Private enterprises need more help to grow

Jun 30, 2017 | 04:36 PM GMT+7

TheLEADERSince the Sixth National Party Congress in 1986, the process of transition from a subsidized economy to a commodity-based economy with many production and business components has helped improve the private sector and affirm its important role in the economy.

Private enterprises need more help to grow
The private sector has made great progress over the past years. Photo: Internet

After 30 years, the private sector has been making great changes in both scale and Vietnam’s economic indicators, contributing to ensure the welfare, increase the number of jobs and income for employees. 

The position and potential of the private sector are confirmed in the new era. The representatives of private businesses and experts have shared their experience and expectation with the Investment & Brand Newspaper.

Mr. Pham Nhat Vuong, Chairman of Vingroup

Vingroup is a large and successful private enterprise of Viet Nam. However, to achieve this success, Vingroup has been facing many concerns and issues. Vingroup’s achievements come from great effort of the whole system. 

We have borrowed up to VND70,000 billion with the interest rate of nearly 20%, thus, each year, we have to pay VND14 trillion for the interest rate only. Gradually we overcome and now our total debt is VND30,000 to 40,000 billion with assets increased by a dozen times. The total value now of Vingroup is about VND150,000 billion.

In addition, the corporation can control the balance of financial sources and apply discipline in training employees. Even every security guard is trained as an ambassador representing the Vingroup brand.

After the merger of Vinpearl into Vincom and officially applying the corporate model, it can be said that Vingroup has entered a new phase of development. Wishing to accelerate the integration process and to become a world-class economic corporation, Vingroup is focusing on recruiting talented human resource team, which is essential for Vingroup to accomplish its important goal of becoming a positive player in Vietnam economy.

Mr. Do Anh Dung, Chairman of Tan Hoang Minh Group

"Effectiveness, sustainability and progress" are the key factors for a project in particular and for a real estate investor in general. It decides the success of a project and contributes to the prestige of the private sector in a long-term development strategy. Therefore, Tan Hoang Minh decided to choose "Efficiency, sustainability and progress" as the guideline, business philosophy of the corporation.

Especially, 2016 is the milestone Tan Hoang Minh needed to change. I have learned valuable lessons from reputable partners. I have observed and researched how the market is moving and what the customers want. Every day to me is a new experience in the business. Therefore, I and Tan Hoang Minh must constantly change and develop to break our breakthroughs, contributing to Tan Hoang Minh’s position in the market and to also boost the private sector’s performance in the economy.

Mrs. Pham Thi Huan, General Director of Ba Huan Company

When I was a child, I helped my mother collect eggs from duck farmers around my house in Chau Thanh district, Long An province and then walk to the city to sell. Then when the government facilitates the private sector to develop, the management agency no longer hold the egg industry, I founded a business which has gradually developed as it is today.

In the chain linking four of our biosafety breeders, farmers are supported in terms of capital, breeding stock, disease prevention techniques and covered the output of the whole product at a stable price. For more than a 40 – year period sticking to agriculture and striving hard to become a private enterprise, I realize that life has no path but the boundaries that we have to overcome.

All difficulties will be over, because nothing is impossible especially in the context of integration and the promotion of private economy, businesses like Ba Huan must continue to fulfill the mission, open new horizons to help the lives of many farmers better and more stable.

Mr. Tran Ba Duong, Chairman of Truong Hai Auto Joint Stock Company (Thaco)

The three areas we are particularly concerning today are supporting industry, agriculture and tourism. If the projects are feasible, we will participate and try to turn them to business projects.

When deciding to invest in the program of promoting young people to start-ups of the Youth Union with a budget of VND200 billion in five years, from 2016 to 2021, we, in addition to the reason of supporting the national movement, are also for the company itself. Because Vietnam's supporting industries are still weak; therefore, it is necessary to have new companies with passion, creativity and expertise.

We have found that if Truong Hai wants to sustainably develop, it is essential to have other enterprises in the same field participating in the value chain with our company. Thus, no one needs startups more than us.

Mr. Johnathan Hanh Nguyen, President of IMEX PAN PACIFIC (IPP)

When evaluating a country's business advantage, firms are often interested in criteria such as start-up time, licensing procedures and especially tax policy. With recent drastic reforms, Vietnam has made many progress in improving the investment environment and taxation. However, there are still many problems needed to be solved.

What I want to emphasize here is that in addition to creating a favorable business environment, we also need to have policies to support and protect businesses that comply the regulations, pay taxes for the government and make the business environment in Vietnam more transparent so that large corporations and brands are confident to invest.

The government also needs to support enterprises to develop. Most Vietnamese small and medium enterprises have to borrow capital. If they invest in unfavorable time with high interest rates, it is understandable that businesses will collapse or have to sell themselves. 

Actually, the IPP itself does not have the financial footing of the parent company, with a profit margin of only 3-4%, and a 9-10% interest rate would be hard to cope with. Looking at other countries such as Japan or Korea, the interest rate is only about 1% in a certain time.

In 2016 alone, there were 12,478 enterprises completing dissolution procedures, with an increase of 3,011 enterprises compared to the same period last year. This is a very large number, greatly affecting the economic development of the country. As a result, it is expected that the government will soon adjust the bank interest rates, monetary policy to timely support enterprises.

Dr. Nguyen Hong Nga, University of Law and Economics, Ho Chi Minh City

It is important for the government to create the favorable business environment for private sector investment. This environment will create a competitive force to make way for a strong incentive for investment and to release substantial resources of the private sector.

At present, public investment in Vietnam accounts for about 30% of the GDP. Theoretically, to obtain 7% growth, the public investment should be 5-7% of the GDP. Thus, the government has invested excessively about 23% of the GDP. 

If this investment goes to the private sector, it will generate at least an increase of 8% growth. And the economy will reach an average growth of 12-14% per year. This is the number that China has achieved in hot developing period. At that time, we will have many billionaires in the fields of industry, commerce, electronics, and information technology.

However, it will take at least anothergeneration to see the bright prospect.