Saturday, 18 Nov 2017

Improve business environment: insufficient transparency

Updated at Thursday, 13 Jul 2017, 19:50
The Hanoitimes - With regard to the newly establishment of more than 61,000 enterprises and 15,000 enterprises recovering their operation in the first six months of this year, many opinions suppose that this is a good sign to improve the business environment.
However, whether or not enterprises can survive depends on the economic environment in general. In particular, can the economic environment create benefits for enterprises? 

Complaints from enterprises 

Attending the meeting between the Prime Minister and enterprises last May, the economic expert Pham Chi Lan shares that enterprises still have many complaints and concerns regarding some governmental agencies. In order to earn money, some agencies make it difficult for enterprises to operate. Unfortunately, this situation has not seen many improvements. According to Ms. Pham Chi Lan, 15,000 enterprises that recover in the first six months of 2017 cannot account for 70,000 enterprises that halt their operation in 2016. Indeed, the number of enterprises going out of business still greatly exceeded that of businesses going back into business. This situation is something to be concerned about, because normally, only the number of newly established and recovered businesses is taken into account, not the great number of businesses stopping their operations. The most important thing at this point is to complete the commitment stated in the Resolution 19/NQ-CP and Resolution 35/NQ-CP in order to resolve the problems and create opportunities for enterprises to develop. “Other countries in the world focus on finding ways for the development of enterprises. Meanwhile, Vietnam still tries to resolve enduring problems and improve the business environment for enterprises,” Ms. Lan shares. 
​Enterprises register their businesses at Hanoi Department of Planning and Investment.
​Enterprises register their businesses at Hanoi Department of Planning and Investment.
The most basic and urgent task, according to Ms. Pham Chi Lan, is to focus on necessary transformations such as restructuring the economy, particularly with regard to state-owned enterprises, banking system, public investment, etc. This task needs to be strengthened strongly to create opportunities for the development of state-owned enterprises and private businesses. Only with the development of enterprises in the country can sustainable economic development be achieved, since in the long term, the economy of Vietnam depends a lot on the advancement of enterprise. Meanwhile, state-owned enterprises are still the center of the economy, but only if the business conditions are improved. Enterprises in the country have to be the foundation deciding the development of the economy. 

According to statistics, the assets of state-owned enterprises are approximately 300 billion USD, while those of private enterprises amount up to 200 billion USD. If 300 billion USD increases by 1%, 3 billion USD will be added to the economy. Similarly, if private enterprises can increase their assets by 1%, 2 billion USD will be added. As a result, the roles of state-owned enterprises are utmost important. The economic expert Pham Chi Lan comments that the state-owned enterprises consist of the greatest force of the nation. With only a slight improvement, the economy can bounce up and advance strongly and rapidly. However, if the private enterprises want to improve but the state-owned ones still lag behind, the economy will only receive a sheer amount of 2 billion USD coming from the private enterprises.

Building mutual trust & understanding

In reality, more difficulties are coming from administrative agencies than support for private enterprises and SMEs. However, It is somewhat easier for big enterprises thanks to their relationships with administrative agencies and large capitals. Although it is recognized that the domestic private sector is essential for job creation and more successful than state enterprises in generating new employment, without sufficient support from policies, it will be extremely difficult for private firms and SMEs to grow, especially small and micro sized enterprises. 

However, it worths mentioning that the problem lies on the implementation of the polices rather than it owns. Dr. Can Van Luc states, the return of enterprises are thanks to three factors. Firstly, the government determines to improve the business environment through resolution No. 19 and 35. Secondly, the government has sent a clear message on supporting and encouraging start-ups. Thirdly, the business environment in Vietnam has improved significantly. In the long term, the policy to transform household business into enterprise, as well as to create favorable conditions for the growth of private enterprises and SMEs are in the right direction. As it is undeniable that the private sectors always use their capital efficient, proactive and flexible against any changes in foreign and domestic business environment.

According to the Director of Vietnam Institute for economic and policy research (VEPR) – Dr. Nguyen Duc Thanh, a high number of newly registered enterprises and enterprises coming back to business in the first 6 months are positive signals. However, there remains a large portion of non-operated and undeveloped enterprises, especially workforce in the private sectors are going down at a alarming rate. It is no doubt that the business environment is improving, but mutual trust between the State and private sectors would need to be built gradually and proved through the management and policies of the government.
“At present, private enterprises and SMEs are under pressures from Foreign direct investment (FDI) enterprises. However, eventually, private and SMEs will be the driving force for the growth of economy – Dr. Nguyen Duc Thanh – Director of VEPR”.

Ngoc Thuy
Nguyen Duong -
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