The Hanoitimes - Vietnam has identified the private sector as a growth engine and the future of the economy, however, its current role in the economy remained modest.
FDI enterprises’ goals are to maximize their profit and willing to leave for a better destination if they see fit, as such, they could not be a long-term engine growth for Vietnam, said Huynh The Du, a lecturer at the Fulbright Economics Teaching Program.
International experiences showed that the private sector is the main pillar for prosperous and developed countries, Du said at the 2019 Vietnam business forum themed “Breakthrough from growth drivers” held by the Vietnam Economic Times on March 12.
According to Du, Vietnam has also identified the private sector as a growth engine and the future of the economy, however, its current role in the economy remained modest.
“From 2005 onwards, the private sector has accounted for merely 10% of the country's GDP,” Du said.
Meanwhile, the state sector has not contributed proportionally with the huge amount of resources under its disposal, which is evident through insignificant number of job creation and modest contribution to state budget and GDP since 2000, Du continued.
Over the last decade, the FDI sector remained the most efficient economic group, which is not a positive sign as local enterprises have not fulfil their potential right at their home soil, he stated.
Du pointed to two reasons behind the poor contribution by the private sector. Firstly, for a long period, the private sector was not considered a growth engine, but preferential treatments were given to state-owned enterprises and FDI sectors. Secondly, Vietnam’s economic policies remain flawed that lead to short-termism in doing business outgrowing long-termism.
Notably, Du considered the rapid growing rate of some major conglomerates a risk to Vietnam's economy, which is even higher that some of South Korea’s chaebols.
“We see 2019 as a sensitive year in our research of the 10-year-economic crisis cycle, so the government must pay special attention to private economic groups with diversified investment activities,” he stressed.
Du, nevertheless, acknowledged that despite being the growth engine, most economic crisis in the world came from the short-termism of the private sector.
Over the course of Vietnam’s economic development, which Du saw the fragility in this process, saying a few leading conglomerates, if getting into troubles, would cause disruption to the whole economy.
In order for the private sector to thrive and be a major force in the economy, Du expected the government to ensure a transparent business environment, in which all enterprises compete fairly with each other.