After nearly four decades of reforms, Vietnam’s private sector has expanded rapidly, making increasing contributions to growth, employment, and social welfare. In 2024 alone, it accounted for more than 40% of GDP and stood out as a key force propelling the overall economy.

Yet experts note that the private economy has not reached its expected potential. It remains the least efficient among all economic sectors, with low labor productivity, modest incomes, weak management, and limited competitiveness. The informal economy, comprising millions of small household businesses, street vendors, and farm-based family enterprises, contributes roughly a quarter of GDP and provides jobs for tens of millions, but has largely been overlooked in terms of policy and oversight.

Professor Tran Tho Dat, Chairman of the University Council at the National Economics University, stressed the need to rethink how the informal sector is perceived. He suggested that policy should follow the principle of “voluntary encouragement – transitional support – incentives for compliance,” with measures such as tax breaks, streamlined procedures, digital transformation assistance, access to credit, social insurance, and vocational training.

“With the right policy instruments, this gray zone can be turned into a bright spot, helping us achieve the target of two million businesses and laying the foundation for sustainable development,” he affirmed.

He also accentuated the importance of improving statistical capacity and building a reliable database on the informal sector to enable more evidence-based policymaking.

Existing bottlenecks

Examining the obstacles, Professor Ngo Thang Loi, Senior Lecturer at the National Economics University, identified four major bottlenecks facing the private economy:

First, the definition of the private sector remains too narrow. Current policy focuses mainly on private enterprises and non-farm household businesses, overlooking agricultural households, the informal street economy, and even the overseas Vietnamese community, which contributes billions of dollars in remittances.

Second, there is still hesitation in recognizing the private economy as the main growth driver. According to Prof. Loi, it is vital to distinguish between “driver” and “leading force”: the state economy acts as the track, the private economy as the train, while foreign direct investment (FDI) plays a supporting role. Without granting the private sector the role of driver, achieving sustainable development will remain elusive.

Third, policies lack inclusiveness and equality. Many private firms struggle to access land, credit, and business opportunities, while state-owned and FDI enterprises often enjoy greater advantages.

Fourth, weaknesses also stem from within the private sector itself: most firms are small, undercapitalized, poorly managed, fragmented, and staffed by a workforce that lacks advanced skills.

Tran Van The, Chairman of InDel Investment and Development, added that many obstacles arise internally, from thin capital and opaque financial records to heavy dependence on bank loans that are often difficult to secure. Legal procedures remain cumbersome, consuming both time and cost, and creating a sense that private firms are not treated equally.

Pathways to breakthrough

For the private sector to truly serve as a growth engine, experts agree that institutional reform and a level playing field are essential.

Tran Van The underscored the need to refine the institutional framework to be more consistent, transparent, and stable, particularly in critical areas such as land, investment, credit, and public–private partnerships. Administrative procedures, he said, must undergo genuine reform, avoiding the situation where a company has to obtain dozens of approvals just to implement a project.

Prof. Ngo Thang Loi, meanwhile, highlighted the importance of policy stability. Every new regulation should come with a reasonable transition mechanism to avoid retroactive impacts that confuse businesses. He also proposed upgrading local business associations into regional-level organizations to strengthen internal linkages, reduce fragmentation, and enhance collective bargaining power.

Crucially, to adapt to the new context, private firms must be encouraged to invest in technology, digital transformation, and green development. This is both a pressing requirement and a valuable opportunity for deeper integration into global value chains.

From “gray zone” to “bright spot”

Overall, the Vietnamese private economy has affirmed its growing role, but to truly become a national pillar, it requires more comprehensive recognition and support, particularly in the informal sector. Policies that encourage formalization, institutional reforms that ensure fairness, and incentives for innovation will be key to transforming the “gray zone” into a “bright spot.”

When that happens, the private sector will not only drive economic growth but also provide a foundation for inclusive and sustainable national development.

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