The article by Mr. Dinh Hong Ky was published in the “Perspective” section of VnExpress on April 2, 2025.
At a recent meeting with the business community, I posed a frequently asked question: “In your opinion, what is the biggest barrier to the development of Vietnam’s private sector?”
One entrepreneur responded, “Lack of capital.” Another said, “Lack of technology.” Then, a business owner with nearly three decades of experience in the market quietly shook his head: “The biggest barrier is lack of trust.”
In the silence of the room, he elaborated: many business owners in Vietnam operate with constant anxiety—fear of shifting policies, fear of being squeezed out, fear of lacking the capacity to move forward.
That meeting took place around August last year, shortly after the United States declined to recognize Vietnam as a market economy—something that gave me much to reflect on. Over the years, the State has introduced various policies to support private enterprises, especially small and medium-sized ones. These policies have focused on reducing financial burdens, improving the business environment, and promoting sustainable growth. Yet Vietnam’s private sector still struggles within an ecosystem where growth drivers are not fully acknowledged.
In a recent article, General Secretary Tô Lâm called for accelerating the completion of a fully-fledged market economy with socialist orientation—modern, dynamic, and integrated. This is a prerequisite for the private sector to grow rapidly and sustainably.
First, we need a fresh perspective on what constitutes a “market economy.” An economy cannot be considered “market-based” if private enterprises are forced to compete unfairly with state-owned enterprises (SOEs) that are favored in terms of capital, land, projects, and contracts; if investment decisions are still driven by a “give-and-take” mechanism; or if tax policies can be arbitrarily changed at the discretion of regulatory authorities.
China’s experience offers a valuable lesson: only when the private sector is given a central role can the economy truly break through. In Vietnam today, the private sector contributes 51% of GDP but still faces numerous obstacles in accessing land and credit—especially small and medium-sized enterprises. According to surveys by VCCI, 57% of SMEs report difficulty accessing capital; over 44% cite administrative procedures and legal compliance as major challenges; and about 70% struggle to expand production or business premises.
Additionally, recent political bribery cases reveal a new form of competition—between genuinely private businesses and SOEs operating under the guise of private ownership or backed by political figures who can manipulate policy. This distorts the competitive landscape and suffocates opportunities for legitimate enterprises. As a result, some businesses choose to “grow and sell” to foreign partners rather than remain for the long haul.
To end this situation, what’s needed is not more laws, but the fair and transparent enforcement of existing ones. There should be tight oversight mechanisms, including independent supervisory committees with participation from business associations and civil society organizations, to monitor and promptly flag resource allocation distortions.
Another concern is the discriminatory treatment between domestic firms and foreign direct investment (FDI) enterprises. While FDI firms often enjoy four years of tax exemption and nine years of tax reduction, many Vietnamese businesses must bear a 20% tax rate from the outset. Several localities roll out the red carpet for FDI while placing obstacles in front of local businesses.
We must establish a fair and conditional incentive framework. Incentives should be tied to commitments such as technology transfer and real linkages with domestic businesses. Transfer pricing in transactions involving “tax havens” should be tightly monitored. Moreover, the phenomenon of FDI aimed at “origin laundering” to circumvent international tariffs must be controlled. This not only risks retaliatory tariffs from the U.S. due to trade surpluses but also harms Vietnamese exporters in key markets.
Rather than chasing FDI project numbers, Vietnam should develop a set of criteria to attract high-quality investors who deliver real value and long-term contributions to the economy.
A further paradox: while enterprises are fined for late tax payments, delays in VAT refunds or unreasonable licensing processes that stretch for months or even years are not adequately addressed. Authorities cannot remain bystanders to difficulties they directly or indirectly cause.
To address this, we need a reciprocal mechanism: if businesses are fined for missing tax deadlines, the State should also pay compensation for delayed refunds—at an equivalent rate. Officials responsible for administrative bottlenecks must be publicly named and held legally accountable.
Vietnam’s new economic era demands a new approach: the State should no longer act as a “midwife” to enterprises but as a creator of a business environment that is clear, transparent, and fair. The country needs a “National Business Charter” based on a simple yet powerful philosophy: a strong state is one that fosters successful entrepreneurs—not one that “feeds” weak businesses.
However, the transformation is not the State’s responsibility alone. The private sector must also change: it must stop operating based on relationships with officials. Private businesses must learn to respect the law and the public good. They must diligently fulfill tax obligations, grow through knowledge, labor hard, innovate in governance, and integrate into the global marketplace.
The State cannot play the role of “midwife” forever—it must become a fair referee, ensuring that no type of business feels like a “stepchild” in the economy.
