More incentives needed for private sector

The private business sector needs a greater effort and more favourable policies to see a stronger growth, both in quantity and quality.

Since the Business Law was introduced, the private sector has seen a significant growth in quantity. The number of private businesses has increased by 15 times from 31,000 in 2000 to the present figure of more than 400,000. The average chartered capital also rose from VND1.29 billion in 2001 to VND11.2 billion in 2009, 1.44 percent of businesses have a registered capital of more than VND200 billion and 0.6 percent have more than VND50 billion.

According to the 2008 index, while a state-run business needs VND436.5 million to create a new job, a private company needs only VND250 million. This shows how effective the private sector can be.

Le Duy Binh from Economica Company said there should be better policies for the sector to develop support industries for not only foreign but also Vietnamese state-run companies.

Economic expert Pham Chi Lan said that limited premises for business and production and a lack of capital are behind the sector’s low profits.

Private businesses find it hard to access bank loans because they do not have the premises to mortgage, she said, adding that their weaknesses in management and outdated technologies also prevent private businesses from developing.

It is estimated that only 2 percent of private businesses in Vietnam have access to modern technologies, much lower than Thai businesses (30 percent), Malaysia (51 percent), and Singapore (73 percent).

Phan Vinh Quang, Deputy Director of Star Vietnam, said that although the private sector has taken advantage of Vietnam’s cheap workforce, they can not develop as expected.

Poor business management and lack of and confidence also stand in their way of progress, said Vinh.

Nguyen Dinh Cung, Vice President of the Central Institute for Economic Management, said the businesses environment has improved in recent time but the key to success depends on business themselves. – VOV

Tags: Vietnam companies, Vietnam enterprises, Vietnam SMEs