What is the key point in private economic development?

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Vu Tien Loc, member of the Economic Committee of the National Assembly, Chairman of the Vietnam International Arbitration Center

It has been five years since Resolution 10-NQ/TW, the Fifth Conference of the 12th Central Committee of the Party “On private economic development becoming an important driving force of socialist-oriented market economy” was promulgated. How do you assess the development of the private economic sector, sir?

The private economic sector includes not only large enterprises and leading brands that have had breakthrough development in recent years, but also large, medium, and small enterprises, even micro-units. Besides more than 800,000 enterprises, Vietnam also has 5.4 million business households. They are the largest force in Vietnam's private sector.

Although the private sector has accounted for 40% of GDP in the economy, among them, businesses have accounted for only 10% of GDP, and the remaining 30% of GDP has belonged to business households. Obviously, the private sector has contributed greatly to the economy, but the quality of this sector was not high.

Currently, up to 85% of the workforce is working in the private sector, and the majority of this work in the household sector. Labor productivity of the private sector is the lowest compared to the three sectors in the economy, besides the FDI sector and the state-owned enterprise sector. However, the growth rate of the private sector is higher than the overall growth rate of the economy. Besides, the added value as well as the labor productivity growth rate of the private sector is higher than that of both the FDI sector and the state-owned enterprise sector. Those are promising signals for the development of this sector, if there is a trigger to promote the development of small and medium enterprises and households.

Resolution 10-NQ/TW set specific goals, striving to have at least one million enterprises by 2020; more than 1.5 million enterprises by 2025, and at least two million enterprises by 2030. The goal of having at least one million enterprises by 2020 did not come true. So, are the remaining two milestones in 2025 and 2030 feasible, sir?

In the previous economic conditions, the participation of the digital economy and small and medium enterprises was not much; business households also mainly operated in the local area.

However, thanks to the digital economy and e-commerce, even micro-enterprises can operate in a global environment. That is a positive signal to strongly promote the private sector. The goal of having more than 1.5 million enterprises by 2025 and at least two million enterprises by 2030 in Resolution 10-NQ/TW is completely achievable.

Vietnam even can achieve higher numbers if there is an adjustment in the legal framework to be able to recognize business households as a form of one-owner enterprises in the economy. According to the laws of many Western countries, a business household is a one-owner enterprise. According to this calculation, now Vietnam has more than six million private enterprises in the economy, not just more than 800,000 units.

Besides quantity, the key point in developing the private sector is to improve its quality. In your opinion, what is the solution to solve this problem?

In private economic development, the most important thing is quality, not quantity. Vietnam is entering a new stage of economic development. Every concept of an economic model or a business model is changing. Issues such as the Covid-19 pandemic and changes in geopolitics are leading the world to restructure the economy towards more autonomy.

In fact, under the influence of the digital economy, flower farmers in Da Lat can now sell flowers to consumers in Europe. It can be said that this is the stage where small, medium, and even micro-enterprises can fully participate in global supply chains. This creates great motivation and space for businesses. Changes in business models and the role of creative individuals become the most important driving force of the world economy as well as the Vietnamese economy.

To promote the private economy, especially to improve its quality, on the one hand, it is necessary to perfect the legal framework to encourage the development of small, medium, and micro enterprises; on the other hand, it is necessary to strongly promote the application of the digital economy and the transformation to the digital economy.

Currently, 80% of Vietnamese SMEs exist outside of supply chains. To improve the quality of the private sector, it is necessary to make small, medium, and micro enterprises participate in the global market and supply chain; and connect them with large leading enterprises, especially FDI units.

Thank you, sir!