One of the most important pillars of the economy

In a recent article, General Secretary To Lam assessed that if the private economy only played a secondary role in the early stage of doi moi (renovation) and the general economy mainly relied on the State economic sector and the foreign direct investment (FDI) sector, this economic sector has risen strongly in the past two decades, especially after the Politburo issued Resolution 09 in 2011 and the Central Committee issued Resolution 10 on private economic development in 2017, to become one of the most important pillars of the economy and prove its increasingly important role as the key driving force of national economic growth.

With nearly 1 million corporate entities and about 5 million individual business households, the private economic sector currently contributes about 51% of GDP, more than 30% of the State Budget revenue, creates more than 40 million jobs (accounting for more than 82% of the total workforce in the economy), and makes up for nearly 60% of total social investment capital. The private economy not only drives growth in production, trade and services, but also plays an important role in enhancing labor productivity, promoting innovation and strengthening national competitiveness.

It is necessary to see private economic development as a long-term strategy and policy of the country. The private economy, together with the state economy and the collective economy, forms a core group for building a resilient and self-reliant economy. Party General Secretary To Lam

The rapid growth of many Vietnamese private companies not only strengthens their dominance in the domestic market but also establishes their brands internationally. This demonstrates that with a supportive business environment, Vietnamese enterprises can develop, expand globally, and compete on an equal footing with international counterparts.

Despite its bigger contributions, the private economy is still facing many barriers that hinder its development toward a breakthrough in scale and competitiveness, according to General Secretary To Lam. Most Vietnamese private companies are small or very small in size, weak in financial potential and management skills. They lack connections with each other as well as with the FDI sector and cannot take full advantage of opportunities brought by the Fourth Industrial Revolution. They are still slow in digital transformation, with only a few investing in research and development (R&D) while paying little attention to business remodeling, technological innovation, or new product development.

Many individual business households still keep their old business practices and lack motivation to grow into corporate entities. Therefore, this makes it hard to increase added value, enhance competitiveness, boost business value and meet international standards.

In addition to internal weaknesses, private enterprises confront many other barriers in accessing resources, especially credit capital, land, natural resources and high-quality human resources, particularly in the technology, engineering and finance sectors.

Moreover, they also operate with an inconsistent and overlapping legal system and in a business environment with many obstacles, handle complicated, time-consuming and costly administrative procedures and face latent risks. In many cases, the right to freedom of business and property rights are still violated by the weakness or abuse of power of some civil servants in office.

On the other hand, the Government's preferential and support policies are not really effective and fair among economic sectors and are not easily accessible to the private economy. In many cases, state-owned enterprises (SOEs) and foreign companies receive more incentives than the private sector. Besides, the existence of harassment and unofficial costs poses an invisible burden for private companies, weakens their business performance and raises concerns when they plan investment expansion.

According to the General Secretary, limitations to private business development stem partly from institutional bottlenecks, economic policies and business climate. These hindrances not only restrain the growth of the private economic sector, thus keeping its share to GDP almost unchanged for more than a decade, but also prevent the general economy from increasing added value and escaping the middle-income trap and slow down the progress of turning Vietnam into a high-income developed country by 2045 as stated in the Party’s resolution and expected by the people.

The private sector serves as a key lever for Vietnam's prosperity

Breakthrough reforms in institutions, policies and business environment

Vietnam aims for economic growth of at least 8% in 2025 and targets annual double-digit growth from 2026 to 2030. This will require stronger efforts and more robust development of the core force - the private economic sector. According to Mr. Sacha Dray, an economist at the World Bank, Vietnam has revived private investment, a key driver of investment growth in 2024. If this trend continues in 2025, it will significantly support economic growth in the future. In particular, to create a more favorable investment environment, Vietnam needs to simplify procedures and create easy access to finance, especially for domestic small and medium-sized enterprises (SMEs). This will support Vietnam's strong growth in the future.

To enable the private economic sector to fulfill its mission and realize its vision, according to General Secretary To Lam, the most important factor is to implement bold reforms in institutions, policies and the business environment, enabling the private sector to unlock its full potential and become a leading driver of the economy in the international market.

It is necessary to see private economic development as a long-term strategy and policy of the country, he said. The private economy, together with the state economy and the collective economy, forms a core group for building a resilient and self-reliant economy. It is necessary to further accelerate the completion of a socialist-oriented full market economic institution which is modern, dynamic and integrated. This is the prerequisite for the private economic sector to achieve rapid and sustainable development.

For this, the State should prioritize stabilizing macroeconomic performance, refining institutions, and ensuring that economic activities operate based on market principles. This includes minimizing intervention, removing administrative barriers, eliminating the bureaucratic "ask-and-give" mechanism, and genuinely applying market-based economic management while using market tools for regulation. It is necessary to strictly control corporate monopolies and policy manipulation, safeguard fair competition and ensure that private enterprises have equal opportunities for growth.

In addition to strengthening the state-owned enterprise sector, particularly state-owned business groups, priority should be given to developing private economic groups of regional and global stature. It is also important to actively support SMEs, empower the household and cooperative economies, and encourage private businesses to participate in the country’s strategic sectors, according to the General Secretary. There must be separate support policies for the development of SMEs, household economy and cooperative economy to encourage business households to transform into corporate entities and develop new effective cooperative models. Private companies are encouraged to participate in strategic sectors, develop important infrastructure, high technology, spearhead industries and energy security, and are offered opportunities in important national projects. They can participate with the State in some strategic industries and special sectors to enhance their research and technological innovation capacity.

Moreover, according to General Secretary To Lam, it is necessary to accelerate the wave of startups, innovation, digital transformation, and the adoption of new technologies. This key factor will help the private economy to make breakthroughs and reach international standards. The State needs to create a legal sandbox for new technology fields, encourage private firms to invest in pioneering fields such as artificial intelligence, blockchain, big data, e-commerce, financial technology (fintech) and smart healthcare.

Specially, it is necessary to drastically reform institutions in favor of businesses and citizens; decisively streamline administrative procedures and business conditions; accelerate digitalization and technological application to State management to reduce time, compliance cost and informal costs; establish an effective policy dialogue and criticism mechanism to enable the private business community to give opinions on economic policy-making process to achieve high practicality and feasibility. Vietnam's business environment is expected to be in the Top 3 in ASEAN in the next three years. 

According to the General Secretary, more effective support policies are needed to ensure the private sector can access resources conveniently, fairly, equitably, transparently and efficiently, enabling them to maximize their potential. Vietnam needs to develop fundraising channels for private companies, including the stock market, corporate bond market, venture capital funds, credit guarantee funds and modern forms of finance such as fintech and crowdfunding; build stable and transparent land policies and allow private companies to access land funds in a convenient manner and at reasonable prices. Policies should be introduced to encourage private companies to invest in processing and manufacturing industries, supporting industries, agricultural industrialization and high technology, rather than over-focusing on real estate and short-term speculative sectors.

"This is the time to act, to make a prosperous, dynamic Vietnam that is reaching out further on the international arena. A strong economy is being formed, a generation of brave, innovative, creative, enthusiastic and patriotic Vietnamese entrepreneurs is writing about the story of success, about a bright future and about a socialist Vietnam on par with world powers as President Ho Chi Minh wished,” General Secretary To Lam affirmed.