It is only through a significant breakthrough in private investment that a rapid economic recovery can be achieved. The key to accelerating economic revival lies in unleashing the potential of the private sector and fostering substantial investment that can drive growth and generate new avenues for economic development.
Private Investment Hits a Five-Year Low
According to data from the General Statistics Office of Vietnam (GSO), realized investment capital for the entire society in 2023, at current prices, is estimated to reach VND 3,423,500 billion. This represents a modest increase of 6.2% compared to the previous year, significantly lower than the 11.4% increase observed in 2022. The GSO attributes this subdued growth to the global economic impact, with decreased export orders affecting various industries, leading to a sharp decline in production and business activities among businesses and individuals.
Of particular concern is the minimal increase in investment within the non-state sector, rising by only 2.7% compared to the previous year. In contrast, the state sector experienced a notable increase of 14.6%, and foreign direct investment (FDI) saw a 5.4% uptick. Dr. Lê Duy Bình, CEO of Economica Vietnam, expressed worry over this development, stating, "This is the year private investment increased the lowest in the past 5 years." He emphasized the significance of private investment in propelling economic growth and enhancing the endogenous capacity of the economy. The current trend raises concerns about the overall health and vitality of domestic private investment in driving economic progress.
In reality, investment from the private sector plays a crucial role in fostering job creation, income generation, and developing new production capacities for the economy. The primary objective is to enhance overall social investment, with a specific focus on increasing investment from the domestic private economic sector. This is integral not only for economic growth but also for facilitating resource clearance and the efficient utilization of resources. Furthermore, a boost in private investment alleviates the burden on public investment for crucial infrastructure projects, particularly through public-private partnerships. This, in turn, reduces pressure on the budget and mitigates the strain on public debt.
Several factors contribute to the gloomy outlook on private sector investment. These include a sluggish market, a decline in the export market, subdued activity in the real estate sector, diminishing demand, and low domestic consumption. Additionally, businesses cite an unfavorable and unpredictable business environment, making it challenging to formulate long-term policies. The apprehension to take risks, evasion of responsibilities, and an overall sense of stagnation and slow resolution of issues contribute to a cautious approach by businesses. Consequently, a prevailing mentality of prioritizing survival over growth is becoming more prevalent within the corporate sector. Addressing these challenges is essential for revitalizing private sector investment and stimulating broader economic development.
Urgent Call to Boost Private Investment
"Private investment is at a critically low level, the lowest in the past 10 years. Even during the Covid period, private investment only saw a modest increase of 3%. We must stimulate private investment," expressed Dr. Cấn Văn Lực, a member of the National Financial and Monetary Policy Advisory Council, with evident concern. Dr. Lực emphasized the necessity for private investment to double, targeting a growth rate of at least 6-7% for stability, a matter he raised at the recent Government Conference with localities.
The sluggish pace of private investment is attributed to an unfavorable business environment and policy mechanisms that pose numerous barriers for the private sector, many of which have yet to be effectively implemented. Challenges in project implementation persist due to ineffective coordination, remaining a significant hindrance to investment activities. These obstacles erode confidence and diminish the motivation for business investment. Consequently, numerous businesses are opting to scale down production and business operations, with many deferring or temporarily suspending investment decisions while reassessing their business challenges. Urgent measures are called for to address these issues and reignite private sector investment for economic stability and growth.
Experts express deep concerns that without appropriate and timely solutions, the economic situation in 2024 may not witness significant improvement—a prospect that raises significant worries. The fear is that if this trend persists, private investment could be overshadowed by state investment and Foreign Direct Investment (FDI). "Only when private investment makes a breakthrough will the economy recover quickly," emphasized Associate Professor Dr. Trần Đình Thiên. Dr. Lê Duy Bình added that in the absence of substantial private investment, the economy remains heavily reliant on state investments, such as public investment and state-owned enterprises, as well as foreign investment capital.
To avert a slide into low growth, there is an urgent need to stimulate private investment. Restoring confidence and improving the business environment are crucial for reigniting private investment. Addressing the fear of responsibility and streamlining processes in ministries, branches, and localities are essential steps. The focus should be on creating favorable conditions for investment, production, and business activities, while reducing business costs, including unofficial costs, logistics costs, and loan costs. Continuing support programs for investment and production through fiscal and monetary policies in 2024 is vital.
The Government has taken steps by issuing Resolution 02/NQ-CP/2024, placing strong emphasis on improving the business environment, bolstering confidence, creating a foundation for recovery, increasing the number of new businesses, and limiting business withdrawals from the market. The resolution underscores that improving the business environment is a top-priority task to promote private investment and accelerate economic growth. The effectiveness of these measures will ultimately depend on their implementation.
