Unfairness still a feature of Vietnam business environment: expert

On occasion of the Vietnamese Entrepreneurs’ Day (October 13), The Investor talks with Nguyen Dinh Cung, former head of the Central Institute for Economic Management (CIEM) and one of the compilers of the Law on Enterprises, about how to make the private economic sector in Vietnam stronger.

Do you think the government’s target of having 1.5 million domestic private companies by 2025 can be achieved?

Resolution 10 dated June 3, 2017 of the 12th Party Central Committee on private economic development set the goal of having at least 1 million domestic private companies by 2020, and the figure would rise to 1.5 million by 2025 and at least 2 million by 2030.

By 2024, the number of operating companies has not yet reached 1 million. That means the 2020 target will not be achieved even in the next five years, and it is certain that by 2030 there will not be 2 million.

Resolution 10 also set the goal of developing the private sector to become an important driving force in the socialist-oriented market economy. It aims to develop the private sector fast and sustainably with high growth rates in terms of quantity, scale, quality and contribution to the national GDP.

On October 10, 2023, the Politburo issued Resolution 41 on building and promoting the role of Vietnamese entrepreneurs in the new era, replacing Resolution 09 issued in 2011.

With many new points, Resolution 41 was enthusiastically received by the business community and entrepreneurs as a special gift on occasion of the Vietnamese Entrepreneurs’ Day, October 13, 2023.

Resolution 41 emphasized the perception that “entrepreneurs have an important position and role, and they are one of the core forces contributing to the country's course of industrialization-modernization and international integration; building and developing a self-reliant and independent economy; while ensuring national defense and security”.

The resolution also features very important, new perspectives and solutions such as creating an equitable, safe and favorable business environment for entrepreneurs to develop and contribute; and supplementing appropriate economic sanctions to handle violations instead of criminalizing economic relations.

Implementing the Politburo's resolution, the Government has issued many resolutions. In Resolution 45, dated March 31, 2023, the Government affirmed: “Developing the private sector to make it an important driving force in the socialist-oriented market economy which contributes to sustainable and fast socio-economic development and enhances the autonomy and self-reliance of the economy...”.

Most recently, the Government issued Resolution 66, dated May 9, 2024, which set out many important goals such as: By 2030, there will be at least 2 million companies; By 2045, forming and developing a contingent of Vietnamese entrepreneurs with scale, capacity and qualifications to meet national development goals, with high income, positions and prestige in the region and global arenas.

To achieve these goals, the resolution proposed seven main groups of tasks and solutions and directed ministers, heads of ministerial agencies, heads of government-managed agencies, chairpersons of municipal/provincial people’s committees, and relevant organizations and individuals to organize the implementation.

So the Party has issued guidelines and policies; the Government has introduced programs and action plans. Why can't we achieve the goals? In my opinion, research and analysis are needed to find the cause.

Although the number of companies has not reached the target, we already have large private enterprises such as Vingroup, Thaco and Hoa Phat.

How many businesses like those do we have? We often say that when businesses are healthy, the economy is healthy. Everyone acknowledges that businesses are indispensable for national growth.

Important but must develop. This force must develop and develop continuously both in quantity and quality. Where there is quantity, there is quality. We cannot naturally have 100 billionaires when the number of companies is only a few hundred thousand. When we have a large number of companies, we can create an ecosystem with top businesses in research and technology.

Our goals of 1.5 million companies by 2025 and 2 million by 2030 are unlikely to be achieved. Without quantity, there is no quality. We must be a sufficient number of small and medium-sized enterprises to have large enterprises. In my opinion, even 1.5 million or 2 million is still a small number, not to mention their business lines and locations.

For example, if we have 1 million companies of which 20% are engaged in processing and manufacturing, the number of firms in these fields would be 200,000. But if we have 2 million, there would be 400,000. Morever, the number of businesses must be large enough for the manufacturing industry to develop. Business development must be linked to industries and the balanced development of regions.

Currently, there are fewer than 1 million companies, but about 70% are concentrated in the northern delta region and the southeastern delta region. The number of businesses in other regions is very small. There are provinces with an average of only 0.5-1 enterprise per 1,000 residents. How can the economy develop and how can we create jobs for workers without businesses?

International experience shows that groups of large enterprises play an important role. They are the core that leads the development of industries and the entire economy.

What needs to be done to expand the number of companies, in your opinion?

The Government has made it clear in its resolutions and clearly assigned work to agencies and individuals. But why can’t the goal be achieved. Where are the difficulties? Things like that should have been put on the table to figure out why it was not achieved and who was responsible for that.

While the number of business establishments is decreasing, the number of businesses withdrawing from the market is increasing. So the target of the number of companies set by the Politburo is even more distant.

We must create vitality and excitement for businesses to be established. People must see that setting up a business is a development opportunity and an opportunity to contribute, not a thing to take risks. I am not referring to market risks.

Businesspeople need the State’s encouragement, training and accompanying them. But in reality, there is still unfairness. Tax stories are an example.

Many businesses suffer because they could not receive or received late VAT refunds from the State. But when they owed tax because they endured difficulties in maintaining employment, paying salaries and making loan payments, their leaders were subject to exit bans. They needed to do business overseas, but travel was limited.

The tax authority said that the law stipulates the restriction, but which law? The law only says country exit is temporarily banned in case of tax enforcement, which means there must be a tax enforcement decision. Only when people do not comply, exit is restricted. But in many cases, businesses did not know they owed tax. Tax debt should be treated like salary debt or bank debt.

Though the business environment is good, if people feel that it is not fair, that they are not encouraged and not accompanied, who dares to engage in business?

I know some people who ventured into business right after the introduction of the country’s Doi moi (reform) policy in 1986. They have a very good life, and if they live abroad, they will still have a good life, but they choose to maintain their businesses here to ensure jobs for workers. But many find it very difficult to transfer their companies to the next family generations, because given concerns over actual business operations, their children do not want to take over the business.

It is necessary to encourage people to do business; encourage existing businesses to accept bigger market risks, domestically and internationally; encourage large businesses to invest more; encourage investments in technology and new business models to lead Vietnamese value chains, instead of only focusing on revenue expansion.

The State needs to stand behind entrepreneurs to support them. Vingroup cannot build an auto industry without support from the State. Vingroup should not be left alone in developing electric cars. The State must stand behind it to support it, in order to win together. If one Vingroup succeeds, Vietnam will have two Vingroups, three Vingroups...

According to a report by the Vietnam Confederation of Commerce and Industry (VCCI), there are currently about 930,000 operating domestic private companies in the country. But they are mainly micro-sized or small and medium-sized, accounting for 98%, and only about 2% are large enterprises.