Minister and Head of the Government Office Mai Tien Dung

The private economic sector in Vietnam employs about 85% of the labor force and contributes 40% of the GDP.

VNR500, the annual list of Vietnam’s 500 largest enterprises, shows private enterprises posting a growth rate far higher than state and foreign direct investment businesses.

Recently, the private sector has boasted a number of big names, including Vingroup, Novaland, Vinamilk, TH Truemilk, and Hoa Phat. But only about 1.2% of private companies participate in key sectors of the economy.

The private economic sector is becoming increasingly important in maintaining national economic growth, especially with the state economic sector undergoing radical restructuring and equitization.

Minister and Head of the Government Office Mai Tien Dung said the Party Central Committee’s resolution stresses the need to remove all preconceptions and barriers for private enterprises, especially small businesses and startups.

“We have identified businesses as the driving force of the economy and the need to improve the business environment, remove barriers, and support private enterprises in particular. We target to have 1 million businesses by 2020, most of them privately owned. We need a mechanism to help 4.9 million household businesses to become full-fledged enterprises,” Dung said.

Young entrepreneur Hoang Thu Hang told VOV on the sidelines of a recent dialogue between businesses and the Prime Minister that even large enterprises face difficulties in administrative procedures, revenue, production costs, personnel, and loan access.

She added: “Most startups’ use their own money to do business, so the capital is not much. I hope the government and sectors will provide financial support for startup companies to help them reform and upgrade their technology so they can grow.”

Small businesses with limited resources, limited knowledge of markets and marketing, and unprofessional working methods often find it difficult to find and work with partners.

To deal with these issues, the government is implementing a program to help startups and other small businesses take advantage of sectoral links.

Deputy Minister of Planning and Investment Dang Huy Dong (Photo: baodautu.vn)

Deputy Minister of Planning and Investment Dang Huy Dong said: “First of all, Vietnamese enterprises should use sectoral links and value chains to improve their quality and price competitiveness. Second, businesses should join associations or cooperatives and cooperative alliances which have the legal status to help them compete properly in the domestic and international markets. By so doing, they can sell their products widely.”

In addition to speeding up administrative reforms, the government is taking steps to remove capital barriers. It has asked commercial banks to reduce their loan interest rates for small and medium-sized enterprises.

Deputy Governor of the State Bank of Vietnam Dao Minh Tu said: “Reducing the cost to enable to access capital resources can be done in various ways. But one important way is to cut lending rates to help SMEs save costs.”

More than 110,000 new enterprises were established last year, with a total registered capital of nearly 40 billion USD. In the first five months of this year, 40,000 new businesses were set up. It is estimated that by 2020 there will be 1.4 million businesses. With the Government's efforts to improve the business environment, reform administrative procedures, and create the most favorable conditions for enterprises, Vietnam’s target of 1 million efficient enterprises by 2020 is feasible.