Statistics show that while the share of the foreign-invested sector (FDI) is getting bigger in both exports and industrial production, domestic firms are being pushed into the corner, being acquired, or shifting to less profitable fields.

The question is why Vietnam does not have true national capitalism to enter global competition, and whether we need to worry about the superiority of the FDI sector.

There was a time that the dynamism of the private sector was abolished, the role of the bourgeoisie, even national bourgeoisie who made important contribution to the wars of resistance, was put aside. The entrepreneur class almost disintegrated until the renovation period began in the second half of the 1980s, when the first generation of businessmen was formed.

With the issuance of the Company Law and the Law on Private Enterprises in 1990, though still preliminary, for the first time the people’s trading rights were officially recognized. Many domestic brands appeared, such as Da Lan and P/S toothpaste, My Hao dishwater, Minh Phung apparel, Biti's footwear, Kinh Do food ...

However, the first wave of integration in the mid-1990s led to the disappearance of a number of brands like Da Lan and P/S, and the main cause was the lack of experience of integration.

Many enterprises which held important positions in production left their traditional areas to move to the areas of speculation and searching for privileges.

Fortunately, the East Asian crisis in 1997 did not cause many Vietnamese businesses to collapse but it was the motive for Vietnam to promote reform and improvement of economic institutions. The issuance of the Enterprise Law 1999 was a great turning point when the private sector was given stronger rights and from then the second generation of entrepreneurs was formed.

Before Vietnam’s joining the WTO in 2007, many Vietnamese enterprises began to emerge with big names, such as FPT, ACB, Sacombank, Pomina, Hoa Phat, Vincom, Minh Phu and Mai Lin. In the second wave of integration, Vietnamese firms did not disappear and were not acquired by foreign firms but they “committed mass suicide”.      

The boom of the stock market and real estate brought about false prosperity, and the outcome was the graveyard of many businesses, including many famous ones. Under the grim rule of the market economy, the private sector was divided very clearly. While many businesses went bankrupt, many others kept growing and growing.

The third generation of entrepreneurs was formed in recent years during the process of business restructuring and screening. In that mess, there were businesses that developed thanks to their internal resources and time-serving ones, such as crony capitalism.

Where will the economy go if Vietnam lacks a generation of entrepreneurs full of enthusiasm and responsibility for the destiny of the nation, such as the first generation of businessmen in the renovation period? This does not mean that today's entrepreneurs are not concerned with the country's fortunes, because we all understand that each age has its own core values. The following analysis shows two shades of color of the business generations in Vietnam.

State-oriented, not market-oriented, enterprises?

During the renovation period, when the views of market-oriented reform and liberalization were still cautious, many enterprises looked for stronger reform so that the rules of the market economy could be fully promoted. Today, there are many more market-oriented businesses but also many state-oriented firms, which become more pragmatic and related to the state sector.

These businesses seek access to government officials or policymakers to "buy" business privileges. It's a prevailing trend. Thanks to the incentives and protection of the State, like state-owned enterprises, these firms "temporarily" prevailed. But the competitive environment is being smothered because of this trend.

Businesses affect the State, instead of the State’s absolute control of businesses?

Although Vietnam recognized diversification of ownership, with the existence of many economic sectors, the business freedom of private enterprises was not opened in the early stage of innovation.

With the philosophy “businesses can only do business under the law’s permission”, many provisions were issued so that the government could control business activities of enterprises. But from a business angle, this meant restriction of the freedom of business.

The oppressive regulations have been gradually replaced by ones that are based on the perspective that businesses are allowed to do business in fields that "the law does not prohibit." The trading rights are not only acknowledged but also are protected by the State.

However, along with the trend of letting the market expand its role is the appearance of larger firms that have the ability to influence the decisions of the State. Here, the problem is not simply "too big to fail", but the influence, to some extent, on the activities and functions of the State, economically and politically.

Do enterprises create value or speculation?

Enterprises pursuing long-term visions are usually the ones that focus their activities in the field of production and create value for society. They are factors that create growth and bring prosperity to the nation.

Conversely, there are businesses that only focus on speculative activities and siphoning of values from society, which are created by others. Vietnam’s previous reforms had produced many value-focused businesses. But beginning ten years ago, more speculation-focused businesses have appeared. These firms have broken normal economic rules, the equality of the business environment, the confidence of the business community and social values.

Notably, many enterprises which used to hold the key positions in production have left their traditional areas to move to speculation and rent seeking.

Clearly, here the fault is not due to the businesses themselves, but the original sin must be interpreted based on the motives that urged enterprises to redirect their activities to speculation and erode values.   

The future of Vietnam's economy cannot rely on state enterprises, but can private businesses be strong and reliable enough to be given this destiny?

Source: TBKTSG