Private sector clarity of regulations a must

Private sector clarity of regulations a must

Despite the government’s efforts to cut and simplify administrative procedures, the private sector – considered the key for Vietnam to achieve outstanding growth – is still struggling with a slew of hurdles.

Experts say improper legal regulations are the biggest hurdle to climb for private enterprises, photo Le Toan

In the last days of March, the government approved a scheme to simplify administrative procedures related to production and business activities over the next two years.

This year, the government wants to immediately reduce and simplify admin procedures related to production and business, ensuring the abolition of at least 30 per cent in three areas: unnecessary business investment conditions, processing times, and the cost of complying with procedures.

In 2026, all unnecessary business conditions or those that are contradictory, overlapping, or unclear will be removed, and all conditions of industries and professions not included in the list of conditional business investment industries and professions of the Law on Investment will be abolished.

The time and the cost of complying with such procedures will be cut in half, while all procedures related to technical regulations and mandatory standards must be published, reduced, and simplified. Additionally, all enterprise reports are to be implemented online.

Administration procedures are still a barrier for many businesses, especially the private sector, as well as hindering the growth of the entire economy.

At a recent workshop on driving forces for sustainable high economic growth, organised by the Vietnam Economic Institute, its former president Tran Dinh Thien said that the country is facing the risk of a high middle-income trap and the key belongs to the development of the private sector.

“Although state-owned enterprises still play a leading role in the economy, the development of private-owned enterprises is necessary for Vietnam to achieve the goal of becoming a highly developed country by 2045,” he added.

Thien pointed out that one of the prominent issues is the decline in growth momentum in recent years. The private sector now accounts for half of the total economy, but there are still many difficulties to overcome.

The number of dissolved enterprises is increasing, especially in the retail sector, where the number soared by 28.4 per cent on year, while the number of newly established enterprises increased by only 2.6 per cent, due to the impact of e-commerce platforms. This indicates that the private sector is suffering seriously and needs strong and drastic changes.

Thien said that one of the main reasons that the market-oriented economy and the private sector do not get much support. “Although the role of the private sector has been acknowledged, policies and admin procedures for this sector are still not favourable,” Thien said.

Dau Anh Tuan, deputy general secretary of the Vietnam Chamber of Commerce and Industry (VCCI), said that there are about 940,000 enterprises and five million individual business households. They contribute just over half of GDP, create 40 million jobs, account for over 80 per cent of the country’s workforce, and contribute 30 per cent of budget revenue and 60 per cent of social investment capital.

“Despite their important role, private enterprises are not forceful on a large scale, with low productivity, a lack of linkages, and numerous difficulties in accessing capital, land and personnel,” he said. “These challenges affect the ability to expand and reduce the competitiveness of the private economic sector amid increasingly deep integration.”

In the view of Nguyen Dinh Cung, former president of the Central Institute for Economic Management Research, the biggest bottleneck for the private sector is caused by improper legal regulations.

“The business legal system is unclear, vague, unreasonable, non-transparent, and overlapping. This causes high compliance costs, in terms of time and money, and especially opportunity costs,” he said.

Thien from the Vietnam Economic Institute said, “To enable the private sector to play a key role in driving growth and development, strong reforms are necessary to remove administrative constraints and build a truly healthy and competitive business environment,” he said.

To remove barriers for the private sector, Tuan from the VCCI proposed some solutions.

“It is necessary to simplify admin procedures, making laws transparent and overcoming overlaps in current regulations. Over 260 documents are revealed to be overlapping, and are being reviewed and adjusted.”

Tuan emphasised the need for separate laws for business households and small enterprises while encouraging the spirit of business support, providing sandbox policy for new business models. He also proposed to create new advantages for enterprises to access new sources of capital.

VIR