Notas a las Cuentas de Orden

In contrast to the shrinking cooperatives, private and household business has seen a visible

and the household sector. In a period o f just five years from 1986 to 1990, the share of the

private and the household sector nearly doubled compared to a modest increase in the share

of the state and a falling share o f the cooperatives and the production groups.

Table 2.5: Share of industrial production, by types of enterprise (per cent)

1989 1990 1991 1992 1993 State-owned enterprises 66.4 67.6 68.5 70.5 71.3 Non-state-owned enterprises: 33.6 32.4 31.5 29.5 28.7 - Cooperatives 35.3 28.2 15.3 9.6 8.6 - Private enterprises 3.1 3.0 4.7 9.6 10.8 - Family firms 61.7 68.8 80.0 80.7 80.6 Total 100.0 100.0 100.0 100.0 100.0

Source: World Bank (1995a)

Since the reforms, the private sector has become more dynamic and has flourished,

especially in services and retail. The proportion o f revenue of the private sector to the total

revenue in services and retail substantially increased from 41.2 per cent in 1985 to 73.1 per

cent in 1991 (Vu Tuan Anh 1994: 31). As this sector emerged, businesses took various

forms, from shared holding companies, joint stock companies, limited liability companies,

sole proprietorships down to household businesses. Table 2.5 shows the shares of industrial

production, by type of production entity. While the share of state-owned enterprises has not

increased significantly, the share of the non-state-owned enterprises has fallen

not from any fall in the share of the private enterprises and the family firms, which actually

expanded by approximately 200 per cent and 25 per cent respectively.

By 1993, there were already 984212 private business entities in operation. These entities

were usually very small in terms o f capital. On average, a private business had 98 million

dong worth of investment and 526 million dong of capital compared to the corresponding

figures of 7021 and 8652 million dong for a government enterprise. On average, the total

assets of a government enterprise were 23.4 times of the total assets of a private business

(Vu Tuan Anh 1994: 30).

The policies encouraging an independent role for households have also positively affected

the production activities of the household sector, a component o f the private sector. The

number o f newly established household businesses increased significantly along with the

increasing number of private businesses. According to a survey conducted by the Ministry

of Labour, Invalids and Social Welfare in 1991, of 1008 business units in five provinces,

up to 80 per cent of them were private and household businesses and were newly

established after 1987 (Vu Tuan Anh 1994: 33). The share of the total value of goods and

services provided by the household sector in services increased from 41.4 per cent in 1986

to 66.9 per cent in 1990 (GSO 1996).

Besides the change of ownership of land use rights and factors of production, which tie the

interests o f households more closely to the final products of their land, there were other

3The difference between these two forms is hired labour: while private business units have to hire labour for their operation, the household ones use only the labour o f the members o f the households. According to Vu Tuan Anh (1994: 33), in 1991, the average size o f a private business was 13.7 labourers with 11.4 hired

reasons for the household sector to expand. These reasons rest in the characteristics of the

household.

Unlike other economic units, economic household units are established along family lines.

Thus all members o f a household business are likely to be closely involved in the family

business and to have a conscientious attitude towards the common work and family

welfare. The problem with labour discipline that used to be a primary concern o f the old-

style cooperatives is no longer present. Children and old people, especially in families

involved with agricultural production, are often found to be very useful in doing simple and

relatively undemanding jobs, for example, in cattle husbandry and vegetable planting.

Production skills and experience are learned and transferred from generation to generation

in these small business units. Not surprisingly, in the cooperative regime pre-1980,

productivity in the “five per cent land”, which households could use as they wished, was

often twice and sometime three times the productivity of the land in the cooperatives (Tran

Hoang Kim 1996).

Another reason for the proliferation of the household economy stems from the small size of

household units. A small size business usually does not require much startup capital and

can be very flexible. Despite their limited capability for applying new technology, often

leading to low productivity, small-scale units are capable of changing the type, the pattern

and the quantity o f products very quickly in accordance with the changes in demand and

price in the local market. They also can be highly flexible in making decisions regarding

finance, production and consumption. If their products are not sold in the market,

confine themselves to production for their own uses. This form o f business, therefore, is

very suitable even for groups of poor households in developing countries.

Traditional professions, such as traditional medicine, handicraft, pottery etc. have been

associated quite closely with family businesses and villages. For example, in a village of

this type in Thai Binh province, up to 700 of the total of 800 households of the village

follow traditional professions (weaving) and the remaining inhabitants are involved in

agricultural production (Hoang Kim Giao 1993: 44). These professions require quite

complicated skills and know-how which are taught and passed down from generation to

generation only in families. For such professions, cooperatives inhibited the transfer of

“know-how” and skills from generation to generation.

Table 2.6: Growth of foodstuff production in different periods

1976-80 1981-85 1986-90 1991-95