Upon my return to Vietnam in 1997, I teamed up with Professor James Riedel from Johns Hopkins University to create a comprehensive report on Vietnam’s private sector for the World Bank.

A primary goal of our study was to assess the entrepreneurial spirit among the Vietnamese. We undertook surveys across varied regions and were pleasantly surprised—business discussions flourished everywhere we traveled.

A memorable moment occurred on a ferry in Can Tho when a foreign team member ordered a cold beer. Despite the delay caused by the ferry leaving before the vendor returned, she nonetheless managed to deliver the drink upon docking. Our foreign colleague remarked, “With such entrepreneurial spirit, this country will thrive.”

More than two decades ago, I aided many young entrepreneurs in launching their businesses. Most began with little to no resources, perhaps a few hundred million VND for raw materials. Today, some of them possess assets worth millions, with several emerging as significant players in the market.

Many inspiring female entrepreneurs in their sixties now lead successful businesses in pharmaceuticals and apparel. These women, who once rode bicycles to remote areas to sell single items, represent a journey of perseverance and success that is often difficult for younger generations to fathom.

The entrepreneurial mindset amongst Vietnamese individuals has experienced remarkable growth. Despite this achievement, the private sector’s development still has significant room for improvement compared to its potential.

Entrepreneurs possess astute awareness of economic risks and opportunities better than anyone else…

However, recent years have posed significant challenges. Global instabilities from events like the Russia-Ukraine conflict have increased uncertainty. International supply chains are strained, globalization is splintering, inflation continues to rise, and interest rates remain high.

Domestically, Vietnamese businesses grapple with high interest rates and an array of operational hurdles. Compounded by the lingering effects of the COVID-19 pandemic, the bureaucratic environment has become increasingly sluggish. Despite these obstacles, Vietnamese entrepreneurs display remarkable resilience.

The current valuation of the private sector stands at approximately $70 billion, a mere fraction compared to the assets of sprawling foreign corporations. In contrast, individual fortunes, like that of Elon Musk, are substantially higher than Vietnam’s overall GDP. This highlights the relatively modest state of Vietnam’s private sector in the global context.

Nonetheless, I estimate that there are around 20 undisclosed billionaires in Vietnam. In this digital age, rapid wealth accumulation is a frequent occurrence, suggesting that more individuals may achieve billionaire status, especially amidst the rise of AI technologies. However, a crucial question arises: while certain individuals amass wealth quickly, is this contributing to the nation’s strength?

In an absolute sense, the private sector has seen notable growth; however, comparatively, it still has much potential to realize.

Issues with the sale of homes lacking complete legal documentation are not solely the fault of businesses; the government shares the responsibility. With occupants already in these homes, how can they be expected to vacate? I advocate for government intervention to legalize these properties, resolving the situation now rather than delaying for decades.

Moreover, the Land Law—a critical statute—needs to offer effective solutions that protect the rights of landowners while also fostering investor confidence. Adequate protection for everyone’s interests will facilitate a healthier market environment. When laws are violated, swift penalties must be enforced, ensuring fairness and trust within society.

Investors should ensure that relocating individuals to new areas enhances or maintains their quality of life. It’s vital to minimize the use of state funds where possible, as this complicates matters. Even for public projects, reliance on public finances should be reduced in favor of attracting private investment. Regrettably, despite the existence of the PPP Law, private sector engagement remains low, which is troubling.

Regarding high land prices, I am confident the market will self-correct. For example, some sellers in District 1, Ho Chi Minh City, insist on a selling price of 1.5 billion VND per square meter based on historical prices, despite significantly reduced buyer interest. Ultimately, market forces will dictate necessary adjustments.

Restructuring involves modifying a business’s operational approach. Initially, firms should divest from less profitable areas to mitigate costs and secure cash flow, especially given the current uncertain crisis period. Sustaining adequate cash flow while minimizing expenditures should be a primary focus.

Additionally, it’s crucial to maintain a long-term perspective. Many companies still lack a clear vision for sustainable development. While frequently discussed, less attention is given to the actions required to realize it. True sustainable growth demands discipline and effective governance.

Many businesses succeed primarily through management rather than solid governance practices. Numerous entrepreneurs excel at seizing opportunities quickly, yet this reflects management, not governance. They may misconstrue their success as effective governance when it is not.

I know an entrepreneur
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Growth Challenges in Entrepreneurship

A business leader who started with 20 employees has grown to over 200. When I inquired about their management style, they claimed to oversee every facet of the operation, asserting that nothing happens without their knowledge.

I beg to differ. I see this approach as disorganized rather than a demonstration of effective oversight. Many entrepreneurs mistakenly equate recognizing market trends and making opportunistic sales with strategic acumen. In reality, this is a form of management, not a strategy.

Effective governance has become crucial, especially with the rapid evolution of AI technologies. Companies must define a clear strategic direction to thrive in this fast-paced environment.

The generation of entrepreneurs emerging after Doi Moi encounters this very challenge, a situation not exclusive to Vietnam.

Numerous successful global enterprises have originated from family-owned businesses that are backed by robust governance and management practices. Therefore, even when passed down to the next generation, these businesses maintain their wealth, even with diminished ownership percentages. These families ensure their governance structures do not depend on any single member.

Take the Rockefeller family, for instance. They have maintained their wealth into the eighth generation, holding considerable fortune despite retaining only 5% of their founding company. Their board includes several representatives and diverse advisors such as lawyers, economists, and financial specialists. Relying on one individual to manage these roles is unrealistic, as no single person can possess all requisite skills.

Contrastingly, many Vietnamese entrepreneurs attempt to manage everything independently. There is a prevailing sentiment that trust in others is misplaced. The belief often heard is, “This is my asset, so I must oversee it,” which can lead to detrimental outcomes.

The chances of effectively preparing a child to take over the family business are exceedingly slim. Even if a child is talented and well-educated abroad, they might find it challenging to navigate the business landscape in Vietnam. The unique challenges faced by their parents may not translate to the younger generation.

I’ve seen situations where families send their eldest sons to study in the U.S., only to pressure them into leadership roles, leading to significant declines in company performance within a year or two. Hence, it’s essential for previous generations to understand that effective governance and systematic operations are necessary for their enterprises. While some capable offspring can assume CEO roles, their authority should be clearly defined and limited.

According to McKinsey research, the chances of successfully transferring management from the first to the second generation are around 30%. From the second to the third generation, this figure plummets to 10%. Consequently, the overall probability of a successful three-generation transition is just 3%. This inheritance model carries substantial risks, placing subsequent generations in vulnerable positions.

This perspective may not entirely apply to Vietnam, where many entrepreneurs are self-made. It is disheartening because these businesses serve as vital societal assets, providing numerous jobs.

This situation partly explains the slow growth of local enterprises. Domestic companies might benefit from stronger partnerships with foreign direct investment (FDI) firms. If FDI companies encounter well-structured and governed local enterprises, they may be more eager to collaborate.

Moreover, local businesses often lack governance systems that align with international standards, resulting in collaboration with FDI firms being limited to subcontracting arrangements.

Tu Giang – Lan Anh

* Mr. Tran Si Chuong is a strategic development and corporate governance consultant and a Senior Partner at 3 Horizons, a UK-based consulting firm. Previously, he served as an economic and banking advisor for the U.S. Congressional Banking Committee. Since 1995, he has frequently worked in Vietnam and across the region, providing counsel to international financial institutions and local and foreign enterprises on macroeconomics, governance, and business development strategies.

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