The business community has become the major driving force for Vietnam’s economy, which is among the fastest growing economies in ASEAN and the world.

Vietnam has more ‘made by Vietnam’ an ‘Make in Vietnam’ products, while many businesspeople have become dollar billionaires, while Vietnam’s products are exported to many markets in the world.

However, many Vietnam businesses remain weak, which cannot grow to catch up with the times, and cannot satisfy the requirements for market economies with deep international integration.

Most Vietnamese businesses are small, while medium enterprises are lacking, and large-scale enterprises can be seen only in the fields of real estate, finance and banking. 

The White Book on Vietnamese Businesses showed that micro enterprises account for the largest proportion, 69.3 percent, small businesses 24.5 percent and medium businesses 3.5 percent. Meanwhile, only 2.6 percent of total enterprises are large.

The majority of Vietnam’s businesses have low economic performance. About 95 percent of small and micro businesses incur long-lasting losses. They don’t have savings for re-investment and they cannot grow.

The business density throughout the country is thin, just nine businesses per 1,000 people. In 40 provinces, the density is 4/1,000 or lower, and only six provinces have the density of 12/1,000 or higher.

After nearly 40 years of doimoi (renovation), the number of Vietnamese businesses remains very modest. Vietnam failed to obtain 1 million businesses by 2020, while the target of having 1.5 million businesses by 2025 is challenging, if noting that 15,000 businesses shut down each month in recent years.

Realizing the aspiration

The 2021-2030 socio-economic development strategy clearly shows the targets on business environment reform. Vietnam plans to join the top 30 group in terms of business environment by 2030; complete the building of digital government and add itself to the top 50 countries in this field; and rank third in ASEAN in e-government and digital economy.

A survey conducted by the Central Institute of Economic Management (CIEM) found half of required business conditions were unnecessary, unclear, unreasonable and ineffective for state management, or regulations had made overly deep intervention into enterprises’ business activities. 

The good news for the business community is that ministries and branches have officially cut and simplified 3,425 out of 6,191 business conditions. And strong reshuffles in terms of business environment were made in 2016-2018.

However, since 2020, the business environment reshuffle has stagnated, while required business conditions still hinder business freedom.

VCCI (Vietnam Chamber of Commerce and Industry) reported that 61 percent of businesses face difficulties when following procedures to register business, while over 61 percent said they have to pay unofficial fees to obtain licenses to operate in conditional business fields.

The Investment Law sets a list of prohibited business fields and a list of 227 conditional business fields. However, in reality, there are thousands of conditional business fields and thousands of regulations on business conditions. At present, no agency takes responsibility for checking and reckoning the regulations.

Businesses’ difficulties are attributed to many problems, including the stagnation of the state apparatus. Many state officials and state agencies avoid dealing with burning issues and lay the blame on each other. Businesses and people complain that institutional problems cannot be solved by the appropriate agencies.

There are two reasons behind this. First, the legal framework is too complex. One legal issue is stipulated in many different legal documents promulgated by state agencies at different levels. Many regulations are unclear, overlapping and contradictory, which can be interpreted in different ways.

Second, state officials, who fear legal troubles, dare not make decisions once legal regulations remain unclear. As a result, businesses and people have to wait for their problems to be solved for an indefinite time.

Vietnam’s economy has been dealt continuous impact, including the Covid-19 pandemic, leading to sharp fall in demand; "imported" inflation, and a lot of internal difficulties exposed recently.

VCCI reported that only 35 percent of domestic private enterprises and 33 percent of foreign invested enterprises (FIEs) have plans to scale up their investment and business in the next two years, the lowest level since 2014.

At present, business owners and managers need to spend time and resources to resolve the problems and overcome difficulties to exist. Therefore, it would be better not to inspect enterprises now.

Nguyen Dinh Cung