Workers at Ho Guom Garment Company's factory. — (Photo courtesy of Ho Guom Garment)Opening the event, Luong Van Khoi, deputy director of the NCIF under theMinistry of Planning and Investment (MPI), said that domestic privateenterprises are playing a more and more crucial role in economic growth.
In 2019, Vietnam had 668,503 enterprises, of which 647,632 were private,representing 96.88% of total companies. Private enterprises contributed 15.127trillion VND (64.7 billion USD) or 57% of total net revenue, and hired 9.075million employees, accounting for 59.9% of the total employees in the country’senterprise sector.
According to a report conducted by the NCIF and Konrad-Adenauer-Stiftung (KAS),the VPE500 outperforms local private enterprises in terms of size and averagebusiness results, as well as participation in import-export activities andbusiness linkages.
During 2016-2019, the average labour size and total assets of VPE500 memberenterprises were 83 and 132 times higher, respectively, than those of otherprivate companies in general, while VPE500’s net revenue is also about 123times higher.
The report said that the VPE500 is considered the driving force, influencingthe market. And the group’s business results are seen as a thermometre of thecorporate sector.
Economist Pham Chi Lan also emphasised the importance of large businesses inthe economy.
“It is clear that the number of enterprises with relatively large or large sizeis gradually growing. And large companies are significant to the growth of theeconomy. Because an economy that only relies on small and medium businesseswith limited competitiveness can never expand,” Lan said.
The VPE500 not only has a stronger foundation in technology, equipment, andmachinery than other private enterprises, but the source of these assets alsodiffers, with a higher percentage of VPE500 members engaging in self-developedmachinery activities and utilising advanced technology.
In addition, the group has a higher rate of automation and digitisation thanthe rest. It shows that large enterprises have been the driving force of theprivate sector in improving long-term productivity and technology developmentand application.
However, Director of NCIF Tran Toan Thang said that the VPE500’s labourproductivity is not growing as fast as its size, indicating that the group isdeveloping based on production expansion rather than depth.
Its labour productivity only increased by about 5.3%, compared to 4.6% of otherprivate enterprises, and lower than that of the FDI sector and State-ownedenterprises.
Nevertheless, the group’s short-term financial indicators, such as return onassets (ROA) or return on equity (ROE), are quite high when compared to otherprivate enterprises.
While the VPE500 has spillover effects on productivity and salaries of otherprivate enterprises, it also puts a certain pressure on them. In the sameindustry, the VPE500 harms the labour productivity of other privateenterprises.
The report also showed that the VPE500 is concentrated in the two majoreconomic centres of HCM City and Hanoi (which account for nearly 50% of thetotal), and some localities that have numerous industrial zones, such as Binh Duong,Dong Nai, Hung Yen, and Ninh Binh provinces. In general, the VPE500 is formedbased on advantages in local infrastructure, resources, and markets.
But the entry-exit ratio of the group members is quite high, according to thereport. On average, more than 20% of this year’s VPE500 list will not appear innext year's, and about 10% of the VPE500 enterprises will only appear once ayear.
As one of the companies expanding from a small to large size, Ho Guom GarmentCompany understands the hardship that every firm has to go through, especiallyin administrative formalities which add extra expenses for companies, accordingto the company's representative.
Florian Constantin Feyerabend, resident representative of KAS Vietnam, hopesthat the report can contribute to the creation of regulations to boost thedevelopment of the country’s economy and companies in particular.
The NCIF-KAS’s report on VPE500 is different from current business rankingmethods. The Top 500 list was identified based on three criteria – labour size,total assets, and revenue./.
VNA
