Final lesson: Fair resource allocation

(Baonghean) - According to many businesses, for private enterprises to thrive, the key is to enhance transparency in policies and laws, review and amend regulations related to businesses to create an equal and favorable business environment for private enterprises. State management agencies need to continue reforming administrative procedures comprehensively in areas such as taxation, insurance, customs, land, environment, construction, and investment…

At the 2015 CEO Forum, themed "Creating an Equal and Healthy Business Environment," many opinions suggested the need for more robust institutional reforms... In fact, over the past period, the Government has taken important steps to reform institutions and enhance competitiveness, clearly demonstrated through Resolution 19-CP/NQ and the directives and decisions of the Prime Minister aimed at reducing administrative procedures.

Strong reforms to the governance system.

Furthermore, the Government has demonstrated a significant shift in thinking by setting its goal as catching up with and surpassing the level of the six more developed ASEAN member countries. Another highlight is that the Government has submitted many draft laws to the National Assembly with strong innovative content, and in the final session of 2014, it passed the 2014 Enterprise Law, the 2014 Investment Law, the amended Housing Law, and many other laws such as tax laws… This has expanded the freedom of business as stipulated in the 2013 Constitution, reduced legal risks, ensured the safety of assets, investments, and businesses, improved market order, implemented fair competition according to the law, and controlled monopolies. Continuing institutional reforms will create new growth momentum, because institutional reform is a breakthrough spearhead to create new impetus for the economy, aiming to exploit new potential and advantages to help the Vietnamese economy move forward in the new phase of global integration.

The amended Enterprise Law, Investment Law, and Bidding Law improve market entry conditions and the investment and business environment with important innovations (such as reducing the number of conditional business sectors; reducing and clearly defining prohibited business sectors; simplifying and reducing barriers to market entry; stipulating that businesses have the right to freely conduct business in all sectors not prohibited by law, creating conditions for businesses to fully utilize their potential and business opportunities for development...). However, some institutional barriers remain. The legal framework is not yet stable, lacks transparency, and is difficult to predict, potentially causing adverse impacts on the business environment; the quality of some legal documents is not high; market transactions are not stable and reliable; a fully established competitive mechanism has not been established for network infrastructure sectors, especially the electricity market; and the restructuring of state-owned enterprises is slow and has not met planned targets… These are specific obstacles.

Meanwhile, by the end of 2015, the ASEAN Economic Community (AEC), comprising 10 member countries, will come into effect with five main pillars: a unified production and market; virtually zero tariffs on goods; a unified services and investment market; free movement of investment capital among member countries; and free movement of skilled labor within the 10 member countries. All these commitments require Vietnam to make significant strides in developing its market economy institutions, especially with concrete, practical, and long-term solutions for the development of the private sector.

Finishing rattan and bamboo products at Duc Phong Company. Photo: PV

We must truly play a pivotal role.

For effective institutional reform, in addition to the participation of state management agencies, the active and proactive participation of the business community is also needed, especially in making practical contributions to the formation of all legal documents related to business. Through their practical activities, businesses need to proactively identify and propose to relevant agencies the difficulties and obstacles they face in the implementation of legal documents. They should not stop at complaining and reflecting, but should also actively provide feedback and suggestions to state agencies in building institutions and policies. From there, these agencies can consider amending, improving, and supplementing, in order to create a transparent legal framework that helps the business community develop strongly.

According to Minister of Planning and Investment Bui Quang Vinh, although private enterprises have been identified as one of the pillar types of businesses in the economy, they have not yet received the necessary incentives. This leads to the urgent need to create a level playing field for all types of businesses, especially in handling capital and creating jobs, which means a fair allocation of resources. Whether private enterprises can participate in the FDI sector depends on proper linkages and policies, and state-owned enterprises also need to form chain models and create conditions for private enterprises to participate to be truly practical. The first support needed is to create an equal investment and business environment, eliminating discrimination between economic sectors.

Equality in access to loans

Sharing this view with state management agencies, VCCI Chairman Vu Tien Loc stated that the most important thing is to help private enterprises have more opportunities to access loan capital. In reality, borrowing capital is the biggest hurdle for private enterprises, and although borrowing from banks is already very difficult, and businesses are reluctant to borrow, there are not many other sources of access to capital. While the government has established a guarantee fund for businesses, what private enterprises need is a simpler and more user-friendly lending mechanism, especially creating opportunities for private enterprises to access low-cost medium and long-term loans such as official development assistance (ODA) and capital mobilization through the capital market, as required by Conclusion No. 14 of the Party Central Committee, which calls for a mechanism to allow private enterprises to borrow ODA capital like state-owned enterprises," Chairman Vu Tien Loc said.

Thus, credit guarantees for non-state-owned enterprises are currently proving to be an effective requirement and solution. However, it would be best if private enterprises could access credit on a credit-based basis similar to what state-owned enterprises currently enjoy after the credit-based mechanism has been improved, supplemented, and perfected. Consideration should be given to granting specific functions to relevant authorities (credit service centers, social enterprises, non-profit organizations, or local state-owned enterprises under local branches of the State Bank of Vietnam), including the function of monitoring credit activities in the area, and providing an additional source of credit information for relevant authorities to support management and administration.

We are anticipating the government's determination to restructure the economy, adapting and aligning with the integration roadmap, in which the position of private enterprises is more clearly defined, so that this sector can attract maximum resources from the entire society, from finance to intellect. 2015 will be a crucial milestone for the economy as free trade agreements come into effect, and we begin to integrate more deeply and broadly with other economies with the signing of the TPP Agreement and the EU-Vietnam Free Trade Agreement. Currently, the government is clearly demonstrating its determination to change the market economy system. This is a good opportunity to lay the legal tracks for the private enterprise to sail onto the regional and global high-speed rail system.

Red River