AP: Private businesses have high hopes for Vietnam's new leader

The generation of leaders following the Party Congress is expected to help Vietnam accelerate and modernize its economy as well as open up many new opportunities for businesses.

Vietnam was once considered a bright star among developing countries in Asia. Now, many foreign investors consider Vietnam a rival to China in the role of the world's factory. However, some people also comment that Vietnam's financial system is very problematic.

Risks such as high inflation in the previous period, bad debts at state-owned banks and the Chinese factory vandalism in 2014 have made many businesses apprehensive. However, the young workforce with low labor costs also attracts many foreign businesses to invest long-term, such as Intel or Samsung. Newly signed free trade agreements are also positive signals for investors.

This week's 12th Party Congress elected a new Central Committee that is expected to accelerate economic modernization. Tran Minh Thang, who has 50 employees at a ceramics factory in Bat Trang (Hanoi), said all he wants is for the government to maintain stability. "Because we can't do anything without stability," he said. He also hopes the new leadership will "accelerate economic reform," because "once the country develops, my business will benefit too."

Workers in a pottery workshop in Bat Trang. Photo: AP

The economy, which is still dominated by state-owned enterprises, is one of the major unresolved challenges. However, Vietnam is also making progress. To avoid dependence on China, Vietnam joined the 12-nation Trans-Pacific Partnership (TPP), which includes provisions requiring the government to reduce its intervention in the economy. Vietnam has also signed several trade agreements with the European Union (EU), South Korea and its Southeast Asian neighbors.

International companies are increasingly realizing that they can benefit from locating factories in an Asian country with low export tariffs to major Western markets. That is part of the reason for the recent influx of foreign investment into Vietnam.

Textile and garment exports are expected to be one of the sectors that will benefit the most from Vietnam joining the TPP. Observers also expect Vietnam to become a fairer and more transparent business environment for foreign enterprises.

Economist Pham Chi Lan said trade agreements are a huge opportunity for Vietnam’s development. However, they could be wasted if domestic companies fail to increase their efficiency and most of the benefits go to foreigners.

The government forecasts economic growth over the next five years to be around 6.5-7%. Last year's rate was 6.7%.

Many small businesses are hoping for a business environment where the private sector is not overwhelmed by the state sector, and where there are more opportunities in Vietnam and abroad.

Luong Van Huy’s family-owned company has been making ceramics for four generations in Bat Trang. After initial export success in the 1990s, the business began to struggle after the 2009 financial crisis. Revenue from overseas markets fell from a peak of $1 million to $300,000 a year.

"I can clearly feel the impact of the global economic recession. Before, I sometimes could not meet the needs of foreign customers. But now, export revenue has decreased by 80% and I have to focus more on the domestic market," Huy said. He hopes the new leaders will apply more economic policies "to open the market further for businesses".

Adam Sitkoff - Director of the American Chamber of Commerce in Vietnam said that the more urgent thing now is to solve problems such as bad debt in banks, and ensure that the government plays the role of referee, rather than participant in the economy.

"Hopefully we will see a faster pace of reform, not a slower pace. Because at the end of the day, this is what will help 93 million people have better choices, higher quality, lower prices and more opportunities for their children," he said.

According to VNE