Vietnam has formed private economic groups with powerful financial capacities and they have been making significant contributions to the national economy. Contrary to the view that private economic groups need to be built on a different model and operated under a specific legal framework, many companies say it is not a prerequisite condition to set the stage for operation of this type of economic group.
These viewpoints are aired at a seminar titled “Identifying the model and way for developing private economic groups in Vietnam”, held by the Ministry of Planning and Investment in collaboration with the Vietnam Young Entrepreneurs Association in Hanoi.
This is an important cultural event in a series of activities the Vietnam Young Entrepreneurs Association has implemented for the project “Establishing the model of private economic groups in Vietnam” under the instruction of the Prime Minister.
Big ship needed for big sea
Pitching the importance of private economic groups, Dr Nguyen Manh Cuong, Standing Vice Chairman and General Secretary of Vietnam Young Entrepreneurs Association, said: “To cross a big sea, we need to build big ships. Vietnam cannot integrate into the international economy with only small businesses.”
According to statistics, the world’s 100 largest transnational corporations currently have assets of US$10 trillion. These corporations produce 25 % of total global industrial output and account for 75 % of total global trade. Mr Cuong said a developed economy necessarily has companies in this Top 100 list.
In fact, the operations of State-run economic groups caused much doubt about the effectiveness of this sector. As the “darling” of the national economy, State-owned economic group are given all the most favourable conditions to develop, capital and land preferences, etc. They hold up to 75 % of national economy assets but they pay only 28.8 % to the State Budget. Meanwhile, the private sector, after more than 20 years of doi moi (renovation), contributes more than 60 % of the country’s GDP, primarily based on their own efforts.
Most economic development policies in recent years advocate the formation of economic groups to compete on international markets. However, that view has only been institutionalised for the state-run sector in Government Decree 101/2009/ND- CP dated November 5, 2009 on pilot establishment, organisation, operation and management of state-owned economic groups. Meanwhile, private economic groups have not yet been officially recognized and have been the subject of controversy.
The concept of “group” needs to be legally defined
Government Decree 139/2007/ND-CP, guiding some articles of the Law on Enterprise 2005, has guidance contents for the group. Accordingly, the word “group” can be used as an ancillary element that forms the proper name of the parent company in accordance with the naming of a business stated in the Law on Enterprise 2005. But, the “group” does not have legal status and business registration, according to the Decree.
Before the controversy about the necessity of legal framework and a specific model for private economic groups, many argued over whether it is necessary to have specific regulations on private economic group development. Why do we have to distinguish the development of private groups from state-owned groups?
Indeed, most developed countries do not have obligatory standards for the group. The group is not a business or a legal entity and operates primarily through investment relations and capital ownership relations. Therefore, the group is used to have a common brand, common activity, and to increase capacity. In the world, only three countries have specific regulations on the group, namely Germany, Portugal and Brazil.
Dr. Dang Duc Dam, Director of Institute of Research and Business Development, said: We must lay the legal framework for the group as this concept is interpreted broadly.
In the market economy, we must be familiar with the different concept of “group”. According to Mr Dam, “Previously, it was understood that the “group” is a giant business with huge capital, many business scopes, large human resources, transnational presence, etc. In reality, a group can be even smaller than a company.”
In other words, the group is essentially an organisation of associated enterprises. So, we only need a chapter on the group in the Law on Enterprise because the law has provisions for all types of enterprise, including State-owned enterprise, private enterprise and foreign-invested enterprise.
Luong Tuan
Vietnamese
