Private enterprises yet to leave their mark

Domestic private enterprises have failed to step up to the plate in the decade since the Enterprise Law came into force.

The latest Central Institute for Economic Management (CIEM) report on the implementation of the Enterprise Law and Investment Law shows that domestic private enterprises have developed in terms of quantity, but not quality.

According to the report, based on General Office Statistic statistics, operating domestic private enterprises increased from 31,767 in 2000 to 178,852 in 2008, accounting for nearly 50 per cent of registered enterprises nationwide.

The return on equity ratio at domestic private enterprises in 2008 was 468.74 per cent, while the figures at state-owned and foreign-invested enterprises was 194.96 and 220.84 per cent, respectively.

“The Enterprise Law has encouraged the development of private enterprises. The increase of those enterprises indicates that private enterprises are very active in the economy,” said Nguyen Dinh Cung, CIEM deputy director.

However, domestic private enterprises’ effectiveness has not improved much during the past 10 years, according to the report. The return on assets ratio at domestic private enterprises increased from 1.63 per cent in 2000 to 1.76 per cent in 2008. Meanwhile, the figures at state-owned and foreign-invested enterprises were 3.38 and 9.55 per cent, respectively.

“That means domestic private enterprises are less effective than state-owned and foreign-invested enterprises though they have been working harder and using more capital,” said Le Duy Binh, an economist at Economica Vietnam.

In the list of the 500 largest enterprises in 2009, private enterprises accounted for only 29 per cent, however, most of them are equitised state-owned enterprises. State-owned enterprises still rank in the list’s top 10. “Though we have seen some domestic private enterprises emerging as economic groups, most enterprises are still small-sized,” Cung said.

Lack of investment in production technology, research and development operations and human resources are the main reasons for domestic private enterprises’ lack of effectiveness. About 60.3 per cent of domestic private enterprises are formed by tiny-scaled household businesses that reflect nepotism management.

VietNamNet/VIR

Tags: Vietnam enterprises, Vietnam Private enterprises