Creating a favourable business environment for further breakthroughs of private economic sector
Party General Secretary To Lam has affirmed that the private sector is the most important driving force for economic growth.
Over nearly 40 years of Doi Moi (Renewal) process, the private economic sector has developed strongly. The sector’s role and position are increasing and have become a crucial contributor to the country's economic growth.
During its development, the private economic sector still faces many difficulties. It is necessary to resolve obstacles, support resources, and create a favourable business environment to support the private economic sector in achieving the goal by 2030 to contribute 70% of GDP, with many businesses having global competitiveness, mastering technology, and deeply integrating into international value chains.
The workshop entitled ‘Removing policy inconsistencies to promote the role of the private sector in Vietnam's economy’ was organised by Nhan Dan (People) Newspaper, Vietnam Television, and the Ho Chi Minh City Business Association on March 21 to discuss policy issues affecting the private sector.
In which, institutional problems were identified as one of the reasons slowing down the development of the private economic sector. Strong solutions are needed to improve the business environment for this sector.
Overview of the workshop on removing policy inconsistencies to promote the role of the private sector in Vietnam's economy
Overview of the workshop on removing policy inconsistencies to promote the role of the private sector in Vietnam's economy
At the workshop, delegates emphasised the importance of the private economic sector, which has contributed over 50% of GDP, more than 30% of the state budget, and created jobs for over 80% of the total workforce nationwide. Some businesses have expanded globally, affirming their brands and competitive capacity in the international market, thus contributing to enhancing Vietnam's status and reputation.
However, the private economic sector still faces significant challenges and obstacles, particularly in accessing resources such as land and credit.
Despite significant development, the results achieved by domestic businesses are not commensurate with their potential. The institutional framework is lagging behind the development of the private sector, which is the main issue hindering the further growth of domestic businesses.
Businesses still face obstacles with unsynchronised laws
Policies and laws are an essential foundation for businesses to operate properly and develop sustainably. Vietnam’s legal system is increasingly improving, however, overlaps and contradictions still exist, causing difficulties for businesses.
According to a report by the Vietnam Chamber of Commerce and Industry (VCCI), in 2023, around 67% of businesses reported that legal regulations still overlap, creating obstacles during implementation.
Having provided business and investment legal advice for many years, Nguyen Thanh Ha, Chairman of law firm SBLaw, noted that many sectors lack consistency in regulations. Notable examples include environmental protection and production investment.
Specifically, the 2020 Environmental Protection Law requires environmental impact assessments before investment licences are granted, while the 2014 Construction Law stipulates that environmental impact assessments should be conducted after receiving project approval. This forces businesses to spend considerable time completing such procedures twice. In Vietnam, some renewable energy projects have stalled because it is unclear when environmental impact assessments should be conducted, causing losses for investors.
Another prominent issue relates to shortcomings in tax refund regulations. Speaking with Nhan Dan Newspaper, Ngo Sy Hoai, Vice Chairman and Secretary General of the Vietnam Timber and Forest Products Association, explained that according to tax authority regulations, one of the conditions for tax refunds is that raw materials must be traceable.
In the case of the timber and forestry sector, traceability must extend to individual forest-growing households. With over one million forest-growing households, verifying the origin of each household is an extremely difficult, time-consuming and costly task. When specific verification cannot be completed, tax authorities cannot process refunds. This results in accumulated business tax refunds, sometimes amounting to thousands of billions of VND.
Another sector facing numerous obstacles due to inconsistent laws is real estate investment and business. Lawyer Nguyen Thanh Ha reported that many real estate businesses are stagnating because regulations between investment law and real estate business law are not harmonised.
One cannot deny that the legal system is constantly being perfected, however, many legal documents remain unsynchronised, with overlaps between various laws (Enterprise Law, Investment Law, Land Law, Bidding Law, Planning Law and so on), leaving both businesses and regulatory authorities struggling to determine proper application in specific cases.
Difficulties in accessing resources
Resources are the lifeblood of a business. Without resources, it is difficult for a business to grow.
According to statistics from the Ministry of Finance, 70% of small and medium-sized enterprises face difficulty in borrowing from banks due to a lack of collateral or complicated approval processes.
Nguyen Thi Hai Binh, General Director of STP Group, said that her business has been investing in aquaculture. Last year, businesses could only access short-term loans, access to long-term loans was very limited. Meanwhile, it takes a long time to recover capital to invest in agriculture. Therefore, although there is a lending mechanism, the lending conditions are not suitable for the actual operations of some businesses.
STP Group’s industrial marine farming model in Quang Ninh
STP Group’s industrial marine farming model in Quang Ninh
Enterprises borrow capital from banks.
Enterprises borrow capital from banks.
Dao Minh Tu, Deputy Governor of the State Bank of Vietnam, said that the banking industry has many credit institutions supporting capital for the private economy with outstanding loans of nearly 7 million billion VND, accounting for nearly 44%, but loans to small and medium enterprises only reached more than 2.7 million billion VND. Currently, the main source of loans is still for large enterprises.
There is the Small and Medium Enterprise Development Fund managed by the Ministry of Finance. The interest rate from this fund is lower than that of commercial banks, but according to Pham Anh Cuong, Chairman and General Director of BestB Business Ecosystem, it is very difficult for businesses to access capital from this fund if they do not have collateral, and the procedures are as complicated as borrowing from commercial banks.
As with borrowing capital, domestic enterprises are not given the same conditions as state-owned enterprises nor foreign-invested enterprises in accessing land and resources, Pham Anh Cuong shared.
Removing policy shortcomings to promote the role of the private economy in the Vietnamese economy
Clearly, the legal system has not kept up with reality, and policies are not implemented in a synchronous manner from the central to local levels, creating institutional barriers that make it difficult for private enterprises to access important resources such as capital, land, resources, etc. Even if they want to boost production and business, enterprises must slow down somewhat.
Sharing at the workshop on removing policy shortcomings to promote the role of the private economy in the Vietnamese economy, Dr Can Van Luc, Member of the National Financial and Monetary Policy Advisory Council, stated that among the solutions to promote the development of the private economy, it is necessary to facilitate the process of accessing land and finance, and quickly release resources that are being suspended, stagnated, and wasted.
Administrative procedures - A burden for businesses
Cumbersome administrative procedures are something that businesses have complained about for many years.
The PCI (Provincial Competitiveness Index) report in 2023 shows that 42% of businesses still face difficulties in administrative procedures.
According to Do Thi Thuy Huong, Representative of Viettronics Industrial Joint Stock Company, Executive Board Member of the Vietnam Electronics Industries Association, and Vice President of the Supporting Industry Association, Vietnamese businesses face many administrative procedures. Carrying out administrative procedures such as business registration, construction licensing, and land access costs a lot of money and time, causing businesses to lose out on opportunities.
Pham Anh Cuong expressed that administrative procedures are not really optimal when they cannot be linked together. After completing the registration procedures, if a start-up business wants to register a priority industry or field, it must provide a lot of documents.
Businesses must carry out many administrative procedures
Businesses must carry out many administrative procedures
According to Pham Anh Cuong, many Vietnamese start-ups have transferred their business registration to Singapore, partly because administrative procedures in Vietnam are very complicated.
Inadequacies related to inspection and examination are another typical example that businesses encounter.
Pham Anh Cuong said that there are enterprises that must undergo many inspections in a year, such as environment, fire prevention and fighting, tax, and customs. Each inspection requires that the factory be temporarily suspended for a certain period of time, slowing down orders and reducing operating efficiency.
In 2017, Directive No. 20/CT-TTg was signed with the regulation that "enterprises cannot be inspected more than once a year, and only sudden inspections are allowed when violations are detected." However, the directive has not been thoroughly implemented until now.
"Conditional business licenses" or "sub-licenses" are also among the nightmares of enterprises.
According to the current Investment Law, Vietnam has 227 conditional investment and business sectors. When established, an enterprise must have a "Certificate of Business Registration". However, if a business wants to operate in a conditional industry, it must continue to apply for a business license.
According to research on the National Business Registration Portal, in the section “Conditional Business Sectors”, each business sector comes with numerous associated conditions.
Phan Minh Thong, General Director of Phuc Sinh Joint Stock Company, shared: “Our company exports agricultural products. When making investments, we must obtain many different permits, such as construction permits, environmental permits, and goods inspection and evaluation permits.”
Production activities at Phuc Sinh Joint Stock Company
Production activities at Phuc Sinh Joint Stock Company
According to Phan Minh Thong, the extensive licensing requirements pose significant challenges for businesses. Moreover, completing all the necessary paperwork takes between three and six months, whereas in other countries in the region, the same procedures take only two to four weeks. By 2014, Vietnam had over 400 conditional business sectors with nearly 7,000 business conditions. By 2017, the number had been reduced to 243 conditional business sectors and 5,719 business conditions. Although significant reductions were made over time, the process has slowed considerably since 2019. In fact, new sub-licenses and cumbersome regulations have emerged, further complicating business operations.
Nguyen Minh Thao, a business environment expert, noted that in investment and business activities, business licenses clearly define the scope of operations for enterprises and serve as a legal basis for authorities to monitor and manage risks. However, many overlapping and unnecessary licenses still exist and need to be eliminated as soon as possible.
Institutional reform -
A crucial driver for private sector growth
For the private sector, institutional improvement is critical. To expand and enhance competitiveness, a favourable institutional environment is a key factor influencing investment decisions, business motivation, and confidence. Therefore, efforts must be directed towards improving this system.
Dr Nguyen Minh Thao, business environment expert
Institutions can serve as a foundation, yet fundamental weaknesses still exist, hindering the private sector’s growth journey.
Despite nearly 40 years of private sector development, Vietnam currently has fewer than one million businesses, despite having a population exceeding 100 million. Of these, 98% are small and medium-sized enterprises, with micro and small businesses alone accounting for 94% of this group. Additionally, there are around five million individual business households.
Weaknesses in the institutional framework have persisted for decades and remain unresolved.
According to Lawyer Nguyen Thanh Ha, the first issue is the involvement of too many agencies, followed by a lack of coordination between central and local levels, as well as among ministries and sectors. Economic expert Dr. Nguyen Tu Anh emphasised that to address institutional issues, it is essential to remove obstacles for those responsible for implementing policies and laws. Currently, without accelerating digital transformation in businesses, government agencies, and national databases, it will be impossible to streamline operations to achieve “efficiency, effectiveness, and impact.”
To ensure that the institutional framework serves as a driving force for the private sector, it is crucial to decisively remove existing bottlenecks. Dr. Nguyen Minh Thao, a business environment expert, affirmed: “For the private sector, institutional reform is extremely important. To expand and enhance the competitiveness of private enterprises, the institutional environment is a key factor influencing investment decisions as well as their motivation and confidence in business activities. Therefore, we must aim to improve this institutional framework.”
Dr Nguyen Minh Thao, a business environment expert
Dr Nguyen Minh Thao, a business environment expert
It is undeniable that the private sector has made remarkable progress in both scale and quantity. With nearly one million businesses, mostly small and medium-sized enterprises, Vietnam has also seen companies expanding to Asia and the world, such as Vingroup Group, Vietnam Dairy Products Joint Stock Company (Vinamilk), and Viglacera Corporation.
Viglacera Corporation
Viglacera Corporation
To foster a generation of enterprises that will lead the economy in the near future, Professor Dr. Hoang Van Cuong, National Assembly Deputy of Hanoi and member of the National Assembly’s Economic and Financial Committee, remarked: "The private sector was previously recognised in Party resolutions as an important driver of economic development, and today, its role is becoming even more significant. We need to establish a new legal framework to pave the way for the private sector to develop in a more vigorous manner, forming large private economic conglomerates that will become pillars of the national economy."
Prof. Dr. Hoang Van Cuong, National Assembly Deputy of Hanoi and member of the National Assembly's Economic and Financial Committee
Prof. Dr. Hoang Van Cuong, National Assembly Deputy of Hanoi and member of the National Assembly's Economic and Financial Committee
For the first time, the private sector has been identified as the "most crucial driver" of economic growth. General Secretary To Lam has instructed that a breakthrough resolution on private sector development should be issued soon. On March 6, 2025, Prime Minister Pham Minh Chinh signed a decision to establish a national steering committee for building a private economic development project and requested that the draft proposal be completed within the month.
Institutional reform will be the key to driving the development of the private sector, helping Vietnam enter a trajectory of high growth and move toward the goal of double-digit growth in the era of the nation’s rise.
Published: March 25, 2025
Production Manager: Kim Phuong Binh
Content and Design: Quynh Trang – Khanh Bach – Mai Anh – Nhi Ha
Translation: NDO
Photos: Thanh Dat
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