"Prime Minister trying to shake government apparatus"
VietNamNet Bridge - "Prime Minister Nguyen Xuan Phuc has quickly solved some practical problems and tried to shake the government apparatus. He started by promoting the settlement of the case related to the Xin Chao café in HCM City. That action showed the head of the Government’s attention to the fate of each individual and each small business and it is also a warning for abuse of power,” said senior economic expert Pham Chi Lan.

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Prime Minister Nguyen Xuan Phuc has been in office for nearly 6 months and his actions have captured the attention of both the mainstream press and social networks. For an assessment of the PM’s acts and the challenges posed for him and his government in this term, VietNamNet talked to Ms. Pham Chi Lan, an independent economic expert and a member of the advisory group of former PM Nguyen Tan Dung. 

One of the first things that Prime Minister Nguyen Xuan Phuc did was have a dialogue with businesses. That action showed that he understood well the current problems of the economy and the role of enterprises and he wished the government could solve these problems by assisting the development of businesses, Ms. Pham Chi Lan said in opening the talks with VietNamNet.

Former Prime Minister Nguyen Tan Dung began his first term by attending the ASEM6 in Helsinki in September 2006, where he met with foreign leaders. Prime Minister Nguyen Xuan Phuc started his tenure by patiently listening to entrepreneurs at the conference entitled "The Prime Minister and Businessmen" on April 29th 2016. In your opinion, what are the biggest worries and problems of Vietnamese businesses? How will Prime Minister Nguyen Xuan Phuc and his cabinet deal with them?

The dialogue between Prime Minister Nguyen Xuan Phuc and businesses in HCM City was warmly praised by the business community. Why?

Because at that time businesses had a lot of problems, which they had pointed out several years ago, especially in recent years, but even two resolutions issued in 2014 and 2015 of former Prime Minister Nguyen Tan Dung, who was known to be very aggressive in solving hindrances for businesses, failed to shake the central and local government apparatus to deal with them.

When the Vietnam Chamber of Commerce and Industry (VCCI) was assigned to join the Government Office to prepare for the dialogue, it took the VCCI for just a few days to collect recommendations of businesses of all sectors and economic scale in a 230 page report. The report was sent to the Government Office to submit to the Prime Minister for consideration before the meeting. The dialogue was extremely active and lively with the presence of around 500 companies. The meeting was connected online to the government and businesses in 63 provinces and cities throughout the country.

The Prime Minister decided to meet with businesses only 3 weeks after taking office and the decision impressed me. I was also impressed with his openness, his way of being ready to listen and readiness to act.

Besides members of the Government Office and leaders of all ministries and sectors who directly participated in the dialogue, local officials were also connected to the conference via online channels so that later they could not plead they did not know about the event.

The same afternoon, Prime Minister Phuc summoned ministers to a meeting to discuss measures to remove difficulties for businesses. He then assigned the Government Office, the Ministry of Planning and Investment and the VCCI to together summarize the issues mentioned by enterprises, the conclusions of the Prime Minister, of ministries and sectors and build the Government's Resolution 35.

Resolution 35 of the Government on assistance for business development from now to 2020 was issued on May 16 and it has many new points compared to Resolution 19 for 2014-2015-2016. 

Resolution 35 has a longer-term vision, and it makes quite clear the commitments of the Government on the 10 key principles in order to improve economic institutions, create favorable environment for business and investment to facilitate the development of businesses and turn them into the engine of the economy, as well as the specific goals, tasks and solutions in the next 5 years.

For example, the No. 1 principle is the State protecting the rights of ownership of legitimate property and freedom of business of people, enterprises under the provisions of the law, or the principles that the State regards enterprises as objects for being served; ensuring stability, consistency, predictability of policies; ensuring equal rights for all businesses in access to resources; or the principle of non-criminalization of economic, civil relations.... Solutions are also given quite specifically and addresses who are responsible for implementation and named clearly. I think this is a resolution that "restructures" the relations between the State and enterprises.

As for the specific issues raised at the conference, I think most of them are “familiar” problems, such as administrative procedures and the regulations that raise difficulties for businesses.

The most important message of all enterprises mentioned by Ms. Mai Kieu Lien, General Director of Vinamilk (Vietnam Dairy Products JSC), at the conference was warmly applauded by attendees and later quoted by many newspapers is that the State must see enterprises as the subject being served, not the subject being managed.

One of the first things that Prime Minister Nguyen Xuan Phuc did was have a dialogue with businesses. That action showed that he understood well the current problems of the economy and the role of enterprises and he wished that his government could solve these problems by assisting the development of businesses.

The PM’s speech at the conference and at several meetings of the government later, as well as Resolution 35, expressed his commitment to build the service government. Actually, the spirit of building a service government was also mentioned by former PM Nguyen Tan Dung in his new year message of 2014 but the specific action in the remaining two years of the previous government failed to prove that spirit.

Prime Minister Phuc showed his interest in quickly solving some practical problems and trying to shake his apparatus. He started by promoting the settlement of the case related to the“Xin Chao” café in HCM City. That action showed the head of the Government’s attention to the fate of each individual and each small business and it is also a warning for power abuse.

One of the biggest problems for enterprises – the high business costs – was also mentioned in Resolution 35, which cut costs for businesses. This suggests that the Prime Minister understood well the problems of businesses and he tried to quickly solve the issues that are within the reach of the Government.

The implementation of the Enterprise Law and the Investment Law which was passed by the National Assembly in 2014 from July 1st 2016 was also mentioned a lot by businesses at the dialogue, especially the promulgation of decrees to implement the two laws. 

Businesses also paid special attention to remove business conditions that are no longer valid under the old regulations, in addition to more than 260 businesses with conditions stipulated by the Law on Investment in 2014. However, when the laws were about to take effect, thousands of regulations in more than 50 related decrees and circulars were not amended by relevant agencies.

Immediately after the conference, the Prime Minister asked the Government Office, the Ministry of Justice, the Ministry of Planning and Investment and the VCCI to urgently review business conditions, the related legal documents and amend a series of decrees, before July 1st.

You mean that enterprises are satisfied with the efforts of the new government?

Not totally, because although the Prime Minister tried a lot, the government apparatus still moves very slowly.

After that dialogue, the Prime Minister has repeatedly reminded ministries and agencies, in monthly cabinet meetings or in every meeting with local governments about the above issues. He frankly told them about the opinion he heard that the Prime Minister was determined to solve problems for businesses but the government apparatus did not move.

Prime Minister Nguyen Xuan Phuc stressed creating favorable conditions for the development of businesses, but on the other side his government focuses on increasing budget revenues via tax collection. Is that a contradiction?

I think they are not completely contradictory, as long as we understand correctly about tax collection.

Correctly, the government is trying to collect all the missed sources of taxes, especially from the companies that deliberately avoid their responsibilities, the firms that do not pay taxes and social insurance, including those that make false statements sa as to be exempt from taxes and enjoy a tax refund. 

I think the government is right and needs to force anyone who is obliged to pay taxes to pay fully.

It is completely right as the Prime Minister instructed agencies to facilitate the development of enterprises. On this spirit, the Prime Minister has accepted the request of businesses and instructed the relevant agencies to review regulations in order to reduce business costs. Under the draft Law on Small and Medium Enterprises (SMEs), the government is ready to reduce corporate income tax to 17% for this kind of enterprise.

More than 10 years ago, when he was Chairman of Quang Nam province, Mr. Phuc had very good relationships with businesses and was very successful in attracting investment to Quang Nam, at a time when the province was short of investment. Do you think that today, as the PM, Mr. Phuc considers the private sector as the driving force for development, and what should his government do to develop this sector, which is less developed compared to the state and the foreign-invested sectors?

I think the Prime Minister's task is much different than that of the chairman or party secretary of a province. Everything he did previously in Quang Nam as you have just mentioned is very good and is a very precious experience, but the scale of an entire country is different from the size of a province and the current situation also has many new features.

Through Resolution 35, I believe that the Prime Minister understands the role of the private sector in the country, both small- and medium-sized enterprises as well as large ones, in leading the development of some fields. Perhaps he has realized the difference between the private sector in the country today and 10 years ago in terms of structure.

Many studies on Vietnam's economy show clearly that our country still does not have an equal competitive platform for the private sector and their right of property ownership; access to basic resources are not yet guaranteed yet. To make the private sector become the driving force for development, the Government must focus on solving these matters.

So far in our country the state-owned and foreign-invested businesses have been granted a lot of privileges, protection and expectations to such a degree that interest groups “block” small- and medium enterprises and farmers in their economic activities, particularly in access to resources owned or distributed by the state. This comes from the policy that the state economic sector is the key, the optimism about the growth rate and a growth model based on capital, natural resources and cheap labor. We have tried to spoil SOEs and entice FDI at all costs.

There is so much proof that state firms, although defined as the key sector, have not fulfilled their key role, even with huge incentives. They have poorly used the country’s resources, and instead of making a profit, some of them are creating a burden of debt to the country.

The FDI sector also has many more incentives than the private one. So, with their capacity and capital market, they may have contributed substantially to industrial growth, GDP growth, and especially exports, which has helped build the reputation of a big exporting country in some products. However, this sector’s actual contribution to building the foundation for Vietnam's economic development is not that significant. Their connection with local enterprises is poor so their contribution to improving competitiveness in technology, management skills and Vietnam’s participation in global value chains is below expectations.

The FDI sector currently accounts for over 50% of the added value of the industry sector, more than 70% of exports. Suppose that one day, when other countries have better conditions or due to changes in technology and market volatility, that some FDI firms leave Vietnam. Then what will remain in the country?

In many cases, some state agencies have granted ridiculous incentives to FDI firms, for example, giving them incentives without supervision of their implementation of their commitments of localization, technology transfer, labor conditions or environmental protection.

The natural disaster caused by Taiwanese investor Formosa in the central region this year has given a warning to our leaders at all levels so that they may change their environmental perspective. I'm very happy about the recent message delivered by the Prime Minister that Vietnam definitely does not accept projects that harm the environment.

How about the private sector? In the past 3-4 years, before Mr. Phuc became the PM, we have been very worried to find that the average size of the private sector in general, especially SMEs, is getting smaller, and every year 5,000 – 7,000 private enterprises stopped operation. We need to solve the three above-mentioned bottlenecks for the private sector while creating policies to effectively support SMEs and to stop the above trend. I hope that the Law on SMEs can partly do this.

On the other hand, policies that encourage start-up businesses to enter into technology, to apply new models and new business methods, and to infiltrate new markets segments, will also draw a brighter picture for private enterprises in Vietnam.

In addition, we have a force of domestic private enterprises emerging as big corporations. Though the number is not high they are capable of doing well in many areas. It is time to put an end to the argument that big projects should be granted to state-owned or FDI firms because private enterprises are not strong enough and not ready to take them. That argument is no longer right when the private sector can do well in all areas and even do better than other economic sectors.

Let the market do its role. In fact, we have many big private firms in all fields. Equitisation has also created big companies in various fields such as Vinamilk, REE, FPT, Saigon Paper, Hau Giang Pharma, PNJ... And in recent years, along with the development of the estate market and expanded credit market, the growing and varied demand for goods and services, some big private corporations in the fields of real estate, banking, industry and service sectors have been formed, with typical names as Vingroup, TH True Milk ...

Entrepreneurship, strategic thinking, administration, the ability to effectively use resources - primarily human resources -- and the attention to consumers are the most common points to the success of most private enterprises.

Those are the healthy factors or motivations that are in line with the overall development rule of businesses in the world, with the common interests of the economy and the majority of people, that enterprises need to promote and the state needs to encourage. There are also doubts about some private enterprises that take advantage of relations with or bribe officials to get access to significant resources. But to prevent this evil, the state must take action first because the allocation of these resources is in the hands of the state.

A good development in the private sector is the appearance of the companies that invest in and apply modern technology in agricultural production. They have also built connections with the small and medium enterprises and farmers. Vingroup, Vinamilk, TH True Milk, FPT ... are good examples and they should be applauded and encouraged because it is the best way to restructure agriculture and meet the demands for safe products.

Restructuring agriculture is extremely important and necessary, but if this process is only based on 9 million farmers, it will fail. Agricultural restructuring must rely on the participation of enterprises, especially the big ones, to create new ways in agricultural development, which come from the needs of the market, and provide advanced technology and governance.

Likewise is the link between large private enterprises with small and medium private enterprises in different manufacturing and service sectors to create new supply chains, strengthen and maintain a foothold in the domestic market against pressure from integration, openness and intense competition from outside.

But aren’t most big private corporations of Vietnam operating in the fields of real estate or banking, not in the manufacturing sector?

It’s true. The current development context is different from the early days of the industrialized countries as Japan and South Korea, but our country cannot realize industrialization without strong private enterprise in the field of industry and service as well as hi-tech.

We wish that the Prime Minister will encourage and create favorable conditions for big private enterprises in Vietnam to invest in modern industry and services, as well as high-tech sectors.

To be continued…

Huynh Phan
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