Clearing bottlenecks for development of private enterprises
The growth of domestic firms, especially private ones, is expected to cause a significant qualitative change in FDI and export attraction.
The upcoming 13th National Party Congress is a very important event for the economy because it not only sets goals for 2025, with a vision to 2030 and 2045, but also core guidelines for planning as well as implementing future policies.
In recent years, most studies or comments on Vietnam's economy have been associated with the keyword "Doi Moi" (renovation), recognizing that the country has been a success story in poverty reduction. The economy has achieved a high and stable growth rate for more than 30 years; the national position has been enhanced; and Vietnam has become a bright spot in attracting foreign investment.
However, Vietnam still has low average per capita income, at $2,540/person, according to the World Bank's 2019 data.
The development of domestic production will boost the need to import technologies, goods and services from developed countries.
In addition to achievements, the matters such as environmental pollution, rich and poor differentiation, regional disparities, selection of foreign investors, and clearing domestic resources for development are huge challenges for building the brand and image of a prosperous and sustainably developed Vietnam.
Qualitative change lies in policy enforcement
It has been observed that when there is high political determination, the implementation of policies will meet or exceed the set targets. This can be seen in the results of poverty reduction, FDI attraction, and export promotion.
But the current and upcoming development periods of Vietnam are not the same as they were 20 or 30 years ago. At a low starting point, the development speed and the time frame for development have been impressive in the early stages. But at a certain scale, the rate of development will naturally slow down. At this point, the change in quality will be the decisive factor for the change in quantity.
The qualitative change, in the opinion of the author of this article, lies in policy implementation.
Outsourcing is still important
In a recent study by Grozier and Keene from the Kennedy School of Public Administration at Harvard University (under the guidance of Prof. Lawrence and Prof. Dapice, who are very knowledgeable about Vietnam), the authors pointed out that developing and enhancing the capacity of the private sector is the best way to maintain Vietnam's export and FDI-based development model.
Indeed, the spillover effect in technology transfer between FDI and domestic firms has not met as expected, as in theory and practice from many other countries. The limited uptake capacity of domestic firms has not created a strong and inclusive business ecosystem.
As a result, the participation of domestic firms in value chains is very low, mainly being outsourcing after a long time. Even in some sectors with a high localization rate, foreign enterprises are still behind.
The development and growth of domestic businesses, especially the private ones, will make a big qualitative change in FDI and export attraction in the following approach:
Firstly, the ability of domestic firms to absorb high technology content will attract quality FDI, participating in the upper segment of the global value chain, in line with Resolution No. 50-NQ/TW of the Politburo dated August 2019.
Secondly, the qualitative development of domestic enterprises will improve the quality of goods exported from Vietnam, creating more added value. More importantly, the development of domestic production will boost the demand for importing technologies, goods and services from developed countries.
Once being an important importer of developed countries, it is more convenient to become an export partner of these countries, because Vietnam currently has joined 13 free trade agreements (FTAs) and is negotiating three other FTAs, which include major economies of the world.
Relying on internal resources to develop
Policy implementation needs to be grounded in reality, associated with the assessment of the completion of political or state management tasks. Policies should focus on key points to unlock potential, remove barriers, and focus on qualitative transformation. According to the writer of this article, there are a number of priorities as follows:
Firstly, continue promoting the development of the private sector, towards enterprises capable of absorbing technology transfer, participating in the ecosystem with quality FDI enterprises.
In the development of the private sector, it is necessary to limit the concentration of a few corporations because they are more likely to fall into a state of manipulation. In order to do so, it is necessary to tackle and strongly limit corruption, protect intellectual property rights, and ensure the integrity of law enforcement.
Secondly, develop domestic human resources through training and research and development (R&D) activities. In addition, it is also necessary to effectively use the network of influencers, experts, scientists and business people overseas to support the prosperous development of Vietnam.
Thirdly, improve the trust of people and businesses in the leadership of the Party and Government. Trust is strengthened over time, through concrete actions for the benefit of the people, businesses, and the country. It is unavoidable to make mistakes in policy making or lack of diligence in implementation, but with a visionary attitude, for the mutual benefit of policy makers and implementers, trust will turn into action – people’s support.
Vietnam's economy is about to move to a new stage with many uncertainties from the external environment such as the Covid-19 pandemic, trade wars, territorial conflicts, and changing ruling parties in some major economies.
More than ever, relying on internal resources to develop can be said to be an inevitable choice. And the best way for Vietnam to be resilient is to clear bottlenecks to develop private enterprises, and improve labor quality and the living environment... by implementing effective policies for the people and businesses. By doing this, Vietnam will develop to become a powerful and prosperous nation!
Dr. Vo Dinh Tri (AVSE Global)
Vietnam needs to develop a strategy to promote the development of the private sector over the next decade to maintain growth, speakers said at a conference on socio-economic development from 2021 to 2030 held in HCM City last week.
Enterprises, organisations and individuals have been called on to contribute to Vietnam’s draft socio-economic development strategy for the next 10 years.