wholly state-owned enterprises had posted losses of $31 million in the first half of last year, and six others faced warnings regarding financial security.

Building credit: How SOEs can get foreign financing for infrastructure

Building credit: How SOEs can get foreign financing for infrastructure

State-owned enterprises (SOEs) face unique challenges when it comes to attracting foreign financing for infrastructure projects. But there are solutions.  

 
 

Other News

.
Nam Dinh-based Rang Dong Textile Industrial Park sign land lease contracts with foreign firms
Nam Dinh-based Rang Dong Textile Industrial Park sign land lease contracts with foreign firms
BUSINESSicon  08/09/2020 

The signing ceremony of a land lease contract and land delivery for factory construction between Cat Tuong Real Estate Group, Top Textile Co., Ltd and Jehong Textile Viet Nam Co, Ltd took place on September 4.

Vietnamese rice takes bite out of global market
Vietnamese rice takes bite out of global market
BUSINESSicon  07/09/2020 

Vietnam’s rice exports have expanded during the pandemic to surpass rival Thailand in price for the first time in three decades, leading experts to suggest the sector should consolidate its position.

Alibaba.com rolls out export-focused program for Vietnamese SMEs
Alibaba.com rolls out export-focused program for Vietnamese SMEs
BUSINESSicon  07/09/2020 

Alibaba.com, the global business-to-business (B2B) e-commerce platform of Alibaba Group, has launched a landmark initiative to help businesses in Vietnam go online and reach an enormous pool of qualified global buyers.

Profit taking to weigh on local market, but September may be bright
Profit taking to weigh on local market, but September may be bright
BUSINESSicon  07/09/2020 

Vietnam’s stock market rally may slow this week as investors eye profits but the one-month projection is still optimistic.

E-commerce gives impetus to woodworking sector
E-commerce gives impetus to woodworking sector
BUSINESSicon  06/09/2020 

In the rapid development of e-commerce, online stores and factories are one of the solutions with which enterprises can cope with the prolonged Covid-19 pandemic while laying a foundation for digitalized business

Logistics groups strive to exploit EVFTA potential
Logistics groups strive to exploit EVFTA potential
BUSINESSicon  07/09/2020 

The EU-Vietnam Free Trade Agreement has created a new driving force for Vietnam’s logistics, but the industry needs to take further action to unlock its full potential.

The path to economic recovery and further growth
The path to economic recovery and further growth
BUSINESSicon  06/09/2020 

While Vietnam has experienced an unprecedented boom in recent decades, the current pandemic is now having a clear negative impact on the economic outlook. 

Vietnam’s plywood suppliers under scrutiny over practices
Vietnam’s plywood suppliers under scrutiny over practices
BUSINESSicon  06/09/2020 

As the trade tensions between the United States and China refuse to slow down, Vietnam-based plywood exporters are under pressure of investigation for alleged issues with the sources of their input materials.

Local wood industry overshadowed by sourcing issues
Local wood industry overshadowed by sourcing issues
BUSINESSicon  05/09/2020 

Vietnam’s wood industry has shown signs of recovery in the third quarter of 2020. However, legal complications may arise through illegally-sourced raw materials from foreign suppliers and a lack of uniformity.

Consumers beware of e-swindlers preying on fledgling cashback apps
Consumers beware of e-swindlers preying on fledgling cashback apps
BUSINESSicon  06/09/2020 

While cashback is considered a strong method to encourage cashless payments, numerous websites and apps are taking advantage of uninformed consumers with untransparent and illegal multi-level marketing models.

One fewer thing to worry for enterprises
One fewer thing to worry for enterprises
BUSINESSicon  06/09/2020 

Businesses will have one fewer thing to worry about in 2021 as the minimum wage is not expected to be increased for privately-owned enterprises.

New strategies required to set deeper roots for wood industry
New strategies required to set deeper roots for wood industry
BUSINESSicon  06/09/2020 

To expand Vietnam’s wood industry sustainably, its development strategy must not only focus on the policies of importing countries but also domestic priorities.

VIETNAM'S BUSINESS NEWS HEADLINES SEPTEMBER 7
VIETNAM'S BUSINESS NEWS HEADLINES SEPTEMBER 7
BUSINESSicon  07/09/2020 

Breakthrough solutions needed to attract foreign investment

Four Vietnamese-born billionaires in the US
Four Vietnamese-born billionaires in the US
BUSINESSicon  06/09/2020 

These are the most famous businessmen of Vietnamese origin in the US.

Airline service fees reduced by half for next six months
Airline service fees reduced by half for next six months
BUSINESSicon  05/09/2020 

Fees for takeoff and landing and aircraft operating services for domestic flights will continue to be cut by 50 per cent for the next six months to support airlines affected by the COVID-19 pandemic, according to a Transport Ministry circular.

More Vietnamese consumers now shop online
More Vietnamese consumers now shop online
BUSINESSicon  07/09/2020 

Online shopping and electronic payments in Vietnam have become more common in recent years as more of the country's population gains access to the internet, 

Funds enjoy growth in August
Funds enjoy growth in August
BUSINESSicon  05/09/2020 

Investment funds involved in Vietnam’s equity market reported positive growth in net asset value (NAV) in August due to a stock market upturn.

Local authorities tighten control over investments in condotels
Local authorities tighten control over investments in condotels
BUSINESSicon  07/09/2020 

Hanoi local authorities are seeking to strengthen management over the construction, investment and trade of condotels, officetels and resort villas.

Vietnam aims to diversify local retail market
Vietnam aims to diversify local retail market
BUSINESSicon  05/09/2020 

The Ministry of Industry and Trade (MoIT) plans to consolidate traditional markets in rural areas while developing a large number of convenience stores and diversifying types and methods of modern business.

Auto manufacturers in Thailand, Indonesia look to Vietnam to sell cars
Auto manufacturers in Thailand, Indonesia look to Vietnam to sell cars
BUSINESSicon  07/09/2020 

Car imports in Vietnam have increased again after a long slump caused by the impact of Covid-19. Thailand and Indonesia have been the biggest sellers.

 
 
 
Leave your comment on an article

OR QUICK LOGIN