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Official Gazette

Monday, October 3, 2022

Nation's largest firms the driving force for economic growth

Updated: 09:45’ - 11/08/2022
The National Center for Socio-Economic Information and Forecast (NCIF) on August 10 launched a workshop assessing the Top 500 Vietnamese largest private enterprises (VPE500).
 
Opening the event, Luong Van Khoi, deputy director of the NCIF under the Ministry of Planning and Investment (MPI), said that domestic private enterprises are playing a more and more crucial role in economic growth.

Workers at Ho Guom Garment Company's factory__Photo: Courtesy of Ho Guom Garment
 
 
In 2019, Vietnam had 668,503 enterprises, of which 647,632 were private, representing 96.88 percent of total companies. Private enterprises contributed VND 15.127 trillion (USD 64.7 billion) or 57 percent of total net revenue, and hired 9.075 million employees, accounting for 59.9 percent of the total employees in the country’s enterprise 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 average business results, as well as participation in import-export activities and business linkages.
 
During 2016-2019, the average labor size and total assets of VPE500 member enterprises were 83 and 132 times higher, respectively, than those of other private companies in general, while VPE500’s net revenue is also about 123 times higher.
 
The report said that the VPE500 is considered the driving force, influencing the market. And the group’s business results are seen as a thermometer of the corporate sector.
 
Economist Pham Chi Lan also emphasized the importance of large businesses in the economy.
 
“It is clear that the number of enterprises with relatively large or large size is gradually growing. And large companies are significant to the growth of the economy. Because an economy that only relies on small and medium businesses with limited competitiveness can never expand,” Lan said.
 
The VPE500 not only has a stronger foundation in technology, equipment, and machinery than other private enterprises, but the source of these assets also differs, with a higher percentage of VPE500 members engaging in self-developed machinery activities and utilizing advanced technology.
 
In addition, the group has a higher rate of automation and digitization than the rest. It shows that large enterprises have been the driving force of the private sector in improving long-term productivity and technology development and application.
 
However, Director of NCIF Tran Toan Thang said that the VPE500’s labor productivity is not growing as fast as its size, indicating that the group is developing based on production expansion rather than depth.
 
Its labor productivity only increased by about 5.3 percent, compared to 4.6 percent of other private enterprises, and lower than that of the FDI sector and State-owned enterprises.
 
Nevertheless, the group’s short-term financial indicators, such as return on assets (ROA) or return on equity (ROE), are quite high when compared to other private enterprises.
 
While the VPE500 has spillover effects on productivity and salaries of other private enterprises, it also puts a certain pressure on them. In the same industry, the VPE500 harms the labor productivity of other private enterprises.
 
The report also showed that the VPE500 is concentrated in the two major economic centers of HCM City and Hanoi (which account for nearly 50 percent of the total), 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 formed based on advantages in local infrastructure, resources, and markets.
 
But the entry-exit ratio of the group members is quite high, according to the report. On average, more than 20 percent of this year’s VPE500 list will not appear in next year's, and about 10 percent of the VPE500 enterprises will only appear once a year.
 
As one of the companies expanding from a small to large size, Ho Guom Garment Company understands the hardship that every firm has to go through, especially in administrative formalities which add extra expenses for companies, according to the company's representative.
 
Florian Constantin Feyerabend, resident representative of KAS Vietnam, hopes that the report can contribute to the creation of regulations to boost the development of the country’s economy and companies in particular.
 
The NCIF-KAS’s report on VPE500 is different from current business ranking methods. The Top 500 list was identified based on three criteria labor size, total assets, and revenue.- (VNA/VLLF)
 

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