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What’s the real quality of private businesses?   2010-01-26 - TBKTVN

Assessing the quality of private businesses over the last 10 years since the Enterprise Law, a taskforce on supervising the law believes that the rising number of newly established businesses year after year shows the strong vitality of the private economic sector and their high quality.


This conclusion has not been shared by many experts.


Tran Kim Hao, Editor in Chief of Quan Ly Kinh Te Journal (Economic Management), commented that ‘this is an overly optimistic assessment.”


Dr Tue Anh from the Central Institute for Economic Management (CIEM) remarked that “The scale does not tell about the quality. A big apple does not always mean a delicious apple.”


“Very impressive” are the words used by the taskforce to describe the quality of private businesses. In 2009 alone, 83,000 enterprises registered, double the figure from 1990-1999. The ratio of businesses to 1,000 people has reached nearly five, approaching the average level in the region.


Le Duy Binh, a member of the taskforce, calls this “the gigantic progress” of the private economic sector.

According to Binh, the scale of private businesses has been expanding rapidly. Turnover increased by 1,500 percent in 2000-2008, while profits increased by 2,700 percent and total assets increased by 2,500 percent. Average stockholder equity rose by three-fold, while average profits grew by five times.

When asked to comment about the fact that only 50 percent of businesses survive and develop after they register, Binh commented that this is reasonable.


Regarding private sector employment, the number of workers increased from 858,622 to 4,339,579 in the 2000-2008 period, while the average income of labourers increased by nearly 400 percent.


Comparing private businesses with state owned (SOEs) and foreign invested enterprises (FIEs), the taskforce concluded that the gap has become narrower, and that working in the private sector is now no longer a bad choice.


Nevertheless, former Deputy Head of the Prime Minister’s Research Team, Dang Duc Dam, argues that the figures collected by the taskforce are not reliable.


For example, sales returns figures are just several percent per annum, while the bank lending interest rate is more than 10 percent. How can businesses make profits?


The taskforce admits the difference in figures. According to the General Statistics Office, by the end of 2008, Vietnam had had 179,000 operational private businesses, or nearly 50 percent. However, according to the General Department of Taxation, only 272,000 businesses had been operational by that time, or 73 percent.

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