VietNamNet: An independent economic expert asserted that one of the successes of the economic renovation is the birth of entrepreneurs. We spent a lot of time talking about the state-owned sector and now what do you want to say about the private business sector in Vietnam today?
Pham Viet Muon: There was a long time in which we did not recognize the private sector. At that time, our economy had two components: the state economy with state-owned enterprises and the collective economy with cooperatives. After renovation, in 1990 we enacted the Law on Enterprises. Earlier, in 1987, we issued the Law on Foreign Investment. Based on these laws, we officially recognized the commodity economy with many economic components.
In the early 1990s, the development of the private business sector in our country remained very limited at some point in scale, quality and efficiency. Because at that time the private sector was still new, small, and inexperienced, they were not strong enough to break into the marketplace and not powerful enough to dominate the market segments which had long been controlled by state-owned enterprises and cooperatives.
Undeniably, private enterprises have been taking an increasingly stronger role and have become pillars in the national economy of Vietnam.
From only 5%-7% now their contributions are up to over 40% of the country’s GDP.
The presence of the private sector has made our economy more dynamic. Now we have very big private corporations operating in the country and abroad, in all fields and contributing positively to society on many fronts.
The method of management of the private sector is closer to the market and these things have contributed to help our country’s deep integration into the world economy.
VietNamNet: Though making a positive contribution, compared to the state sector, private enterprises still have to "swim“ by themselves because they receive less favorable policies and mechanisms.
Pham Viet Muon: It is not "swimming by themselves" but development on their own and fast growth.
The State creates a legal framework for business activities and businesses are allowed to operate in all the areas that the State does not prohibit. This is of fundamental importance to open the playground for the private sector to have the opportunity to develop. Looking at the reality we will see that private enterprises always choose to invest in sectors with the opportunity to earn substantial returns. When it is difficult to do business, they move to other fields.
The market is a battlefield, in several decades of innovation, many private businesses closed, dissolved, changed, or stopped business registration, but at the same time many private enterprises were established.
We should not panic when we hear information about the closure and dissolution of private firms because simply this business sector is extremely dynamic and sensitive. If the business does not work, they quickly withdraw capital and seek new opportunities without having to consult anybody. Meanwhile, state-owned enterprises or cooperatives have to fulfill complicated procedures if they want to stop or dissolve business. For the past few decades, the number of state-owned enterprises going bankrupt has been very few.
VietNamNet: But we already have the Bankruptcy Law?
Pham Viet Muon: We have had the Bankruptcy Law but it is extremely difficult to enforce.
Not all three subjects want to propose bankruptcy. If the trade union proposes bankruptcy, then workers lose their jobs; if the Director offers bankruptcy, he loses his position; if the creditor suggests bankruptcy, he loses his money.
Recently, the state said that state-owned enterprises should be allowed to go bankrupt, but due to several reasons they have not gone bankrupt. I know that in Ho Chi Minh City, the bankruptcy decision for some state-owned enterprises was made from 1995 - 1998 but until now bankruptcy has not yet been implemented because the review of debt and other procedures had not been completed. Therefore, some state owned business are no longer active, but they cannot go bankrupt.
VietNamNet: Reality shows that private Vietnamese entreprises have become exhausted. At official and informal forums, businesses and experts sounded the alarm that without assistance from the government, this sector will decline.
Pham Viet Muon: Firstly, in the mechanisms that have been issued, we do not discriminate between private and state-owned enterprises. We only distinguish economic sectors, products and economic regions to provide appropriate support for economic development and how to effectively match the requirements of society and international commitments.
Secondly, let’s question why some enterprises keep their mechanisms or policiesthey have grown up with, while others keep little forever. In the present context, everyone has the opportunity to grow.
Thirdly, every year since 2007 onwards, the Prime Minister has always met with businesses to listen to their opinions. I attended all of these meetings so I know it very clearly.
After 2007, these meetings were not held annually but only when necessary, so they are more practical and effective.
The Prime Minister assigned the Vietnam Chamber of Commerce and Industry (VCCI) to keep track of the business community and reported monthly to the government at the monthly cabinet meeting the requirements of businesses and progress made by state agencies in dealing with the problems of businesses.
I used to be in charge of advising the Prime Minister in handling these problems. Before each issue, each recommendation, we relied on the law, opinions of agencies and experts to work out solutions. I confirm that many issues have been resolved, clarified and improved. But as you see, people still complain because life always changes and even if we have moved urgently, it is still difficult to meet the requirements of life.
So what do they complain about? They complain about general policies or about a particular problem that requires competent authorities to stand out to resolve. There are matters that they complain about today, and they are solved the next day. But there are also matters that they have to wait for to be solved by relevant agencies, and many other things that must be approved by the National Assembly.
We have more than 600,000 businesses. They have general requirements, and also specific requirements. It is easy to solve general requirements but for specific requirements, we need research.
Even in developed countries, this fact remains. To grow, businesses have to have requirements. Usually I find that their requirements are justifiable. And the government’s job is how to best solve the general requirements, how to create a level playing field and common rules for all participants. And we're going in that direction.
VietNamNet: What can you say about the fact that state enterprises have easier access to capital and land than private enterprises?
Pham Viet Muon: Not exactly. I do not think that it is more difficult for private groups like Hoang Anh Gia Lai, Dong Tam, Him Lam or Vingroup to borrow money or hire land than state enterprise. They have even more access to these resources. They work efficiently and can easily borrow money from banks.
The businesses that have difficult access to capital and land are small, very small, and many of them don’t do business really well. Therefore their projects cannot convince credit institutions. We should remember that credit institutions are also enterprises. Their goods are money and they need the best guarantee to make profits.
We have industrial parks and industrial clusters where enterprises build their factories. However, the majority of our private enterprises are small-scale; for them capital and land are always a problem. For example, many small businesses are looking for small ground, they do not want to enter industrial parks. The land outside industrial parks they choose has sometimes been selected for other purposes.
Regarding capital, all businesses want to borrow capital but why can one business borrow capital but others cannot?
In terms of policy, there are no barries or discrimination. But we have to note the current administrative procedures, or sublicenses. This is the stage that raises difficulties for businesses and they complain about this.
VietNamNet: Is there a way to remove difficulties for private businesses so they do not feel that they are "abandoned" and have to "swim in the ocean by themselves"?
Pham Viet Muon: The best way is from people. Human resources and the apparatus.
What we need is an effectively operating apparatus.
What we need are people and government officials who behave lawfully, who accompany businesses in solving the problems.
And for businesses themselves, they must also do business legally.
Many countries around the world also have experienced difficulties we are facing. However, they have many advantages as they have had a market economy for a very long time. In our country the market economy has existed for only several decades, which is not long enough. Nothing can be solved overnight.
VietNamNet: As what you have said, we have acted for a long time. But why did the National Assembly recently hold the Spring economic forum with the theme "Turn words into concrete actions"?
Pham Viet Muon: I remember that American President Theodore Roosevelt once said, "When we decide, the best thing is to make the right decision. It is almost good to make a wrong decision and the worst is not making any decision."
What we always need and crave for is to take action. Unfortunately, if that decision leads to something wrong, it is also an opportunity for us to know that it's wrong and then fix it. This is better than doing nothing.
The National Assembly’s act proves that we must continue to strive for much more concrete action to promote national economic development. For the central government, this requirement is not only the promulgation of mechanisms and policies but application of policies in practical life.
And to do so, perhaps the most important and most necessary task now is to build a team of public servants who can handle matters on-site in a professional and clean way. Unfortunately, we are very weak at this point.
VietNamNet: You used to hold a senior post in the Enterprise Reform Steering Committee. Based on the fact, do you think that your team could have done better with the responsibilities assigned, but for some reasons, you could not realize your expectations?
Pham Viet Muon: That is absolutely right! When we do something, after we finish it or after we stop doing it, we often think whether we could do it better. I often think about this. And indeed, we could have done it better, with higher results, but in fact we couldn't do it all because:
Firstly, our capacity did not meet the requirements of enterprise reform and renovation.
Secondly, we were members in the administrative apparatus. Administration is one way, is imperative, is unilateral. When we work, we must use as a basis the resolutions and guidelines of the Party, the State and the Law, the governmental decrees, the direction of the Prime Minister, leaders of the government, and even circulars of ministries. When a problem occurs, we have to review it based on all of these things.
VietNamNet: Are the difficulties that you have just mentioned a bottleneck for the reform of state-owned enterprises?
Pham Viet Muon: Actually, we have not achieved what we have set out.
In life there are things that we have to work very hard to achieve, but the results are beyond the requirement. It is similar for our task. For 10 years we worked very hard, but there is still a lot of work to do by our successors.
VietNamNet: So with the current mechanism, can your successors accelerate this process?
Pham Viet Muon: Our mechanism is always changing. We are continuing to remove obstacles to get better mechanisms to meet the practical needs. Our successors will do better then what we did. Life is constantly moving forward.
For example, regarding the mechanism for determining value, if we maintain such high state-owned capital ratio in state owned enterprises, then no one will buy our shares, so surely we will have to change.
Or the issuance of sublicenses, if this is not resolved completely, enterprises will keep complaining andwill be hampered and the business environment will not be made less cumbersome.
VietNamNet: I can understand that in order to improve the barriers, as you just said, we have to play by the rules of a market economy, yes?
Pham Viet Muon: In our context, we must act under the framework of the current legislation, and during that process, if we see any problem we have to make proposal to fix it. We should not put the cart before the horse, and not take a shortcut because that is a violation of the rules.
For example, when the Prime Minister does not allow divestment below the cost price, if you do it, that means you break the law and you will be punished.