Many explanations have been given, but perhaps the most insightful comes from a report by the Ho Chi Minh National Academy of Politics.

It suggests that private enterprises have struggled to grow due to concerns that an overly powerful private sector could manipulate the economy and deviate from the Socialist orientation by creating a “shadow government” influencing policies and mechanisms.

This mindset persists due to a few examples of misuse in the private sector’s development over recent years.

Similarly, discrimination remains between the private sector and other economic sectors, as most resources are still concentrated in state-owned enterprises, even though these resources are often not efficiently used.

In contrast, state-owned and foreign-invested enterprises are given favorable treatment—land, loans, taxes—while domestic private enterprises not only lack such incentives but are also burdened by numerous administrative requirements.

The report from the Ho Chi Minh National Academy of Politics also points out that some officials create unnecessary difficulties for private enterprises by demanding excessive documentation or causing delays in administrative processes. In reality, private businesses often avoid interactions with officials out of fear of corruption or obstacles to their operations.

These explanations show that policymakers are not unaware of the issues that hinder private sector development.

But there is more to consider. High bank interest rates have drained the private sector’s resources. A recent survey of over 30,000 private enterprises revealed that 47% requested lower loan interest rates to reduce the cost burden on production and business.

Vietnamese businesses have long faced interest rates that are 2-3 times higher than those in other market economies, not to mention the additional transaction costs that far exceed international norms. This situation has persisted for decades.

A development paradox

Dr. Tran Dinh Thien observed: “There is a paradox - Vietnamese businesses are resilient but grow slowly, struggling to mature.”

Although Vietnam’s private enterprises are a relatively new force in the economic transition, they exhibit unusual growth characteristics.

On the one hand, they display extraordinary resilience and survival instincts. According to market competition logic, given their cost burdens, low efficiency, and weak resources, it would be difficult for Vietnamese enterprises to survive in an open economic environment.

Yet, in reality, they continue to thrive, contributing more and more to the country’s development.

In the first half of 2024, nearly 120,000 new businesses were established or resumed operations, a figure higher than the 110,000 that exited the market. This means that the rate of businesses joining the market compared to those leaving is approximately 1:1, the lowest in recent years. Previously, for every 4 businesses joining the market, only 1 left.

Dr. Thien stated, “From this perspective, if we measure enterprise development by the ‘relay race’ logic, the lifespan of Vietnamese businesses is concerning. It implies that many businesses ‘die young’ before they have the chance to grow.”

Conversely, while their survival rate is high, their international competitiveness is weak.

This paradox has become more apparent in recent years, particularly in 2023 and 2024.

However, there is another angle to consider in the growth of Vietnamese businesses. The question remains: why, with such remarkable resilience, do most Vietnamese enterprises remain small, weak, and slow to grow, despite being a critical component of the country’s internal strength, as identified by the Party?

Institutional and legal obstacles remain unresolved, with regulations not timely amended or adapted to the realities and development needs. The process of decentralization, streamlining of administrative procedures, and reduction of technical standards and business conditions has been incomplete. Efforts to address challenges for businesses, especially large-scale projects, have been slow.

While there are emerging medium and large enterprises, they have yet to become the driving force of the economy as expected. Investment in leading industries, especially in new areas such as clean energy, chips, semiconductors, and hydrogen, remains low, with no large-scale projects to spur breakthroughs and foster economic restructuring and competitiveness.

These are the challenges and concerns that need to be addressed to fulfill the message conveyed at the recent meeting with entrepreneurs: “Businesses and entrepreneurs are always key players, the main force driving the material production of the economy.”

Tu Giang - Lan Anh