Vietnam is positioning itself for a new era of economic growth, with the private sector emerging as a central force in this transformation. Amid bold reforms and a push for deeper international integration, the government is placing significant emphasis on empowering private enterprises to drive national development. However, as the country navigates this ambitious path, challenges such as institutional bottlenecks, limited innovation, and workforce gaps threaten to slow progress. With the right policies and a shift in mindset, Vietnam’s private sector could become a powerhouse, not just domestically but on the global stage.
A Strategic Vision for Growth
Vietnam’s leadership, under General Secretary Tô Lâm and Prime Minister Phạm Minh Chính, has articulated a clear vision for the private sector to serve as a cornerstone of the national economy. This marks a notable shift in policy, reflecting a growing recognition of the sector’s potential to fuel sustainable growth. In a recent interview with Government News, Professor Vũ Minh Khương from the Lee Kuan Yew School of Public Policy in Singapore praised the government’s resolve, describing it as a transformative moment for Vietnam’s political and economic landscape.
The private sector, once overshadowed by state-owned enterprises (SOEs) and foreign direct investment (FDI), is now carving out a significant role. Over the past decade, private firms have made remarkable strides in industries such as steel, automotive manufacturing, and high technology. Today, they contribute substantially to GDP growth, job creation, and Vietnam’s global competitiveness. While SOEs and FDI still dominate in scale, experts like Professor Khương believe the private sector’s ascendancy is inevitable if current momentum is sustained. 
This optimism, however, comes with caveats. The private sector’s growth must be strategic and sustainable, a goal that requires more than just reducing bureaucratic hurdles. Coordinated policies, tailored to the unique needs of each industry, are essential to unlock the sector’s full potential. Without such measures, Vietnam risks squandering the opportunity to establish private enterprises as the backbone of its economy in the coming decades.
Barriers to Breakthrough
Despite the positive trajectory, Vietnam’s private sector faces deep-rooted challenges that could derail its progress if left unaddressed. Professor Khương identifies three critical barriers: institutional inefficiencies, limited capacity for innovation, and shortcomings in human capital.
On the institutional front, regulatory and structural hurdles vary widely across the 35 sectors where private enterprises operate. For instance, in maritime transport, many Vietnamese companies register vessels overseas due to cumbersome domestic procedures. At major ports like Cái Mép, fragmented customs clearance processes hinder efficiency. Professor Khương suggests that adopting a unified digital system, similar to Singapore’s, could significantly boost productivity, potentially yielding immediate growth of 10 to 20 per cent in certain industries. In logistics, outdated rules limit domestic transhipment, forcing routes to detour via regional hubs like Hong Kong. Addressing these inefficiencies through targeted reforms could position Vietnam as a more competitive player in global supply chains.
Innovation remains another sticking point. In advanced economies, businesses investing in research and development often benefit from tax incentives or financial support. In Vietnam, however, unclear policies deter firms from taking risks due to fears of audits or regulatory backlash. A robust framework offering preferential financing and tax breaks for technology upgrades and digital transformation could be a game-changer. Drawing lessons from neighbours like Thailand and Singapore, Vietnam has the opportunity to create an environment where innovation thrives.
Human capital is equally critical. Vietnam’s training systems are often disconnected from the real-world needs of businesses, lacking the flexibility to adapt to a rapidly changing economy. In contrast, Singapore’s government supports enterprises by training surplus workers, ensuring a ready talent pool for investment. Vietnam’s efforts to assess business needs, while well-intentioned, are often superficial. A more practical, industry-aligned training strategy is needed to equip the workforce with skills that match the demands of a modern economy.
The Path to Competitiveness
While government support is vital, Vietnamese private enterprises must also take responsibility for their own growth. A key limitation, according to Professor Khương, is the sector’s focus on short-term gains over long-term strategy. Many businesses are drawn to quick-profit industries like real estate or export-driven activities, leaving them vulnerable to global volatility. Without a coherent vision, firms risk stagnation, unable to compete on a broader stage.
A shift in mindset is essential. Private enterprises must prioritise modern management practices and invest in understanding global trends. An effective business model, as Professor Khương notes, can generate far greater value from initial investments, building resilience against external shocks. Singapore offers a compelling example, with structured programmes providing strategic advice, technology support, and subsidies for digital transformation. Vietnam could adapt similar initiatives to steer its private sector toward sustainable growth.
As Vietnam accelerates its integration into the global economy, the private sector must embrace digital transformation. This goes beyond adopting new technologies; it requires improved governance and a commitment to long-term planning. By aligning with international standards and leveraging state support, private firms can position themselves as key drivers of Vietnam’s economic future.
Balancing Ambition with Caution
The government’s commitment to elevating the private sector is commendable, but translating vision into results will require sustained effort. Bold directives from Vietnam’s leadership signal a deep appreciation of the sector’s role, yet the path forward is fraught with complexity. Institutional reforms must be precise, targeting specific bottlenecks rather than relying on broad, one-size-fits-all solutions. Engaging with industry bodies to design timely interventions will be crucial to overcoming regulatory challenges.
Moreover, fostering innovation and building human capital are not quick fixes but long-term investments. If Vietnam can establish a regulatory environment that encourages risk-taking and aligns training with industry needs, the private sector could achieve transformative growth. However, if these elements are neglected, the sector’s potential may remain unrealised, leaving Vietnam at a disadvantage compared to regional peers.
Speculative estimates about the private sector’s future impact—such as its potential to overtake SOEs or FDI in economic contribution—must be approached with caution. While trends suggest a growing role, no definitive evidence confirms when or if this shift will occur. Conditional analysis indicates that, if reforms address key bottlenecks and businesses adopt sustainable strategies, the private sector may become the dominant force in Vietnam’s economy within the next decade. Yet, as Professor Khương emphasises, such outcomes depend on both government action and private initiative.
A Pivotal Moment for Vietnam
Vietnam stands at a crossroads, with the private sector poised to redefine its economic trajectory. The government’s strategic vision, coupled with the sector’s growing dynamism, offers a promising foundation for progress. Private firms are no longer merely participants in the economy; they are increasingly vital to national growth, employment, and global competitiveness.
Yet, the road ahead is not without obstacles. Institutional inefficiencies, innovation gaps, and workforce challenges must be addressed through coordinated policies and a shift in business mindset. Drawing inspiration from regional success stories, Vietnam has the tools to create an environment where private enterprises thrive. If these efforts succeed, the private sector could emerge as the driving force behind Vietnam’s ambition to become a regional economic powerhouse.
For now, the focus remains on laying the groundwork. As Vietnam deepens its international integration and embraces digital transformation, the private sector’s role will only grow in significance. The question is not whether it will shape the nation’s future, but how quickly and effectively it can rise to the challenge. With bold leadership and strategic reforms, Vietnam is well on its way to harnessing the full potential of its private enterprises, setting the stage for a new chapter of economic success.
