though most lists provided specific addresses and phone numbers, a significant amount of time was lost at the start of survey implementation trying to locate firms.<sup>13</sup> In Ha Tay province, in particular, DPI lists were supplemented with company lists provided by the local Department of Labor, Invalids and Social Affairs (DOLISA) in order to increase the number of smaller sole proprietorship enterprises captured in the survey.<sup>14</sup> 17. In 2001, the Vietnamese press frequently reported cases of illegitimate company registrations. Surveyors did encounter a significant number of cases where no company existed at the address of a registered company and no one at the address or in the neighborhood appeared to have ever heard of the company or its owner. Vietnam’s press has been quick to label these firms “ghost firms”, engaged in some sort of illegal activity, such as trying to access VAT receipts for the use of other businesses. An equally possible explanation is that these firms have registered before starting up operations or have moved their operations elsewhere.<sup>15</sup> Further research on this issue, its costs, and appropriate policy responses would clearly be useful.

# **IV.  THE CURRENT PICTURE: VIETNAM’S PRIVATE COMPANIES IN 2000**

# **The Firms**

18. By any measure, Vietnam’s domestic formal private sector is, at present, small. Domestic private companies contribute the smallest share of GDP of any enterprise type and employ less than 60 percent as many workers as even the Vietnamese state bureaucracy. The domestic formal private sector is also largely concentrated in the southern third of the country, in cities, and in low sunk cost industries like trade.

# **Small in Size**

19. Domestic private companies produce 7.6 percent of national GDP, compared to about a third contributed by state enterprises. In manufacturing, the gap is even larger: the domestic formal private sector’s share is nine percent and the state’s share is half. In both cases, however, it may be that the private sector’s role is somewhat larger than credited by official statistics, as measurement of the sector’s output is complicated by private companies’ propensity to under-report their activities to avoid high corporate taxes and other, less formal fees.<sup>16</sup>

> 13 According to CIEM, DPI registration lists were comprehensively checked and updated in 1997 in preparation for a national firm survey.  This still means that formal and informal bankruptcies, as well as firm relocations, over the past four years are not accounted for by the lists used for this survey.  Other firms also may have registered, but not yet begun operations.  Firms are ordinarily removed from DPI lists only after companies do not return required paperwork for two consecutive years.

> 14 DOLISA lists are lists of existing private firms that the DOLISA is responsible for supervising with regard to their labor practices.  DOLISSA Ha Tay said all the firms on its lists were in operation.  Given the limited time frame of the survey, this list proved  a more efficient means for selecting and finding relatively small and footloose sole proprietorships—which were the main form of enterprise that most often could not be found from the DPI list.

> 15 Registering before starting operations is standard in many countries.  If doing so is becoming more common in Vietnam, this might represent a significant change from the first stage of formalization of the private sector in the 1990s when registering private companies were usually pre-existing informal sector firms adjusting to the new legal framework.

> 16 The “tall poppy syndrome”, which states that private companies in Vietnam are reluctant to grow relatively large for fear of attracting too much negative attention from authorities and regulators, is relevant to this point.

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