Formula for success of Vietnam’s private sector

To build a domestic business force that is both large and strong – one that can take the lead as in other successful countries – Vietnam must tackle what can be seen as a 'three-part formula': the fear of entrepreneurs, the fear of civil servants, and finding a reasonable balance between performance and reward.

To turn society's resources into real wealth, there must be an entrepreneurial spirit – not only among businesspeople but also within the public sector. What we often refer to as the 'daring to think, daring to act' mindset is what makes a place one of the best in the world for doing business.

Business climate and streamlined administrative procedures are frequently mentioned as important factors. However, what is often overlooked, yet extremely important, is the 'handshake' between powerful public officials and entrepreneurs.

Today, the U.S. has institutionalized the contributions of businesses to political campaigns and programs. But at its core, this is not so different from the 'kickbacks' seen during the Gilded Age, an era of corruption from the late 19th to early 20th centuries.

In this dynamic, wealth was created through the cooperation between entrepreneurs and public officials, and it was divided into three parts: one for the entrepreneur, one for the officials, and one for society as a whole.

It's worth noting that the United States achieved a real GDP growth rate of 4.59 percent per year between 1870 and 1899, among the highest in the world at the time and a period considered one of the country's economic miracles.

Such cooperation between entrepreneurs and public officials is inevitable in all societies.

During South Korea's rise, President Park Chung Hee was an exception, as he was rarely associated with corruption. However, nearly all other South Korean presidents have faced scandals, and some – most notably Park's own daughter – have even been prosecuted while in office.

Still, South Korea's success lies in the coordination between business leaders and government officials to produce internationally competitive products.

China's success story is no different. Its formula also involves collaboration between businesspeople and officials to generate wealth and divide it into three parts. However, corruption in China reached an extreme level, prompting the launch of sweeping anti-corruption campaigns. These efforts have significantly impacted the entrepreneurial spirit among public servants.

In recent years, the crackdown on private enterprises in China has had serious consequences, both for the private sector specifically and for the economy overall.

While public-private cooperation is inevitable, it becomes damaging to a nation's future when such collaboration is driven purely by self-interest and exploitation, leaving little – if anything – for society.

This results in a weak, uncompetitive economy, where businesses struggle to expand globally. Many countries fall into this trap and fail to develop.

Back in Vietnam, collaboration between entrepreneurs and officials has played a key role in the country's nearly four decades of miraculous growth since the Doi Moi (Renovation) reforms.

But in today's context, what is needed is a bold vision, a willingness to reach outward, to compete internationally, and the capability to turn that vision into reality.

International competition is critical because it demands the efficient use of resources and helps minimize the negative consequences of public-private cooperation.

To achieve this, the first step is to reduce the fear felt by both entrepreneurs and public officials – so they dare to think big and take action. The next step is to ensure strong social oversight mechanisms to prevent abuse within these partnerships.

Both formal and informal institutions must create a framework that encourages this kind of collaboration. Only then can society recognize, either clearly or intuitively, whether cooperation between officials and entrepreneurs is truly for the common good or merely serves cronyism and vested interests.

Minimizing corruption and becoming a developed country is Vietnam's ultimate goal. But it will be difficult to succeed if the public sector is expected to work wholeheartedly for the collective good without any regard for individual interest, especially at the current stage of development.

Therefore, what Vietnam needs is a balanced approach to the said 'three-part formula.'

* The Vietnamese version of this article was authored by Dr. Huynh The Du, a faculty member at the Fulbright School of Public Policy and Management, Fulbright University Vietnam. His teaching and research focus on urban economics, infrastructure development, and banking and finance.