The limitations of private sector Vietnam currently has around 610,000 private firms, but a majority of the registered enterprises are microsized with 70% of them employing less than 10 workers and having a registered capital of below VND5 billion (US220,300). The number of big companies has been growing, but they are yet to demonstrate their leadership in innovation and driving growth.
I Overview of the development of the private sector Table 1: Number of Newly Registered Enterprises (1991-2005) 19911999 2000 2001 2002 2003 Private enterprise 29,135 6,412 2,229 6,532 7,085 10,246 11,366 Limited company 15,310 7,304 7,179 12,62 15,12 20,145 20,67 524 726 1,243 2,305 3,715 6,470 6,675 Partnership company 0 member limited company 0 59 88 125 130 14,444 21,040 21,52 26,00 Joint-stock company Total 44,962 2004 2005 36,993 38,114 Source: Information Center on Enterprise – Ministry of Planning and Investment This table show that: Average number of newly registered enterprise daily during this period was 3.75 time higher than that during 1991-1999 Number of newly registered enterprise for years (200-2005) was three times higher than those over previous years (1991-1999) Not only number of newly registered firms has been increased, their size as well as scale has been enlarged Growth rate of their production output exceeded those of the state enterprise and foreign invested enterprise since 2000 Yet, private firms are of small scale Currently, they account for 96% of total number of small enterprises according to the criteria specified in Decree 90/2001/ND-CP In 2002 “private enterprise”7 was the most widespread structure and accounted for 39.41% of all registered companies By 2011 only 14.3% of business entities were “private enterprises” In contrast, limited country notes for emerging asia liability companies expanded sharply from 37.33% of firms to 57.22% by 2011 Newly registered and expended investment increased significantly by VND 293,878 billion (about USD 18.4 billion) for years, from 2001-2005, higher than the foreign investment inflow to Vietnam during the same period Private investment has been playing an important role in development, especially it has been the main source of local development investment They account for over 61% of the total workforce in all types of enterprises – a share that has more than doubled since 2000 And they are playing an increasingly important role in accumulating capital: their share of the total capital of enterprises of all types rose from 35% in 2000 to more than 50% in 2011 In fact, they are growing in size and number faster than any other kind of firm In 2007 there were only 103 among Viet Nam’s 500 biggest enterprises (which include FIEs) By 2012 there were 225 The fifth plenary meeting of the 12th Communist Party of Vietnam Central Committee in May issued an important resolution that acknowledges the greater contribution of the private economy to the country’s socio-economic growth The meeting supplied some information about the development of private sector In the early 1990s, Vietnam adopted a radical and comprehensive reform package aimed at stabilizing and opening the economy, and enhancing freedom of choice for economic units and competition For the first time, the Government demonstrated its support for development of the domestic private sector The year 2000 was the next important turning-point for private sector development The introduction of the Enterprise Law significantly reduced administrative burdens for business registration, resulting in a dramatic increase in the number of registered private businesses Since then, the private sector has been growing strongly, accounting for 39%-40% of gross domestic product (GDP) It is noteworthy that the private sector also became a major source of employment, absorbing about 85% of the 1.3-1.4 million new labour market entrants each year We can now see the image of a dynamic and prominent private sector with a large number of entrepreneurs covering three to four generations, struggling to succeed, as well as a powerful start-up movement In 2016, the country saw a record number of newlyestablished enterprises, over 110,000, bringing the total number of private enterprises to 610,000 Phan tich them so lieu thong ke giai doan -2015: ban tieng anh+ tieng viet (file:///C:/Users/Windows%207/Downloads/sach%205%20nam%2020102015%20(1).pdf) view1+ sách doanh nghiejp source: http://www.gso.gov.vn/ The limitations of private sector Vietnam currently has around 610,000 private firms, but a majority of the registered enterprises are micro-sized with 70% of them employing less than 10 workers and having a registered capital of below VND5 billion (US$220,300) The number of big companies has been growing, but they are yet to demonstrate their leadership in innovation and driving growth Another concern is the downsizing trend among private enterprises, which has prevented productivity gains through economies of scale, specialization and innovation Many small household businesses have refused to register as formal enterprises, citing bureaucratic and regulatory problems, concerns over the security of property rights and high transaction costs Private sector lacks capital They have to borrow capital from the informal market with high interest rate and for a sort time They hardly access to loans of the commercial banks, especially to those with preferential interest rate The main reason is that they are lacking assets to mortgage Many of them not know about the assistance of the Government Private companies have a prominent position in several industrial clusters, like textiles and garments, footwear and others But it is notable that the overall structure of the private sector is not balanced, with over 80% concentrating on trade and services sectors with low productivity and low value-added products and services The number of private firms in manufacturing and processing is small It can also be seen that private enterprises have been facing many difficulties in doing business, with the rate of loss-making and bankrupt companies at a high average of 45% in the 2007-2015 period The Vietnam 2035 Report shows that the productivity and competitiveness of Vietnamese private sector are decreasing Vietnamese firms are engaged in the global/regional production network but with weak positions in the global/regional value chains All of these facts suggest that there has been a lot of obstacles for private businesses to grow and eventually make it to the top II The role of private sector in Vietnam’s economic: Impact on GDP growth: Table1 GDP structure by economic sector (%) 2007 GDP State sector (private sector) 100 35,93 2008 100 2009 100 2010 100 2011 100 35,54 35.13 33,74 35,93 Non-state sector 46,12 46,04 46,53 47,54 46,12 Foreign invested sector 17,96 18,43 18,33 18,72 17,96 Source: General Statistics Office Of Vietnam Table1 show that: Non-state sector contributed to the highest gross domestic product (GDP), reached 47.5% in 2010 and 46.1% in 2011 and relatively stable over the years A forum titled “Private economy in the socio-economic development process of Viet Nam” was held by Vietnam Private Business Association (VPBA) on April 26, 2017Speaking at the forum, Nguyen Van Binh, Politburo Member and Head of the Party Central Economic Committee, pointed out that the private sector has increasingly contributed to economic growth and economic restructuring It has always accounted for the 39-40% of national GDP, a big proportion among other economic sectors However, “the private sector has not fulfilled its role yet as an important driving force of the economy Impact on workforces The private sector has contributed to building relations of production conformity promote productive forces development The transformation of the relations of production has lead to the transformation of the relations of distribution management and make the relations of production become flexible, consistent with the level of development of the productive forces was low and uneven development between regions departments in the country The private sector contributed to attract idle capital of society and optimal use of local resources The private sector is noteworthy that the private sector also became a major source of employment, absorbing about 85% of the 1.3-1.4 million new labour market entrants each year (following report from meeting of the 12th Communist Party of Vietnam Central Committee) Currently in our country, the state sector only deals with employment given to over million workers While only counting private enterprise and non-farm individual households business has created jobs roughly million workers Private Sector is a great advantage over creativity job (https://www.uef.edu.vn/newsimg/tap-chi-uef/2015-11-12-25/3.pdf) Impact on the national budget: The private sector has contributed significant in the government budget Statistics show now it contribute to the budget With low level (less than 10%) but there are pennies direction up Phân tích sản lượng ngân sách gồm báo cáo niên giám đính kèm tổng cục thống kê ... acknowledges the greater contribution of the private economy to the country’s socio-economic growth The meeting supplied some information about the development of private sector In the early 1990s,... proportion among other economic sectors However, the private sector has not fulfilled its role yet as an important driving force of the economy Impact on workforces The private sector has contributed... eventually make it to the top II The role of private sector in Vietnam’s economic: Impact on GDP growth: Table1 GDP structure by economic sector (%) 2007 GDP State sector (private sector) 100 35,93