Steady start and major breakthrough for Vietnam's private economy

That assessment was made by Senior Professor Tao Yitao, former Deputy Secretary of the Party Committee of Shenzhen University and Director of the China Center for Special Economic Zone Research, in a recent media interview on Vietnam's achievements after one year of carrying out Resolution No. 68 on private economic sector development.

Professor Tao said the first achievement was institutional reform and the rebuilding of confidence. The resolution supports private enterprises through state-backed credit, elevating them from recipients of “policy preferences” to agents of “endogenous growth”.

She explained, “‘Confidence is more important than gold.’ Gold is existing capital, while confidence is growth capital. Having gold does not necessarily mean having confidence, but confidence can turn lead into gold. This change in top-level design has significantly strengthened the confidence of domestic and foreign investors in the stability of Vietnam's economic system.”

She added that market access is being further liberalised and factors of production are moving more freely. The principle that “everything not prohibited is permitted in market access” is beginning to take effect in sectors traditionally characterised by monopoly, including energy and finance. Cracks are appearing in “invisible barriers”, while “competitive neutrality” is gradually becoming the norm. A trend of capital, technology and talent flowing into the private sector is emerging.

At the same time, the business environment has improved. The simplification of administrative procedures has reduced start-up costs for private enterprises, while the digital economy and cross-border e-commerce have shown clear innovative momentum. In addition, mechanisms for protecting property rights continue to be strengthened. Administrative review procedures and the application of legal measures in resolving enterprise-related property-rights disputes have become more effective, helping reinforce business confidence.

Finally, the financial environment has greatly improved. Policy banks have shifted lending towards small and micro enterprises, while the expansion of the Growth Enterprise Market (GEM) and private capital markets has helped ease capital shortages resulting from an ownership-priority model.

One year of implementing Resolution 68 could be described as an effort to “exchange time for space” within the system. The deeper significance lies in demonstrating that all economic reforms ultimately come down to political reform. If power does not operate under the rule of law and resources are not opened to the market, the effectiveness of the resolution will ultimately be diminished by shortcomings in implementation, Professor Tao argued.

In her view, Vietnam's next step is not to issue more resolutions but to ensure fewer exceptions, apply the universality of law and grant the private sector equal institutional status from the outset. Accordingly, all economic actors should be treated fairly and given equal opportunities for development from the moment they enter the market.

Looking ahead, the Director of the China Center for Special Economic Zone Research proposed several recommendations to help Vietnam continue implementing the resolution on private sector development effectively.

First, Vietnam should move from “policy support” to “rule-of-law guarantees” in order to strengthen the foundations of property rights. Policies can deliver timely results, while the rule of law provides stability. China's experience shows that only when protections for private enterprises are elevated to the constitutional and legal level can entrepreneurs truly gain a sense of security.

“Stable property leads to a stable mindset.” Real development, she argued, does not lie in “creating space”, but in strengthening property-rights protection through the rule of law and reducing opportunities for rent-seeking through transparency. This would allow private enterprises to move from a positive cycle “based on policy” to a positive cycle “based on institutions”.

Second, building a “clean and close” relationship between the State and businesses is of particular importance. This requires removing institutional barriers in order to create a more transparent and enabling business environment.

She therefore proposed establishing a negative list for market access, eliminating discrimination based on ownership, and opening all sectors outside that list to private enterprises. Implementing a “list of powers” and a “list of responsibilities” would help control administrative power and reduce unnecessary intervention in market and business activities. Only on that basis can stable and highly credible institutional commitments to economic actors be established.

Third, Vietnam should advance supply-side reform in the financial sector and improve capital channels. The essence of discrimination in finance, she said, lies in institutional returns. A financial assessment system focused on creditworthiness rather than ownership should be established, while the development of small and medium-sized banks and inclusive financial institutions should be encouraged. Vietnam should also explore supply-chain finance and credit-lending models, expand direct financing channels for private enterprises, and reduce excessive dependence on indirect bank financing and institution-related transaction costs.

Professor Tao stressed that Vietnam is currently at a critical juncture in its effort to realise a “new era of national rise”. In the long run, the development of the private sector depends not only on supportive policies but also on a stable, transparent institutional environment that guarantees fair competition.

Public power, she emphasized, should operate within the framework of law, while resources are to be allocated primarily through market mechanisms. These are important conditions for improving the effectiveness of the private sector and boosting the development of a socialist-oriented market economy.

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