Industry News
Green light turned on for private economic groups

In the last 10 years, Vietnam has seen the establishment of private joint stock companies operating in many different business fields.

The common characteristic of the private economic groups, as pointed out by many economists, is that they have developed by exploiting natural resources (minerals, land and forest) and receiving preferential treatment compared with other businesses in the same fields. 

The economists said that if Vietnam’s large economic groups mostly come from the real estate sector, they cannot be considered the motive power for the national economy.

The economists said that if Vietnam’s large economic groups mostly come from the real estate sector, they cannot be considered the motive power for the national economy.

Vingroup, for example, has large scale of operation, but economist Bui Trinh said it cannot serve as the driving force of the economy.

Real estate has been attracting the most investment in the last decade. This is the field where most of Vietnam’s multi-billion dollar businesses and dollar billionaires can be found.

According to the Ministry of Planning and Investment, the real estate sector attracted $297.4 million worth of foreign direct investment (FDI) in January, or 21.2 percent of total FDI in the month.

However, a knowledge-based economy relies on intelligence and technology to optimize product value.

Nguyen Tri Hieu, also an economist, commented that big real estate groups have recently invested in other business fields, but this is not enough to grow into powerful conglomerates like chaebols in South Korea. They have invested in retail and agriculture sectors, but their mark remains modest.

According to Vietnam Report, the total revenue of the 10 largest businesses in 2015 was $7.23 billion, equal to 3.4 percent of the revenue of $211.32 billion of the 10 largest businesses in the US Fortune 500. 

Many Vietnamese enterprises in the top 500 are just equal to small and medium enterprises in accordance with US standards.

The revenue of Vinamilk, the Vietnamese company which had the highest revenue in 2016 ($2.08 billion), is just equal to 28.9 percent of the company ranking 2,000th in the world – Hanwha Chemical from South Korea ($7.2 billion).

Vietnam hopes it can have big private companies in the fields of manufacturing and technology, not companies which exploit natural resources or undertake production phases which bring low added value.

The revenue of the 10 biggest private businesses is VND33.3 trillion, very small compared with the revenue of VND135.4 trillion of the 10 biggest state-owned enterprises.

The Communist Party has issued an important resolution acknowledging the greater contribution of the private economy to the country’s socio-economic growth, affirming that private economy as “an important driving force of the socialist-oriented market economy”.

Source : VietNamNet Bridge

June 2017

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