Private economic sector seen as spearhead of development

Since the launch of the “Doi Moi” (Renovation) policy in 1986, the Communist Party of Vietnam’s perspective on the private sector has undergone a remarkable transformation, shifting from non-recognition to cautious acceptance and ultimately to recognizing it as a vital engine of economic growth and sustainable development.

Unleashing the power

Vietnam’s private sector has grown alongside Doi Moi, becoming a driving force in the nation’s socio-economic development. As of 2024, nearly 900,000 private enterprises were in operation, with major players like Vingroup, Masan, Sun Group, Vietjet Air, and Thaco shaping the business landscape.

With over 5 million individual business households, the private sector now accounts for approximately 50.4 per cent of GDP and around 30 per cent of State budget revenue, and provides jobs for about 85 per cent of the workforce. Beyond economic contributions, it has played a crucial role in poverty reduction and closing development gaps between regions and between urban and rural areas.

However, despite these achievements, the private sector still faces significant challenges. First, many businesses lack the motivation to scale up, with some choosing to remain small or selling to foreign investors rather than pursuing long-term growth. Second, limited internal capacity, particularly among small and medium-sized enterprises (SMEs), continues to be a roadblock. Third, both businesses and policymakers have yet to establish a clear long-term development strategy, leading to fragmented growth and missed opportunities. Fourth, the sector still operates in silos, with weak connections between private enterprises, between the private sector and FDI enterprises, and between the private sector and State-owned enterprises (SOEs), making it difficult to integrate with national development strategies. Finally, while support mechanisms and policies exist, their effectiveness remains limited, preventing businesses from fully leveraging government initiatives.

Those challenges have resulted in low efficiency, poor competitiveness, and limited international integration. Many businesses struggle not only to expand beyond Vietnam’s borders but also to compete effectively in their home market. Innovation capacity remains underdeveloped, further limiting the sector’s potential.

With rapid global changes reshaping economies, Vietnam can no longer afford to delay addressing these issues. Now is the time to unlock the full potential of the private sector and drive the country towards its strategic development goals for 2030 and 2045. During a working session on March 7, Party General Secretary To Lam emphasized the urgent need for bold, revolutionary solutions that not only tackle immediate challenges but also lay the groundwork for long-term, sustainable, and dynamic growth. These solutions must be implemented in a comprehensive, coordinated manner to ensure the private sector becomes a true engine of Vietnam’s future prosperity.

Six key solutions

To drive breakthrough, sustainable growth in Vietnam’s private sector, six key solutions must be implemented.

First, renewing perspectives and building a strong consensus on the role and position of the private sector in Vietnam’s socialist-oriented market economy is essential. Creating a breakthrough in improving the business and investment environment is critical.

Only when mindsets evolve and perceptions align can effective policies and mechanisms be developed to foster private sector growth. Vietnam must reaffirm that the private sector is an indispensable component of its socialist-oriented market economy, playing a vital role in driving economic growth. Alongside SOEs and the collective economy, the private sector forms the backbone of an independent, self-reliant economy, capable of spearheading development and propelling the country past the middle-income trap towards prosperity by 2030 and 2045. The private sector should enjoy equal development opportunities alongside other economic sectors.

However, removing restrictions alone is not enough. A more significant transformation is needed, one that creates a breakthrough in improving the business and investment environment. This requires a revolution in transparency, digitization, intelligence, and automation, leveraging information technology (IT), AI, and big data to eliminate inconsistencies in legal frameworks, simplify and enhance transparency in administrative procedures, reduce business costs and compliance burdens, reform inspection mechanisms to avoid redundancy, and establish continuous consultation and dialogue mechanisms to resolve bottlenecks. These measures will inspire confidence, ambition, and decisive action within the private sector as Vietnam enters a “New era - The era of the nation’s rise”.

Second, developing and effectively implementing a comprehensive strategy for private sector growth is crucial.

Vietnam currently lacks a dedicated private sector development strategy. Creating one will ensure that the sector’s expansion aligns with the country’s overall economic strategy, supporting national targets for 2030 and 2045. A well-defined strategy will maximize the potential of different enterprise groups within the private sector, fostering connectivity between them as well as with SOEs and FDI enterprises, ultimately strengthening Vietnam’s economic foundation.

The strategy should set concrete targets, including the private sector’s contribution to GDP, job creation, tax revenue, workplace productivity, integration into global value chains, and innovation capabilities. It must also define the distinct roles of different business segments, from large enterprises leading in innovation and international market penetration to medium-sized enterprises strengthening their market positions, small businesses and household enterprises driving employment, and startups serving as incubators for new ideas, business models, and products. Additionally, the strategy must outline priority sectors for State support and detail mechanisms and policies tailored to each business group, ensuring a dynamic and resilient private sector that propels Vietnam towards its long-term economic ambitions.

Third, design effective mechanisms and policies tailored to different groups within the private sector. Segmenting beneficiaries ensures policies align with their roles and characteristics, maximizing their potential.

Fourth, establish policies linking the private sector with national development strategies, fostering connections among private enterprises, SOEs, and FDI enterprises. Strengthening these links enhances domestic business capacity, reduces import dependency, increases localization, promotes innovation and technology transfer, and boosts global value chain integration.

To achieve this, a “three-way ecosystem” between private enterprises, the State, and FDI should be developed to ensure collective growth through: (i) Building a national innovation ecosystem that connects private businesses and FDI with research and development (R&D) centers, universities, research institutes, and venture capital funds to foster product development, technological innovation, and digital and green transformation; (ii) Establishing integrated industrial parks, high-tech parks, and innovation hubs, following models like “Vietnam’s Silicon Valley”, where large, medium, and small enterprises, startups, and FDI enterprises interact, bridging research, production, business, and policy-making; (iii) Implementing localization policies by mandating local content ratios in strategic sectors (for example, automotive, electronics, and high-tech), supporting domestic companies in meeting FDI supply chain standards.

To enhance collaboration between private enterprises: (i) Strengthen industry associations and business clubs, develop digital platforms for networking, information sharing, and supply chain integration; (ii) Establish industry clusters and value chains, encouraging large enterprises to lead local supply networks and support SMEs and household businesses, particularly in supporting industries, agribusiness, IT, and creative industries.

To connect the private sector with the State sector: (i) Establish direct dialogue channels between private businesses and government agencies, ensuring timely resolution of business concerns; (ii) Promote public-private partnerships (PPPs) in infrastructure, healthcare, education, and environmental projects; (iii) Prioritize domestic private enterprises in public investment, digital transformation, and technology innovation programs; (iv) Improve access to national development funds (for example, technology innovation funds, SME development funds, and credit guarantee funds).

To integrate private businesses with FDI: (i) Develop supply chain links, particularly in supporting industries, manufacturing, and high-tech sectors, and encourage FDI enterprises to transfer technology, train workers, and enhance local supplier capabilities; (ii) Establish centers to connect and advise local companies on global supply chain participation and industrial promotion hubs in key economic zones; (iii) Offer investment incentives to FDI enterprises committed to technology transfer and local procurement, requiring large FDI projects to include domestic supply chain development plans.

Fifth, develop modern, integrated infrastructure to support business activities. These include transport networks (high-speed rail, urban railways, and logistics hubs), international-standard ports, free trade zones, and national and open-access databases for business operations.

Sixth, strengthen the leadership of the Party, State management, and business associations in supporting, protecting, and promoting business links. The Politburo is set to issue a new resolution on private sector development, with the government working alongside the Central Policy and Strategy Committee to formulate actionable and breakthrough solutions, similar to Resolution No. 57-NQ/TW on science, technology, innovation, and digital transformation.

^{(* )}Associate Professor Nguyen Hong Son is the Deputy Head of the Party Central Committee’s Commission for Policies and Strategies