This resolution, he noted, will have a general goal: “The private sector is really an important engine of the socialist-oriented market economy; the private sector is developing in a rapid, sustainable and diverse manner, with high growth in terms of quantity, size, quality and percentage of gross domestic product (GDP), contributing to improving people’s living standards, social justice, defense and security, soon making the nation an industrialized country in the direction of modernization.

 

“Private economic development is an indispensable, objective, urgent and long-term requirement in the process of perfecting institutions and developing a socialist-oriented market economy.”

 

He deemed it necessary to rally widespread support for the view that the State sector and the collective sector together with the private sector will serve as the core for the development of an independent and autonomous economy. 

Developing a healthy private sector based on market forces should be seen as an important means to mobilize and allocate resources and increase productivity, and to facilitate the development of the private sector in all areas not prohibited by law.

 

Many issues with private sector

 

Binh commented that until now, the private sector had not yet fulfilled its role as an important engine of the economy.

 

It is still primarily made up by small household businesses, accounting for 31.33% of GDP, while larger-scale private concerns represented only 7.88% of GDP in 2015.

 

GDP growth of the private sector has ebbed in recent years (11.93% in 2003-2010 versus 7.54% in 2011-2015). Some 97% of private enterprises are small and micro small, with low technology and slow innovation, limited finances, low labor productivity and poor business efficiency, weak management and connectivity, and limited ability to participate in the domestic and international value chains.

 

The rate of loss-making and bankrupt private enterprises remains high, with an average of 45% in 2007-2015.

 

The structure of the private sector is imbalanced, with 81% concentrating on trade and services and only 1% on agriculture. The number of private firms in manufacturing and processing is small.

 

Binh said: “The weaknesses and limitations of the private sector in the past time are due to both objective and subjective reasons, mostly subjective ones.”

 

Institutions for business development still have many shortcomings, not meeting the actual requirements. 

There have not been breakthroughs in renovating and perfecting private economic institutions and improving the investment and business environment in order to quickly and firmly develop the private sector under the socialist-oriented market mechanism.

 

There is a lack of consistency in the perception and practical activity of some levels of the Party concerning private economic development, with sometimes no appreciation of the role of the private economy.

 

The low starting point of development and internal capacity of the private economy is another reason.