Strategies needed for sustainable development of Vietnam’s private sector: VCCI

 There should be proper policies to help the private sector enjoy the same treatment as other sectors, said Dau Anh Tuan, Deputy Secretary General and Director General of the Legal Department of the Vietnam Confederation of Commerce and Industry (VCCI), when speaking to the Government Portal on the need to strengthen this economic sector for sustainable growth. 

How do you see the private sector developing in recent years?

In nearly 40 years, Vietnam's private sector has almost one million registered enterprises and five million home-based businesses.

Private enterprises are critical to the economy, supporting key infrastructure projects and developing automotive brands that state-owned enterprises don't.

Many large firms in the real estate and financial sectors compete globally, while medium-sized ones have advanced technology but limited involvement in global supply chains.

Many households and individual businesses in the informal economy provide significant employment and contributions to GDP. However, its size and reluctance to formalize hamper growth, limit technology adoption and management improvements, and access to government support.

What should be done for the private sector to be treated fairly like other sectors of the economy?

Much remains to be done to develop the private sector. According to the Party's direction, a more systematic strategy is now needed to further empower private enterprises to assert their important role in the economy.

At present, incentives for the private sector differ from those for state-owned and foreign-invested enterprises, particularly in terms of access to resources. State-owned enterprises (SOEs) often benefit from land rent exemptions and lower leasing costs.

Foreign-invested enterprises (FIEs) have access to well-equipped industrial parks and enjoy tax exemptions, which allow capital-rich FIEs to secure favorable lease terms. In contrast, private enterprises, especially SMEs, face challenges in accessing land, resulting in their limited presence in industrial parks.

In terms of capital, SOEs enjoy high credit ratings from banks, which makes it easier for them to access financing. FIEs can tap various funding sources, especially those with low costs. Meanwhile, most Vietnamese private enterprises rely solely on banks and face relatively high interest rates compared to other countries.

There are incentive policies to support large foreign enterprises, but very few for Vietnamese private enterprises. The Law on Supporting Small and Medium-sized Enterprises, enacted in 2017, including provisions for tax reductions for small and medium-sized enterprises, has not been properly enforced after several years.

At present, these enterprises do not benefit from tax reductions because the corporate income tax law has not been amended.

What strategies will be in place to increase the role of private enterprise in Vietnam's economy?

I believe that the strategy for Vietnamese private enterprises should target different groups of stakeholders.

Large enterprises should be engaged in key national projects to enhance their capabilities and strengthen the private sector's role. These firms are vital to the national private sector, contributing to the country’s brand while pursuing profit. They should be involved in major initiatives such as high-speed rail, energy, and airports.

Additionally, small and medium-sized private enterprises need a strategy to improve management, adopt technology, and engage more in global supply chains.

Small businesses have the advantage of being highly adaptable to the rapidly changing economy. For example, Vietnamese private enterprises benefit from being latecomers by having access to new technologies.

For micro-enterprises and home-based businesses, we need a strategy to encourage this sector to formalize and gradually adopt transparent and accountable management practices. There must be economic incentives while procedures regarding taxes and fees must be very simple.

How should support policies for the sustainable development of private enterprises be designed?

There are several groups of policies to support private enterprises in the coming period.

The first and foremost is the institutional policies. Specifically, we are continuing to implement strong administrative reforms under the leadership of Party General Secretary To Lam to streamline business conditions and compliance costs. Vietnam should be among the top three ASEAN countries in terms of business environment. We need to review legal regulations to further facilitate the private sector's participation in various sectors and reduce the state's presence.

The second is empowering the private sector, which means granting authority and increasing responsibility to private enterprises. This group of policies can target larger companies, allow them to subcontract important projects, and encourage their participation in more areas.

Third is the support and training. The approach must be different from the current one, favoring market-oriented methods rather than the traditional recruitment way.

For small and micro enterprises, the government should support them by providing free services.

In some important areas, such as exports, the government needs to develop programs to support market exploration, trade promotion, and brand building for Vietnamese agricultural products.

To ensure the sustainable development of private enterprises, we should advance cooperation among enterprises. Vietnam must find ways to improve its business culture and promote the role of associations.

What do private enterprises expect from the government?

I think there is still a lack of trust in the private sector on the part of the government apparatus. Many leaders and government officials believe that private companies operate with a short-term mindset and lack expertise.

When private companies are not trusted, they tend to be reluctant to operate. It is important to improve the government's trust in the private sector.

Next is the mindset gap. It's necessary to have a better understanding of business and investors to develop the solutions that will benefit them most. Meanwhile, the government needs to better understand business and the mindset of entrepreneurs.

The third gap is speed. The business moves fast and requires quick decisions, while administrative processes are slow. This mismatch can hamper operations, especially in a fast-changing market where timely decisions are critical.

Thank you for your time.