Q: Why do you think institutional reform and improving the business climate is an imperative and that there is no time for hesitancy?

A: The Vietnamese economy is being hit by two consecutive shocks: the COVID-19 pandemic and rapidly falling demand and rising inflation externally, especially in Vietnam’s key trading partners. The economy and the business community, which have yet to recover from the first shock, have to deal with the adverse impacts of the second shock.

As we all know, the consequences are that economic growth in the first quarter of 2023 was only 3.32%, the lowest level in recent decades, except for the first quarter of 2020. It is worrying that Ho Chi Minh City’s economy in the first quarter only expanded by 0.7%, a record low, except during the COVID-19 pandemic, diminishing its role as the country’s leading economic engine.

Growth drivers such as industrial production and export fell consecutively and posted negative growth in the first quarter and are unlikely to recover soon. Private investment is of low quality and shrinking.

Foreign investment has dropped for the first time in terms of both disbursement and new pledges, which plunged by 40%, the steepest decline since 2011. Public investment disbursement has not improved from the previous quarter, with only 10% of the full-year target, the worst first-quarter performance in years.

Notably, our country’s economic growth is declining while the period of high growth is too short and not enough to exceed the middle-income trap. Our economy is on a downward trend in both long term and short term.

This fact shows that it will be extremely difficult and challenging to achieve the economic goals set in the socio-economic plan in 2023, the 5-year plan in the 2021-2025 period and the plan in the 2021-2030 strategic period.

International experience and actual developments in our country over the past few decades have shown that drastic improvements to the business investment environment is necessary and indispensable to overcome difficulties in such tough times.

Q: Enterprises are having to downsize production, cut workforce, and even sell their assets?

A: The first years of the 2021-2025 period are the time of business and economic recovery after the COVID-19 pandemic. However, the economy, which had just recovered in the first three quarters of 2022, has declined rapidly since the fourth quarter of 2022.

During this period, businesses and the economy have had to cope with the unprecedented adverse impact of the pandemic while many businesses have gone bankrupt, and the rest are also weakened or still recovering.

The business situation in the first quarter of 2023 saw abnormal fluctuations: The number of enterprises withdrawing from the market reached a record high, which was higher than the number of newly established enterprises and enterprises resuming operation. This is the first time this phenomenon has happened in our country (on a quarterly basis).

I think it may take years for both the economy and businesses to recover to the pre-pandemic pace of development. More than ever, businesses need practical and effective support from the State. Strong reforms and improvement to the business environment are the most practical and valuable support for businesses in the post-crisis period.

Q: Improving the business environment is still a priority task of the Government not only in the 2021-2025 period but also in the 2021-2030 strategic period. How is this mission being implemented?

A: In 2023, the Government will not issue a separate resolution on improving the business environment and enhancing national competitiveness, but will integrate it into one content in Resolution No.01/NQ-CP, on key tasks and solutions to implement socio-economic development plans, state budget estimates, and improve the business environment and national competitiveness.

Therefore, the tasks and solutions to improve the business environment and enhance national competitiveness are set out quite vaguely in the Action Programme to implement Resolution No.01/NQ-CP of ministries, branches, and localities. And even in some places, it has almost not been implemented.

Meanwhile, this is the period when the business environment needs to be improved the most, to recover from the pandemic and at the same time, create new growth drivers to offset the continued decline of traditional growth drivers and combat adverse external factors.

It can be seen that a series of events and phenomena have worsened the quality of the business environment. Specifically, legal documents being drafted or promulgated in recent years have restored many barriers that have been removed, or easily set up regulations creating new barriers, in the direction of causing more difficulties, as well as increasing compliance costs for people and businesses.

The attitude of companionship, sharing and sympathy towards the difficulties of people and businesses is also disappearing. The way of working according to the constructivist ideology, following the laws of the market economy, and accompanying businesses has been replaced by a way of doing things that favours subjective inspection, control, and administrative intervention, considering businesses as management objects.

This fact is affecting the trust of people and businesses in policies, laws and management effectiveness of state agencies, from central to local levels.

As a result, businesses tend to delay investing in expanding their business lines and sizes. The percentage of businesses with investment plans to expand over the next two years fell to the lowest level since 2014.

Q: Reforming the business environment is showing signs of slowing down recently. What many people are interested in is how this fact will affect the process of economic recovery and development?

A: The economy cannot be without growth. With the current decline of growth drivers, it is very difficult to achieve the target of 6.5% growth for the whole of 2023; it must grow an average of at least 7.65% in the remaining three quarters.

Looking back at the whole development period of the past 30 years, we can see that our economy is declining at the rate of every 10 years; average GDP growth decreased by 0.5 percentage points.

For the first 10 years (1991-2000), the average GDP growth rate was 7.56%;

For the second 10 years (2001-2010), the average GDP growth rate is 6.61%;

For the third 10 years (2011-2020), the average GDP growth rate reached 6%;

In the first 3 years of the fourth 10 years (2021-2023), the average GDP growth rate is expected to be 5,6%.

If the goal of the term (2021-2025) is to reach an average of 7% as set out by the Socio-Economic Development Strategy, growth in 2024 and 2025 must average 9% per year. That is a difficult task to achieve at the present time.

I want to emphasise that our economy has been experiencing two consecutive shocks. As a result, economic growth has slowed and is now much lower than before the pandemic. The actual growth rate is far lower than the strategic target.

In that context, institutional reform and drastic improvement of the business environment should have been an important and indispensable factor for the economy to overcome difficulties and quickly recover. However, in reality, this task has not been paid enough attention, so it is much weaker than before.

Business environment reform is far from meeting the requirements of reality; not in line with the goals and tasks of institutional reform and business environment improvement identified in the socio-economic development strategy 2021-2030.

This fact needs to be reversed, as soon as possible.

Q: The requirement for institutional reform and improvement of the business environment is mentioned a lot in the reports of research organisations, in the report on the people’s aspiration work, being the burning desire of the business, businessman.

However, in reality, it is very difficult to turn the situation around. Even experts accompanying reform are concerned that it is difficult to bring breakthrough values in improving the business environment at the present time. What is your view on this matter?

A: Institutional reform and business environment improvement are indispensable elements in the framework of thinking for socio-economic development management.

Since the beginning of 2011, the Government has begun to form a policy framework to govern socio-economic development including 3 pillars:

- Stabilisation of the macro-economy, inflation control, reasonable growth and good settlement of social security issues.

- Institutional reform to improve the business environment; economic restructuring with three focuses on restructuring and innovating the growth model.

- Deep and wide international economic integration, focusing on new-generation free trade agreements.

The three pillars mentioned above are closely linked and complement each other to form a solid tripod of the policy framework for governing national socio-economic development, creating important achievements to overcome the economic crisis during the 2008-2011 period, as well as maintaining stable macroeconomic fundamentals and promoting high and sustainable growth in the following periods.

However, in recent years, we are lacking breakthrough reforms that can create new vitality in the business environment. This reality could undermine the reform achievements that have been gained over the years.

From this fact, I propose that the Government should soon restore continuous and comprehensive reform, improve the business environment and enhance national competitiveness.

This programme was represented by a separate and annual Government resolution. In addition, practical experience shows that the Government urgently needs the support, sharing and companionship of the National Assembly and the Supreme People's Court, in improving judicial-related indicators in the quality of the business environment.

The content of the reform programme must closely follow and concretize the directions and requirements for reform and improvement of the business environment, identified in the 10-year socio-economic development strategy for the 2021-2030 period.

Q: What solutions do you propose to make outstanding reforms, towards creating new vitality in the business environment, and promoting economic recovery and development?

A: I think it's time to change the method of implementing institutional reform and improve the country’s business environment, to create breakthrough results.

Institutional reform and business environment improvement in our country is an extremely difficult process. What has been done to realise this process is just making a to-do list, and it is still an open question of who does it, how and when to do it. I think that in this period, “who undertakes the reform" is the decisive factor in the success of the process.

For a long time, we have relied on the administrative apparatus, mainly ministries and branches, to carry out reforms. This method has proved to be inappropriate because they have not carried out the process in a substantive way or in a way that does not affect their roles, functions and interests.

Facts have shown that reforms proposed by independent, neutral agencies, which have no function in state management, have brought positive results and have had great impacts on the country's economic development.

Who will undertake the initiative and take on the reform projects? I would like to propose that the Prime Minister establish the Prime Minister's Advisory Group on institutional reform and business environment improvement.

The Advisory Group is responsible for advising the Prime Minister on relevant reform projects, including supplementing and amending the law related to improving the business environment and enhancing national competitiveness. The group should also provide advice and recommendations to the Prime Minister on initiatives and solutions, to promote institutional reform, improve the business environment, and monitor the results of the implementation of reform programmes and projects.

Thank you so much for your sharing!