Backing beyond basics
06/08/2010 - 13 Lượt xem
Ten years have passed since the Enterprise Law was introduced to encourage
the growth of the private sector. There can be no doubt that the private sector
has emerged as a significant component of Vietnam’s economic growth, far
exceeding the state-owned sector and even the foreign invested enterprises
(FIEs) sector in terms of economic benefit.
But much like young people, who will face problems and challenges in the course of growing up, the private sector, with a large number of new enterprises, must deal with a range of concerns, from capital sources and the business environment to the legal system. These obstacles stand in the way of their development and few private Vietnamese enterprises can truly grow and become successful. The number of private companies becoming large in size remains modest, but their stories not only reflect the development of the private sector but also provide positive examples for other enterprises to follow.
The Truong Hai Auto Joint Stock Corporation comes to mind when discussing the local automotive industry. In its early days as a small business, Truong Hai, like other private enterprises at that time, faced many challenges. Chairman and General Director Tran Ba Duong recalled: “My enterprise was established in 1997 following the promulgation of the Party’s Central Resolution V, encouraging the development of the private sector. But most of the State’s support came only in the form of recognition and encouragement, without real solutions.”
According to economist Pham Chi Lan, before the Enterprise Law Vietnam’s private sector was viewed as weak and unstructured, totalling some 40,000 in number but lacking equal rights in doing business. “It was a hard time, when the private sector did not have a voice,” she said.
When the government began to welcome private sector participation, a legal framework was urgently needed to implement comprehensive regulations. The private sector has rightly put questions about subsequent problems to relevant agencies and ministries, in the hope of finding reasonable solutions. But they do not always get the answers they seek. Inconsistencies in the regulations and the way authorities deal with difficulties encountered by enterprises has also been a major concern. As Mr Duong explained, the regulations took too much time to become effective. “The rules are fine but it seems that they are too slow and a bit inflexible,” he said. “This is why many new private enterprises face common problems relating to business licences and accessing capital.”
In healthcare, Mr Nguyen Huu Tung, Chairman and CEO of the Hoan My Medical Corporation, said that the most difficult problem for private hospitals is human resources. “In other countries, doctors are allowed to work in both public and private hospitals but this is not the case in Vietnam,” he said. “Moreover, a private hospital must guarantee that it has enough doctors before applying for a business licence.” The government hopes that by 2015 the private sector will contribute about 20 per cent in the healthcare industry and ease the burden on public hospitals. But Mr Tung believes it is hard to reach this goal. “There are only 90 private hospitals, accounting for 5 per cent of the total number nationwide,” he said.
While difficulties such as financial pressure, an unhealthy business environment and others present challenges, enterprises that survive and prosper are those with better business strategies than their competitors. Mr Le Phuoc Vu, Chairman and CEO of the Lotus Group Joint Stock Company, started in business as the owner of a small retail store selling steel. “Having been a retailer, I understand about the local market and can accurately predict my competitors’ moves and do better than them,” Mr Vu said in a recent online forum. The retail method was key in the Lotus Group overcoming the crisis faster than other enterprises. When the price of steel materials fell in the fourth quarter of 2008, enterprises were forced to bargain to cut losses. While others struggled because they heavily depended upon their distributors, the Lotus Group, thanks to its retail distribution channels, could readily deliver to customers. After clearing its entire inventory, the company then returned to the black.
Private enterprises have been treated differently in the past to their state-owned and FIE counterparts, and this is widely acknowledged as a main obstacle to their growth. Although the issue remains, substantial progress has been made and improvements are likely to continue. Besides creating the conditions for the private sector to become stronger, the government has also sought firmer measures in dealing with loss-making SOEs. “In my opinion, the private sector is now acknowledged as equal to other non-state sectors,” said Mr Duong.
It clearly can’t be denied that Vietnam’s private enterprises have grown at a very fast pace, as they now account for 95 per cent of all enterprises in the country. The difficult 2009 proved that private enterprises can adjust very well to crisis, and many were successful in converting challenge into opportunity. Once realising a problem, private enterprises will try to come up with solutions. But support from the State is very much still needed, and most private enterprises in Vietnam are looking for it. Mr Duong, when asked about what shape such support should take, said: “The State should create better business and investment environments, invest in infrastructure and manage macroeconomic policy carefully, to enhance the competitiveness of the corporate sector in general and the private sector in particular.”
Meanwhile, Mr Tung suggested that discrimination between public and private hospitals be removed. “I think that the State should introduce fair policies for both public and private hospitals, to encourage healthy competition between them,” he said. “Competition should be welcomed in business, as it ensures that customers are given the best service.”
It seems that the government is now trying to strengthen the private sector to prepare for new global business challenges. Many eyes are also fixed on changes in policy to come at the Party Congress, to be held in early 2011. But time waits for no man, and whatever needs to be done really needs to be done now.
Source: VNEconomy.
