Private sector plays larger role in economy: expert

The private sector has contributed greatly to the country’s socio-economic development in recent years, outstripping even the foreign direct investment (FDI) sector, economic expert Pham Chi Lan said.

Speaking at a ceremony held in Can Tho City on October 7 to honor businesspeople and businesses in the Mekong Delta region, Lan said that Vietnam’s economy had expanded over 6% a year in the past few years, attributing this strong growth to the private sector.

Regarding contributions to gross domestic product, according to Lan, the non-state sector has the highest proportion, with an estimated 43.78% in 2020. The state sector and the foreign direct investment sector are projected to contribute 25.6% and 20.69% next year, respectively.

The non-state sector has posted steady growth, with its 2017 growth put at 7.93%, above the FDI sector’s 7.69% in the same year. Meanwhile, the state sector posted growth of only 4.79%.

These figures indicate that the private sector is independently strong and can navigate difficulties to achieve high growth, Lan noted.

The private sector also made the largest contribution to the state budget, at 14.7% last year, whereas the respective budget contributions of the FDI and state sectors were 13.1% and 10.7%.

With regard to socio-economic development investments, Lan said that the contributions of the non-state sector were significant, at an estimated 46% next year and an average of 41.3% per year in the 2011-2020 period. Investments in the FDI sector are stable, at some 22%, whereas the state sector is seeing declining contributions.

In the processing-manufacturing industry, the private sector has grown considerably with 2017 revenue accounting for 35%, whereas that of the FDI and state sectors were 54% and 11%, respectively.

According to Lan, some fear that the domestic sectors do not play an important role in the processing-manufacturing industry. However, domestic firms are growing and they may eventually surpass the FDI sector.

As of 2017, the non-state sector made up 51.5% of capital mobilization and 49.1% of the lending market. Therefore, half of the country’s financial and credit market is held by this sector.

The business efficiency of private firms has been improving over the years but at a slow pace. Their percentage of pretax profit on equity averaged 3.4% in the 2011-2015 period, compared with the state sector’s 12.1% and the FDI sector’s 15.1% in the period. The respective figures in 2017 were 6%, 11.4% and 18.1%. This is what private firms should focus on in the coming time to obtain higher efficiency, Lan said.


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