Without a robust and rapidly growing private economy, Vietnam will struggle to achieve high and sustainable growth or transition toward a technology-driven, innovation-based economy. It is imperative that the private sector expands and transforms to fully absorb new opportunities and drive economic progress.
A Crucial Component of Aggregate Demand
According to data from the General Statistics Office of Vietnam, the private sector currently accounts for approximately 50% of the nation's GDP. Officially registered private enterprises contribute over 10% of GDP, while household businesses, agricultural producers, farms, and individual business entities contribute roughly 40%. Furthermore, the private sector provides employment for approximately 85% of the national workforce.
The private economy is a critical driver of aggregate demand and, consequently, plays a decisive role in economic growth. Currently, private enterprises contribute nearly 30% of total export revenue. In terms of investment, the private sector accounts for 56% of total social investment, a significantly higher proportion compared to state-owned enterprises (SOEs) at 28% and foreign direct investment (FDI) at 16%.
By 2025, Vietnam’s total social investment is projected to reach approximately $174 billion, with the private sector contributing around $96 billion (56%). In comparison, public investment is expected to account for about $36 billion, FDI for $28 billion, and other sources for approximately $14 billion.
Unlike public and foreign investment, which face limitations such as public debt ceilings, budgetary pressures, and concerns over FDI dependence, the domestic private sector has vast potential for expansion. A significant portion of Vietnam’s wealth is held in assets such as gold, foreign currency, land, and bank savings. Unlocking this capital for private sector investment could significantly enhance the country’s economic resilience and GDP growth.
Even a modest 1% increase in private sector investment would generate an absolute value equivalent to a 2.5% rise in public investment or a 3.5% increase in foreign investment. This demonstrates the immense potential of Vietnam's private sector in driving sustainable economic growth.
The Need for Bold Policy Decisions
Since Vietnam embarked on economic reforms, the nation has capitalized on key advantages such as a low-cost labor force, strategic geographic location, and integration into global trade. These factors have enabled Vietnam to attract substantial FDI, contributing significantly to economic expansion. Meanwhile, SOEs have undergone restructuring and currently hold nearly VND 4 quadrillion ($160 billion) in assets, accounting for 20.5% of corporate capital.
While FDI continues to thrive, the private sector has gradually matured into a crucial economic force. However, its development remains below its full potential. Now is the time for Vietnam to maximize its internal economic strengths, reinforcing the private sector's capacity to support GDP growth.
To unlock the enormous potential of the private economy, Vietnam must adopt policies that nurture entrepreneurship and protect the right to conduct business in all sectors not explicitly prohibited by law. Regulatory bodies should shift from administrative decision-making to market-driven governance, leveraging market mechanisms for resource allocation. A flexible and well-structured legal framework should facilitate resource mobilization and economic development.
This requires establishing legal mechanisms that support high-risk, high-reward ventures that yield breakthroughs in productivity and technology. Key policy measures should include the introduction of controlled regulatory sandbox environments, innovation-focused policies for startups, and frameworks to facilitate technology absorption and transfer from international markets.
A forward-thinking legal framework should also foster a culture of venture capital investment, risk-taking, and entrepreneurship. Developing an ecosystem that supports venture funding and innovative business ideas will be crucial. Simultaneously, administrative procedures must be simplified to reduce compliance costs and minimize legal uncertainties for businesses.
Moreover, government agencies should transition from being mere regulatory bodies to service-oriented institutions that support businesses and citizens. This shift requires a fundamental change in mindset from administrative control to development facilitation. Enhancing public service quality, expediting administrative procedures, and increasing transparency in policymaking are essential steps toward this goal.
Well-crafted policies will reassure businesses that they are operating in a stable and legally protected environment. When entrepreneurs feel secure, they are more likely to take risks, invest in innovation, and drive industrial transformation. This confidence will foster greater enthusiasm for entrepreneurship, leading to increased investment in research and development, technological advancement, and innovative business models.
To further accelerate the development of the private economy, Vietnam must invest in infrastructure that supports private sector growth, including digital transformation, logistics, and financial services. Improving access to financing for small and medium-sized enterprises (SMEs) is particularly vital, as these businesses form the backbone of Vietnam’s private sector. Encouraging financial institutions to develop tailored lending programs and venture capital initiatives can help bridge the funding gap that many private enterprises face.
Additionally, education and workforce training must align with the evolving needs of the private sector. Strengthening vocational training programs and fostering industry-academia collaboration can ensure that businesses have access to a skilled workforce capable of driving technological innovation and productivity enhancements.
By implementing these policies, Vietnam can solidify the role of its private economy as the backbone of national economic growth. The private sector will not only become the primary driver of GDP expansion but also enhance Vietnam’s competitiveness in the global economy. A thriving private sector will lead to greater innovation, increased job creation, and more robust economic resilience.
Vietnam stands at a critical juncture where decisive action is needed to unleash the full potential of its private economy. By fostering a more favorable business environment, ensuring regulatory transparency, and supporting innovation, the country can accelerate private sector development and achieve sustainable economic growth. Now is the time for bold reforms that empower entrepreneurs, attract domestic investment, and elevate Vietnam’s economic standing on the global stage.
In the coming years, Vietnam’s economic success will increasingly depend on the ability of the private sector to grow, innovate, and integrate with global markets. With the right policies and institutional support, Vietnam can fully harness the potential of its private economy, positioning itself as a dynamic and competitive player in the international economic arena.
