More private companies have shown poor competitiveness though Vietnam is intensifying its global economic integration, the 2018 Vietnam Business Development Forum heard in the capital city of Hanoi on June 19.

Phan Duc Hieu, vice president of the Central Institute for Economic Management (CIEM), speaks at the 2018 Vietnam Business Development Forum in Hanoi City on June 19 

Held by the Economy and Forecast Review, under the Ministry of Planning and Investment, and the Institute for Brand and Competitiveness Strategy, the forum was aimed at seeking ways to streamline the regulatory framework and create a safe business environment for local enterprises to help them operate in a more effective and sustainable manner.

Phan Duc Hieu, vice president of the Central Institute for Economic Management (CIEM), said the Government has adopted various policies to improve the business environment for over three years. “This is the competitive edge of Vietnam,” he noted.

Dau Anh Tuan, head of the Legal Department at the Vietnam Chamber of Commerce and Industry (VCCI), shared the same view, pointing out that some ministries have recently put together a slew of business conditions, following a Government resolution on major tasks and solutions to guide the execution of the socioeconomic development plan within the State budget estimate for 2018.

The VCCI released its annual Provincial Competitiveness Index (PCI) report, which surveys some 10,000 local companies and 2,000 foreign direct investment (FDI) enterprises across the country. The results show that enterprises have become increasingly optimistic and have noticed positive changes in administrative reform.

Based on the 2017 PCI report, some 52% of local companies confirmed that they were planning to expand their operations over the next two years, the highest since 2011, while the share of their foreign counterparts rose to a staggering 60%, a level unseen since the apex of 2010.

The number of companies that admitted having paid informal charges saw a decline to 59% in 2017 from the previous 66% in the 2015-2016 period. However, the new figure was still high.

Tuan stressed that the Government had failed to achieve its 2017 target of reaching the average of the ASEAN Top 4 in business environment rankings, despite having jumped 14 places to rank 68th.

Hieu of CIEM said 28 more steps were needed for the Southeast Asian nation to fulfill the ambitious target.

According to Hieu, the period for reforming administrative procedures is quite long. In August 2017, the Government asked ministries to slash one-third or even half their business conditions. However, it was not until June 2018 that these State agencies were ready to put forward their own reduction plans.

In addition to removing business obstacles, he noted, what really matters is creating breakthroughs in providing substantive support for enterprises, which requires the concerted efforts of the Government, local administrations, ministries and agencies.

The Government, he continued, should give businesses peace of mind in terms of providing the rights of property ownership and intellectual property and should offer more policies aimed at stimulating greater competition.

Business development was also a primary topic of discussion at the forum, which intended to seek ways to raise the number of operational companies to one million by 2020.

According to Tuan of VCCI, the rate of business establishment is high, but that of companies going out of business is similar.

Tuan cited a recent report as saying that the January-May period of 2018 saw some 52,000 startups and some 66,000 companies returning to operations. However, the period also witnessed some 39,000 companies either disbanding or suspending operations.

Vo Tri Thanh, president of the Institute for Brand and Competitiveness Strategy, forecast that, given such rates, it would be tough for the Government to fulfill the target of one million operational companies in the next two and a half years.

The VCCI official wondered how many companies had closed their doors because of administrative barriers and difficulties in meeting regulations.

Tuan noted that one of several problems is the shrinking scale of private enterprises coupled with their weak competitiveness amid global integration and stiff competition. He cited experts’ assessment that the health of these enterprises as a whole has not shown any significant improvement.

According to Tuan, the private sector also lags behind other economic sectors in terms of its modest participation in export activities, resulting in its poor export performance.

“The private sector contributed a record low of 28% to the export turnover in 2017. This means the FDI sector accounted for a staggering 72% of the total. Many studies suggest the connectivity of the private sector in the global economic chain has not been successful,” Tuan said.

He added that private enterprises are still faced with many unfavorable business conditions, such as stricter requirements for workshop size, specialized equipment, management personnel and capital in some fields than those affecting FDI companies.

Further, management agencies tend to require greater budget contributions from the private sector, so tax continues to be a burden on private enterprises, he remarked.

SGT