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Private economic groups seek official recognition
The private business sector accounts for up to 60 percent of the Gross Domestic Product (GDP). However, private economic groups still need further recognition from the state and society to achieve stronger growth.
Given this, the Prime Minister has assigned the Ministry of Planning and Investment to join the Association of Young Entrepreneurs in proposing a model for private economic groups to be submitted to the government this October.
A conference on developing private Vietnamese economic groups was held recently in Hanoi. Participants in the event agreed that besides the issuance of a related legal document, more efforts are needed for the sustainable and substantial development of these enterprises.
Need for major private groups
At the conference, Truong Gia Binh, President of the Board of Directors of Vietnam’s FPT Group, stressed that first and foremost, the country must realize the pressing need for stronger growth and there must be groups which devote themselves fully to their commitments.
Mr. Binh made this remark as he cited the rapid development of the Republic of Korea which has many world-leading economic groups.
According to Pham Dinh The, senior official of Phu Thai Group, the model of private economic groups in Vietnam remains nominal. The translation of this model into reality is unlikely to be possible without a pledge from the government.
Representatives of Japanese businesses attending the conference said Vietnamese companies have had no clear structure or differentiation of functions. By way of comparison, Japanese and Korean businesses have pyramid-shaped structures. At the top are global groups and at the base are major companies, and small- and medium-sized enterprises. This is a unified system, in which bigger companies transfer contracts to smaller ones.
In the meantime, Vietnamese companies are more like a disorganized pile of bricks.
The need to promote the development of private groups as economic engines is becoming increasingly urgent as state-owned groups manage 75 percent of the national assets but pay for only 28 percent of the state budget.
The government promulgated a decree in late 2009 which stipulates the establishment of some pilot state-run economic groups. According to the decree, these groups will play a mainstream role in the national economy and will enjoy preferential treatment in terms of capital, land and some monopoly rights.
Some expressed concern that this might deepen the inequality between state and private groups.
Participants in the conference believed that it would be very difficult to create giant groups through the spontaneous development of private enterprises, most of which are small- and medium-sized.
In any case, the government has shown its determination to work out a model for private economic groups, which takes into account different kinds of support from the government. Such a model will also have to handle such issues as institutional frameworks and global trademarks.
In the US and Europe, private groups were often established through mergers or expansion, which take a long period of time. The newly emerging economies such as Japan, China and the Republic of Korea, have taken shortcuts by using the state apparatus to boost the creation of strong groups.
“We can’t wait 200 years like the US did to have powerful private groups,” said Nguyen Manh Cuong, Vice President of the Association of Young Entrepreneurs. “Instead, the state will guide and promote such development.”
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