Urging a stimulus for private investment.

Báo Đầu tư•28/03/2024

The macroeconomic picture in the first quarter of 2023, both domestically and internationally, is brightening, but it is causing impatience among economic experts. The opportunities for recovery are becoming clearer, requiring the capacity to seize them.

Produced at Hoa Phat Steel Plant. Photo: Duc Thanh

The bright spot is not clearly defined.

“We are feeling anxious,” shared Dr. Can Van Luc, Chief Economist of BIDV and Director of the BIDV Training and Research Institute. Dr. Luc sees more positive signs supporting investment and business activities in the first quarter of 2024, but businesses still face numerous challenges.

Although the global economy is projected to grow more slowly than last year, inflation and interest rates are beginning to fall. Market prospects are becoming more positive with the relatively rapid recovery of key export markets for Vietnamese goods. Domestically, access to credit is easier, with the State Bank of Vietnam's commitment to maintaining low policy interest rates; legal obstacles in many projects are being addressed. In particular, mechanisms and policies that lay the foundation and promote new growth drivers for the economy, linked to green development and digital transformation, are gradually being perfected. Foreign direct investment is increasing strongly…

However, in this increasingly positive picture, Mr. Luc has yet to highlight much about the domestic private business sector.

“Domestic businesses still face many difficulties regarding legal issues, financial obligations, and high input costs, while order recovery remains slow…”, Dr. Can Van Luc analyzed the health of the sector that contributes approximately 50% to the GDP growth rate of the economy.

Furthermore, the region continues to experience slow internal progress. Vietnam's Corporate Governance Index remains significantly lower than that of other countries in the region, at 42-43% compared to Thailand's 60-62%. The vision and strategies of most businesses are still quite short-term, not to mention the continued prevalence of unethical business practices…

It's not just Dr. Luc who's impatient. In his assessment of the economic situation in the first few months of the year, Dr. Vo Tri Thanh, Director of the Institute for Strategic Brand and Competition Research, left the section on private investment blank. Last year, private sector investment only increased by 2.7%, the lowest growth rate in the past 10 years.

This year, the Q1/2024 figures will take a few more days to arrive, but Dr. Thanh believes that the sense of a true recovery in the region is not yet clear, especially when compared to the very positive growth rate of foreign direct investment (FDI) disbursement and public investment.

"This situation will affect our ability to capitalize on the emerging opportunities for recovery," said Dr. Thanh.

Identifying points to stimulate private investment

Sharing the existing challenges facing the domestic private sector, Dr. Luc argued that the key to resolving them lies in the business environment. Legal obstacles, especially those related to real estate projects, were cited as evidence of the impact of this solution.

"Just boost business confidence, and private investment will increase. The key lies in institutional reform and improving the investment and business environment," Mr. Luc emphasized.

Simply boosting business confidence will increase private investment. The key lies in institutional reforms and improving the investment and business environment.

Dr. Can Van Luc, Chief Economist of BIDV

However, it is worth noting that this is a difficult task, despite the many efforts of the Government, the Prime Minister, as well as ministries, departments, and localities.

At a seminar held earlier this week by the Central Institute for Economic Management Research (CIEM) summarizing the five-year implementation of Decree No. 15/2018/ND-CP on food safety, the expectation of replicating successful policy models from the business community still faces numerous challenges.

It should be reiterated that the notable changes in Decree No. 15/2018/ND-CP, such as applying the principle of risk management based on the level of legal compliance of enterprises and the level of risk of goods; adding subjects exempt from inspection; decentralizing state management, overcoming overlapping, hierarchical, and redundant management; creating flexibility and proactiveness for enterprises in carrying out administrative procedures; shifting from pre-inspection to post-inspection… have saved 8.5 million working days and 3,332.5 billion VND/year. The abolition of the self-declaration deadline alone, compared to the previous 3-year deadline, has reduced costs for enterprises by more than 310 million VND/year. This is why this decree is included in Resolution 02/2024/NQ-CP on key tasks and solutions to improve the business environment and enhance national competitiveness in 2024.

However, Mr. Dau Anh Tuan, Deputy Secretary General and Head of the Legal Department of the Vietnam Chamber of Commerce and Industry (VCCI), believes that replicating the lessons of Decree No. 15/2018/ND-CP is not easy. “Similar obstacles are emerging in the management of emulsion paint standards by the Ministry of Construction, and in the management of veterinary drugs and animal feed by the Ministry of Agriculture and Rural Development. We have presented the mechanism applied in Decree No. 15/2018/ND-CP as an example, but it has not been approved. Businesses are having to comply with regulations that are difficult for them, but are merely 형식적인 (formalistic), and do not bring about effective state management,” Mr. Tuan analyzed.

Most recently, during a meeting with state leaders, the Chairman of the Vietnam Young Entrepreneurs Association, Dang Hong Anh, continued to submit a proposal to persistently and decisively remove barriers to the investment and business environment, creating the most favorable investment and business environment for enterprises to develop.

Specifically, the leaders of the Vietnam Young Entrepreneurs Association proposed strict implementation of regulations on the issuance of business conditions, linking them to the responsibilities of the heads of ministries and specialized agencies, ensuring clarity, transparency, and a suitable roadmap, eliminating unreasonable sub-licenses that increase costs for businesses. In particular, businesses still have high expectations for the commitment to simplify pre-inspection procedures, shifting strongly towards post-inspection linked to risk management, and assessing the level of legal compliance of organizations and individuals in specialized inspections.

Clearly, the key to stimulating private investment has been identified.

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