Private Sector Development in Vietnam

Private Sector Development in Vietnam Presentation by Pham Chi Lan Senior Advisor, Prime Minister’s Research Committee 19 April 2005 The views expres...
Author: Molly Andrews
1 downloads 0 Views 71KB Size
Private Sector Development in Vietnam Presentation by

Pham Chi Lan Senior Advisor, Prime Minister’s Research Committee 19 April 2005 The views expressed in this paper are the views of the author, and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Directors or the governments they represent. ADB makes no representation concerning and does not guarantee the source, originality, accuracy, completeness or reliability of any statement, information, data, finding, interpretation, advice, opinion, or view presented.

Today’s Presentation • Recent development of the private sector in Viet Nam • Importance of PSD in realizing the national development goals • Current PSD policies • Challenges in PSD • Expectations

Recent Development - Doi Moi • Doi moi, or reform, shifted Viet Nam’s economy toward a market economy. • Private sector was encouraged to develop • PSD policies have been stated clearly in Viet Nam’s Constitution & institutionalized in law • 1st Private Company and Enterprise Laws in 1990 • 1991-1999: 40,000 private enterprises set up

Recent Development - New Enterprise Law • In 1999 new Enterprise Law was passed and became effective in Jan 2000. • EL and its implementation made important contributions to improving Viet Nam’s legal and business environment. • EL marked a turning point in PSD in Viet Nam

Recent Development - An Engine for Economic Growth • Private sector enjoyed highest growth rates and increasing share of economy • 49% in GDP • 27% in manufacturing & in total investment • 50% in non-oil export

• Job creation helped reduce poverty and increase income for much of population • PS created almost all new jobs, 2000-03 • about 5 million jobs in all

PSD Supporting NDGs Restructuring the Economy • Developing manufacturing industries • Improving agricultural productivity • Developing new businesses & services • Current structure of GDP: • Industry 40%; Agriculture 21.8%; Services 38.2%

• New business & market developed in all provinces, including rural & mountainous areas • 11.3% of enterprises are in rural areas.

PSD Supporting NDGs Developing Exports • Private sector contributed largely to: • Diversifying export product structure • Expanding export markets • Developing business links & distribution system • Integrating into world markets • Privately Owned Enterprises are key actors in

most successful export industries & items: garments, footwear, wooden furniture, seafood, coffee, cashew nuts, pepper, handicrafts….

PSD Supporting NDGs Improving Social Equality • More opportunities for women, young people, minorities, handicapped; higher roles for business associations ; changes in the mindset and attitude of the society to the market system • 30% of new businesses are set up by

women; 50% by young people

Current PSD Policies - CPRGS • Vietnam’s blueprint for development is Comprehensive Poverty Reduction and Growth Strategy (CPRGS) with 3 pillars: • Completing the transition to a market

economy

• Making development inclusive and • Building modern governance

Current PSD Policies - Major Objectives • • •

Step up the reform process Develop a multi-sector economy Actively integrate with international economy

• Broaden bilateral and multilateral relations with all countries. • Build a clean and strong state apparatus

Current PSD Policies Comprehensive Reform Policies • New Enterprise Law and Investment Law • SOE, SME and administrative reforms • Further liberalize trade, tax & financial regimes • More commitments in international economic integration • Improve labor & land regulation • Develop technology, education, training & health care

Current PSD Policies Enterprise Law of 1999 • Most significantly, simplified business entry • Licensing system & minimum capital requirement dropped • All sectors opened up, except those clearly prohibited

• Provided progressive provisions on: • Protecting private enterprises and transforming SOEs • Increasing flexibility on business structure and changes • Directors’ obligations and minority investors’ rights

Current PSD Policies Enterprise Law of 1999 (cont.) • Reforms helped to: • •

Reduce ambiguities and inconsistencies Simplify entry procedures & protect rights

• Provisions to improve corporate governance • Clarify rights and interests of company members, especially of minority shareholders and for profit distribution • Clarify mechanisms for decision making within company • Define transfer of ownership of non-cash assets • Better protect interests of lenders

Current PSD Policies Consequences of EL 1999 • Abolition of: • About 150 business licenses & permits and • Thousands of sub-licenses & conditions, issued at ministerial and local levels

• •

Services provided by business registration offices Disseminating information to business on rights and obligations • Setting up business information system, opened to public • Clarifying requirements for doing business in conditioned sectors

Lessons Learned from EL 1999 • Strong national ownership of reform process has been crucial to success • Sustained effort helped mobilize broad support • This meant domestic factors drove the process

• The process itself was critical in: • Building investor confidence and changing attitudes • Increasing pressure for more pro-business practices

• Role of interest groups • Vested interests can slow the process but they can be overcome with analysis & steady hands in steering committees

Challenges in PSD • Business environment still needs improvement • Barriers caused by legislative and administrative systems • Difficulties in getting access to needed resources • Lack of efficient support services & institutions • High cost of business operations in Viet Nam

Challenges in PSD - Remaining Business Environment Barriers • Business environment still needs • Level playing field (PS vs SOEs, FDI) • Faster and cheaper market entry - still requires • 50-60 days, 49% of per capita income

• More business freedom in some areas

• Legislative and administrative barriers • Lack of transparency, consistency, coordination and predictability • Bureaucracy and corruption

Challenges in PSD - Remaining Business Barriers (cont.) • Difficulty in getting necessary resources • Land-use rights, capital and credit • Efficient, affordable infrastructure and information

• Absence of efficient supporting services • Qualified and competitive service providers

• High cost of business operations in Viet Nam • Expensive market entry, infrastructure & inputs • Reduces competitiveness, profit making, investments, creation & expansion of business

Expectations - Significant Institutional Reforms • Introduction of unified Enterprise Law and common Investment Law in 2005 • Other legislation & economic reforms

• PSD or SME development strategies • Efficient implementation of new laws and strategies • Public-private partnership in the new development process

Expectations - What’s new in the UEL and CIL? • Expanded business freedom: • All enterprises may do business and invest in all areas not prohibited by law • All enterprises may exercise own discretion and accountability • Applying universal registration system • Removing patronage

• Meets international practices & commitments • MFN & NT principles - ready for next steps of integration (WTO) • Formulate friendly investment environment

Expectations - Further International Integration • Finalizing negotiations for WTO accession • By 2006 all AFTA and most of US-Viet Nam bilateral trade commitments completed • New arrangements with ASEAN + China, Japan, Korea, India, Australia-NZ…

• Viet Nam is entering new stage of development • Business environment in Viet Nam will be improved; market system completed • Private sector will develop faster, more sustainably and

become strong engine for Viet Nam’s development

For More Information Pham Chi Lan [email protected] RETA website: http://www.adb.org/Projects/Supporting-PSD-Strategies

Suggest Documents