Vietnam’s private sector awaits bold reforms

Despite shouldering half the burden of the economy, the private sector still faces numerous barriers (Photo: VietnamPlus)

Hanoi (VNA) - Nearly four decades into Vietnam’s economic reform, the private sector has cemented its role as a pillar of a socialist-oriented market economy. With over 940,000 registered enterprises and 5 million business households, it drives half of Vietnam’s GDP, powers over 80% of employment, and sparks innovation.

Yet, structural bottlenecks and a fragmented landscape keep it from becoming the economic juggernaut it could be.

Growth stymied by systemic hurdles

Since the 1990s, Vietnam’s private sector has made notable gains, contributing over 30% of State revenues and spawning domestic firms with global and regional reach.

But it remains a patchwork of small players, not a unified force, with over 70% of private firms clustered in the Red River Delta and the southeast, leaving many provinces with sparse enterprise presence, economist Nguyen Dinh Cung noted.

The sector leans heavily on manufacturing, construction, and wholesale/retail, with scant presence in high-value arenas like technology, logistics, healthcare, and education. Most are micro, small, or medium-sized, hamstrung by limited capital, outdated tech, and weak innovation. Collaboration with State-owned or foreign firms is minimal, and long-term strategic vision is often absent.

Almost all private enterprises are micro, small, or medium-sized (Photo: VietnamPlus)

Business formation has slowed, with closures outpacing new entries for some years. Legal frameworks, riddled with inconsistencies, breed uncertainty, while weak protection for assets and business freedom dampen risk-taking, Cung said.

Access to finance remains a choke point, starving firms of funds for tech upgrades or research and development. Land scarcity and a shortage of skilled labour add to the strain, while compliance costs, both formal and informal, bite hard.

In 2024, nearly 24% of surveyed companies report spending over 10% of their time just trying to understand and comply with legal regulations (Photo: VietnamPlus).

From outcasts to heavyweights

The private sector’s rise has been hard-won. “Before 1988, we were just ‘con buon’ — petty traders, seen with suspicion,” said Nguyen Thi Tra My, CEO of PAN Group. Then came Resolution 68, a game changer that grants legal legitimacy. “We still sell fish, shrimp, and rice, but that recognition was everything. It reignited our belief,” she said, calling it a “balm” for years of struggle.

Some 28% of firms report unofficial payments during inspections, 50% for land procedures; and nearly 29% in local bidding processes (Photo: VietnamPlus)

Veteran entrepreneur Nguyen Thi Nga, Permanent Vice Chairwoman of the Vietnam Association of Private Entrepreneurs and Chairwoman of BRG Group, said Resolution 68 and other timely policies have restored faith in the hustle.

Incentives over the past decades are often skewed toward foreign investors, eroding local competitiveness (Photo: VietnamPlus)

Nguyen Duy Hung, Chairman of Tan Hiep Phat’s Board of Governors, urged Vietnam to take notes from countries that actually nurture their homegrown firms. “Other countries have shown how it is done. Vietnam must follow suit to unlock real changes”, he said.

The private sector’s role in Vietnam’s ascent is undeniable, but unlocking its full potential demands bold action. Streamlined regulations, better access to finance and land, and investment in skilled labour are critical to transform it into a primary economic engine. Without these fixes, Vietnam risks squandering a sector that has reshaped its economic landscape but has yet to soar./.

To turn the private sector into a growth locomotive, breakthrough reform is critical. (Photo: VietnamPlus)

VNA