Urgent need to develop private economy

Developing the private economic sector is urgent for Vietnam in its global economic integration.

Private economy and its role in Vietnam’s economy

After 30 years of renewal, the private economic sector has grown in both quantity and quality. The number of private businesses jumped from 55,000 in 2002 to 495,000 last year, employing 85% of the labor force.

Private economic groups in construction, aviation, industry, and agriculture have generated momentum for the economy and boosted GDP growth.

Former Trade Minister Truong Dinh Tuyen said: “Private businesses have the advantage of a young population who are industrious, studious, and adaptable to new working conditions.

Private businesses which have appropriate strategies and long-term vision can win. The government considers the private economic sector a driving force of the national economy.”

Generating opportunities for the private economic sector

Despite recent growth, the private economic sector has some disadvantages and shortcomings. 97% of private businesses are small or micro-scale with poor financial, managerial, and technological capability, which hinders them from participating in domestic or global value chains.

From 2007 to 2015, 45% of all private companiesdeclared bankruptcy. Nguyen DucTho, General Director of the An Tin Group, said that in the global economic integration, Vietnam should encourage start-ups, issue appropriate policies for private businesses, and simplify procedures for them to access capital, land, technology, and human resources.

Economist Dao Xuan Sam, former Head of the Economic Management faculty of the Ho Chi Minh National Academy of Politics, said Vietnam needs to fine tune mechanisms to boost the private economy.

“Vietnam sets high targets to promote businesses. Success requires policy reforms that encourage start-ups. The Party has supported private economic development and equitization of state-owned enterprises to build a market economy of fair competition without state-subsidized enterprises.”

Vietnam hopes to have 1 million businesses by 2020. It will be no easy task for a country that had no more than 500,000 businesses during its 30 years of renewal.