Hanoi (VNA) – The non-State sector is playing a greater role in the economy with its proportion in the society’s total investment rising fastest among all economic sectors’.

At a workshop in Hanoi on October 30, Nguyen Dinh Cung, former Director of the Central Institute for Economic Management (CIEM), said it is now the private sector, not the State or foreign direct investment (FDI) sectors, that is the driver of economic growth.

Private sector becomes healthier

According to the General Statistics Office, total investment in the society during the first nine months of this year increased 10.3 percent from the same period last year. Notably, the non-State sector accounted for the largest part, 45.3 percent of the total, and its proportion also posted the strongest increase.

The FDI sector still sustains its growth trend with the implemented capital reaching 14.2 billion USD in the period, compared to 9.8 billion USD in 2015, 11 billion USD in 2016, 12.5 billion USD in 2017, and 13.3 billion USD in 2018.

Meanwhile, investment capital from the State budget has yet to be improved and grew by only 4.8 percent, the slowest pace compared to 8.1 percent in 2015, 13.1 percent in 2016, 6.6 percent in 2017, and 11.4 percent in 2018.

Echoing Cung’s view, Nguyen Anh Duong, a division head at CIEM, said the non-State sector is becoming healthier in the economy with its proportion in the total social investment rising fastest.

The entrepreneurship can be seen in the number of newly established businesses. In the first 10 months of 2019, up to 149,000 companies were set up and resumed operations, up 8.6 percent year on year.

In a new context full of challenges, domestic businesses have become healthier with more innovation and flexibility to adapt to and grow, Duong said.

Non-State sector becomes growth driver of national economy hinh anh 1The workshop is held by CIEM on October 30 within the framework of the Aus4Reform programme (Photo: VietnamPlus)

Indirect investment capital surges

Analysing the FDI sector’s capital structure and business performance in 10 months, Cung said although the number of new FDI projects rose by 25.9 percent, their registered capital dropped 14.6 percent.

The decline in registered capital means smaller projects, he noted, adding that it is necessary to review the quality of new projects as well as the ways foreign businesses have invested in Vietnam recently.

Another worrying point is that the growth of additional capital in existing FDI projects tends to slow down, and it even decreased 16.4 percent from the same period last year, the expert said.

Meanwhile, indirect investment soared by 70.5 percent year on year, Cung noted, urging prudence amidst an influx of indirect investment capital.

According to Dung, new-generation free trade agreements have brought about positive impact, promoting reforms of the domestic investment and business climate. Besides, international trade tensions have fueled the shift of the global investment flow, and Vietnam is assessed as a relatively attractive destination.

However, without good selection, new FDI projects would not generate as high effectiveness as expected or result in environmental and social consequences, he added.

Regarding the country’s economic prospect, Cung expected the abovementioned FDI trend would be reversed in the coming time thanks to the implementation of the Politburo’s Resolution 52-NQ/TW, dated September 27, 2019, on some guidelines and policies for the proactive participation in the Fourth Industrial Revolution.

This resolution requests ministries and sectors from the central to local levels to actively coordinate to tackle difficulties so as to ensure a fair business environment and perfect legal regulations on foreign invested venture capital.

Cung also forecast Vietnam’s gross domestic product (GDP) growth rate at 7.02 percent for 2019 and 6.72 percent for 2020, and inflation at 2.78 percent and 3.17 percent, respectively./.

The Aus4Reform programme, funded by the Australian Department of Foreign Affairs and Trade, aims to support the Vietnamese Government to improve the investment – business climate through promoting labour productivity and the economy’s quality and competitiveness towards fast and sustainable development. The programme, worth 6.5 million AUD, is implemented from 2017 to 2021.