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Let businesses take the lead   2010-10-15 - Thanh nien

The government’s policy to prioritize certain industries and encourage businesses to invest in them should be abandoned, experts say.

They say that businesses should decide what they want to do based on their reading of the market, and the government should support them by creating favorable conditions for business development.

Nguyen Xuan Thanh, a lecturer with the Fulbright Economics Teaching Program, told the Thoi Bao Kinh Te Saigon magazine that the experience of other countries showed choosing a certain industry or industries and giving them priority treatment had failed, most of the time.

“With the development of technologies and the global restructuring of labor forces proceeding at a fast pace, such a policy is no longer suitable,” Thanh said.

Vietnam has focused on several industries based on “the government’s orientation,” he said, but this has not paid off.

The automobile and electronics industries, which have been priorities for many years, have made little progress with most companies still engaged in assembly work, he said. Other sectors like sericulture and shipbuilding had actually regressed despite being given very favorable conditions.

On the contrary, some sectors have grown well even though the government did not set any clear orientation for their development. The tra fish sector, for instance, was driven by farmers as they saw the export potential of the fish, which used to be underrated earlier because of their low value, Thanh said.

“It’s the farmers who decided to raise the fish, not because the government told them to do so,” he said.

Huynh The Du, also from the Fulbright Economics Teaching Program, said the growth of a certain sector of the economy is mainly determined by businesses.

For example, Ho Chi Minh City has a strong financial and banking sector because it is home to many banks and financial companies. “It’s all about costs and benefits. Businesses have flocked to the city not due to any policy but simply because they can find favorable conditions for their business and a better chance to earn profits.”

“Businesses have the best understanding of the market, but sometimes they make mistakes,” Thanh said. “So how come government officials who do not have firsthand business experience decide (what is good) for businesses?”

The success of the tra fish sector was possible because the government gave it the right kind of support – by facilitating research of new breeds and scouting export markets, Thanh said. “That’s the role of the government: to create favorable conditions. Once the business environment has been improved, if an industry fails to grow, it means it doesn’t have the potential.”

Economist Tran Du Lich said infrastructure is one of the bottlenecks that the government needs to remove to help businesses, along with improving the quality of human resources.

Taking logistics as an example, it would be difficult for the industry to grow if the road system to seaports is not improved, said Lich, who is also a National Assembly representative.

Thanh said the government should also review the policies that can have negative impacts on doing business.

For instance, the financial sector in HCMC can be affected by a regulation that bans high-rise buildings in the city center, he said.

The nature of financial services is that they concentrate on a small area, which can be seen in all financial centers like Singapore, Shanghai, Hong Kong and Tokyo. A ban on high buildings will increase rentals in the city downtown, discouraging investors, he said.

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