In developed market economies, the private sector has consistently played a central role in driving economic growth, fostering innovation, and enhancing national competitiveness. In fact, countries that implemented breakthrough policies early on to support private sector development have generally experienced rapid progress and prosperity. Conversely, those that underestimated its role have faced the risk of stagnation and falling behind.

Developing the private sector goes beyond merely encouraging the legitimate aspiration to prosper; it requires the establishment of a fair, transparent, and stable business ecosystem. Such an environment allows enterprises to invest confidently in the long term and compete on a level playing field. In this context, the private sector not only contributes to GDP but also becomes a key driver of the entire economy.

The Politburo’s decision to designate the private economy as the “most important driving force” in Resolution No. 68-NQ/TW marks a profound shift in development thinking. It serves as a clear affirmation of the private sector’s foundational role in the new growth model, as well as a strategic commitment by the Party and the State to accompany this sector on the path toward building a strong and prosperous Vietnam.. 

In the era of digital transformation and global integration, only when the private sector develops rapidly, robustly, and sustainably will the economy possess sufficient capacity for international competitiveness. Promoting the private economy is not only an urgent requirement but also a strategic choice for Vietnam to overcome the middle-income trap and assert its position on the global economic map.

A Major Contributor to Growth, Employment, and Poverty Reduction

In recent years, Vietnam’s economy has achieved remarkable results: stable growth, controlled inflation, significant improvements in living standards, and enhanced social welfare. One of the critical driving forces behind these achievements is the private sector—a rapidly rising actor playing an increasingly visible role in national development.

Over 42 Million Workers and 51% of GDP—An Irreplaceable Force

According to the General Statistics Office, the private sector employed over 42 million workers in 2024, an increase of 1.5 million compared to 2021, accounting for 82% of total employment contributing to economic growth. This sector has been instrumental in generating jobs, fostering innovation, and enhancing labor productivity. On average, labor productivity in the private sector has increased by 6–8% annually, reflecting notable improvements in production efficiency and organizational capacity. 

Moreover, the private sector plays an important role in poverty reduction and narrowing regional disparities. The multidimensional poverty rate fell from 4.03% in 2022 to 1.93% in 2024. Meanwhile, the proportion of people living below the $3.65/day threshold (PPP 2017) was halved—from 4% in 2020 to 1.98% in 2024. These outcomes clearly demonstrate the positive spillover effects of private sector development on living standards and social welfare.

Growing in scale, expanding influence

From contributing 42.6% of GDP in 2016, the private sector’s share rose to 50.2% in 2021 and is estimated to surpass 51% in 2024. The number of private enterprises and individual business households has also grown significantly, now reaching nearly 800 thousand firms and over 5 million households. Among them, private enterprises contribute more than 24% and household businesses contribute about 23% to national economic growth. 

The private sector is also a major investment force, accounting for 60% of total social investment, over 30% of state budget revenues, 35% of import value, and 25% of export turnover. These figures testify to the sector’s growing adaptability and market reach, both domestically and regionally.

Comprehensive participation in key industries

Private enterprises are present in most key economic sectors: from processing - manufacturing, construction, transportation, aviation, real estate, information technology to finance - banking and high-tech agriculture. In particular, many enterprises have mastered technology, deeply participate in the global value chain, gradually affirming their international competitiveness.

Big names such as Vingroup, Masan, Sun Group, Vietjet, Thaco, Hoa Phat, Geleximco, Sovico, TH Group, REE... not only contribute to the development of the domestic economy - society but also build Vietnamese brands on the global business map.

A Living Testament of National Development Aspirations

The remarkable development of Vietnam’s private sector in recent years is a testament to the great potential of this sector if given opportunities, trust and conducive policy environment. Far beyond merely contributing to a dynamic and innovative economy, the private sector is progressively becoming a solid pillar in realizing the vision of a strong and prosperous Vietnam.

“Bottlenecks” that hinder development

Despite its growing contributions to growth, job creation and poverty reduction, the private sector has not yet fully exploited its potential due to many inherent barriers that have persisted over many years. This situation has prevented the private sector, despite its large population, from becoming the driving force for growth as expected.

Large in Number, Yet Contribution Remains Disproportionate

By the end of 2024, the private sector employed over 42 million workers—more than 82% of total job creation – far exceeding that of the state-owned and foreign-invested sectors combined. However, its contribution to GDP was only over 51%, highlighting a significant gap between labor size and actual economic output.

Over 97% of private enterprises are currently micro- or small-sized, characterized by limited financial capacity, outdated technology, and weak management. According to a report by the Vietnam Chamber of Commerce and Industry (VCCI), only about 6% of private enterprises have the capacity to participate deeply in the global supply chain - an alarmingly low number in the context of increasingly deep international integration.

Lack of motivation to grow from the individual business sector

Vietnam currently has more than 5 million individual business households, contributing about 23% of GDP. However, most operate at a fragmented scale, are unregistered, lack proper accounting and invoicing practices, and often avoid tax and social insurance obligations. Despite many generating tens or even hundreds of billions of VND in annual revenue, these businesses are reluctant to formalize due to concerns over complex legal procedures, high compliance costs, and a non-transparent business environment.

A recent survey by the World Bank (WB) in Vietnam showed that 55% of business households do not want to grow into formal enterprises, citing fear of frequent inspections and a lack of trust in the fairness of the legal and regulatory system.

Inequality in access to resources - a structural barrier

One of the major structural “bottlenecks” is unequal access to land, capital, information, and other development resources. While state-owned enterprises still enjoy preferential access to resources and projects, many private firms must “fend for themselves” in an environment lacking effective support mechanisms.

According to a 2023 VCCI survey, only 30% of private enterprises could easily access bank credit. These constraints not only discourage investment expansion but also undermine the sector’s long-term competitiveness on its home turf.

Low labor productivity, lack of high-quality human resources

Although the labor productivity of the private sector has improved, its overall level remains slow. Alarmingly, the labor productivity of this economic sector is still among the lowest, many times lower than other economic sectors. Specifically, labor productivity (at current prices) in the private sector rose from 90.8 million VND per worker in 2020 to 124 million VND in 2023. In contrast, state-owned enterprises increased from 405.6 million to 536 million VND, and foreign-invested enterprises from 339.9 million to 398.1 million VND per worker in the same period.

Although accounting for the majority of social workers, most of the workers in this sector have not been properly trained, lack vocational certificates and basic digital skills. According to a report by the International Labor Organization (ILO), only about 23% of workers in the private sector have technical expertise, compared to more than 60% in the FDI sector. This gap not only hampers productivity but also impedes innovation and digital transformation.

Informal economy distorts markets dynamics

The widespread presence of the informal sector estimated to account for around 30% of the national economy which poses significant challenges to transparency, efficiency, and fairness. Private firms must compete with unregistered businesses that pay no taxes and are not subject to legal obligations, thereby distorting the playing field and discouraging long-term investment..

Proposing breakthrough solutions for the private sector to thrive

The above constraints demonstrate that the development of the private sector is not merely a technical issue but a structural institutional challenge. Without comprehensive and bold reforms, the private sector will struggle to assume the role of a central pillar in the economy, as set out in Resolution 68-NQ/TW.

Building strategic trust: A foundation for sustainable growth

International experience shows that sustainable private sector development begins with trust from the state. For example, Singapore—renowned for its dynamic and transparent business environment—has always regarded private enterprises as central to economic development. In Vietnam, institutionalizing a philosophy of “trust, expectation, and support” toward private businesses will expand room for innovation and investment, while avoiding “ask-give” mechanisms and discriminatory treatment.

Removing institutional barriers to ensure equal access

Many private enterprises in Vietnam still face limitations in accessing essential resources such as land, credit, and market information. According to the World Bank, complex administrative procedures can raise business costs by as much as 15–20%. South Korea’s continuous reforms to support private enterprises—such as preferential credit, land access, and high-quality labor—have helped grow global conglomerates (chaebols) like Samsung and Hyundai. Since the 1960s, the Korean government has supported these firms through credit incentives, land reform, and market access, resulting in a private sector that now accounts for over 80% of GDP.

Transparent business environment, fair competition

A fair playing field is a prerequisite for private enterprises to maximize their potential strength. Experience from Japan shows that when private enterprises are allowed to participate equally in national projects and global supply chains, productivity and product quality increase significantly, creating a driving force for continuous innovation. In Vietnam, only about 30% of private enterprises participate deeply in the global value chain, a very modest number compared to other countries in the region.

Developing high-quality human resources that aligns with business practices

Human resources are the key to long-term private sector development. Training in management, technology, and digital skills must be closely aligned with business needs. For example, Germany is famous for its high-quality vocational training system that is closely linked between schools and businesses, helping to reduce the labor skills gap. In Vietnam, only about 20% of the workforce is properly trained to align with the Fourth Industrial Revolution trend, highlighting the need to promote vocational education and entrepreneurship training.

Supporting innovation and digital transformation

In the context of globalization and the Fourth Industrial Revolution, innovation is a vital factor. In 2024, only about 15% of enterprises in Vietnam applied extensive digital transformation solutions, lower than the average in Southeast Asia (about 30%). The state should introduce financial and technical incentives, such as Singapore’s innovation investment funds and startup support programs, to help the private sector catch up and lead emerging trends.

Transitioning Household Businesses into Enterprises: Expanding scale, increasing strength

More than 5 million individual business households in Vietnam are a huge potential resource but have not been effectively exploited. Thailand has many policies to support the conversion of business households into enterprises with simple procedures, tax exemptions and technical support, helping this sector contribute up to 40% of GDP. Vietnam should adopt similar approaches to encourage “upgrading,” increase the number of formal enterprises, and create millions of high-quality jobs.

Private sector development strategy by the year 2035, with a vision to 2045: A guide for the future

The early promulgation of a National Private Sector Development Strategy is extremely necessary. This strategy must set clear goals, synchronous policy pillars and sustainable development orientations to turn Vietnam into a developed country by 2045. From there, each locality and industry will have a specific roadmap, supporting private enterprises to grow dramatically, contributing to building a strong and prosperous country as the aspiration of the whole nation.

Resolution No. 68-NQ/TW is not only a simple economic development orientation, but also a political commitment of the Party to put private enterprises at the center of innovation and development. Effective implementation of Resolution No. 68-NQ/TW will not only create new growth momentum but also contribute to the formation of a modern, deeply integrated and globally competitive market economy - for a truly prosperous and powerful Vietnam by 2045./.

Dr. Nguyen Nhu Quynh

National Institute for Economics and Finance

Source: Center for Economic, Financial and Statistical Information

References

1. Central Committee, Resolution No. 68-NQ/TW regarding private sector development.

2. Prof. Dr. To Lam, Private sector development - Leverage for a prosperous Vietnam.

3. General Statistics Office, Statistical Yearbooks 2017, 2023.

4. General Statistics Office, Report on the socio-economic situation in 2024.

5. Dr. Tran Van Khai, Aspiration for 2045 and the private economy

6. Assoc. Prof. Dr. Nguyen Hong Son, Strategic solutions to create breakthroughs in private sector development