A marginalized class of entrepreneurs

Economist Hai Loc can finally smile. At last, the household business sector has been included in Resolution 68, which he hopes will foster its growth.

“After nearly 40 years of doi moi (Renovation), a Party resolution has finally reaffirmed the role of household businesses. This is a significant step forward,” he said.

Household businesses, the small-scale economic entities not covered by any law, have been mentioned 10 times in Resolution 68, marking a significant distinction of this resolution.

Resolution 68 emphasizes the need to provide substantial and effective support to small, micro-enterprises, and household businesses. Notable measures to do this include improving the legal framework, providing free digital platforms, shared accounting software, legal consulting services, and training on business management.

Additionally, it is necessary to promote access to and use of financial products for small and micro-enterprises and household businesses, prioritizing young entrepreneurs, women, vulnerable groups, ethnic minorities, and those in mountainous, border, and island areas.

The household business sector has long been overlooked, rarely benefiting from state incentives.

According to economist Le Duy Binh from Economica, Vietnam currently has about 5 million household businesses, of which only 1.7 million are registered with tax codes, while the remaining 3.3 million are unregistered.

The sector generates nearly 8.5 million jobs, or 37 percent of total employees in the enterprise sector, higher than non-state enterprises (37 percent), foreign invested enterprises (22 percent), and far surpassing state-owned enterprises (4.3 percent).

Roughly one in every 20 Vietnamese starts a business and earns a living through household businesses. “This shows how prevalent the household business model is among Vietnamese people. They serve as the final safety net for the population,” Binh said.

According to the 2020 Statistical Yearbook, the individual economy made up nearly 30 percent of GDP annually from 2015 to 2020.

However, this reality also reveals another facet: Vietnam’s economy remains fragmented, small-scale, and fragile. Millions of street vendors, noodle shop owners, small grocers, and farmers raising fish or growing vegetables remain the backbone of the national economy.

Historical gray area

While Resolution 68 marks a new milestone in development thinking, particularly in establishing the private economy as the most important driving force, it also acknowledges a reality: the private economy still faces numerous barriers hindering its growth, scale, and competitiveness, falling short of expectations as the core force of the national economy.

What is the gray area between this reality and the vision outlined?

The answer must be grounded in scientific data.

Also according to the 2020 Statistical Yearbook, the private economic sector or formally registered private enterprises contributed only 8.64 percent, 9.10 percent, 9.68 percent, and 9.65 percent to GDP in 2017, 2018, 2019, and 2020, respectively.

These figures coincide with a 2023 report by the Ministry of Planning and Investment reviewing the implementation of the 2017 Resolution 10 and reports from the Central Economic Commission, now the Central Policy and Strategy Commission.

The private enterprise sector made up less than 10 percent of GDP for many years, demonstrating that it has not grown significantly after nearly 40 years of Renovation.

From the 2021 Statistical Yearbook, the private economy disappeared from statistics. Instead, it was merged with household businesses (agriculture and non-agriculture) and the collective economy into a new category, called ‘non-state economy’.

For instance, according to the 2023 Statistical Yearbook (the latest updated yearbook), the non-state economy contributed approximately 50 percent of GDP, 56 percent of total investment of the society, and over 82 percent of employment.

Due to this aggregation, the exact contribution of private enterprises to GDP remains unclear.

Nguyen Dinh Cung, former Director of the Central Institute for Economic Management, a respected economist, also said: “Statistics about this sector are still unclear, still referred to as the non-state economy. They have not been properly identified as the private economy in statistics.”

“This indicates a lack of unified thinking when talking about the private economic sector.”

Vu Thanh Tu Anh, PhD, who has a series of features about the private economic sector based on statistics, said: “I believe no one knows the exact contribution of the private sector to Vietnam’s GDP.”

Under Resolution 68, the private economy currently comprises over 940,000 enterprises and more than 5 million household businesses, contributing about 50 percent of GDP, making up over 30 percent of state budget revenue, and employing around 82 percent of the workforce.

Tu Giang - Lan Anh