The Vietnam’s Leading Business Council, launched by VCCI, is dedicated to nurturing Vietnam’s key enterprises, strengthening both domestic and international collaborations, driving industry growth, guiding SMEs, and contributing to a self-sustaining, globally integrated, and sustainable Vietnamese economy, thereby fortifying the business community 

Promoting the leadership

As the traditional driving forces of economic growth, namely natural resources and inexpensive labor, are gradually being depleted, it is imperative to shift the focus to two new growth propellers: innovations grounded in Industry 4.0 framework and robust private economic development. The role of leading corporations that possess significant international competitiveness, control domestic value chains, and effectively participate in global value chains is of paramount importance. It is essential for Vietnam to foster the growth of colossal businesses comparable to globally recognized brands such as Sony, Samsung, and Hyundai. Without such entities, Vietnam’s standing in the global market may be compromised.

Dr. Luong Minh Huan, Director of the Enterprise Development Institute under the Vietnam Chamber of Commerce and Industry (VCCI), emphasized that a viable policy on the development of leading businesses will significantly enhance the economy’s value. These businesses serve as the driving force and vanguard in propelling the economy and Small and Medium Enterprises (SMEs). Their influential roles enable them to integrate into global value chains, become the engines of the national economy, and generate ripple effects that stimulate growth in other business sectors. Therefore, strategies for the development of large-scale businesses are indispensable.

At present, large private corporations have expanded both in number and scale, primarily operating in fundamental industries such as materials and mechanical engineering. Notable examples include Vingroup, Truong Hai Auto Corporation (THACO), Thanh Cong, and Hoa Phat. These private business conglomerates have increasingly focused on technological innovation, applying scientific and technological advancements to their production and business operations.

Some of these corporations have made substantial investments, broadened their reach to regional and global markets, enhanced their competitiveness, and upgraded their capacity to provide products and services. Companies such as Vingroup, Vietjet, Masan, Vinamilk, TH, and Loc Troi have affirmed their brands on the global stage. Their contributions have significantly bolstered the value of Vietnam’s brand in the international arena.

In addition, Vietnamese private firms have constructed many large, difficult and complex construction, property, wharf and airport projects that have helped change the outlook of the country and give a strong boost to local economic development as well as national economic development, thus playing an important role in creating jobs and incomes for workers and improving living standards of people. Despite their significant accomplishments, private business groups continue to exhibit numerous shortcomings and limitations, as noted by Dr. Pham Dinh Doan, President of Phu Thai Group. Large private corporations represent only a small fraction of the business landscape. In 2021, large firms constituted less than 2% of the total, medium-sized companies accounted for slightly more than 2%, while nearly 96% were classified as small or micro-sized businesses.

Private business groups have yet to clearly delineate their roles in establishing connections and forming value chains with domestic SMEs. They have not maintained a dominant position in the economy and lack effective strategies to enhance business performance amidst insufficient development models.

The largest private firms are built on local infrastructure, resources and market advantages, mostly focusing on manufacturing, processing, trading (wholesaling and retailing), real estate and construction. They report annual asset growth of 15.4% (versus the 5% growth of domestic private companies), annual revenue growth of 11.7% (versus 6% of domestic private companies). Nevertheless, their labor productivity is not increasing as fast as their scale. Their development is being driven by extensive expansion rather than intensive expansion. Their labor productivity is only 5.3% a year.

According to Dr. Luong Minh Huan, those limitations are attributed to the diverse formation of private business firms in Vietnam which were formed just 2-3 decades ago. Basically, the majority of business groups in Vietnam still lack development vision and development strategies. Most firms grow from small scale to large scale or gradually expand scale through administrative policies (as State-owned enterprises previously). Besides, business group development guidelines and policies still lack specificity. It is hard for companies to realize business freedom, including private business groups. Changing, unstable policies disturb their business operations and pose legal risks. Laws on business firms have yet to be completed. Incentive policies and access policies to resources still discriminate private business with other types of business.

Many solutions are needed, from policy to enforcement

The government issued resolutions for economic development, including policies on business group development, including private business firms. Vietnam strives to have 1.5 million companies by 2025, including 60,000-70,000 medium and large companies, and at least 2 million companies by 2030. Many powerful private firms with strong capacity and sharp domestic and global competitiveness will be formed and developed.

To realize the goal of building leading firms with international competitiveness, controlling domestic value chains and effectively joining global value chains, Vietnam needs to improve the effectiveness and efficiency of state administration, unify perceptions and ideologies of private economic development, and place the private economy with its right great roles in national economic development, he said. At the same time, the country needs to reform policies on private economic encouragement with policy amendment, supplementation and perfection to create a favorable business environment, ensure business freedom for private business firms, with focus placed on unifying regulations on business conditions between the Investment Law and specialized laws. It needs to review, abolish or simplify obstacles to business freedom.

Besides, according to Dr. Doan, it is necessary to complete the legal framework for business group development like clearly defining the legal nature and model of business groups, perfecting related laws on capital mobilization, accumulation and concentration for private firms. Instead of considering borrowing difficulties, we should closely monitor the use of capital and control cash flows used for production and business; actively deploy bank-business connection programs; and support private firms to expand market participation, promote fair competition with other economic sectors, create a fair and transparent business environment, especially access to input resources and output markets. There is a need to further engage private resources for infrastructure development.

In addition, Vietnam needs to have incentives for key industrial projects, administer foreign investment in this field, enhance competitiveness by sectoral connectivity and raise production quality, and promote locomotives and potential businesses. It should strongly boost effective use of existing resources to create inputs for production and construction to form supporting industries to reduce import dependence and increase revenue.

Besides, it is necessary to strongly develop the digital government, speed up digitalization for better economic transparency and reduce unofficial costs; support business groups to foster innovations, develop green economy and digital economy, modernize technologies, develop human resources and enhance productivity; strengthen policies to encourage private business development, stimulate and promote M&A activities between private firms and SMEs; support providing more timely, more transparent and clearer information on policies, markets and resources for companies to develop their markets, approach strategic plans and manage risk exposure, he noted..