Most recent data: 2014
In 2014, Vietnam’s economy continued to show signs of recovery. Gross Domestic Product (GDP) increased by 5.98%, representing the highest level of growth since 2011. However, the slow recovery process has affected the confidence of businesses and individuals.
Although the business environment improved in 2014, the nascent entrepreneurship rate (% of adults in the initial phases of starting a business) is only 2%, lower than the 4% seen in 2013 and much lower than the average level of 12.4% for factor-driven economies at the same level of development.
Meanwhile, the rate of adults perceiving good entrepreneurial opportunities decreased – from 44% in 2013 to 39% in 2014. Similarly, the entrepreneurial intention rate – those intending to start a business within 3 years – decreased from 24% in 2013 to 18% in 2014, again much lower than the average level of 40% for the factor-driven economies.
One positive is that the rate of adults assessing themselves as having entrepreneurial capabilities leapt to 58% from 34% in 2013, bringing it more in line with the factor-driven economies average (65%). Fear of failure is still high (50%), although less so than it was in 2013 (57%). Furthermore, business discontinuation in Vietnam decreased from 4.3% in 2013 to 3.55% in 2014.
Thus, entrepreneurship in Vietnam continued to face difficulties; however, there are signs of improvement.
Entrepreneurs in Vietnam, especially successful entrepreneurs, receive high status in society. Indeed, 3 in every 4 Vietnamese adults dream of becoming an entrepreneur.
In Vietnam, entrepreneurs are primarily older, from 25 to 54 years of age, and are more likely to be male than female. They often come from a higher income background, have a university degree, and actively seek out business opportunities. They are often supported by their family in their business activities, which tend to be in the consumer service sector.
Enablers and Constraints
The positive perception and image of entrepreneurs helps to develop business in Vietnam. While Vietnam is still a developing country, Vietnamese women are increasingly valued by society. Family care services promote gender equality and increase business opportunities for women.
Although there is much room for improvement in Vietnam’s physical infrastructure (roads, airports etc.), the situation is better than that found in many other developing countries. Furthermore, communications technology has developed well in recent years. Internal market dynamics create many opportunities for business development; all of these factors create favourable conditions for the development of businesses.
In terms of constraints, Vietnam still has not solved the problem of business education – equipping young people with basic business knowledge and providing early career advice for students, especially at the primary level. In addition, access to capital is problematic.
Initiatives Supporting Entrepreneurship
2014 saw great efforts by the government to improve the business environment.
- The amended New Enterprise Law (2014) has simplified procedures for establishing businesses: entrepreneurs now enjoy a far greater degree of flexibility when registering their companies.
- The amended Investment Law (2014) has loosened regulations on investment; now, only 6 business activities are deemed ‘prohibited’ (down from 51) and 267 ‘with conditions’ (down from 386).
- With Resolution No. 19 / NQ-CP (18th March 2014), the government committed itself to reaching, by the end of 2015, ASEAN-6 averages on a number of measures relating to competitiveness and the business environment. Progress has already been made – the average time taken in tax procedures is down from 537 hours to 247 hours/year.
- Directive 11 / CT-TTg (21st May 2015) is intended to help businesses promote their products. The Vietnam Chamber of Commerce and Industry has been tasked with collecting recommendations from businesses and making monthly reports to the Prime Minister.
Trends Over Time
The results of GEM 2014 show that business activities in Vietnam are still facing difficulties despite the continued recovery of the economy. Government policies to improve the business environment in 2014 will not have an immediate impact; we will see their effects more clearly in the coming years.
Challenges for the Future
After a period of declining growth, Vietnam is implementing a restructuring and renovation of its economic growth model. At the same time, the country is increasingly integrating with the world economy – for example, signing the Trans-Pacific Partnership (TPP) agreement and joining the ASEAN Free Trade Area (AFTA). This creates both opportunities and challenges for Vietnamese businesses. In order to develop, businesses and entrepreneurs need to focus on innovation, enhancing competitiveness and actively participating in global value chains.