Can public investment stimulate private investment?

DNHN - Public investment policies have been actively implemented to stimulate private investment. Therefore, the benefits and mechanisms that public investment brings to encourage private sector activity are very positive.

Public investment encourages private enterprises to expand production and business

Public investment often focuses on building and upgrading infrastructure, including transportation, electricity, water, and telecommunications. Improving infrastructure reduces transportation costs, enhances connectivity between regions, and creates favorable physical conditions for private enterprises. This encourages private businesses to expand their production and business activities.

Thus, public investment can create a favorable investment environment for private enterprises. The government can apply preferential tax policies, reduce land prices, or provide financial support packages to encourage private investment in the sectors and regions that need development. This helps alleviate the financial burden on businesses and creates an incentive for them to invest and expand their operations.

Additionally, public investment activities create opportunities to strengthen public-private partnerships. The government can collaborate with private enterprises in implementing large-scale projects, from infrastructure construction to other industrial and service sectors. The combination of private sector expertise and state power can create effective projects and enhance the competitiveness of private enterprises.

Public investment will also create job opportunities for workers, especially in sectors related to construction and infrastructure. Increasing employment helps improve the living standards of the population and creates favorable conditions for private enterprises to attract and retain highly qualified personnel.

However, to achieve maximum efficiency from public investment and stimulate private sector activity, it requires strict management and supervision from the government. This ensures that public investment projects are implemented transparently, fairly, and do not create unhealthy competition within the business community. Additionally, it is necessary to establish simple legal mechanisms and administrative procedures to reduce barriers and time for private enterprises when participating in public investment projects.

Public investment plays a crucial role in stimulating private sector activity in Vietnam. Improving infrastructure, creating favorable investment conditions, strengthening public-private partnerships, and creating job opportunities help create a favorable and attractive business environment for private enterprises. This simultaneously contributes to economic development and sustainable growth in Vietnam.

Public investment plays a crucial role

Dr. Le Duy Binh, Managing Director of Economica Vietnam, stated that despite some positive signs in import-export activities in 2024, domestic private investment in the first quarter only increased by about 4.2%. To achieve the set growth target, public investment still plays a very important role.

However, there are several issues related to public investment that need priority resolution. First, public investment must focus on a few major projects and key projects to avoid widespread investment. Project implementation times should be shortened to ensure projects quickly bring about economic and social benefits. Priority should be given to projects that drive the development of specific localities, regions, or sectors of the economy.

Second, it is necessary to ensure the speed and scale of public investment disbursement. According to the Ministry of Finance, as of April 30, 2024, 316 projects and sub-projects in 48 localities had a disbursement rate of 0%. This indicates that public investment funds have not been used effectively in many places and need urgent resolution.

Third, public investment should focus more on creating a new growth model. This involves supporting the formation of new industries such as clean energy, semiconductor technology, chip production, electronics, green transportation, and infrastructure for green transitions.

Lastly, public investment should create greater spillover effects to attract and stimulate private investment. This is crucial for Vietnam in the coming period, as public investment will gradually decrease relative to the growing scale of the economy. Many sectors will need investment that public funds cannot meet or should not meet, requiring private investment instead. We must prioritize stimulating private investment through public investment and find solutions to this challenge.

Dr. Le Duy Binh emphasized that public investment is not just about allocating state budget funds for infrastructure but also plays a vital role in promoting and supporting private investment. In high-tech industries, for instance, the shortage of skilled and high-quality labor has become a serious issue. Public investment can focus on building vocational training systems, providing high-quality human resources for economic sectors through upgrading and modernizing training facilities, laboratories, and establishing research and development (R&D) centers.

“For some countries, public investment does not only focus on traditional infrastructure such as energy or highways but also includes direct investment in startups in the form of venture capital. This opens up a new and diverse approach to using state budget investment funds, helping many countries develop their economies more sustainably and effectively”, Dr. Le Duy Binh shared.

Nghe Nhan