Private businesses growing up

24-Mar-2016 Intellasia | Bao Dau Thau | 6:00 AM Print This Post

Although the majority of our country’s businesses have many barriers in terms of capital, governance, etc., many businesses have made efforts to assert their positions in the market.

Looking at the revenue of businesses listed in 2016 Best Prospect 500 which will be released at the beginning of April, the noticeable point is the proportion of revenue of private businesses is “dominating” state-owned enterprises (SOEs).

In the ranking published in 2014, a large proportion of revenue belonged to SOEs such as Vietnam Oil and Gas Group (PVN), Electricity of Vietnam, Vietnam National Petroleum Group, etc. that accounted for 57 percent of the total revenue. However, at 2016 Best Prospect 500, the group of private businesses created a new position with the proportion of more than 54 percent the total revenue compared to 39.2 percent of SOEs; 6.4 percent of FDI businesses.

Leading the Top 10 private businesses 2016 is Dai Dung Commercial Construction Engineering JSC; Saigon Machinery Spare Parts JSC; Le Phan Construction Company Limited; Thai Tuan Group JSC, etc. with revenue and after-tax profits far exceeding the previous year.

As per many economists, this is considered as the bright spot in the context of deep integration because for a long now, the group of private businesses are still considered to be “weak”. Experts believe, Vietnamese private businesses can surely grow further if the equitisation process follows the roadmap. When SOEs that do not operate effectively are restructured reasonably, the number and quality of domestic private businesses are improved, Vietnamese businesses will become increasingly strong, positively contributing to the overall development of the economy.

It should be acknowledged that, so far, the equitisation of businesses has mainly been conducted for small-scale SOEs. The effectiveness of this work does not seem to be as good as expected. Meanwhile, the majority of domestic private businesses that are small and medium enterprises (SMEs) even super small businesses are still entangled with “barriers” in terms of capital, management, technology and human resources.

The survey result of 2016 Best Prospect 500 recorded that, corporate governance is the factor that causes the biggest hindrance to the growth of the business in the past three years.

Regarding Vietnam’s corporate management, the head of the Central Institute for Economic Management, Nguyen Dinh Cung acknowledged: “Unfortunately, our businesses, including large businesses, have not really paid much attention to improving the efficiency, effectiveness and quality of business management”.

Cung said, upon international integration, corporate management is a very important issue to ensure investment efficiency. The survey result of the 2016 Best Prospect 500 also noted, corporate management is quite important to ensure investment effectiveness.

The survey result also noted, corporate management is the factor that causes biggest obstacle to the growth of businesses in the last three years (2002-2015) when nearly 44 percent of businesses said they will choose this option. “It is time to change the perception of governance quality in order to improve the operational efficiency of businesses”, said Cung.

The survey result indicated top three priorities in the business strategy a company in 2016 i.e. revenue/profit growth in the current markets (accounting for 89.8 percent); cost reduction (accounting for 69.4 percent) and introducing new products/services (accounting for 59.3 percent). Only about 50 percent businesses give priority to expanding investment and business to new areas. This priority only ranked 5th among eight priorities given, showing that businesses have actually realised their core values and be more cautious when making investment decisions into a new field.

Referring to the domestic supply, foreign investors believe that the development of support industry is an extremely important factor in the sustainable development of Vietnam industry. However, many investors believe that, so far, Vietnam’s localisation rate is still far behind from many regional countries. For example, the localisation rate of Vietnam’s electronic industry only makes up about 20-40 percent now.

The survey result of The 2016 Best Prospect 500 suggests, Vietnamese businesses are growing every day, completely capable of becoming strong competitors if opportunities from global economic integration are utilised and their operational capacity is optimised.


Category: Economy, Vietnam

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