The General Secretary clears the way for private sector growth

“We must reframe our perspective and reinforce the role of the private sector as the most crucial engine of economic growth,” stated General Secretary To Lam in his widely publicized article, "Private sector development – the driving force of a prosperous Vietnam".

On October 11, 2024, the General Secretary met with a delegation of prominent entrepreneurs from the Vietnam Chamber of Commerce and Industry and the Vietnam Private Business Association. His directives highlight an unprecedented commitment to developing a groundbreaking resolution that will open new avenues for the private sector in what he calls the nation’s "new era."

This vision is also echoed by Prime Minister Pham Minh Chinh, who underscored the importance of private enterprise during a session of the Economic-Social Subcommittee in preparation for the 14th National Congress. "The private sector must be the most important driving force of economic growth," he stated.

Similarly, National Assembly Chairman Tran Thanh Man emphasized that achieving an 8% economic growth rate will largely depend on a thriving private sector.

These directives reflect a fundamental shift in the Party and the government’s perspective on private enterprises, marking a milestone in economic thought and policy-making.

A transformation decades in the making

Vietnam’s private sector has endured a turbulent history, from being restricted and marginalized to gaining official recognition, and now being positioned as the primary driver of economic growth.

Economic policies have evolved significantly over the years. The 1986 Party Congress hesitated, allowing only limited use of private capital in certain industries. By 1991, the Party allowed unlimited development of private capital in legally permitted industries. In 1996, private enterprise was acknowledged as a contributor to national development.

The 2001 Congress encouraged widespread private-sector growth. By 2006, the Party called for eliminating barriers and creating a more business-friendly environment.

In 2011, the goal was to make the private sector one of the economy’s key drivers. The 2016 and 2021 Congresses further strengthened commitments to facilitating private-sector expansion.

Now, as Vietnam prepares for the 14th National Congress, its highest-ranking leaders have declared the private sector as the most crucial economic force.

This shift in policy, decades in the making, signals a firm commitment to breaking past hesitation and fully integrating private enterprise into the nation’s economic strategy.

Removing obstacles to private-sector success

In 2017, the Central Committee’s 12th Congress introduced Resolution 10, setting ambitious targets. By 2020, Vietnam aimed to have at least one million enterprises, with the number rising to 1.5 million by 2025 and two million by 2030.

The private sector was expected to contribute 50% of GDP by 2020, increasing to 55% by 2025 and reaching 60–65% by 2030.

However, as of early 2025, Vietnam has only 940,000 registered businesses, falling short of targets. The private sector contributes around 50% of GDP, indicating slow progress. A breakdown of business sizes reveals further challenges.

Micro-enterprises account for 69%, small businesses make up 25%, medium-sized enterprises represent 3.5%, and large corporations only 2.5%. With just one business per 1,000 people, Vietnam’s private-sector density remains low compared to regional peers.

Why is private-sector growth lagging? Several structural barriers persist. Many micro-enterprises struggle to secure bank loans, forcing them to rely on high-interest informal lending markets.

Regulatory burdens remain a significant hurdle. Between 2021 and early 2024, Vietnam reduced 2,866 business regulations across 243 legal documents. However, over 13,000 complex requirements still exist, hindering private-sector expansion.

Bureaucratic inefficiencies further exacerbate the problem. A survey by the Vietnam Chamber of Commerce and Industry found that 61% of businesses struggle with licensing procedures, 61.36% report paying unofficial fees, and 21.7% face regulatory delays that derail business plans.

Lessons from past reforms

History shows that bold policy shifts can yield transformative results. In 1968, Party Secretary Kim Ngoc pioneered the Khoan Ho policy in Vinh Phuc, a precursor to the agricultural Khoan 10 reform of 1988.

This reform dismantled the inefficient cooperative farming model, enabling Vietnam to transition from a food importer to one of the world's top rice exporters.

Today, policymakers hope that a Khoan 10–style breakthrough in private-sector reform will unleash Vietnam’s full economic potential. If realized, it could remove outdated ideological barriers, stimulate domestic enterprise, and drive long-term prosperity.

Tu Giang