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Ninety percent of all firms are household businesses, most with three or fewer employees. Most of these firms are too small, too undercapitalized and too concentrated in traditional sectors.

Economists Point Out the Reasons Vietnam Companies Cannot Grow Big
The World Bank in Vietnam recently launched a new report titled “Vibrant Vietnam: Forging the Foundation of a High-Income Economy” which provides analyses and policy recommendations on how Vietnam can maintain quality growth in the next decade. 
The report suggests that a productivity-driven development model–combining innovation with balanced development and allocation of private, public, human and natural capital–will be key for Vietnam to achieve its goal of becoming a high-income economy by 2045.
Vietnam’s business sector is populated by firms that are young, dynamic and diverse. As anyone visiting Vietnam can confirm, the country has a buzzling business sector with small shops, workshops and farms seemingly everywhere.
Every month about 10,000 new non-farm businesses register in Vietnam. Ninety percent of all firms are household businesses, most with three or fewer employees. Most of these firms are too small, too undercapitalized and too concentrated in traditional sectors. 
They rarely grow to a size where they can benefit from scale economies and easier access to finance and technology. At the other end of the firm size distribution, state-owned enterprises (SOEs) and a few large domestic firms dominate their markets. 
SOEs control some strategic and utility sectors but are also active in markets that are typically served by more productive private firms such as banking, agriculture or telecoms. The final segment of Vietnam’s firm landscape consists of foreign-owned or FDI firms. They largely produce for export and tend to be far more productive than domestic firms of all types.
Government policies can help make the entire business sector more productive by removing obstacles to competition. Small businesses can absorb a lot of labor and provide opportunity to many. But a modern economy needs a more balanced universe of firms and stronger linkages across them. Many of the small firms should grow to mid-size covering regional and even national markets. 
And some firms across different sectors should be able to grow to larger size and compete nationally as well as internationally. For that to happen, they need to compete nationally as well as internationally and more resources must flow to the more productive and successful firms. Currently this is not happening to the extent necessary. International experience has shown that a lack of dynamism in the business sector is more often due to distortionary regulations and the overall business climate than because of limited technology or information access.

DIEP NGUYEN