Viet­nam pushes chal­lenges to state com­pa­nies

The Pak Banker - - BUSINESS -

Nguyen Hieu, chief ex­ec­u­tive of a Hanoi con­struc­tion com­pany, last year was turned down by sev­eral banks for a $800,000 loan for a pro­ject the com­pany had won and had al­ready in­vested nearly half a mil­lion dol­lars.

"It's very dif­fi­cult for small, pri­vate com­pa­nies like us to get bank lend­ing," said Hieu, whose com­pany em­ploys a few dozen. "They pre­fer to lend to big busi­nesses and state-owned com­pa­nies. We've had to trim down op­er­a­tions due to a lack of cap­i­tal."

Viet­nam's rul­ing Com­mu­nist Party says it rec­og­nizes the chal­lenges com­pa­nies like Hieu's face and is set­ting a stronger tone to sup­port pri­vate busi- nesses over the next five years, as frus­tra­tion grows over the slow re­forms at state com­pa­nies. The na­tion is set to be one of the fastest-grow­ing economies in the world, yet lo­cal firms have strug­gled to ben­e­fit while for­eign man­u­fac­tur­ers reap the ex­port boom.

In his open­ing ad­dress Jan. 21 at the most im­por­tant Com­mu­nist Party con­clave that oc­curs ev­ery five years, Gen­eral Sec­re­tary Nguyen Phu Trong said the "pri­vate sec­tor is an im­por­tant en­gine of the econ­omy" and urged for poli­cies to sup­port it.

An on­line draft of the party's fiveyear eco­nomic plan, which the 1,510 del­e­gates are ex­pected to ap­prove this week, calls for pri­vate busi­nesses to get "equal ac­cess" to credit, land and other re­sources--the level play­ing field com­pa­nies have been seek­ing for years.

While many are skep­ti­cal the words will trans­late into pol­icy change soon, other busi­ness lead­ers say they're cau­tiously hope­ful. "It's good they rec­og­nize the im­por­tance of the pri­vate sec­tor but im­ple­men­ta­tion is the key thing," said Hieu. "We still don't know how much of that idea will be trans­lated into poli­cies and regulation to re­ally help pri­vate busi­nesses."

Along with a new slate of lead­ers, the party congress also sets the tone for eco­nomic re­form and growth. The pro­posed so­cioe­co­nomic plan through 2020 shows the na­tion will tar­get as much as 7 per­cent av­er­age an­nual ex­pan­sion and gross do­mes­tic prod­uct per capita at $3,200 to $3,500 by 2020 from the cur­rent In­ter­na­tional Mon­e­tary Fund es­ti­mate of about $2,170. If Viet­nam hits th­ese goals, it will be one of the fastest grow­ing economies in the Asia-Pa­cific re­gion, ac­cord­ing to the IMF.

Viet­nam's stock mar­ket has at­tracted for­eign in­vestors, with over­seas in­vestors net buy­ers for the 10th con­sec­u­tive year in 2015. The bench­mark VN In­dex has lost 7.8 per­cent so far this year, as emerg­ing-mar­ket stocks face a rout on China's slow­ing econ­omy and drop­ping oil prices.

The 2016-2020 eco­nomic blue­print calls for the cre­ation of "fa­vor­able con­di­tions" to sup­port pri­vate com­pa­nies. The plan also lays out ac­cel­er­at­ing the pri­va­ti­za­tion of state en­ter­prises, re­solv- ing bad debt and im­prov­ing the na­tion's com­pet­i­tive­ness. Sev­eral lead­ers, in­clud­ing Trong, have stressed that Viet­nam is at risk of fall­ing be­hind re­gional peers. Av­er­age growth in 2011 through 2015 was 5.9 per­cent, lower than the 6.5 per­cent-to-7 per­cent tar­get that the coun­try's lead­ers had set.

Del­e­gates at the con­fer­ence also reg­is­tered a dif­fer­ent tone from the pre­vi­ous five-year plan. "The idea of pro­mot­ing the pri­vate sec­tor is ex­pressed more clearly and deeply this time with more de­tails to sup­port it," said del­e­gate Nguyen Thanh Ngoc, vice-chair­man of Tay Ninh prov­ince. "The doc­u­ment will pave the way for the govern­ment to en­act more poli­cies and reg­u­la­tions later to sup­port pri­vate busi­nesses."

State- owned com­pa­nies use al­most 50 per­cent of Viet­nam's pub­lic in­vest­ment and tap 60 per­cent of the coun­try's bank loans, while con­tribut­ing to just a third of GDP, ac­cord­ing to govern­ment data. The econ­omy is fore­cast to ex­pand 6.7 per­cent this year, the same pace as in 2015.

"The party has to main­tain eco­nomic growth and they are in­creas­ingly aware that state-owned com­pa­nies aren't pro­vid­ing that," said Tony Foster, the Hanoi- based man­ag­ing part­ner in Viet­nam for the law firm Fresh­fields Bruck­haus Deringer LLP. "In or­der to main­tain sat­is­fac­tion among the pop­u­la­tion and their own power, they have to make sure the pri­vate sec­tor gets more and more sup­port."

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