THE ROLE OF THE PRIVATE
SECTOR IN TRADE IN
THE CASE OF TEXTILE AND
GARMENT INDUSTRIES
(Abstract)
After a period of impressive high growth from 1990 –
1995, the economic growth rates have been slow down since 1996. It is believed
that development of the private sector would bring in strong impulses to the
economy’s recovery. The impact of the enterprise law effective since the year
2000 has been proved such suggestion.
The purpose of this research is to show out
contribution made by the Vietnamese non-state sector as a consequence of trade
liberalization, to identify obstacles restraining its development and to put
forward recommendations to increase its contribution. The textiles and garments
are chosen as case studies.
There has been investigated the Vietnamese non-state
sector (NSEs) which includes incorporated private and cooperative sector.
Households are not included because the method used is to compare firms of
non-state sector with state and foreign ones. The analysis is based on results of
the survey at 150 textile and garment firms in 1999- 2000.
The main findings are following. NSEs are dynamic and
efficient: they are more active in the international market, especially in non
quota market. Their contribution to value added is double than that to output.
Labor productivity in revenues per employee at NSEs is smaller than SOEs, but
lag considerably far behind FIEs. But NSEs acquire the highest labor
productivity in value added: 1.30 times of SOEs and double that of FIEs. NSEs
better manage resources than SOEs and FIEs. They create much more new jobs than
SOE and FIE sector, especially for the poor. The average monthly wages at NSEs
are higher a bit than SOEs, but about 1/3 lower than FIEs.
But NSEs contribution to investment is modest: 1/3 of
SOEs and 1/2 of FIEs. Domestic investors rely mainly on their own capital
rather than to borrow from the banks although lending to them seems not as
risky as it is thought: their financial performance in terms of almost all
considered financial leverages is better than SOEs.
The better performance of the non-state sector can be
explained by some factors. Their directors have stronger, even than FIEs
directors- incentives to do business well because most of them are the owners
or the largest co-owners of the firms where they work. They have more autonomy
to make decisions on investment as well on daily operations, such as pricing,
marketing and personnel, like to recruit and replace labor as well to motivate
and maintain discipline.
The limited role of the non-state sector in some
aspects is due to discrimination against it. NSEs get less quotas: number of
NSEs with quotas is just 2/3 of SOEs, poorer information about market and
technology, fewer loans from state budget and banks than SOEs despite their efforts:
55% of SOEs succeed to borrow from state commercial banks in comparison with
17% of NSEs and 2.9% of FIEs. NSEs also have disadvantages in material supply
due to indirect imports and comparatively small distribution networks.
The main recommendations are to create a fair
competitive environment for all ownership sectors, namely better access for
non-state sector to international market through foreign trading firms, better
provision of information and participation in trade fares and exhibitions, widening
the scope of activities for branches and representative offices, providing tax
incentives for reinvestment, increasing in banks credits to the sector by
opening the banking services for competition; adjust the financial regulations on R&D expenditures and amortization.
This study highlights the potentials of the non-state
sector and helps it to prepare for fiercer competition in the context of
globalization.