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Incorrect support can create "zombie" businesses

21:08 | 31/03/2021

VCN - According to Dr. Phan Duc Hieu (pictured), Deputy Director of the Central Institute for Economic Management (CIEM), to support the development of private businesses, it is necessary to have an accurate orientation, otherwise, it may cause disturbing information and improper development.


Private enterprises are playing an important role in the country's economy. Besides achievements, they still have many limitations, could you tell us more about this situation?

Frankly, the productivity and growth rate of this sector is low; the scientific and technological capacity is backward; and the level of corporate governance is weak. Enterprises have not boldly invested in the application and development of science and technology, especially core and pioneering technologies. Currently, only 10% of businesses have successfully registered a patent within three consecutive years; enterprises’ investment in technology innovation has accounted for about 0.3% of revenue, much lower than other countries like India (5%) and South Korea (10%). And only about 10.2% of businesses have invested in research and development (R&D) activities.

What is the cause of the constraint on the development of private enterprises, in your opinion?

Personally, the State’s planning work is not timely, incomplete, and is affecting the businesses’ investment. Many of the State’s major development directions are spread evenly in many branches and fields, leading to low efficiency in resource mobilization and allocation. For example, regarding the priority industry development orientation, there are many different priority and important industries. Some strategic directions only mentioned objectives and quantity, not focused on in-depth development and quality improvement. Many master plans have low quality, especially there is a gap between the policies and views of the Party and the State and actual implementation. This has caused great difficulties for businesses.

Concerning the establishment of an institutional framework, the transformation of the growth model has not made strong progress in the field of perfecting the market economy institutions. The business environment has been improved mainly in market entry conditions. Additionally, the ecosystem that facilitates businesses, especially private ones, has not been enhanced.

The private enterprise sector, especially small and medium enterprises, remains weak in the allocation of physical resources compared to state-owned and FDI units. Inadequacies in the institutions of land and property rights, including security transactions, and handling collateral, have been resolved slowly. These are the major obstacles hindering production development.

Regarding administrative procedures, enterprises have many complaints and recommendations about difficulties in implementing administrative procedures, business investment conditions, and ambiguous conflicts of legal regulations. Many unreasonable and incompatible regulations have caused high compliance costs and deeply intervened in corporate governance.

Notably, in the stage of allocating resources for economic development, resource allocation policies for sectors and areas are ineffective and not on target. There is still no equality among businesses sectors or businesses of different sizes in accessing resources and supportive policies.

Especially, improperly oriented support resources can lead to the situation of "zombie" businesses, which do not live on their production and business activities, but live by taking advantage of the State's supportive policies.

Meanwhile, the SOE reform process has many limitations. Many state-owned enterprises are slow to divest, equitize; and the SOE sector has low operating efficiency.

There have been many positive changes in the implementation of corporate inspection and supervision, including moving from pre-check to post-check. However, these changes are not substantial, causing difficulties for businesses. What is your opinion on this problem?

I think that inspections are a big bottleneck and should be overcome in the future to create motivation for business development. Nearly 20% of enterprises surveyed said they were inspected twice a year, even in the context of the pandemic. Meanwhile, the inspection and examination are creating many risks for businesses.

Vietnam's reforms have only been achieved in terms of market entry and enterprise establishment. But inspection and examination will be a hindrance to the growth of businesses with many unofficial costs.

Inspection and examination are meant to punish enterprises, not to support them to comply with the law. Therefore, they should be changed to not to affect the normal businesses’ operations with the selection and application of the risk principles and increase of cost efficiency. As a result, businesses will feel more secure to do business and develop.

Besides, the law application is arbitrary, which needs to be improved to bring benefits to businesses. Accordingly, it is necessary to apply the principle that is most beneficial to enterprises in case the law is unclear and there are many different interpretations.

Simultaneously, State management agencies need to reduce their administrative interference in corporate internal governance. In resource allocation, the State should focus on improving the quality and feasibility of preferential policies, supporting enterprises on the principles of market, competition, equality, and promoting the formation of value chains and links. Since the spreading and ineffective implementation of the orientation can lead to the wrong direction for businesses with a lot of disturbing information.

Thank you, sir!

By Xuan Thao (recorded)/ Ha Thanh