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[Research Contribution] Unleashing National Inner Strength from the Private Sector: Restructuring Vietnam’s Development Model – Part 1

11 October, 2025

Keywords: private sector, GDP growth, time periods, economic institutions.

After more than a decade of robust transformation, Vietnam’s private sector has evolved from a “recognized position” to a “key driver” of national growth. Its development across three distinct phases—foundational (2010–2015), acceleration (2016–2020), and breakthrough (2021–2024)—not only reflects the sector’s maturation but also mirrors the evolution of institutional thinking and the operational capabilities of Vietnamese enterprises in the currents of global integration. From initial limitations to resilient post-pandemic recovery, the private sector has affirmed its indispensable role in GDP growth and economic restructuring. As the economy shifts towards digital growth and innovation in the 2025–2030 period, establishing a strategy to leverage this sector as the “main driving force” is not just a development requirement but a prerequisite for Vietnam to achieve its goal of becoming a prosperous and sustainable nation by 2045. In Part 1 of this study by researchers from the University of Economics Ho Chi Minh City (UEH), we will explore the development of the private sector within Vietnam’s economic trajectory.

The 2010–2015 period marked a crucial turning point in shaping the role of the private sector in Vietnam’s economy.

During the 2010–2015 period, despite facing numerous institutional and legal barriers, the private sector played a significant role in sustaining economic momentum. According to the General Statistics Office (2015), the non-state sector—primarily comprising private enterprises—contributed approximately 38–40% of the annual GDP. This was a period when Vietnam was emerging from the 2008–2009 global financial crisis, with a focus on macroeconomic stabilization and economic restructuring. Notably, the 11th Party Congress documents (2011) for the first time affirmed the private sector as “one of the important driving forces of the economy,” marking a fundamental shift in institutional thinking. Whereas previously the sector was considered merely a “supplementary component,” the Party now formalized its proactive role in the socialist-oriented market economy model. The 11th Congress also called for improving the institutional environment, enhancing state management effectiveness, and creating a favorable legal framework. Specifically, the amended Law on Enterprises in 2014 simplified market entry procedures, and Resolution 19/NQ-CP (2014) was issued to improve the business environment and national competitiveness.

In terms of actual contributions during 2010-2015, the private sector demonstrated its significant role by contributing 38-40% of GDP annually, employing over 77% of the social labor force, and accounting for about 45% of total social investment capital (GSO, 2015). This period saw the private sector exhibit remarkable dynamism, particularly in industries like food processing, retail, construction, and domestic transportation. According to GSO data, the food processing industry grew by 5.1%, while the beverage sector achieved 10% growth in 2014. The construction industry also recorded a 10.8% growth rate, its highest since 2010 (GSO, 2015). During the same period, over 50% of non-agricultural household businesses operated in commerce and services, 11% in transportation, and nearly 1% in construction (Vietnam Government Portal, 2011).

Crucially, this was the first period where private enterprises began to participate in high-value-added sectors such as information technology—with software hubs in HCMC—and high-tech agriculture, exemplified by modern shrimp and pangasius farming models that achieved outstanding labor productivity (World Bank, 2019). The private sector’s involvement in these industries marked a qualitative shift in its structural composition.

Despite these significant strides, the private sector in this period still faced structural and institutional limitations. The legal system lacked consistency, administrative procedures were cumbersome, and the unclear and inconsistent classification of economic ownership led to inaccuracies in assessing the sector’s true role and contribution. Overlaps between equitized state-owned enterprises and purely private firms, as well as between household businesses and micro-enterprises, hindered the formulation of appropriate policies (CIEM, 2015; World Bank, 2019). This resulted in the majority of private firms (over 94%) remaining small or micro-sized, struggling with capital access, low productivity, and weak linkages to global value chains (Le Duy Binh, 2018). These limitations stemmed from both the state and the enterprises themselves, with fragmented support policies on one side and weak internal governance and outdated technology on the other.

The challenge for the private sector at this stage was to restructure its business models towards modernization, invest in technological innovation, and enhance human resource quality and corporate governance to international standards. Concurrently, the state needed to continue market-oriented institutional reforms to create a foundation for large private enterprises to emerge and compete regionally and globally.

The 2016–2020 period marked an acceleration in the private sector’s development, becoming an institutional turning point and a key driver of innovation.

This period witnessed a profound shift in national economic development thinking, clearly reflected in political documents and policy actions. The 12th Party Congress documents (2016) established a landmark by fully and explicitly affirming that: “The private sector is an important driving force of the economy.” This ended the viewpoint of the private sector as merely a “supplementary component” to the state and collective sectors.

Following this breakthrough, Resolution No. 10-NQ/TW of the 5th Plenum of the 12th Party Central Committee on June 3, 2017, emphasized the need for the healthy, effective, and sustainable development of the private sector, making it a truly important driver of the socialist-oriented market economy. The resolution set specific targets, reflecting a long-term strategic vision: the private sector’s contribution to GDP was projected to reach about 50% by 2020, 55% by 2025, and 60-65% by 2030. These directives marked a fundamental shift, establishing the private sector’s strategic role as a long-term, proactive, and core component of a modern growth model.

The Party and State institutionalized this vision through policies to improve the investment environment and foster the private sector’s internal strength. The 2017 Law on Support for Small and Medium-sized Enterprises provided the first comprehensive legal framework for the sector, which accounted for over 98% of all domestic firms. By the end of 2020, there were over 700,000 registered enterprises, with over 96% being domestic private firms. The private sector contributed over 45% of GDP, employed over 85% of the total labor force, and accounted for over 40% of total social investment (GSO, 2021). Major private corporations like Vingroup, Masan, FPT, Thaco, and VietJet expanded regionally and internationally, helping to restructure the economy and dominate high-value sectors.

However, challenges remained. Despite an improved investment climate, administrative hurdles, informal charges, and a lack of transparency persisted. The 2019 Provincial Competitiveness Index (PCI) report revealed that 59% of private firms considered informal charges a “burden” (VCCI, 2020). Vietnamese private firms were still predominantly small, with weak governance and outdated technology (World Bank, 2020). These limitations were caused by asynchronous institutional reforms on the state’s side and a short-term mindset and weak inter-firm linkages on the enterprises’ side.

In the new context of the Fourth Industrial Revolution, the private sector needed a comprehensive development strategy, focusing on high-value-added value chains, digital technology adoption, and R&D investment. This required continued state reforms to create a business-friendly institutional framework and ensure property rights, laying a stable foundation for the sustainable development of private enterprises.

The Breakthrough Period (2021–2024): The private sector recovers post-COVID-19, becoming a critical pivot for driving internal growth.

At the 13th Party Congress (2021), amidst the profound impact of the COVID-19 pandemic, the Party recognized the critical importance of national inner strength, identifying the private sector as “an important driving force of the economy” (Communist Party of Vietnam, 2021, vol. 1, p. 112). The Party set a target of having at least 2 million private enterprises by 2030, contributing 60-65% to GDP.

The government subsequently concretized these goals. Resolution No. 45/NQ-CP (March 31, 2023) aimed for 1.5 million enterprises by 2025, with 35-45% engaged in innovative activities by 2030. These directives underscored the central role of the private sector in the national strategy for internal strength and innovation. Entrusting the private sector with this responsibility demonstrated a strategic shift: it was no longer a supporting force but the main driver leading national growth targets (Nguyen & Hoang, 2024).

According to the GSO (2024), the private sector contributed about 52% of GDP in 2023, employed over 87% of the labor force, and accounted for 45% of total social investment. However, systemic challenges became apparent. By the end of 2024, the number of private enterprises reached just over 940,000, falling short of the 1-million target set for 2020 (CIEM, 2024). The rate of business withdrawals increased, and the labor productivity of private firms was only 60% of the enterprise sector average (World Bank, 2023). Investment efficiency was low, with an ICOR of 10.1, 1.6 times higher than the FDI sector (GSO, 2024).

Private firms still faced significant barriers in accessing land and finance. The PCI land access index dropped from 7.01 (2021) to 6.75 (2023), with 73% of firms reporting difficulties with land procedures (VCCI, 2023). Only 5% of private firms practiced good governance, and the average ACGS score for Vietnamese firms (57 points) remained the lowest in ASEAN (ASEAN CG Scorecard, 2024). In the green-digital twin transition, about 80% of enterprises lacked proper awareness of innovation’s role, and only 12% had ESG policies (Cisco, 2020; CIEM, 2023).

Nevertheless, COVID-19 spurred the private sector’s internal strength. Small and flexible firms quickly adopted e-commerce and digital solutions to maintain operations (Nguyen Kim Nguyen, 2023). However, the “sudden brake” on supply chains revealed their fragility. Many firms still produced low-value goods and lacked advanced technology and long-term financing. The primary causes were both internal (lack of long-term strategy) and external (ineffective post-COVID support policies and outdated regulations).

Read the full research paper: Unleashing National Inner Strength from the Private Sector: Restructuring Vietnam’s Development Model HERE.

Authors: Prof. Dr. Nguyen Dong Phong, Assoc. Prof. Dr. Pham Thi Kien – University of Economics Ho Chi Minh City

This article is part of the series spreading research and applied knowledge from UEH with the message “Research Contribution For All.” UEH cordially invites readers to look forward to the next UEH Research Insights newsletter.

News, photos: Authors, UEH Department of Communications and Partnerships

Chân Trang (1)