[9 Dec. 2014] — Prime Minister Nguyen Tan Dung has again stated that the equitisation of state-owned enterprises must be accelerated in order to create bigger space for the private sector in the economy. 

In 2000, the private sector held 22.9 per cent of Vietnam’s total development capital. However, the rate rose to 37.6 per cent in 2013, creating 14.5 million jobs, accounting for 76.7 per cent of the country’s total non-agriculture jobs, the government reported. In Vietnam, only 2 per cent of enterprises are of large-scale, with the remainder being small-and medium-sized enterprises (SMEs) and very small companies.

The urgent need for accelerated SOE reforms is one of the main topics at the VDPF 2014

“The government will also enact more legal documents in favour of private enterprises like the Law on Supporting SMEs, a decree on supporting industries, and by providing more financial assistance to private enterprises,” said Minister of Planning and Investment Bui Quang Vinh.

Pierre Amilhat, director for Asia, Central Asia, Middle East/Gulf and Pacific at the EuropeAid Office in Brussels, told VIR that Vietnam’s development must rely on the private sector, not on SOEs as it currently does.

“The private sector must play a crucial role in such development, meaning they need a level playing field. They, especially SMEs, are dynamic and able to create sustainable employment and instill confidence. This factor is very important for Vietnam to attract more foreign direct investment,” he said.

World Bank country director for Vietnam Victoria Kwakwa also asked the government to create a more transparent investment and business climate for private enterprises, and boost SOE restructuring.

“No country has developed through dominant reliance on the foreign private sector. The government’s growing attention on the emergence of a dynamic and vibrant domestic private sector is again wise and timely,” she said. “Continued reform of SOEs will be important in this regard. But the reform needs to focus less on the numbers of equitisations and more on their quality.”

According to Kwakwa, actions to strengthen SOE transparency through regular and credible financial disclosures, putting an end to preferential access to land and capital for SOEs, and imposing tough budget constraints will be “critical for a more efficient public sector, and for creating space for private enterprises to grow.”

According to the World Bank, Vietnam’s SOE equitisation has picked up momentum. The government equitised 74 SOEs in 2013 (tripling the number in 2011 and 2012), and this momentum continued in 2014. By the end of September 2014, 71 SOEs were equitised, 35 of which completed initial public offering of shares through the stock markets. Recent equitisation has increasingly involved large SOEs such as Vietnam Airlines and Vinatex. The government aims to equitise 200 SOEs in 2014 and 232 in 2015.

Currently SOEs still hold a monopoly in sectors like gas and electricity (94 per cent), coal (97 per cent), fertiliser (99 per cent), water supply (90 per cent), insurance (88 per cent) and telecommunications (91 per cent).