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Why does Vietnam lag behind?

Last update: 08:00 | 24/03/2019

VietNamNet Bridge - Vietnam is economically lagging behind other countries in the region and in the world. There is a big gap in GDP per capita between Vietnam and other countries, which makes it difficult for Vietnam to catch up with them.


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The core of the doi moi (renovation) in Vietnam is the shift from single-ownership into a multi-ownership economy, where the central planned regime no longer exists.

The 1987 Law on Foreign Investment, the 1990 Corporate Law & the Law on Private Enterprises, and the 1999 Enterprise Law have encouraged the development of Vietnam’s private economic sector.

One of the revolutionary viewpoints of the 1999 Enterprise Law was that ‘people can do anything that are not prohibited by the laws’, rather than ‘people can only do the things allowed by the laws’, which was one of the major reasons hindering economic development in many decades before.

Soon after the Enterprise Law took effect, the then PM Phan Van Khai set up a task force in charge of implementing the Enterprise Law, which deserved credit for removing half of sub-licenses, considered obstacles on businesses’ development way.

Soon after the Enterprise Law took effect, the then PM Phan Van Khai set up a task force in charge of implementing the Enterprise Law, which deserved credit for removing half of sub-licenses, considered obstacles on businesses’ development way.

Khai then set a goal that Vietnam would have 1 million businesses by 2010.

However, the business environment did not improve as expected to pave the way for the development of private enterprises. The ask-and-grant scheme still existed and businesses still had to ‘ask for grant’ from state management agencies. 

News vendors also had to obtain licenses valid for 3 months and scrap dealers needed to have licenses for six months.

Old sub-licenses were removed, and new licenses have come out. One chocolate bar must obtain 13 kinds of licenses to be able to hit the market, while farmers complain that it takes longer to obtain a license to sell chicken than to raise chicken.

As a result, the private enterprise network is shrinking and their competitiveness is getting weaker, while Vietnam is more deeply integrating into the global economy.

The 2017 master economic survey conducted by the General Statistics Office (GSO) found that as of January 1, 2017, Vietnam had 517,924 operating enterprises. Vietnam had 800,000 enterprises already in 2008.

The GSO’s report on the socio-economic situation in the first 11 months of 2018 showed that the number of businesses suspending operation or awaiting to get dissolved increased sharply by 64 percent, while the number of newly established businesses increased by 4.5 percent only, compared with the same period 2017.

The report pointed out that the number of small & medium enterprises (SMEs) increased sharply, now accounting for 98 percent of total enterprises. Of SMEs, 74-75 percent are micro businesses.

The Communist Party Politburo Resolution No 39 released on April 17, 2015 said that the number of state officers must be cut by 70,000 a year, or 140,000 after two years, to streamline the civil service However, in reality, the number of officers has increased by 96,000.

As a result, the ratio of civil servants per 1,000 people in Vietnam is 43, not including policemen and military officers, much higher than other countries. In the Philippines, there are only 13 civil servants, including policemen and military officers for every 1,000 people.

Vietnam has 30 ministries and ministerial-level agencies, while Japan has 11, Singapore 15 and China 20.

Vietnam has more than enough deputy heads of divisions. A report shows that there are 81,492 ‘deputy heads’, from deputy head of divisions to Deputy Minister, accounting for 21.7 percent of total civil servants from the central to district levels.

The cumbersome apparatus requires a huge budget to feed it. In 2011-2015, regular spending accounted for 65 percent of total spending, increasing by 2.2 times compared with five years before.


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Hai Loc

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