Party General Secretary To Lam. Photo: Thong Nhat/VNA

DEVELOPING PRIVATE ECONOMIC SECTOR – A LEVER FOR A PROSPEROUS VIETNAM

To Lam

General Secretary of the Communist Party of Vietnam Central Committee

Thanh Dung Co., Ltd., located in the Hoa Hiep 1 Industrial Park (part of the Nam Phu Yen Economic Zone), specializes in processing striped tuna for export to the US and European markets. The company generates an annual revenue of approximately 43 billion dong (1.72 million US dollars). Photo: Vu Sinh/VNP

The private sector has not only helped expand production, trade, and services but also made an important contribution to improving labour productivity, promoting innovation, and increasing national competitiveness. The strong rise of many Vietnamese private enterprises has not only enabled them to dominate the domestic market but also gained a foothold in international markets. This proves that if there is a favourable environment for development, Vietnamese enterprises are completely able to stretch their far and compete fairly with global companies.

However, despite its increasing contributions, the private economic sector has still faced many barriers that hinder its development, making them unable to make breakthroughs in terms of scale and competitiveness. Many individual business households have still followed old business practices, lacked the motivation to develop into enterprises, and even "have not want to grow". The majority of private businesses in Vietnam are small- and micro-sized enterprises which have limited financial potential and management skills, lack connectivity with one another as well as with the foreign direct investment sector, have yet to make full use of opportunities generated by the Fourth Industrial Revolution, and remained slow in digital transformation. Very few enterprises have invested in research and development (R&D) while they also pay little attention to business model reform, technological innovation or new product creation. Therefore, it is very difficult for them to increase added value, promote competitiveness, enhance corporate value, and reach international levels.

In addition to their own limitations, private enterprises have also faced many barriers in accessing resources, especially credit, land, natural resources and high-quality human resources, especially in the fields of technology, engineering and finance. Meanwhile, some state-owned enterprises hold many resources, land, capital and high-quality human resources but have not leveraged them effectively, or even wasted them. Besides, there remain many shortcomings and overlaps in the legal system, the business environment still has many obstacles, while administrative procedures are complicated, time-consuming, costly and pose latent risks. In many cases, the right to freedom of business and property rights are still violated due to the weakness or abuse of power by some civil servants while performing their duties.

Vuong Van Minh, a resident of Quarter 5, Tuong Binh Hiep Ward, Thu Dau Mot City, has improved his family's financial situation by successfully growing mushrooms using proper techniques. Photo: VNP

On the other hand, the Government's preferential and support policies have not proved really effective or fair among economic sectors, or accessible for the private economic sector. In many cases, state-owned and foreign enterprises have still received more incentives than the private sector. State-owned enterprises often gain more favourable access to land, capital, and credit; while foreign firms often receive better support in terms of taxes, customs procedures, and access to land. In addition, corruption and informal costs still exist, causing an invisible burden on private enterprises, reducing production and business efficiency, and causing hesitation when they consider investment expansion.

Obviously, the development limitations of private enterprises stem partly from the shortcomings of the institutional system, economic policies, and the business environment. These bottlenecks not only restrain the growth rate of the private economic sector, making its contribution to GDP almost unchanged for more than a decade, but also preventing the economy from increasing added value and escaping from the middle-income trap, and slowing down the process of turning Vietnam into a developed and high-income country by 2045 as targeted in the Party’s resolution and aspired by the people.

Looking towards the common vision of the country, the private economic sector also needs to define more clearly its mission and vision. It must be a pioneering force in the new era, thus successfully implementing the industrialisation and modernisation of the economy, enhancing national competitiveness, exercising social responsibility, helping to improve people's life quality, participating in the building of a civilised and modern society, and contributing to a dynamic and internationally integrated Vietnam. The private sector should to strive to become the main and leading force in technology application and innovation so as to achieve the goal of contributing to about 70% of GDP by 2030; more and more private enterprises having the capacity to compete globally, mastering technology and deeply integrating into international value chains and supply chains; joining the whole country in building a dynamic, independent, self-reliant, resilient, and prosperous Vietnam.

In order for the private economic sector to fulfil its mission and realise that aspirational vision, the most important factor is to continue to make breakthrough reforms in the institution framework, policies, and the business environment so that the sector can maximise its potential and become the driving force leading the economy to reach the international market. A prosperous economy cannot rely solely on the state sector or foreign investment, but must rely on its internal strength, which is a strong private sector playing a pioneering role in national renewal and development. The national economy can be truly prosperous only when all people engage in working to create material wealth, a society where everyone, every household, and every person is enthusiastic about working.

Facing that requirement, we need to thoroughly re-orient the viewpoints and perceptions throughout the entire political system about the role of the private economic sector as the country's leading growth engine. This requires a fundamental change in policy making, the settlement of limitations, and the promotion of the market mechanism’s superiority to support the private sector in improving labour productivity and innovation. The State must adopt a management method appropriate to the market mechanism, ensure the right to freedom of business, the right to property ownership, and the right to fair competition for the private sector; remove all barriers, make policies transparent, eliminate group interests in policy making and resource allocation, and not discriminate among the private economic sector, state-owned enterprises, and foreign-invested enterprises in all policies. At the same time, the State must stay consistent with the viewpoint that "everyone has the right to freely do business in the industries that are not prohibited by law", build policies that reassure investors, businesses, and entrepreneurs, and create stronger trust between the State and the private economic sector, thereby encouraging businesses to boldly invest, innovate, and participate in strategic economic sectors.

My Tan Fishing Port, located in Thanh Hai Commune, Ninh Hai District, Ninh Thuan Province, has been comprehensively developed to support the local marine economy. Photo: VNA

 

The Politburo’s upcoming resolution on the private economic sector needs to encourage, support, and orient the development of the private sector, create a breakthrough impulse, open up an era of growth for Vietnamese private enterprises. It is necessary to identify the development of the private economic sector as a long-term strategy and policy of the country. The private sector, the state sector, and the collective sector form the core for building an independent, self-reliant, and resilient economy. In particular, focus must be placed on implementing the following key solutions:

First, it is essential to continue accelerating the completion of fully-fledged market economy institutions in the direction of socialism, modernity, dynamism and integration. This is a prerequisite for the private sector to grow rapidly and sustainably. To achieve this, the State must focus on macro-economic stability and institutional improvement, ensuring that the economy operates according to market principles, minimising intervention, eliminating administrative barriers and the asking-giving mechanism, truly managing the economy based on market principles and using market tools to regulate it. In particular, strict control must be exercised over monopolistic enterprises and policy manipulation to protect healthy competition and ensure equal opportunities for private businesses to thrive. The core of perfecting the market economy institutions lies in clearly defining the role of the State in the economy, with the State focusing on macro-economic regulation, creating a favourable business environment, ensuring the effective functioning of market mechanisms, and upholding social equity. Promoting the development of the private sector must be regarded as a central task at present.

Second, it is crucial to effectively protect property rights, ownership rights, business freedom, and the enforcement of contracts for private enterprises. As one of the key functions of the State in a modern market economy is to safeguard investors' property rights, it must establish and enforce a robust legal framework for the rights to ownership of intellectual property and intangible assets, while minimising legal risks and avoiding abrupt policy changes that could harm businesses. A support and protection mechanism should be in place for private investors, particularly startups and innovative enterprises, to help them operate with confidence and grow smoothly. Moreover, a modern socialist-oriented market economy requires a transparent, efficient, and effective contract enforcement system, giving businesses confidence in their commercial transactions and investments. To achieve this, the State should reform the commercial judicial system, shorten the time needed to settle contract disputes, reduce business costs and risks, address cases of contract violations without effective sanctions, enhancing the transparency and efficiency of economic courts and commercial arbitration to ensure fair and impartial rulings, helping businesses protect their legitimate interests. Enhancing the monitoring of law enforcement is also crucial to address inconsistencies between central and local authorities, strictly penalise misuse of inspections and audits that harass businesses, and increase investment and support for the development of the private economy. At the same time, violations of the law by enterprises must be firmly addressed, requiring them to uphold legal compliance and ethical business values, thereby promoting the healthy development of the private sector.

Third, along with the strong consolidation of state-owned enterprises, particularly major state economic groups, priority should be given to building large-scale private economic conglomerates with global and regional scales, extending active support to small and medium-sized enterprises (SMEs) while also fostering economic development of households and cooperatives, and encouraging private firms’ involvement in the country’s strategic areas by recognising their crucial role in the structure of a socialist-oriented market economy. The outdated mindset of prioritising state-owned enterprises over private businesses and the monopoly of state enterprises in certain sectors must be eliminated. The development of large, strong private economic groups with global competitiveness should be promoted, enabling them to lead and support domestic counterparts in deeper integration into global value chains. At the same time, dedicated policies are needed to support SMEs, family businesses and cooperatives, encouraging business households to transition into formal enterprises and promoting a modern, efficient cooperative model. To ensure that the private economy not only grows in scale but also contributes considerably to the country’s long-term development, private enterprises should be encouraged to engage in strategic sectors such as critical infrastructure, high technology, key industries, and energy security. Opportunities for private enterprises should be expanded in major national projects, allowing them to collaborate with the State in strategic industries and special sectors, thereby enhancing research capabilities and technological innovation. The State should establish mechanisms and policies allowing the private sector to take on key national projects and urgent tasks, such as high-speed rail, urban rail, energy infrastructure, digital infrastructure, defence industry and security projects.

The specialized tea-growing region not only generates high economic value but also provides opportunities for local communities to develop community-based tourism. Photo: VNP.