Though Vietnamese private firms take lead in investment efficiency, their profits are still much lower than those of state owned and foreign-invested enterprises, said a recent report.
While private businesses take the lead in terms of investment efficiency, their ratio of profit on total assets is still lower than that of SOEs and FIEs, according to the report on private economic sector development released by the Taskforce on the implementation of Enterprise Law and the UNDP on Wednesday.
The ratio of profit on total assets of private businesses is 1.5 percent, while the figures are 5.4 and 10.6 percent for SOEs and FIEs respectively.
To date, 500,000 enterprises have been established in Vietnam. If comparing the investment capital and the GDP of private businesses, SOEs and FIEs, one can see that the private sector has the highest investment efficiency.
In 2001, the ICOR index (Incremental Capital Output Ratio) of the private sector was 2.63, while the figure was 7.42 for SOEs and 6.29 for FIEs. The ICOR of the private sector was still the lowest in 2007: private businesses only needed VND3.74 to make a VND1 of profit, while SOEs needed VND8.28, and FIEs VND4.99.
Besides, the expenses private businesses have to pay to create jobs are also the lowest. In 2008, SOEs needed VND436.5 million worth of stockholder equity to create a job, while private businesses only needed VND224.1 million.
In 2009, the private economic sector provided jobs to 85 percent of laborers, while SOEs and FIEs 11.5 percent and 3.4 percent, respectively, of the total 47.7 million laborers.
The ratio of total turnover on total assets of the private sector is also higher than other economic sectors. In 2008, private businesses could create VND1.8 billion in turnover from VND1 billion. Meanwhile, with the same sum of money, SOEs created VND0.8 billion, and FIEs VND0.89 billion.
Le Duy Binh, Representative of the Taskforce on the implementation of the Enterprise Law, said that a lot of private businesses have reported loss.
Private businesses have to bear high expenses, therefore their profit is low. Private businesses, for example, have to pay high for leasing workshop premises, while SOEs and FIEs can lease land at lower fees, Binh added.
Besides, private businesses usually find it difficult to access bank loans because they do not have assets to mortgage for loans.
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