Private enterprises: Part 2: Limited competitiveness

(Baonghean) - Policies to support private enterprises have been gradually implemented, and the awareness and attention of ministries, sectors, and localities towards supporting the development of private enterprises are gradually increasing. These are encouraging signs for the private business community, giving them more confidence and fighting spirit to overcome difficulties and achieve sustainable development.

Workers at Duc Phong Co., Ltd. Photo: QL

However, in reality, the private sector generally still has certain limitations. As a result, many domestic businesses lack sufficient competitiveness, and their development and growth into medium and large-scale enterprises is very slow.

Many policies offer only general incentives.

In the reality of private businesses, many new policies remain at the level of general incentives, lacking clear preferential regulations such as assistance with production space, support for businesses participating in public procurement and service provision plans, and credit policies. According to Dr. Cao Si Kiem, Chairman of the Association of Small and Medium Enterprises (SMEs), currently only about 30% of private businesses have access to capital from banks, while the remaining 70% cannot access it due to not meeting the eligibility criteria. In particular, a large number of businesses have tax debts, overdue debts, bad debts, and are unprofitable, making their ability to borrow even more limited. To be fair, banks meet the needs of businesses that meet the criteria, but they cannot meet the needs of those that do not – that is the principle of banking. And almost 70% of businesses do not meet the criteria. That is the current reality of private businesses," said Dr. Cao Si Kiem.

For a business to achieve sustainable development, it needs resources, finance, technological expertise, access to market information, legal knowledge, etc., thus requiring comprehensive support from the state. In reality, there are shortcomings and inconsistencies in policy regulations, and even the implementation of these policies is very slow. Although the government allocates resources to support businesses annually, the effectiveness and impact on businesses cannot be clearly measured. Many businesses are unaware of or unable to access state support policies, and some believe that the support policies and programs do not truly meet their actual needs, with complicated participation procedures and a lack of specific guidance – the Ministry of Planning and Investment acknowledges.

While this is the situation at the central level, the impact of policies and programs is even more limited at the local level, due to weak efforts in understanding the needs and production and business situation of enterprises. Many localities have not proactively developed programs and policies to support businesses in their areas; most have only participated in programs led by ministries and agencies to a modest extent (trade promotion, intellectual property, quality management, etc.). Nationwide, approximately 30% of localities have not yet approved and implemented their provincial enterprise development plans, nor have they submitted reports on the implementation of these plans to promptly address recommendations and difficulties.

Lack of consistency in policy design

The lack of synchronization in policy and program design, as well as in practical implementation, is one of the reasons why private enterprises have not truly achieved fair competition with other types of businesses. The Ministry of Planning and Investment acknowledges that 6 out of 8 policies supporting businesses stipulated in Decree 56/2009/ND-CP, when implemented, are integrated into programs of various sectors and fields. Consequently, these programs have a broad scope of support, not specifically for small and medium-sized enterprises (SMEs) and private businesses, and their content is not truly appropriate. This leads to new policy groups remaining on paper, unable to be put into practice – Director Ho Si Hung frankly stated.

For the private business community, the weak coordination between ministries and between the central and local governments, and the lack of mechanisms for coordinating support activities, are among the insurmountable obstacles. In reality, with an average of only 2-3 dedicated staff members for business support (even in some large cities like Ho Chi Minh City, the Department of Planning and Investment only has one staff member from the Economic Sector Department in charge of supporting the development of SMEs), it is very difficult for policies to support business development to be truly effective," said Director Ho Sy Hung.

Furthermore, in practice, the attention and investment of localities in supporting the development of SMEs are low, while central government budgets are limited. Most localities have not proactively allocated budgets to support SMEs; if they have, it is very limited compared to the high demand for support from the SME community (only 19% have been allocated separate budgets for supporting businesses). Currently, there is no equal competition between private and state-owned enterprises, especially in that if losses occur, private enterprises cannot obtain debt guarantees, debt restructuring, or debt forgiveness like state-owned enterprises. This is unfair. Even regulatory agencies face difficulties and obstacles in implementing preferential policies and support for SMEs regarding taxes, credit, etc. The limited capacity and vision of private enterprises, with most lacking long-term development strategies, also contribute to the low level of awareness and interest among businesses in support programs for innovation, creativity, and enhancing competitiveness. Therefore, for private enterprises to continue developing strongly and sustainably, more support is needed for this type of enterprise, especially in terms of policy sustainability and stability.

Clearly, without corresponding incentives, the resources of the economy cannot be mobilized, and creating a favorable and equal competitive environment for all types of businesses in general, and private enterprises in particular, must be identified as a priority solution to attract all resources for development. The reality of the private enterprise landscape shows that the essential element for private enterprises to operate more effectively is practical support, implemented in a more focused and targeted manner. Specifically, support for private enterprises should focus on improving market access, access to credit, adoption of new technologies, and support for the formation of industry linkages and development along value chains. To achieve this, institutional management reform plays a decisive role.

Red River