return icon

Private enterprises too dependent on crony culture

Forbes Magazine recognized seven Vietnamese billionaires in it 2021 issue, which came as great news for the private sector. This news may now encourage other Vietnamese business people to look more towards development and new ideas.
Illustrative photo

However, at the same time, several super rich business persons were prosecuted for misconduct and misinformation in the fields of real estate and bonds trading, showing that the private sector and private enterprises operate in two different extremes.

Rare cases

The development process of enterprises is also associated with the country's integration process, when the country keeps pace with the Vietnam-US Bilateral Trade Agreement (BTA). With this agreement, domestic enterprises have awakened and rushed outside to look for opportunities. Other economies are also taking this opportunity to explore the Vietnamese market of nearly 100 million people. It can be said that at the present time, Vietnamese private enterprises have entered a new stage of development. There is more focus now on quality, with an aspiration to build large, multi-industry private corporations and reach out to the world market.

During the last ten years, many large private corporations have appeared in Vietnam. They have diversified businesses and have stepped outside, competing directly with major competitors from Europe to the US, something that the previous generation of private enterprises could only dream of. This proves that the entrepreneurship as well as the management capacity of Vietnamese private enterprises has improved. All these steps show that they have a specific path and a clear goal.

On the other hand, one can look at the cases of large private enterprises that have been dubious in the past to the point of being prosecuted. However, personally I still think that these are just minor incidents in the overall picture of private enterprises, and basically, Vietnamese private enterprises are still in a strong development stage.

Crony culture

In Vietnam, crony relationships in businesses still raise big doubts, especially those related to real estate, because our system still has many shortcomings. For example, in the field of land, which is believed to be the most corrupt, because the Land Law has many shortcomings people can easily misuse the loopholes. Land is defined as owned by the entire people, but is managed by the State and represented by the owner. But the State here has too many different levels of management, and the management power is also very wide, so land management tends to overlap across many departments.

In 2013, when amending the Land Law, there were also many opinions suggesting that the State should only recover land for security and defense purposes and public purposes. As for economic purposes, the recovery is not consistent with the role of the State. Even if the law is passed, there is still a big gap in the implementation process. The proof is that at present there is no field that complains as much as the land sector. It is clear that the issue of market and State management of land has become distorted.

Mistakes in the field of land are not isolated but occur on a large scale and involve many localities and a number of ministries and branches. For instance, in the case of competent officials, especially when acquiring land of high commercial value, public opinion sees doubts in dubious dealings. Here, crony relationships can help private enterprises grow but cannot help private enterprises mature.

In recent years, Vietnam has had a number of private enterprises develop strongly, but this development is thanks to the crony culture. Because without a relationship, these enterprises are very difficult to access for investment resources of the state as there is no other way to grow.

The crony culture causes the market to distort, because of the inadequacies in the policies and management of the State mechanism. Building a market economy in the true sense of the word is a common desire that has been mentioned for a long time in Vietnam and has actually been concretized by the legal system and documents. But the actual reality is still far away.

In addition, if you look at the Vietnamese economy, there are still many problems to becoming a real market economy. The structure of Vietnamese enterprises includes state-owned enterprises, enterprises and private enterprises. Current policies are mainly incentives for state-owned enterprises and FDI enterprises, while private enterprises receive very few incentives, and this is favorable for the crony culture to develop.

Looking at all the above inadequacies, I think that economic thinking by the State must intervene deeply and widely in enterprises and the market. This is what causes the reverse effect, that is to say, in order to enjoy preferential policies for development, some private enterprises are forced to accept dubious dealings with individuals in state management agencies. The phenomenon of group interests and crony businesses has created an unequal competitive environment with other businesses. This needs to be phased out soon in order to return to a market which is open, transparent and non-disparaging.

Pham Chi Lan, Economist

Source: Sai Gon Giai Phong


Roaming Hanoi for 1,001 specialties from different parts of Vietnam

There is no need to travel far, just a walk around Hanoi will help you taste specialties across Vietnam.


PM to attend ASEAN-EU commemorative summit, visit three European countries


Da Nang to host Vietnam International Travel Mart

Share purchases by foreign investors hit record

In the week from November 28 to December 2, the Vietnamese stock market saw foreign investors’ net purchases reaching VND9.15 trillion, raising the total net purchase since early November to VND20.2 trillion.

Employers sell private assets to offer Tet bonuses to workers

Many enterprises in Vietnam are struggling to give Tet bonuses for their workers.

Promoting PPP cooperation to develop green agriculture in Vietnam

Promoting public-private partnerships will help improve sustainability in the agricultural sector, according to experts speaking at an event in Hanoi on Monday.

Undervalued banks winning bet for investors

The recent declines of the securities market have moved bank stocks to an 'attractive zone'. Banks were trading at a P/E multiple of 7.1 and P/B of 1.3 in late November, equivalent to the lows in March 2020.

Park Hang-seo receives Order of Diplomatic Service Merit

Head coach of the Vietnamese national team Park Hang-seo has been awarded the Order of Diplomatic Service Merit, Heungin Medal, by the Republic of Korea’s President Yoon Suk-yeol for his contribution to promoting friendly ties with Vietnam.

HCM City Party Secretary: robbery must not exist on streets

HCM City Party Secretary Nguyen Van Nen said the city has a bad reputation for robbery and he has asked relevant bodies to deal with this.

Positive prospects for Vietnam’s stock market in 2023

The stock market saw a trading session with the strongest growth rate in Asia on December 2 as the Vietnam-Index surged by 4.22 percent.

A look at VN fashion through “Taste of Heritage”

After three years of suspension due to the Covid-19 pandemic, the Vietnam International Fashion Week Fall/Winter 2022 returned to Hanoi in late November with eye-catching collections in the spirit of 'Taste of heritage'.

Vietnamese interested in metaverse and fintech

According to a recent report by Meta and Bain & Company, Vietnam is among the top 3 countries besides Indonesia and the Philippines to adopt new technologies such as fintech and metaverse.

The opportunity for a chip-making industry in Vietnam

Chip production will fuel Vietnam's aspiration to become a prominent manufacturing hub in the region.

R&B legend Babyface, 2022 Masked Singer Vietnam’s winner to be on stage together

The much-awaited item of the 2022 “Ho Do" International Music Festival in HCMC will be a duet performance of R&B superstar Babyface and singer Ngoc Mai who won the Masked Singer Vietnam 2022, said Director of the festival, musician Huy Tuan.

HCM City to launch overnight cruises along Saigon River

Ho Chi Minh City’s tourism authority plans to launch overnight cruises with ships accommodating hundreds of people along the Saigon River starting next year.