Võ Trí Thành

Võ Trí Thành*

Việt Nam is undergoing a significant shift in its perception of the private sector, increasingly positioning it as a key driver of economic growth and a lever for prosperity. This transformation is not merely rhetorical—it reflects a deeper understanding of the private sector’s vital contribution to Việt Nam’s development over the past four decades.

As the country pursues an ambitious target of 8 per cent GDP growth this year and double-digit expansion in the years ahead, unleashing the full potential of private enterprises is more crucial than ever.

Over the past 40 years, Việt Nam’s private sector has grown in tandem with the country’s economic transformation. It now comprises nearly one million enterprises and five million household businesses, contributing over 50 per cent of GDP, more than 30 per cent of State budget revenue, and employing over 80 per cent of the total labour force. The sector also accounts for nearly 60 per cent of total social investment capital.

Beyond the numbers, the quality of Việt Nam’s entrepreneurial community has improved markedly, with growing competitiveness, increased technology adoption, and deeper integration into international markets.

However, to reach its long-term goal of becoming a modern and high middle-income economy by 2030 and a developed economy with high income by 2045, Việt Nam must undertake substantial policy reforms to accelerate private sector growth.

From recognition to action

The Party and Government have acknowledged the private sector as a vital force for development, as reflected in key documents such as Resolution 10 of the 12th Party Central Committee in 2017 and Resolution 41 of the Party Politburo in 2023.

Yet despite broad consensus on its importance, translating this recognition into concrete policy action remains a pressing challenge. Việt Nam must take decisive steps in several key areas to truly empower the private sector.

First, regulatory reform must go beyond administrative simplification.

The Government has taken steps to cut red tape, with the Prime Minister calling for the elimination of 30 per cent of unnecessary business procedures. Still, more structural changes are needed. The State must shift from a bureaucratic, permission-based and asking–giving system to one that actively supports businesses in line with a modern market economy.

Creating a transparent and accountable governance framework will foster a more predictable business environment and reduce informal barriers that hinder enterprise growth.

Second, strengthening market institutions is essential.

Việt Nam needs a fully functioning market economy, with strong mechanisms to protect property rights, ensure free rights of doing business and fair competition, as well as effectively enforce contracts. This applies not only to goods and services, but also to key production factors such as land, capital, technology and data (as a new one). A well-regulated, competitive market will allow businesses to innovate and scale, while maintaining a level playing field.

Small- and medium-sized enterprises (SMEs) account for over 97 per cent of all active businesses. VNA/VNS Photo

In addition to regulatory improvements, targeted support is required to help businesses expand.

For start-ups, Việt Nam should build an ecosystem that fosters innovation, improves access to funding, and provides mentorship. Programmes such as start-up sandboxes, venture capital incentives, and skills training can help nurture a new generation of entrepreneurs.

For household businesses, which form the backbone of the economy, tailored policies are needed to encourage formalisation. Supporting their transition into registered enterprises will contribute to the Government’s goal of reaching 1.5 million businesses this year and two million by 2030.

For small- and medium-sized enterprises (SMEs), the focus should be on improving access to finance, strengthening supply chain integration, and promoting digital transformation. Many SMEs struggle with limited capital, low technological capability, and weak connections to larger value chains. These challenges can be addressed through innovation grants, targeted lending, and business networking initiatives.

Concrete policies should also encourage micro-, small-, and medium-sized enterprises that have the potential to scale, creating an ecosystem where they can grow and thrive.

Larger private enterprises, particularly those with strong national brands, should receive strategic support as well. But rather than favouring “national champions”, policies should encourage fair competition and facilitate their growth through market-based opportunities. In other words, the way to support such companies must be “supporting winners” as reflected by market results, rather than “picking winners”.

Party General Secretary Tô Lâm meets with representatives of the Vietnamese business community on the occasion of Việt Nam Entrepreneurs’ Day (October 13) last year. Photo vov.vn

The State can support private participation in large-scale, publicly funded projects—including infrastructure and defence—provided such engagement is aligned with international trade commitments and competitive principles. This will allow leading domestic firms to expand their capabilities while encouraging innovation and spillover benefits for the broader economy.

Beyond policy, Việt Nam’s private sector must also adapt to an evolving global landscape. Businesses must embrace digital transformation, adopt ESG practices, and improve corporate governance to remain competitive.

A thriving private sector also requires a culture of confidence, integrity, and long-term thinking—ensuring companies prioritise national development, not just short-term profit.

The road ahead

As Việt Nam prepares to release a new resolution on private sector development, expectations are high for meaningful reform.

The business community hopes for stronger action to remove legal barriers, improve access to land and finance, and ensure a transparent and supportive business environment. Incentives for research and development will also be critical to driving productivity and innovation.

The Government has proposed several strategic solutions for private sector growth, focusing on a conducive business climate, access to resources, technological advancement, and human capital development. If well executed, these reforms will address long-standing structural constraints, laying the foundation for a resilient and prosperous economy.

For many years, State-owned enterprises were seen as the backbone of Việt Nam’s economy, while foreign direct investment (FDI) served as a growth engine. Meanwhile, the private sector—despite its significant contributions—was often considered supplementary. That perception must change.

As Party General Secretary Tô Lâm has stated, Việt Nam’s economic future depends on unlocking the full potential of its private sector by providing the right policies, institutional support, and enabling environment.

Doing so will allow Việt Nam to achieve sustainable growth, enhance its global competitiveness, and build a more inclusive and dynamic economy for future generations.

*Võ Trí Thành is former vice-president at the Central Institute for Economic Management (CIEM) and a member of the National Financial and Monetary Policy Advisory Council. With a doctorate in economics from the Australian National University, he focuses on macroeconomic policy, trade liberalisation, and institutional reform. He authors the Việt Nam News column Analyst’s Pick.