A number of obstacles concerning the national business climate should be removed in an attempt to attract greater private investment, which is considered one of the key drivers contributing to the country’s economic recovery following the novel coronavirus (COVID-19) pandemic, according to insiders.
Private investment adds fresh impetus to economic growth
Dr Le Duy Binh, director of Economica Vietnam, said although private investment plays an important role in accelerating economic growth, there remains plenty of obstacles that hinder the private sector’s investment including high business costs and an array of cumbersome administrative procedures.
Most notably, private enterprises have tended to struggle with the so-called ‘unofficial costs’ and time-consuming administrative services in doing business, Dr Binh noted. According to a recent survey on the Provincial Competitiveness Index 2019, more than 50% of local enterprises must pay ‘unofficial costs’ which have ultimately caused a significant financial burden for them.
Moreover, there exists certain discrimination among private enterprises, state-owned enterprises (SOEs), domestic-private enterprises, and foreign direct investment (FDI) enterprises.
Dr Binh added that local administrations seem to offer SOEs greater incentives related to land allocation and opportunities in which to sign contracts from public investment projects.
Priorities are often given in an attempt to attract greater levels of investment capital from the FDI sector as opposed to the private sector, which has become a major hindrance in facilitating the investment of private businesses, said the executive.
Following Prime Minister Nguyen Xuan Phuc setting a goal of achieving economic growth of over 5% for this year, economists underlined that, in order to meet this challenging goal, it is necessary to introduce synchronous solutions aimed at effectively making major breakthroughs to attract private investment.
Dr Binh therefore emphasised the need to simplify administrative procedures, especially moving into the post-COVID-19 period, and to strictly handle corruption cases in an attempt to increase investor trust in the business climate, thereby adding fresh impetus to private firms to boost both their production and business activities.
Simultaneously, the economic expert also stated the importance of creating optimal conditions in which private enterprises can increase investment in different sectors of the national economy, especially in terms of FDI projects in localities.
Mac Quoc Anh, Vice Chairman of the Hanoi Association of Small and Medium Enterprises, proposed the Government provide support for private firms, especially SMEs, which were badly affected by the COVID-19. This can be done through strengthening trade promotion and seeking new export markets, thereby accelerating the private sector’s investment, boosting production, and increasing the rate of business activities.
Furthermore, the Government should strive to provide assistance to large private enterprises and corporations, that play a leading role in helping SMEs to form new ecosystems, get involved in new value chains, and generate jobs for workers, for the ultimate goal of stimulating private investment.