VINACHEM

The meeting between General Secretary and President To Lam with entrepreneurs from the Vietnam Small and Medium Enterprises Association on the afternoon of August 22 clearly delivered many positive messages.

In his capacity as the head of the Party and the State, To Lam chose to engage with small and medium-sized enterprises, rather than state-owned enterprises, FDI companies, or large private corporations.

This marks a historic occasion, as there has never been a meeting of this nature between a General Secretary and representatives of the private business sector before. The private sector has become the largest pillar of the economy, as evidenced by its contribution to 50% of the GDP, 35% of total budget revenue, and employment for 50% of the national workforce - figures that surpass those of both state-owned enterprises and the FDI sector.

At the meeting, Mr. To Lam reiterated the Party's stance, emphasizing that businesses are the driving force of economic development. He stressed that the Party and the State remain committed to creating the best conditions for the Vietnamese business community to thrive. Acknowledging the intense challenges many businesses face in a fiercely competitive environment, he urged the Vietnamese business community to continue striving for success.

This meeting, coupled with the encouraging words from the head of the Party and the State, is expected to breathe new life into the business sector, which is currently navigating one of its most challenging periods due to numerous domestic and international upheavals.

In response to this renewed spirit, we sought the opinions of several economic experts and policymakers. The central question was: What is the key to creating a breakthrough that would unleash the country's resources and overcome the current situation?

The consensus among experts is clear: it is imperative to revive the entrepreneurial spirit within the private sector and reinvigorate the public sector's work ethic to generate rapid development.

Economic expert Nguyen Dinh Cung observed: "There was once a burning spirit for business in society, but now it’s different. The state system is sluggish due to its focus on inspections and audits; no one dares to take action." He emphasized that while the role of the state remains crucial in socio-economic development, it is essential to address the stagnation within the state sector swiftly.

Cung further noted that the private sector is also experiencing significant inertia, with business confidence at a low point. The VCCI report illustrates this decline, showing that only 27% of businesses plan to expand their operations in 2024 and 2025, a significant drop from 35% in 2022. This figure is even lower than the previous trough in 2012-2013, when the Vietnamese economy was grappling with the dual impacts of the global financial crisis and domestic macroeconomic instability.

Cung suggested that leadership should focus on reducing inspections and eliminating unnecessary restrictions, such as the travel ban on tax-indebted entrepreneurs. He believes that small actions like these could have a significant psychological impact on society and the business climate.

The ban on exit for tax-indebted entrepreneurs is stipulated in Clause 1, Article 21 of Decree 126/2020/ND-CP, detailing provisions of the Law on Tax Administration. Many localities have published extensive lists of entrepreneurs barred from leaving the country due to tax debts. The Ministry of Finance reported that tax debt reached nearly VND 164 trillion by the end of 2023.

Economic expert Tran Dinh Thien criticized the exit ban policy, arguing that it causes more harm than good. He pointed out that publicizing the names of indebted entrepreneurs deters potential business partners, making it difficult for these individuals to secure new contracts, recover operations, expand markets, and ultimately repay taxes. Thien described this regulation as counterproductive, especially in the current economic climate.

Thien also raised concerns about the criminalization of civil economic relations. He noted that imprisoning entrepreneurs often leads to the collapse of their businesses, affecting the entire ecosystem and resulting in job losses. Thien advocated for imposing heavier economic penalties instead of imprisonment, suggesting that fines should be substantial enough to deter illegal activities.

For example, during the drafting of the Securities Law, experts proposed that stock manipulation offenses should be fined up to 1,000 times the illicit gains. However, this suggestion was not adopted, and the law currently imposes a fine of only VND 500 million - a negligible amount compared to potential gains of up to VND 100 billion from stock manipulation.

Thien emphasized that economic violations should be addressed through financial penalties that significantly exceed the illegally obtained funds. He argued that stringent sanctions would discourage future offenses and prevent the recurrence of fraudulent activities.

To avoid criminalizing civil economic relations, Thien also called for reforms to enhance the efficiency and fairness of contract dispute resolution and bankruptcy procedures. He suggested establishing economic courts at the inter-district or regional level, creating appropriate legal frameworks, and improving the capacity and effectiveness of the enforcement and judicial systems.