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Bureaucratic hurdles still hobble private sector
An architect of the Enterprise Law regrets that too much of the economy remains off-limits to Vietnam’s home-grown private enterprises.
As the Central Office of the Communist Party convened a conference to review seven years’ experience implementing Resolution #5 on the development of Vietnam’s private economic sector, Tien Phong newspaper talked with Dr. Le Dang Doanh, former Head of the Party’s Central Institute for Economic Management (CIEM).
Tien Phong: How would you characterize the development of the private economic sector over the last seven years?
Dr. Le Dang Doanh: Vietnam’s private economic sector has been developing well. It has created many jobs and has been the driving force for the national economy development. However, we have to admit that the development has been rather slow. Vietnam still lacks enterprises that have dynamism, good brands, strong technology and management. They aren’t internationally competitive.
Registered private enterprises provide seven percent of the economy’s jobs, eleven percent of GDP and some 25 percent of industrial output. Adding the 28 percent created by the household-level economy, the private economic sector currently generates 38-39 percent of GDP, There are some three million non-agricultural households and 12 million agricultural households.
The household economy has major disadvantages. Its production is typically low-tech, and it is not associated with international integration. A survey on the household economy in Hanoi showed that only five or six percent of households are linked to big enterprises.
An example of such linkage would be households that are providing nem cuốn (Spring rolls) to big hotels in Hanoi. The hotels sell them for $5.90 each!
In general, we can see that the household economy has helped families escape from hunger, but still has not helped them escape from poverty.
Tien Phong: What strategies do we need to follow to foster the private economic sector?
Doanh: We have changed our policies, but it is not enough. We need to renovate the institutional framework as well to support a market economy and ensure strong sources of finance. It’s a fact that 64 percent of enterprises can’t get loans from a bank. That means they can’t grow, and that’s no encouragement to families that set up businesses. To develop well, Vietnam needs to emphasize development of the banking sector. It is necessary to mobilize capital from the public and make that capital available to businesses.
We have to tear down the barriers and regulations that restrict the development of the private sector, and provide real support.
One of the problems I see is the domination of foreign enterprises in the domestic market. Let’s take retailing as an example. Why have so many ‘golden tracts’ have been allocated to foreign investors to set up supermarkets, while domestic enterprises have been impeded?
In Japan, I could hardly find a foreign-owned supermarket. It is because of a Japanese law that forbids huge stores to be located within 50 kilometers of another. And that means smaller scale retailers are popular and fiercely competitive
Our private sector policy must emphasize making our own people and nation prosperous. We need to become more ‘open’ to our private sector’s investment in education, science and technology.
Tien Phong: The Enterprise Law gave a huge boost to the private sector. Does it need to be amended to keep private enterprise moving forward?
Doanh: The Enterprise Law has shortcomings that need to be fixed. For example, it does not give emphasize the protection of minor shareholders in businesses. That’s undemocratic.
Tien Phong: In principle, people should be given the right to do anything that’s not prohibited, while the State only does those things the private sector cannot. However, it seems that there are still many fields denied to the private sector. . . .
True. There is a worrysome tendency that state management agencies are setting up lots of obstructions and restrictions through the mechanism of the so-called ‘sub-licenses’ (giấy phép con, a term meaning ‘extra hurdles’ that an enterprise must jump in order to get permission to do something).
The Enterprise Law abolished 180 sub-licenses and modified another 286. But now, however, another 400 new sub-licenses have been drawn up!
Why is that? It is because the National Assembly has not stepped forward and taken over the task of compiling the laws itself. Instead, it’s the ministries that draft the statutes, and of course, they always write the laws and decrees in a self-serving way.
Tien Phong: What should we do to eliminate the ‘sub-license’ trend?
Doanh: First of all, civil servants ought to have decent salaries, and learn to live on them [So they won’t seek extra income to cover their basic needs – VNNB]. Secondly, the drafting of our laws and regulations must proceed in a more transparent way. The public must be offered the chance to comment. Associations ought to express their ideas actively. They must not be just an old folks’ home for retired officials.
vietnamnet, Tien phong
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