PUBLICATIONS & REPORTS

Contents Introduction

In January 2000, Vietnam began implementing a far-reaching Enterprise Law that reduced numerous barriers to private business and weakened policies favoring state-owned enterprises (SOEs), and to a lesser extent, foreign-owned multinational corporations (MNCs). Partially as a result of these institutional changes, the number of private firms more than doubled in 2000-2004, both in manufacturing and non-manufacturing, although they remained much smaller than SOEs or MNCs throughout the period. Private manufacturers were also less profitable than SOEs and MNCs, and new firms, especially new MNCs, also tended to have relatively low profits. Entrenched SOEs and MNCs were thus better positioned to exercise market power than private firms. Moreover, despite a strong trend toward reduced producer concentration during this period, econometric evidence suggests that large SOE and MNC presence or large changes in SOE and MNC presence tended to accelerate increases in producer concentration. Although this evidence does not suggest that SOEs or MNCs should be restricted on the basis of ownership, it does suggest that policy makers should be aware that large or increasing presence of SOEs and MNCs may raise anti-trust issues, especially in industries where competition is weak.