MINISTRY OF EDUCATION AND TRAINING
NATIONAL ECONOMICS UNIVERSITY
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REPORT
LECTURE: MACROECONOMICS
TOPIC: DESCRIBE THE SITUATION OF NON-STATE ENTERPRISES IN
VIETNAM SINCE 2010
Group 9 - Class: DSEB 65B
Lecturer: Dr. Nguyen Viet Hung
Full name Student’s ID
1 Nguyễn Mạnh Cường 11230521
2 Phạm Khánh Dương 11230525
3 Đặng Ngọc Hòa 11230537
4 Dương Thị Huyền Trang 11230593
Hanoi, 2024
INDEX
INTRODUCTION ............................................................................................................... 1
BODY .................................................................................................................................. 2
I. Overview of Non-State Enterprises ........................................................................... 2
II. Development process of Non-State enterprises since 2010 ................................... 2
1. The number of operating enterprises having business results ............................... 2
2. Labor force ............................................................................................................. 3
3. Investment capital .................................................................................................. 5
4. Revenue .................................................................................................................. 6
5. Profit margin .......................................................................................................... 7
III. Challenges, Causes and Solutions for Non-State Enterprises in Viet Nam ........... 8
1. Limitations of Non-State Enterprises..................................................................... 8
2. Causes and Challenges ........................................................................................... 9
CONCLUSION ................................................................................................................. 13
REFERENCES .................................................................................................................. 14
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INTRODUCTION
In 1986, the "Doi Moi" (Renovation) policy was introduced at the 6th National Congress
of the Communist Party of Vietnam. With this policy, the private economic sector was
officially recognized as an integral component of the socialist-oriented market economy.
Since the 6th Congress, perspectives on private economic development have been
continuously supplemented and refined. As a result, the private sector has grown steadily,
becoming one of the main drivers of rapid economic growth. The non-state enterprises,
which constitute a significant portion of the private sector, have experienced remarkable
development in terms of quantity and diversity of business sectors. They have created
numerous job opportunities, attracted substantial social capital, contributed to increased
state budget revenue, and played a major role in stabilizing and promoting economic
growth. Since 2010, the non-state enterprise sector has witnessed continuous development
and expansion in its activities. However, this sector also faces many challenges in the
socialist-oriented market economy of Vietnam today. This report aims to provide an
overview of the development of the non-state enterprise sector from 2010 to the present,
analyze its role and existing challenges, and propose several solutions to promote the
sustainable development of this sector in the coming period.
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BODY
I. Overview of Non-State Enterprises
Position: Non-state enterprises in Vietnam play an important role in the economy,
accounting for a large proportion of the number of enterprises and the workforce (Cường,
2014).
Definition: Non-state enterprises are domestically funded enterprises owned privately by
an individual or a group of individuals or owned by the state but with no more than 50%
of charter capital (GSO G. S., 2024).
Components: The non-state enterprise sector includes: Private enterprises; Partnerships;
Private limited liability companies; Companies with up to 50% state-owned capital; Joint-
stock companies without state capital; Joint-stock companies with up to 50% state-owned
capital.
II. Development process of Non-State enterprises since 2010
1. The number of operating enterprises having business results
Considered across all enterprises nationwide
Source: GSO (2010 – 2022)
From the chart above, it is evident that the number of non-state enterprises in Vietnam has
increased significantly from 2010 to 2022, specifically rising from 268,831 enterprises to
710,664 enterprises, marking an approximate increase of 164.3% over this period. From
2016 to 2019, the number of non-state enterprises grew steadily year on year, but in 2020,
the growth rate slowed slightly compared to previous trends.
Specifically, from 2010 to 2015, the number of non-state enterprises increased by 59.1%;
from 2015 to 2020, the number continued to rise by an additional 54.3%. However, from
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2020 to 2022, the growth rate was reduced to approximately 7.7%. The main reason for
this slowdown was the challenges caused by the COVID-19 pandemic, which particularly
impacted small and medium-sized enterprises. Social distancing measures and travel
restrictions reduced the ability of many businesses to sustain and expand. Nevertheless, the
recovery in 2021 and 2022 shows that non-state enterprises still have the potential to
recover as economic conditions improve, reflecting the increasingly important role of the
private sector in Vietnam's economy.
Consider business types within Non-State enterprises sector
Source: GSO (2010 – 2022) ()
From the data of 2011 and 2022, we can clearly observe the shift in the structure of non-
state enterprises, reflecting market trends and demands. The proportion of limited liability
companies increased from 61.8% to 76.3%, due to the advantages of protecting personal
assets and the ability to raise capital flexibly, making this model suitable for small and
medium-sized enterprises. Meanwhile, joint-stock companies without state capital slightly
decreased from 21.8% to 19.4%, indicating that while still suitable for large enterprises,
this model has gradually become saturated. The proportion of private enterprises dropped
sharply from 15.7% to 3.9%, possibly due to limitations in personal asset protection and
difficulties in raising capital. The proportion of joint-stock companies with state capital fell
from 0.6% to 0.12%, reflecting the process of equitization. The proportion of partnerships
increased from 0.1% to 0.28%, but still remains small due to the unlimited liability of the
members.
Overall, this trend also reflects the development of the economy and the demand for
expanding business production scales. The maintenance of low proportions of joint-stock
companies with state capital and partnerships also indicates that non-state enterprises
primarily prioritize fully private models, in line with the trend of market integration and
development.
2. Labor force
3
Source: GSO (2010 – 2022)
From 2010 to 2019, the number of workers in non-state enterprises in Vietnam increased
from 5.983 million to 9.075 million, reflecting the expansion of this sector thanks to
policies supporting private sector development. However, due to the impact of the COVID-
19 pandemic, the number of workers fell to 8.607 million in 2020 and 8.604 million in
2021, as many businesses had to suspend operations or downsize their workforce. By 2022,
the labor force recovered slightly to 9.081 million, accounting for 59.2% of the total
workforce in the entire enterprise sector. With appropriate support policies, this sector has
the potential to continue growing and create more jobs.
Source: GSO (2010 – 2022)
From 2010 to 2022, non-state enterprises played a significant role in job creation in
Vietnam, with the workforce increasing from 5.983 million to 9.081 million. This growth
reflects the strong potential of the private sector and limited liability companies in the
economy. Despite the impact of the COVID-19 pandemic, non-state enterprises recovered
quickly in 2022, reaffirming their indispensable role in economic development (VNA,
2022).
Compared to the state-owned enterprise sector, the workforce in non-state enterprises is
significantly higher. Meanwhile, the workforce in state-owned enterprises has gradually
declined, from 1.602 million in 2010 to 978,000 in 2021, reflecting a shift towards
restructuring and equitization to improve efficiency. Foreign-invested enterprises (FDI)
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have also attracted a large workforce, growing from 2.1 million in 2010 to 5.2 million in
2022. The FDI sector was less affected by the pandemic thanks to strong financial capacity
and modern technology, allowing it to continue expanding.
Overall, the growth of non-state and foreign-invested enterprises (FDI) indicates that
Vietnam's economy is increasingly reliant on the private sector and foreign investment,
while state-owned enterprises focus on improving operational efficiency.
3. Investment capital
Source: GSO (2010 – 2022)
The bar chart above shows that both domestic and foreign investment in the non-state
enterprise sector has maintained significant growth over the years. This reflects the
continuous expansion and development of the non-state sector, driven by Vietnam’s
government policies aimed at reform and private sector encouragement. The total capital
utilized for production and business in the non-state enterprise sector as of December 31,
2022, reached VND 33.3 trillion, achieving steady growth from 2015 to 2022 with an
average rate of 17.12%, six times higher than in 2010 (VND 5.45 trillion).
Distribution of investment capital in different sectors during the period 2010-2022
Source: GSO (2010 – 2022)
The capital structure has shifted towards an increasing share of capital from non-state and
FDI enterprises, with a declining share from state-owned enterprises. The production
capital ratio of the non-state sector rose from 50.3% in 2010 to 59.7% in 2022, although
this process was uneven, with periods of decline, particularly in 2015.
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Non-state enterprises make up 96% of all enterprises, yet their capital share accounts for
only about 59%, as this sector consists primarily of small and micro enterprises with limited
access to bank loans or substantial investments from other sources.
4. Revenue
Revenue Growth Rate of Non-state Enterprises (2010-2022)
25.00% 20.90% 20.20% 17.60%
20.00%
15.00% 12.80%
14.12% 14.30%
10.00%
11.40%
5.00%
0.00% 4.30%
2010-2015 2016 2017 2018 2019 2020 2021 2022
Source: GSO (2010 – 2022)
The chart above shows significant fluctuations in the revenue growth of non-state
enterprises from 2010 to 2022. The period from 2010 to 2015 saw an average growth rate
of 14.12%, reflecting the significant development of this sector as Vietnam's economy
gradually opened up and attracted domestic investment. However, after this period, the
growth rate showed a downward trend, dropping from 20.9% in 2016 to only 4.3% in 2020,
possibly due to the impact of the COVID-19 pandemic disrupting business operations. By
2022, growth had rebounded to 17.6%, supported by post-pandemic economic measures
and the rapid adaptation of businesses. These changes in growth rates reflect the impact of
macroeconomic factors and the resilience of the private sector during the recovery process
after the crisis.
Source: GSO (2010 – 2022)
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The chart shows that the non-state enterprise sector plays a crucial role in Vietnam’s
economy, with revenue far surpassing the other two types of enterprises. Specifically, from
2010 to 2022, the average revenue of non-state enterprises reached VND 12,508 trillion,
3.5 times higher than state-owned enterprises with an average revenue of VND 3,256
trillion, and nearly 1.5 times higher than foreign-invested enterprises with an average
revenue of VND 7,200 trillion.
This outstanding performance is attributed to the high flexibility of non-state enterprises,
their ability to adapt to market changes, and the government’s supportive policies toward
the private sector.
Overall, the steady increase over the years demonstrates the stable development of non-
state enterprises in Vietnam from 2010 to 2022. This growth is evidence of the strength and
advancement of the private sector in generating economic value, contributing to GDP
growth, and addressing employment issues.
5. Profit margin
Non-state enterprises have had low and slightly fluctuating profit margins during the period
from 2015 to 2022, with a minor upward trend since 2020. This indicates some progress,
but it is still insufficient to achieve high profitability comparable to other types of
enterprises. Data for the period 2015-2022 is presented in the table below.
Source: GSO (2010 – 2022)
From 2010 to 2015, the profit margin of non-state enterprises declined sharply, from 2.71%
in 2010 to 1.84% in 2015. This decrease could be attributed to various factors, such as
increasing competition, rising production costs, or the impact of the global economic crisis.
In the period from 2015 to 2017, the profit margin of non-state enterprises rose from 1.84%
to 2.48%, with a growth of 0.64 percentage points. This reflects recovery and stable
development due to reform policies and a more favorable business environment. Although
still modest compared to state-owned enterprises and foreign-invested enterprises, this
increase demonstrates the potential of the private sector in Vietnam’s improving business
environment.
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During the 2017-2019 period, the profit margin showed a downward trend, indicating that
non-state enterprises faced some challenges in their business operations. In the period from
2019 to 2020, the profit margin on revenue for non-state enterprises continued to decline
compared to 2018. Due to the impact of the Covid-19 pandemic, non-state enterprises faced
many difficulties and challenges, with many businesses temporarily suspending operations,
withdrawing from the industry, or even dissolving
The 2021-2022 period saw Vietnam’s economy recover, largely overcoming the negative
impacts of the Covid-19 pandemic and regaining its pre-pandemic growth momentum.
However, the pre-tax profit of private sector enterprises remained relatively low compared
to the overall pre-tax profit of Vietnamese enterprises. The low profit margin of the private
sector poses disadvantages for enhancing competitiveness and achieving long-term
development for these enterprises.
III. Challenges, Causes and Solutions for Non-State Enterprises in Viet Nam
1. Limitations of Non-State Enterprises
The limitations of non-state enterprises are evident through the following statistics as of
December 31, 2022. Here, we consider enterprises that are actively operating with business
results.
The average profitability rate of non-state enterprises in 2021-2022 was 44.3%,
significantly lower than that of state-owned enterprises (82.9%) and foreign direct
investment (FDI) enterprises (52.6% or 51.7%). This indicates that non-state enterprises
face more challenges in generating sustainable profits compared to enterprises that have
state support or foreign investment.
The pre-tax profit-to-capital ratio of non-state enterprises in 2022 was 1.5%, lower than
state-owned enterprises at 2.8% and significantly lower than FDI
enterprises at 5.2%
Monthly average income per worker:
State-owned enterprises had the highest monthly average income
per worker at 16.9 million VND, an increase of 7.0% (of which,
100% state – owned enterprises reached 17.7 million VND, an
increase of 11.7%); non-state enterprises reached 10.2 million
VND, an increase of 12.9%; and FDI enterprises reached 12.6
million VND. An increase of 12.6%. The lower wage-paying capacity of non-state
enterprises affects their ability to attract and retain high-quality labor.
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In 2022, the labor efficiency of non-state enterprises was 19.27 times lower than state-
owned enterprises at 21.09 times. The asset turnover ratio was highest in the FDI sector at
0.97 times; non-state enterprises had a ratio of 0.62 times. The average fixed asset per
worker in non-state enterprises was 387 million VND, lower than FDI enterprises at 501
million VND and state-owned enterprises at 1,145 million VND. Non-state enterprises use
labor less efficiently compared to state-owned or foreign-invested enterprises.
Return on assets (ROA):
FDI enterprises had the highest asset efficiency, with an ROA of
4.9%, down 5.6% from 2021; state-owned enterprises had an ROA
of 3.0%, up 24.1%; and non-state enterprises achieved an ROA of
1.7%, up 2.5%.
Return on equity (ROE):
In 2022, state-owned enterprises had the highest ROE at 14.3%;
FDI enterprises achieved 12.5%, while non-state enterprises had
the lowest ROE at 5.1%.
Return on sales (ROS):
In 2022, state-owned enterprises had the highest ROS at 8.1%; non-state enterprises
achieved 2.7%, and FDI enterprises reached 5.1%.
Non-state enterprises are less profitable, which leads to difficulties in optimizing the use
of existing resources and assets.
Summary of the survey on non-state enterprises’ performance in 2022 (GSO G. S., 2024):
The non-state enterprise sector hosts the largest number of enterprises (96.6%), accounting
for 59.2% of the total labor force, and 59.7% of capital but generates only 57.5% of net
revenue and 38.0% of pre-tax profit. The average scale per labor and capital is the lowest
among the three sectors. Non-state enterprises show low performance with the lowest
percentage of profitable businesses and the highest rate of unprofitable businesses. Key
indicators reflecting business efficiency, such as ROE, ROA, and ROS, are also the lowest
in this sector.
2. Causes and Challenges
The limitations of state-owned enterprises arise from several factors, outlined below:
enterprise scale, high production costs, infrastructure quality, law enforcement, and a lack
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of support mechanisms. These also represent challenges that non-state enterprises must
confront.
2.1. Enterprise Scale
For a long time, non-state enterprises have been treated unequally, starting from a
very low position (Thu, 2022). The majority are small and micro-sized businesses. Most
enterprises in Vietnam are still micro, small, or medium-sized (accounting for 97.4%), with
this sector's share steadily increasing from 2016 to 2021. These businesses are primarily
non-state enterprises; although numerous, their business operations lack stability,
sustainability, and high efficiency (GSO G. S., 2023).
Their competitiveness is weak due to their small size, lack of influence,
vulnerability, lack of planning, and outdated technology. The workforce is low-skilled,
often untrained, with limited salaries and benefits, which make it challenging to attract
talent. Productivity and competitiveness are low. Most non-state enterprises develop
household businesses, so their management capabilities do not meet requirements, relying
mainly on experience and limited knowledge of laws and business practices.
2.2. Difficulties in Accessing Capital
Accessing loans is often challenging, as these enterprises typically operate in low-
capital fields with limited technology and minimal investment in science, leading to low
added value. According to a VCCI survey, in 2022, about 55.6% of businesses indicated
that capital access was their biggest challenge. This rate has steadily increased, from 34.8%
in 2019 to 40.7% in 2020 and 46.9% in 2021 (VCCI, 2022).
2.3. High Production Costs
Businesses report that the cost of production in Vietnam remains high, including
labor costs, non-tax financial obligations to the government, capital costs, and logistics
expenses. These high costs reduce the competitiveness of Vietnamese enterprises compared
to those in other countries (Tuan, 2023).
Risk of Losing Orders: The high-cost barrier puts Vietnam at risk of losing orders
to other countries, leading to a situation where businesses do not invest in new initiatives
and must reduce labor.
2.4. Infrastructure Quality
Infrastructure that does not meet demands: Although infrastructure quality is
improving, it still lags the economic development needs. A typical example is the severe
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electricity shortage in Northern Vietnam in May and June 2023, which caused considerable
damage to business operations.
2.5. Law Enforcement
Regulatory quality: The PCI survey shows that stability and predictability of legal
regulations in Vietnam are relatively low (Tuan, 2023). This directly affects business
operations and the attractiveness of the investment environment.
2.6. Lack of Support Mechanisms
Domestic manufacturing enterprises have yet to develop strongly and lack effective
support mechanisms (Tuan, 2023). Compared to foreign enterprises, Vietnamese
businesses—especially in the non-state sector—are at a disadvantage due to significantly
higher capital costs and a lack of effective financial support to access funds from
international financial institutions.
These findings indicate that although Vietnam’s non-state enterprises have made certain
strides, they must address these challenges to enhance competitiveness and ensure
sustainable development in the future.
3. Solutions to Promote the Development of Non-State Enterprises
Firstly, there needs to be a shift in societal perceptions toward the private sector,
including non-state enterprises. Non-state enterprises have substantial untapped potential
and resources, yet their activities do not fully reflect their capacities, nor are they given the
recognition that aligns with their contributions. The government should enhance the
socialist-oriented market economy framework, refining mechanisms, policies, and legal
systems to ensure a solid legal foundation for the private sector.
Ensuring fairness and eliminating any bias or prejudice against the private sector is
essential, as its position should be elevated to be recognized as a key driver of the economy.
Continued improvements to institutions are needed to fully implement policies that
leverage the private sector's potential, uphold the right to business freedom under the law,
and protect the lawful ownership rights of citizens.
Policies should be introduced to support non-state enterprises by addressing
challenges in land use, production, capital access, tax reduction, subsidies, investment,
human resource training, business establishment support, administrative simplification,
and technological and market development.
In addition, preferential conditions in terms of capital, land, and taxes should be
provided to enterprises investing in new technologies and modern machinery to capitalize
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on local strengths in agricultural processing, high-tech agriculture, and supporting
industries. Innovation and technological upgrades should be encouraged to enhance
product competitiveness.
The development of strong private economic groups should also be promoted,
maximizing resources for socio-economic growth.
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CONCLUSION
Through the process of analysis and evaluation, non-state enterprises in Vietnam
have experienced significant growth since 2010. With an increase in numbers, non-state
enterprises in Vietnam have made a positive contribution to the economy, creating jobs,
and promoting socio-economic growth. However, these enterprises still face major
challenges, ranging from operational efficiency issues to limitations in competitiveness and
access to important resources such as capital, technology, and human resources.
Data shows that non-state enterprises have a lower proportion of profitable
businesses compared to state-owned and foreign invested (FDI) enterprises. Additionally,
the pre-tax profit margins of non-state enterprises are also lower than those of state-owned
and FDI enterprises, reflecting difficulties in resource optimization and maintaining
profitability. This can be partly attributed to their small scale, outdated infrastructure, and
high production costs, which reduce their competitiveness compared to international
counterparts. Challenges in accessing capital, a shortage of skilled labor, and instability in
regulatory policies are also significant barriers for non-state enterprises.
To overcome these challenges, solutions should focus on improving the legal
environment, promoting fairness in business, and providing practical support in finance,
taxation, and infrastructure for non-state enterprises. There needs to be alignment between
government policies and the efforts of enterprises to develop technology, enhance
management capacity, and improve the quality of human resources. Additionally, raising
societal awareness of the private sector's role is considered an important part of creating a
sustainable business ecosystem, maximizing the potential of non-state enterprises.
In summary, non-state enterprises play a crucial role in driving comprehensive
economic growth in Vietnam. For sustainable development, it is essential to have
collaboration among stakeholders, especially government support and long-term
development-oriented policies.
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