Transition into a new development phase

According to Associate Professor Dr. Ho Sy Hung, President of Vietnam Chamber of Commerce and Industry, this is the first time VCCI has released a comprehensive Vietnam Private Economy Report. In addition to evaluating provincial governance quality under the traditional PCI framework, the report also provides, for the first time, an overview of the private sector, from more than 1 million enterprises and over 6.1 million business households employing 26 million workers, accounting for 50.2% of total nationwide employment, to the innovation and digital transformation capabilities of Vietnam’s business community.

This reporting period also marks PCI’s transition into a new development phase. After 21 years accompanying reform efforts, PCI has officially been upgraded to PCI 2.0, the most complete version in the project’s history. For the first time, VCCI also introduced the Business Performance Index (BPI), a parallel measurement tool that adds a new perspective to PCI. Instead of measuring only the quality of “institutional inputs,” the new index also evaluates “market outputs,” including businesses’ ability to survive, generate profits, and move up the value chain.

Notably, this is the first reporting period conducted under the new administrative structure of 34 provinces and cities, following government restructuring reforms and the transition to a two-tier local government model.

The Vietnam Private Economy Report was developed from a large-scale survey involving 3,546 domestic private enterprises, 586 foreign-invested enterprises, and 1,001 business households across all 34 provinces and cities. It is considered one of the most comprehensive private sector surveys conducted in Vietnam in recent years.

According to the VCCI President, the report delivers three key messages. First, the private sector has moved beyond a defensive phase and is preparing for stronger growth. In 2025, the number of newly established businesses reached a record 297,500 enterprises, up 27.4% from the previous year. About 85.7% of businesses maintained or expanded their operations, while business confidence continued to recover. However, this momentum can only be sustained if the three biggest bottlenecks are addressed within the next 12 to 18 months: market access, access to capital, and policy transparency.

In addition, institutional reform has moved in the right direction, but the gap between policy design at the central level and implementation capacity at the local level remains large. This continues to be the most important area for reform today. Politburo Resolution No. 68-NQ/TW on private sector development, Politburo Resolution No. 66-NQ/TW on reforming lawmaking and law enforcement to meet the country’s development needs in the new era, together with National Assembly Resolution No. 198/2025/QH15, have created unprecedented institutional space for the private sector. The issue now is no longer a lack of policy, but how policies are implemented so businesses can truly feel the changes.

To achieve the goal of two million enterprises by 2030, Vietnam must shift from a management mindset to a partnership mindset, and from reducing administrative burdens to strengthening competitiveness. This marks a major shift in governance thinking. Over the past 20 years, PCI helped local governments “process procedures faster.” In the next phase, PCI 2.0 and BPI will measure governments’ ability to “create fairer markets, support businesses more effectively, and govern more proactively.”

The 2025 picture shows many positive signs but also reveals unavoidable challenges. About 60.2% of businesses faced difficulties finding customers, the highest level in the past five years. Around 75.5% of businesses could not access loans without collateral, compared with just 33.4% in Malaysia, while only 6% to 8% of businesses could predict policy changes. Innovation capacity also remains limited, with only 8.8% of businesses conducting product innovation activities, far below Malaysia at 21.7%, Thailand at 18.9%, and the regional average of 28.5%. The business household sector, which serves as a social safety net for millions of families, continues to operate on thin profit margins, with 81.5% of households reporting declining revenue over the past year.

“These figures are not meant to create pessimism. They provide valuable data for policymakers at both central and local levels to correctly identify priorities, implement the right solutions, and measure the real outcomes of reform,” the VCCI President said.

PCI 2.0: From measuring the business environment to evaluating the private sector development ecosystem

Dau Anh Tuan, Deputy Secretary General and Director of the Legal Department of Vietnam Chamber of Commerce and Industry, said PCI 2.0 has been restructured into nine component indices with 98 indicators. The indices include Market Entry, Access to Resources, Transparency, Administrative Procedure Compliance Costs, Informal Costs, Fair Competition, Business Support Policies, Legal Institutions, and Proactive Governance.

In 2025, VCCI shifted from publishing detailed rankings to announcing six governance quality groups, reflecting differences among provinces and cities following administrative mergers and aligning with international practices. The national median PCI score reached 63.90 out of 100, reflecting continued reform momentum.

The five localities leading the “Good” governance quality group, listed alphabetically, are Bac Ninh, Da Nang, Hai Phong, Phu Tho, and Quang Ninh. A shared characteristic among the leading group is balanced governance performance, with at least five out of nine component indices ranking among the national top 10. Bac Ninh ranked first in Proactive Governance with 6.67 points and Administrative Procedure Compliance Costs with 8.93 points. Da Nang led the country in Market Entry with 8.70 points. Hai Phong recorded strong results, with seven out of nine component indices ranking among the top 10 nationwide. Phu Tho ranked second nationally in Access to Resources, while Quang Ninh maintained high rankings in Fair Competition and Proactive Governance.

According to Dau Anh Tuan, the Business Performance Index (BPI) includes 23 indicators across two dimensions: private sector development and innovation capacity. While PCI measures institutional inputs, BPI measures market outputs.

The pilot BPI 2025 results ranked Ho Chi Minh City first with 5.67 points, followed by Hanoi with 5.41 points and Quang Ninh with 5.33 points. The national median reached 4.20 points. Correlation analysis also shows that governance quality measured by PCI in 2022 has a statistically significant relationship with private sector performance measured by BPI in 2025, confirming that policy impacts typically have a lag of about three years. This provides an important basis for maintaining long-term reform roadmaps rather than expecting immediate results.