Vietnam’s emerging and dynamic private sector proved its resilience during the Covid-19 pandemic as it helped the country become one of the few countries to obtain positive growth in 2020.
Many private enterprises grew strongly during the difficult time when the Covid-19 pandemic broke out.
Role of pioneers
|Vietjet Air CEO Nguyen Thi Phuong Thao.|
Vietjet Air has released its semi-annual financial report for 2021 with after-tax profit of more than VND34 billion, up 102% year on year thanks to profit from new projects.
Vietjet is known as a young private airline with several years of experience, but it has occupied the leading position in the domestic market since 2018.
The younger private airline – Bamboo Airways – remains profitable and on September 23 it successfully carried out the first non-stop flight to the US.
These are impressive results, especially when Vietnam’s aviation industry is facing unprecedented difficulties. Even the oldest and largest airline in Vietnam – the national flag carrier Vietnam Airlines – has incurred huge losses of tens of trillions of VND.
In the past 10 years, Vietnam’s aviation market has undergone a great change along with the rise of private firms. The industry has become a typical example for the development and contribution of the private sector to the economic development of Vietnam.
With the participation and competition of the private sector, the air route network of Vietnam has expanded widely with hundreds of new domestic and international routes opened over the past decade. Private groups have also been involved in the development of airports.
In the past five years, Vietnam’s aviation industry has recorded a double-digit growth rate, compared to China at 10-15%, Thailand and South Korea at about 10%. International organizations rated Vietnam’s aviation industry as one of the fastest growing in the world.
The strong development of the private sector has also been seen in other fields such as construction materials with big names such as Hoa Phat and Hoa Sen; consumer goods with Masan and Dabaco; retail market such as Vinmart, The Gioi Di Dong (Mobile World); real estate such as Vinhomes, Novaland, Phat Dat …
The rapid growth in revenue, profit and scale of Vietnamese businesses has helped the stock market have private enterprises with capitalized value worth of tens of billions of dollars such as Vingroup, Vinhomes, Hoa Phat and others
Building a middle-income economy
|The rapid growth in revenue, profit and scale of Vietnamese businesses has helped the stock market have private enterprises with capitalized value worth of tens of billions of dollars such as Vingroup, Vinhomes, Hoa Phat and others|
The Country Private Sector Diagnostic (CPSD), published recently by the International Finance Corporation (IFC) and the World Bank (WB), said that the private sector plays a leading role in the outstanding development of Vietnam. The potential of this sector needs to be further exploited to promote productivity growth so that Vietnam can achieve its goal of becoming a high-income country by 2045.
Kim-See Lim, IFC’s regional director for East Asia and the Pacific, said that the private sector has helped bring Vietnam into the ranks of middle-income economies within just a generation. However, as Vietnam was preparing for the next stage of development, it faced the Covid-19 pandemic.
She said that Vietnam should promote a dynamic, diverse, and innovative private sector for the post-Covid-19 recovery period, when public resources become limited.
Carolyn Turk, World Bank Country Director for Vietnam, said Vietnam’s emerging and dynamic private sector proved its resilience during the Covid-19 pandemic, as it helped Vietnam become one of the few countries to obtain positive growth in 2020.
By opening up to trade and pursuing an export-led growth model, Vietnam has attracted large amounts of foreign direct investment (FDI) into the labor-intensive segments of the manufacturing value chain. Currently, Vietnam is the second largest smartphone export base in the world, producing over 40% of Samsung’s global phone products. Domestic private enterprises are very dynamic with big names such as Vingroup, VietJet, and Masan.
At the inauguration ceremony of VinFast automobile factory, President Nguyen Xuan Phuc, then the Prime Minister, said the achievement of VinFast as well as Vietnam’s private corporations had proven the State’s viewpoint in Resolution No.10: the private economy is an important driving force of the national economy.
The development of the private sector is also reflected in the number of businesses registered to operate in Vietnam, which has increased sharply, from more than 42,000 units in 2000 to about 800,000 at present.
The driving force for economic recovery
|The strong development of the private sector has also been seen in other fields such as construction materials with big names such as Hoa Phat and Hoa Sen; consumer goods with Masan and Dabaco; retail market such as Vinmart, The Gioi Di Dong (Mobile World); real estate such as Vinhomes, Novaland, Phat Dat …|
Ms. Carolyn Turk said that Vietnam needs to continue with stronger legal and structural reforms to create a stronger foundation for competition and innovation in the economy, thereby promoting the development of the private sector in the roadmap to shift the economic growth model to achieve the goal of becoming a high-income country by 2045.
According to the World Bank Group, as Vietnam is struggling to respond to a large-scale Covid-19 outbreak, accelerating the pace of reform, upgrading the qualifications and skills of the workforce, and improving Infrastructure will help strengthen the private sector so that the economy will soon recover from the pandemic and make the most of its growth potential.
Accordingly, the shift towards focusing on green, efficient and high-performance private investment is extremely necessary to maintain rapid and sustainable economic development for Vietnam. To achieve this, it is necessary to promote the private sector by reducing barriers to market entry and competition, improving its position in global value chains, diversifying into knowledge-intensive industries, addressing skills gaps, and promoting digitalization in many industries.
IFC recommended that the reform program should focus on key areas such as creating a fair competitive environment among all businesses, promoting financial access opportunities for small and medium enterprises, expanding long-term capital sources, strengthening and greening infrastructure services, and securing a skilled workforce to achieve the high-value, innovative, and high-productivity growth model.
Kyle Kelhofer, IFC Country Director for Vietnam, Cambodia, and Laos, said that to prolong Vietnam’s successful development story, it is necessary to keep accelerating reforms to create favorable conditions for the development of the private sector so that it can lead the economy to move to a growth path based on innovation, high quality and sustainability.
The Covid-19 pandemic has made it even more urgent to address challenges to the development of the private sector in search of public-private partnership solutions to mobilize resources of the private sector. This is especially important because the limited government resources have been prioritized for health care and livelihood support during the pandemic.
The electricity, logistics, education and skills training, agribusiness, and tourism sectors have strong potential for the private sector’s participation. Demand for sustainable energy and logistics services is increasing due to strong industrialization, the expansion of the middle-income population, and rapid urbanization. Private investment in these sectors can help reduce the burden on the state budget and contribute to the greening of infrastructure and production through new investments in renewable energy and climate-related smart solutions.
After over 30 years of Doi Moi (reform), Vietnam has had large private groups operating in many industries with international stature. There are also Vietnamese USD billionaires, but only a handful.
There was good news on September 4: A flight carrying 297 Vietnamese citizens from Japan landed at Van Don airport in Quang Ninh province. The passengers were fully vaccinated with two doses of Covid-19 vaccine.