Once in an inferior position in the economy, after more than three decades, private enterprises have risen to become one of the nation's development pillars.

Stronger development

The position of the private economy has been increasingly asserted and it has clearly demonstrated its contribution to socio-economic development. Currently, about 800,000 private companies are operating nationwide, accounting for about 97% of the business community.

The private economy has kept growing at a good pace, accounting for 42-43% of the gross domestic product (GDP) and employing 85% of the workforce. It has played an important role in mobilizing social resources for business and investment development, economic growth, economic restructuring, budget revenue growth, people's living standards, and social security. Especially, the private force has helped realize the goal of industrialization and modernization, given a facelift to the nation, enhanced the position and prestige of Vietnam in the international arena, and created many regional and international competitive brands.

Private economic development in quantity, scale, level, governance, technology, business, and competitiveness has been very encouraging in recent years thanks to tireless efforts of the private sector itself and the undeniable role of the government in creating an enabling business environment for its development. Vietnam already has large-scale privately held enterprises that are able to compete at regional and international levels in many different fields. Many not only become industry leaders, but also successfully create products of regional and international class, helping promote Vietnam's position in the international arena. Notable names include Vingroup Joint Stock Company, Mobile World Investment Joint Stock Company, Hoa Phat Group Joint Stock Company, Vietjet Aviation Joint Stock Company, Masan Group, and Truong Hai Automobile Joint Stock Corporation (Thaco).

Vietnamese CEOs have also become dollar billionaires. According to the Forbes world billionaires list in 2021, Vietnam has six billionaires this year, namely Vingroup Chairman Pham Nhat Vuong, VietJet Air CEO Nguyen Thi Phuong Thao, Hoa Phat Chairman Tran Dinh Long , Techcombank Chairman Ho Hung Anh, Thaco Chairman Tran Ba Duong and Masan Chairman Nguyen Dang Quang.

In addition, many private companies have overcome numerous difficulties to play a significant role in the socio-economic development of the nation.

Equal institutional and business playing field is most important

Despite strong development, it must be acknowledged that the private sector also has certain limitations. Most are micro or small in scale (accounting for about 93%) while large ones account for less than 3%. Most private enterprises are weak at competitiveness and governance. Their profit margin is only 2.4% while that of State-owned enterprises (SOEs) and foreign direct investment (FDI) companies is 5.58% and 5.6%, respectively. Nearly 50% of privately held enterprises suffer losses.

Their scientific and technological capabilities are still weak, even backward in some aspects. They lack appropriate investment in scientific and technological application and development, especially core technologies and pioneering technology. Their rate of long term success is quite low. Every year, the number of new private startups is very high and bankruptcies of private enterprises are also numerous. For example, 2019 was a quite good year for business as the economy grew well. A record number of 138,100 enterprises were established, but the number of bankruptcies equaled more than 52% of this figure.

Notably, the connectivity and culture of cooperation among Vietnamese companies are still superficial. They lack a truly strong bond for joint development. They are unaware of common interests generated from true cooperation and association for stronger competitiveness to join regional and global value chains. Currently, only about 21% of Vietnamese companies can join global value chains and just 14% have succeeded in linking with foreign partners, while a lot of foreign-invested companies are present in Vietnam.

Dr. Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI), said the future of the country depended on private enterprises. The task of the Party and the Government is stimulating private sector development.

In fact, Vietnam has a large private business force that consists of not only 800,000 corporate entities but over six million business households. Nevertheless, the country does not have many strong giant firms. “Policy approach is not to increase the number but to upgrade the quality and size of enterprises, to support large and medium-sized enterprises. The support for large enterprises is different from that for SMEs, especially in the context of the COVID-19 outbreak. It is important that the institutional and business environment is safe, fair and favorable. Among these factors, safety is the top task,” he added.

According to economic expert Pham Chi Lan, the Government needs to create an environment that ensures truly fair and healthy competition to enable the private economy to play its role. It is essential to end relations-based administration where the closer enterprises are the more privileges they can access. Support solutions also need to be changed in approach. Indeed, it is necessary to focus on supporting startups of innovation and innovative technology to make them feel that they are not alone. The ways of support also need to be reconsidered. Instead of providing support for many with conventional products and services, we should consider focusing on businesses with better added values and interests for the community. Last but not least, we need to create a new supply chain that generates more added value and higher trust for the business community.