From Doi Moi reforms to Vietnamese billionaires

The opening of the economy more than 30 years ago has made Vietnam a prospering nation, Photo: Le Toan

In mid-April, Vietnamese veteran economists gathered in Hanoi to discuss the country’s economic situation, swapping stories from various economic sectors, especially the private sector.

Over the past three decades since Doi Moi was launched in 1986, the private sector has had open access to the economy, thanks to the Party’s resolutions, especially the most recent Resolution No.10-NQ/TW on developing the private economic sector into an important impetus for the socialist-oriented market-based economy.

However, the private economic sector is now finding it difficult to grow further.

“After numerous efforts to reform mechanisms and policies, the private sector’s contribution to the economy remains limited, currently accounting for only 9 per cent of the GDP, up less than 1 per cent over the past 10 years. Meanwhile, the state sector occupies 32 per cent of the GDP, while holding nearly 50 per cent of enterprises’ investment,” said Tran Dinh Thien, head of the Vietnam Economics Institute. “This means the key forces for Vietnam’s international economic integration, including private small-scale business households and state-owned enterprises (SOEs), remain almost unchanged from dozens of years ago.”

According to Thien, there has been substantial discrimination between privately owned enterprises (POEs) and SOEs. Almost all policies are in favour of SOEs, not POEs.

“POEs have been unable to grow. The economic structure remains almost unchanged,” Thien said. “This has also prevented the emergence of billionaires.”

Thien recalled one day when he met with a billionaire who told him that he felt unhappy when being called a billionaire.

“Other billionaires like him also do not want to be termed ‘billionaires,’ though they have contributed to society. It is because they are often viewed by the public in a negative light,” Thien said. “An economy cannot become wealthy and prosperous if the rich are stigmatised.”

According to Forbes, as of March, Vietnam had four billionaires in the magazine’s list of the world’s richest people, two more than last year.

In addition to Vingroup chairman Pham Nhat Vuong, listed by Forbes in 2013, Vietnam has added three more billionaires in 2017 and 2018 - Vietjet CEO Nguyen Thi Phuong Thao, Thaco chairman Tran Ba Duong, and Hoa Phat chairman Tran Dinh Long.

However, other statistics suggest that the number of Vietnamese billionaires may be higher. For example, according to Bloomberg’s Billionaires Index, Masan Group chairman Nguyen Dang Quang’s total assets are worth about $1.2 billion. Other businesspeople, including FLC Group chairman Trinh Van Quyet, Novaland chairman Bui Thanh Nhon, BRG chairwoman Nguyen Thi Nga, and T&T chairman Do Quang Hien, are also reported to have total assets in excess of $1 billion each.

However, in Southeast Asia, the number of Vietnamese billionaires remains smaller than those in Thailand, Singapore, Indonesia, the Philippines, and Malaysia. Also, almost none of them are willing to own up to how rich they actually are.

Huynh The Du, director of the Department on Public Policy and Management at Fulbright University Vietnam, said that each billionaire in Vietnam has his own set of values to offer the community.

Specifically, the low-cost Vietjet mirrors inclusive development, as it enables many Vietnamese people to fly. Vingroup has benefited many urban areas via its Vinhomes projects. Hoa Phat has helped exploit the country’s ore mines and added value to Vietnamese homes. Lastly, Thaco’s Truong Hai auto complex has been taking the lead in developing Vietnam’s auto industry.

However, Du also sees that despite numerous positive changes, the Vietnamese business climate houses negative phenomena, with businesspeople still doing nothing but speculating and taking advantage of legal loopholes to benefit themselves.

Rich people do not want to be called billionaires because they do not want it known that their wealth comes from special relations with state officials and interest groups or from overexploitation of the country’s natural resources.

“I do economic research, so I do not pin my hopes on the kindness of businesspeople, but on their purposes in pursuing profit,” Du said. “Institutions create business climates where enterprises will seek profit and where billionaires will develop with different values given to society. Thus, in Vietnam, a more friendly business environment must be created so that talented people and enterprises can develop based on actual values.”

The Central Institute for Economic Management (CIEM) has compiled three economic scenarios for the 2018-2020 period. The scenarios model the outcomes of three different government economic policy approaches.

In the first scenario, without state interference, Vietnam’s average annual GDP growth is expected to reach 6.71 per cent during 2018-2020, and 6.63 per cent during 2016-2020.

In the second scenario, with loosened fiscal and monetary policies, the respective rates are 6.83 and 6.7 per cent, but there will be higher inflation pressure.

In the third scenario, with improvements in the investment climate, competition policies, and innovation, average annual GDP growth is expected to reach 7.47 per cent in 2018-2020 and 7.08 per cent in 2016-2020.

The breakthroughs in economic reforms and policies will help improve the private economic sector’s investment and SOEs’ efficiency, and also make it easier to attract technology from foreign enterprises into domestic enterprises.

CIEM director Nguyen Dinh Cung believes that the third scenario will be the most feasible. “The macro-economy has been seeing positive developments, but some challenges remain in economic reforms. For example, while one agency said costs for enterprises must be reduced, the other one said there must be a rise in fees and taxes. The market and the business community are in critical need of a consistent messages from the government,” Cung said.

“The government’s role in the market must be redefined, meaning that the government must be a supporter and facilitator for enterprises,” he added.

According to Du, the government should focus on macro-economic stability, with the average inflation rate kept at about 2-3 per cent, helping to offer 4-5 per cent in lending rates. This will facilitate doing business for enterprises in the long term. The government should also focus on improving the business climate in favour of all enterprises.

“The government needs to create a transparent business climate from which all enterprises can benefit. Then both billionaires and ordinary people will be able to better understand their positions in society, and then treasure the money they make for themselves and for society. Ultimately, real prosperity will come,” Du said.