VietNamNet Bridge – Private firms should be more dynamic in developing linkages and production chains to sharpen competitive edges as the country was underway to integrate deeply into the global economy.

Employees work at Trung Dung Limited Company, which manufactures elastic bands and thread in Ha Noi's Thanh Tri District. The company has nearly 200 workers, who earn between VND4 million (USVND3,982,305) and VND5 million (VND4,966,695) per month. — Photo: VNA/VNS

Viet Nam recognised the private sector as an important economic driver and planned to raise stronger support for private firms to grow in the economy which witnessed disappointing reforms of State-owned enterprises (SOEs), even as the foreign direct investment (FDI) sector proved to be the most dynamic.

According to the General Statistics Office, the FDI sector accounted for roughly 70 per cent of the country's export value and 20 per cent of the national gross domestic product.

Vu Tien Loc, chairman of the Viet Nam Chamber of Commerce and Industry, said that while the FDI sector could reap rich dividends from support policies, private firms were weak with 98 per cent of them being of small and micro scale.

Even in the home market, local firms were not strong enough to become partners of their FDI counterparts, he said. This could be clearly seen in the stories that Vietnamese firms were struggling to become suppliers of foreign giants such as Samsung.

Vice Director of the Central Institute for Economic Management (CIEM) Vo Tri Thanh pointed out that not only the support industry but even the garment industry, which was considered to be one of the country's competitive advantages, faced great challenges in securing domestic supply of yarns in order to enjoy preferential tariffs brought about by free trade agreements.

The vulnerability of the agricultural sector in the rapid integration process due to the lack of a brand name and poor conditions was also of great concern to experts.

Loc said that enhancing competitiveness of private firms, especially those of small and medium sizes, was becoming an urgent issue.

According to Truong Dinh Tuyen, former Minister of Commerce, the nation posted an impressive growth rate of 6.8 per cent last year, with significant contributions from the FDI sector. "The growth which does not originate from internal force will hardly be firm and sustainable."

Tuyen said that competitiveness of private firms were also undermined by less preferential interest rates and greater difficulties in accessing credit, compared to SOEs.

New position

The recognition of the role of the private sector of an important driver at the 12th National Congress of the Communist Party of Viet Nam was expected to promote the institutional reform and power the development of this sector.

Tran Dinh Thien, director of the Viet Nam Economics Institute, said that this was a big difference from a State-subsided economy more than 30 years ago when the private sector was not recognised.

Thien said that the private sector should be the base to operate the market economy while the spearheads should be strong economic groups.

During the past three decades since a multi-sector economy was first mentioned in the 6th National Congress' Document, the private sector contributed significantly to the nation's economic growth.

There were around 500,000 private firms in Viet Nam, generating 1.2 million jobs and contributing more than 40 per cent to GDP per year, statistics showed.

According to the country's five-year blueprint, favourable conditions for the development of private firms would be raised to create an impetus to enhance the economy's competitiveness.

Be fair, be dynamic

National Assembly Deputies said that it was vital to promote institutional reforms towards building a strong private business community.

Deputy Ngo Thanh Danh said that incentives would be increased to encourage the private sector to participate actively in the economy with sound mechanisms for each region and each industry.

Deputy Nguyen Thanh Ngoc said the recognition of the private sector's role in the economy should be translated into government's detailed policies and supports.

According to Loc, to push the development of the private sector, besides a State policy giving equal treatment to all economic sectors, private enterprises themselves should take the initiative in renovating production technology, modernising equipment and machinery, and enhancing their business administration capacity.

Loc also urged the private sector to be more active in seeking out markets and diversifying their products and services, as the demands of markets and customers were increasingly become stricter.

VNS