Brian Jeffrey
Editorial Insight
On October 13, 2024, Vietnam celebrates the 20th anniversary of Entrepreneurs’ Day. This day highlights the remarkable transformation of the private sector from its modest beginnings into a dynamic contributor to national progress, fueled by youthful ambition and a commitment to national advancement.
Once viewed negatively, contemporary entrepreneurs are now embraced as essential figures in the economy. Many of them started with nothing and built their ventures from scratch. Today, they play crucial roles in job creation and wealth generation. Nevertheless, recent years have seen a decline in this entrepreneurial spirit due to the pandemic-related lockdowns and a pervasive fear of making mistakes in the bureaucratic landscape.
Reviving the entrepreneurial spirit, promoting wealth creation, and eliminating fear of accountability are vital. Vietnamese entrepreneurs have shown unparalleled adaptability and resilience, proving their importance to the country’s economic landscape.
They will unquestionably serve as a cornerstone in achieving Vietnam’s prosperity goals by 2045.
In celebration of October 13, VietnamNet is launching a series of articles aimed at igniting the entrepreneurial spirit and discussing the current obstacles entrepreneurs encounter, all while advocating for a “New Era of National Growth” that emphasizes rapid and sustainable development.
“Larger companies must lead the charge, addressing significant and complex national challenges to stimulate economic growth, thus paving the way for smaller enterprises in various sectors.”
This was articulated by Minister of Planning and Investment, Nguyen Chi Dung, during discussions with major corporations. He emphasized that large firms, equipped with financial resources, innovation capabilities, skilled Labor, and reputable brands, need to accept more significant responsibilities, aligning with government expectations for the business sector.
Unlike previously when state-owned conglomerates dominated many industries, there’s now a notable emergence of robust private groups. Businesses like Thaco, Hoa Phat, Vingroup, Sungroup, TH, and FPT exemplify entities driving regional prosperity wherever they are found.
Vietnam reportedly has six entrepreneurs whose net worth reaches a billion dollars, although experts suggest the real number could be two or three times greater than the official figures.
According to the Ministry of Planning and Investment, since the Doi Moi reforms, the country boasts over 930,000 active businesses, with small and medium-sized enterprises making up 98%, alongside roughly 14,400 cooperatives and over 5 million household businesses.
The private sector accounts for approximately 46% of GDP, contributes around 30% to the state budget, and employs 85% of the workforce.
It’s important to revisit the objectives laid down in the 2017 Resolution No. 10 concerning private sector enhancement, which recognized the private sector as a critical growth driver. Aspirations included achieving at least 1 million enterprises by 2020, 1.5 million by 2025, and a target of 2 million by 2030, alongside increasing its GDP contribution to 50% by 2020, 55% by 2025, and 60-65% by 2030.
According to Resolution No. 66/NQ-CP dated May 9, 2024, the goal is to reach 2 million enterprises by 2030, with private contributions to GDP stretching between 65-70%.
This assessment indicates that the target of 1 million businesses by 2020 was not met, and the 1.5 million by 2025 goal is at risk of being similarly unachieved.
Currently, non-agricultural family businesses represent 33%, leading to a fragmented economic landscape, while registered private firms contribute merely about 10% of the GDP.
Numerous reasons have been suggested for these challenges, with a particularly revealing report from the Ho Chi Minh National Academy of Politics highlighting that apprehensions about a potentially domineering private sector pose risks to economic manipulation and straying from Socialist values by forming a “shadow government” that influences policies and frameworks.
This concern persists partly due to a few recent instances of mismanagement within the private sector’s growth narrative.
Additionally, inequality remains, as the private sector frequently faces discrimination compared to state-owned enterprises, which continue to see a disproportionate allocation of resources, often in inefficient manners.
Meanwhile, state-owned and foreign-invested firms are favored with advantages regarding land, loans, and tax incentives, whereas domestic private enterprises often lack support and face excessive regulatory requirements.
The report from the Ho Chi Minh Academy also points out that some officials complicate processes for private entities by demanding extensive documentation or causing administrative delays, leading many to avoid official engagement out of fear of corruption or business interference.
This signifies that policymakers are aware of the challenges confronting private sector growth, yet various factors remain unresolved. High bank interest rates have drained resources from private firms. A survey of over 30,000 businesses indicated that 47% sought lower interest rates to alleviate operational costs.
Vietnamese enterprises typically face interest rates that are two to three times higher than those in comparable economies, coupled with additional transaction costs often exceeding global norms, a scenario that has persisted for years.
A Development Paradox
Dr. Tran Dinh Thien remarked: “There’s a paradox—while Vietnamese companies showcase resilience, they still grow at a sluggish pace and struggle to evolve.”
Despite their status as a relatively recent force in economic transformation, Vietnamese private enterprises possess unique growth traits.
On one side, they demonstrate remarkable resilience and survival abilities. Conventional market dynamics would suggest their considerable burdens and low efficiency should hinder survival in an open economy.
Contrarily, they continue to flourish, contributing increasingly to the nation’s progress.
In the first half of 2024, approximately 120,000 new firms were created or resumed services, surpassing the 110,000 that exited the market. This maintains a near equilibrium of business entries versus exits, marking the lowest ratio observed in recent years. Traditionally, for every four businesses entering, only one would exit.
Dr. Thien stated, “If we assess enterprise growth through a ‘relay race’ framework, Vietnam’s business lifespan raises concern, indicating many firms fail to thrive before they can mature.”
While survival rates are commendable, international competitiveness remains notably weak.
This paradox has emerged with greater clarity in recent years, particularly during 2023 and 2024.
However, another perspective on the progression of Vietnamese enterprises is warranted: despite their evident resilience, why do most remain small, fragile, and slowly evolving, when they are viewed as integral to the nation’s intrinsic strength as emphasized by the Party?
Unresolved institutional and legal hurdles, outdated regulations failing to adapt to current realities, and slow progress in decentralizing administrative processes contribute significantly to this challenge, inhibiting large-scale projects from flourishing.
Emerging medium and large firms have yet to fulfill anticipated roles as economic drivers, with investment in leading sectors, particularly in clean energy, chips, semiconductors, and hydrogen, remaining minimal, lacking major projects to spur economic transformation and competitiveness.
These issues and uncertainties must be resolved to realize the assertion made in the recent entrepreneur meeting: “Businesses and entrepreneurs are always central players, the primary movers of the economy’s material production.”
Tu Giang – Lan Anh
