Private economy gradually affirms its important role

Number of businesses growing annually. Illustration: Hien Hoa

Every year, more than 100,000 new businesses are established.

According to the General Statistics Office, the number of newly established enterprises and the number of temporarily suspended enterprises returning to operation has increased. Since 2016, more than 100,000 new enterprises have been established each year. In 2017-2018, 258,134 new enterprises were established and 60,458 temporarily suspended enterprises returned to operation thanks to the improved business environment and the State's policies to support and develop enterprises.

The positive point in more than 2 years of implementing the Resolution is that the entrepreneurial spirit has spread widely in society and the strong development of the private economy in a number of fields such as construction, processing, manufacturing, automobile industry, air transport, finance, banking... has contributed significantly to the development of Vietnam's national brand in industries and fields with great potential and strengths. The trend of developing innovative startup business models is taking place vigorously; there are currently more than 3,000 innovative startups in operation, many of which are successful.

The private sector contributes greatly to GDP and promotes rapid economic growth. The private sector contributes over 40% of the economy's GDP and shows signs of increasing thanks to economic growth faster than the overall growth rate of the economy. By 2018, it was estimated that the private sector contributed 42.1% of the economy's GDP and showed signs of increasing.

The private sector also creates many new jobs; the number of workers aged 15 and over working in the economic sector accounts for the majority of the workforce and is increasing. In 2019, the number of workers working in the private sector accounted for 83.3% of the total number of workers aged 15 and over working nationwide, equivalent to nearly 45.2 million people (2017: 44.9 million people). In the 2 years 2017-2018, the number of newly established enterprises created nearly 2.3 million new jobs.

In 2017-2018, private economic investment capital grew by 17.1% and 18.5% respectively compared to the previous year, higher than the growth rate of total social investment capital (about 11-12%/year). Accordingly, the proportion of private economic investment capital in total social investment capital increased rapidly and exceeded 40% (in 2017: 40.6% and in 2018: 43.27%).

The private economy mobilizes large capital sources in society for economic development. In 2017-2018, the number of newly established enterprises had a total registered capital of 2.77 million billion VND (not including nearly 4.28 million billion VND of additional capital of operating enterprises).

The private sector plays an important role in Vietnam's trade activities. In 2017-2018, the private sector accounted for 25.3 - 26.3% of total merchandise export turnover and 34.7 - 34.8% of total merchandise import turnover, more than 10 times larger in terms of export and nearly 7 times larger in terms of import of the state-owned enterprise sector (excluding crude oil).

State budget revenue from production and business of the private economic sector increased rapidly, over 15%/year, about twice as high as that of the foreign-invested economic sector, while state budget revenue from production and business of the state-owned enterprise sector decreased. The Government's efforts in promoting the business start-up movement and improving the business environment have brought initial results. State budget revenue from non-state enterprises continuously increased over 16%. 2018 was the first year that state budget revenue from production and business of the private economic sector exceeded that of the foreign-invested sector and the state-owned enterprise sector. These signals reflect the growth in scale, number of entities and improvement in efficiency of the private economy.

The contribution of the private economy to the state budget revenue is increasingly large. Before 2016, the state budget revenue from production and business activities of the private economy only accounted for less than 30% of the total revenue from production and business of all economic sectors, lower than the proportion of state-owned enterprises (up to 11%) and the proportion of the foreign-invested sector. However, by 2018, this proportion of the private economy had surpassed the foreign-invested sector and far exceeded (nearly 9%) the state-owned enterprise sector. The contribution to the increase in state budget revenue shows that the development of the private economy has played a role in consolidating the national financial system.

Breakthrough in business environment

According to Associate Professor Dr. Nguyen Trong Dieu - Chairman of the Vietnam Private Entrepreneurs Association, the above results are due to the fact that the current business environment in Vietnam is quite attractive for investment and business; the business environment is changing rapidly and improving positively.

“We see that the Party and State attach importance to improving the business environment, considering this work as a key and central step for economic development, GDP growth and the foundation for investment and business development as well as business establishment,” Mr. Nguyen Trong Dieu emphasized.

Associate Professor Dr. Nguyen Trong Dieu - Chairman of the Vietnam Association of Private Entrepreneurs talks with reporters about the business environment in Vietnam. Photo: Hien Hoa

To analyze more clearly, the Chairman of the Vietnam Private Entrepreneurs Association said that, firstly, the Vietnamese business environment has a stable political system not only in the region but also in the world. Especially in the context of the world and the region recently appearing many complicated developments, conflicts, disputes and the risk of trade war.

Second, in terms of demographics, Vietnam's population is still in the golden population period, the young population group in good working age still accounts for a high proportion in the population structure. Accordingly, it creates an abundant and ready labor force, which is a key factor that determines the decision for businesses and investors to consider when deciding to invest and do business.

Third, Vietnam is a developing country, with a GDP growth rate of over 6.5%, there is still a lot of room for investment and development, especially with a population of hundreds of millions of people, a young and dynamic population, an open and friendly culture, and an easy acceptance of new things, thus creating an extremely attractive market not only for foreign investors, large domestic enterprises and entrepreneurs, but also an extremely attractive place for young people, start-up groups, and business start-up groups.

Fourth, the Vietnamese Government has recently made efforts and regularly reviewed, adjusted, and improved indicators related to the business environment, such as adjusting and amending legal mechanisms and policies, focusing on reforming administrative procedures, and has initially implemented digital government and paperless executive offices with the opening of the National Document Interconnection Axis, thoroughly applying information technology in the activities of state management agencies related to people and businesses to facilitate production and business development.

Fifth, the awareness and perception of starting a business, starting a real business to have a job, a career, thereby establishing oneself and contributing to society has initially become a culture in society. Considering self-employment as a way of life, as glory is becoming a trend in society, the majority of society gradually admires and sees those who do business honestly and successfully as images, as examples to follow. That is why it has created a wave of spread, urging business establishment, starting a business and developing, investing in business expansion, being a good driving force and catalyst to promote development, improving the business environment.

Sixth, the Vietnamese Party and Government have attached great importance to and taken drastic and concrete actions in the international integration stage, with great achievements such as completing negotiations and signing many free trade agreements, continuing a number of FTA agreements with large regions, and at the same time attaching great importance to disseminating this content to the business community, with significant attention and support for businesses. Thereby, it also promotes significant improvement of the business environment.

To have a more comprehensive view of more than 2 years of implementing the Resolution, on May 2, the Central Economic Committee and the Government will organize the Vietnam Private Economic Forum 2019. There will be from 2,000 to 2,500 private enterprises participating. The Forum is a place to gather the business community, connect and share experiences, and is also an opportunity for the Party and Government to listen to recommendations and proposals from private enterprises to promptly remove difficulties for private enterprises to develop in accordance with the policies and resolutions set out./.