Reforms urged to unleash private-sector power

Afternoon session on 'Fostering New Growth Engines' at Vietnam Economic and Financial Forum 2025

At the Vietnam Economic and Financial Forum 2025, held in Hanoi on December 5, speakers shared perspectives on institutional reform, private-sector development, the green transition, innovation, and strategies to build strong Vietnamese private conglomerates.

During the afternoon session on 'Fostering New Growth Engines', insights shared by Trinh Thi Huong, deputy director general of the Agency for Private Enterprise and Collective Economy Development (Ministry of Finance), highlighted that while the private sector is a crucial pillar of the economy, it still faces significant impediments.

Vietnam’s private sector currently comprises more than 6.1 million business entities, including around 1 million enterprises and over 5.1 million household businesses. This sector contributes more than half of GDP, employs 82 per cent of the workforce, and accounts for 55 per cent of total social investment.

May's Resolution No.68-NQ/TW once again strongly reaffirmed the sector’s role, “The private sector is one of the most important drivers of the national economy.”

However, in reality, the private sector continues to face multiple obstacles. Contributions to the state budget and exports remain modest, around 30 per cent, significantly lower than the foreign investment sector’s share of over 70 per cent.

According to Huong, there are three major groups of barriers hindering private-sector development, the first of which is the complex institutional and business environment. Numerous administrative procedures continue to impede investment and day-to-day operations.

She pointed out, “Seventy-four per cent of enterprises have had to delay or cancel business plans due to complicated land procedures.”

In agriculture-related fields such as fertilisers and pesticides, domestic producers must spend 1–2 years obtaining licences, while imported products can enter the market in just 5–7 days. “This does not encourage domestic production,” she stressed.

Technology adoption and innovation within the private sector also remain weak. “Despite efforts in digital transformation, technology investment in the private sector is still low, especially among micro, small, and medium-sized enterprises, which make up 98 per cent of all firms,” Huong said.

Moreover, the internal capacity and degree of linkages across private-sector firms are still limited. Weak connections between private enterprises and other economic sectors result in fragile domestic value chains that are difficult to scale up.

To remove these barriers, the government is pushing forward strong reforms. The prime minister has mandated a target to cut 30 per cent of costs, 30 per cent of time, and 30 per cent of business conditions. The draft amendment to the Law on Investment, submitted to the National Assembly at its eighth session, is expected to reduce 25 per cent of business conditions and shift towards post-audit mechanisms.

In addition, the government is preparing to issue a new Resolution No.02/NQ-CP in January to further improve the business environment and enhance national competitiveness.

Huong said, “Businesses cannot grow without investing in technology. But for them to be willing to invest, capital costs and research and development costs must be reduced.” She also stressed the importance of business culture, saying “Entrepreneurs must think long term and comply with the law to build trust and sustainable growth.”

Meanwhile, economist Tran Dinh Thien also discussed the context for developing large private conglomerates, an essential requirement for elevating Vietnam’s economic position. He said, “Current challenges are also major opportunities. The private sector has been ‘compressed’ for many years, and once released, it will unleash tremendous momentum.”

However, he cautioned that a major national mission is now placed on a sector whose capacity remains weak. “After the COVID-19 pandemic, the health of private enterprises is still fragile. For them to take on big missions, the market institutions must be strong enough to support them.”

He outlined four priority areas like strengthening market institutions, “We must remove institutional barriers, so the market can operate smoothly, particularly in land, science and technology, and capital markets.”

Assigning ‘national missions’ to private enterprises is also needed. “If we don’t entrust them with major tasks, they cannot grow,” he said. Many countries have successfully developed through empowering private conglomerates with strategic national responsibilities.

It is necessary to define product-chain strategies. Vietnam must choose value chains where private enterprises can lead and where the country has the potential to 'leapfrog' others. “We must go with global giants, learn from international experience, and leverage the advantages of latecomers,” Thien noted.

He proposed to build collective strength through alliances, forming an association of major private enterprises to create a new ecosystem and strategic coordination mechanism. “Large enterprises need to sit together and design strategies for the nation, rather than operating in isolation,” he said.

He also highlighted the need to reshape societal attitudes, saying,“Society must adopt a more positive perception of the wealthy and entrepreneurs. When they are respected, they will be motivated to contribute.”

The discussion revealed a shared conclusion – Vietnam’s private sector holds immense potential, but significant barriers remain. To ensure the sector truly becomes the most important engine of the economy, Vietnam must undertake deeper institutional reforms, foster innovation, strengthen linkages, and build strong private conglomerates capable of competing globally.

As Thien said, “Unleashing the full potential of the private sector is the key for Vietnam to enter a new phase of development.”

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