For many years, Vietnam has been praised as one of Asia’s most dynamic economies. Yet behind those impressive growth figures stands a “silent force”—over 5 million household businesses. They contribute around 30% of GDP and create jobs for tens of millions—almost equivalent to the formal private sector.
However, most of these household businesses still operate in the “grey zone” of the economy—without legal entity status, with simple financial records, heavy reliance on cash transactions, and limited access to finance, technology, or modern markets.
It is time for Vietnam to view the transition “from household business to enterprise” not merely as an administrative reform, but as a transformation of management capability, financial discipline, and development mindset—a decisive step for building a truly strong private sector.
Household Businesses: The “Potential Cells” Still Constrained
For years, household businesses—ranging from grocery stores, small workshops, and eateries to handicraft and tourism households—have been pillars of local economies. Yet this model has reached its ceiling.
They cannot sign large contracts, issue VAT invoices, access bank loans or investors, and are not protected by commercial law as enterprises are. In other words, despite paying taxes, they remain “classified as small and informal.”
A 2023 survey by the Ministry of Planning and Investment revealed that over 70% of household businesses wanted to expand, but only 8% had plans to transition into formal enterprises. The main reasons: fear of complex procedures, higher taxes, and lack of management knowledge. Most still rely on manual bookkeeping and opaque financial practices—making it difficult to access capital, especially in today’s data-driven digital economy.
Lessons from Practice: Transition Is Possible with the Right Guidance
In Vietnam, there are already inspiring success stories.
In Ben Tre, a small household coconut-processing business transformed into a limited liability company within six months. After obtaining legal status, it secured a 3 billion VND preferential bank loan, invested in automated pressing equipment, and achieved food safety certification. The result: production doubled, contracts were signed with domestic supermarket chains, and exports began to Japan.
Another example comes from Indonesia’s “Warung Formalization Program.” The government partnered with fintech and banks to help millions of informal retailers register as micro-enterprises. Each household was guided through a simple 5-day registration process, granted a tax ID, and exempted from fees in the first year. Post-conversion, they received digital bank accounts, e-invoices, and access to microloans based on sales data.
The outcome: over 10 million household businesses formalized, boosting productivity and revenue. The Indonesian government not only expanded its tax base but also built a robust economic data foundation for policy planning.
These experiences show the issue is not reluctance to formalize, but the need for a simple, low-cost, and well-supported pathway.
The Benefits of “Becoming an Enterprise”
Transitioning to enterprise status brings not just legal benefits, but multiple development gateways:
- Access to finance and support funds: Eligible for bank loans, green credit, and investment opportunities.
- Market expansion: Able to sign large contracts, issue VAT invoices, and participate in bidding.
- Legal protection: Contracts, intellectual property, and commercial rights are safeguarded.
- Improved management: Adoption of accounting systems, technology, and processes for cost optimization and cash flow control.
- Brand building: Eligible for trademark registration, e-commerce participation, and greater consumer trust.
For the government, formalizing millions of household businesses expands the formal economy, increases tax revenue, and enhances national competitiveness.
Barriers to Overcome
Despite clear benefits, the transition faces several obstacles. First, registration procedures remain intimidating for many households. Second, there is fear of taxes—concerns about complex VAT or corporate tax filings compared to the current fixed-tax model. Third, many lack accounting, finance, and legal literacy, making the change seem daunting.
Hence, a comprehensive support mechanism—covering training, consulting, finance, and legal aspects—is essential. And this is where VAPEDCO can play a leading role as facilitator and catalyst.
VAPEDCO – The “Launchpad” for Household Businesses Becoming Enterprises
As a center for private sector support and development, VAPEDCO can initiate the “Starter Kit: From Household to Enterprise in 90 Days” program, comprising three key components:
- Comprehensive Legal Support:
Provide free or low-cost consulting and registration for eligible households, covering tax ID, digital seal, business account, and compliance reporting guidance.
Goal: “3 steps – 3 days” to complete legal documentation. - Training in Management – Accounting – Taxation:
Conduct a two-week “New Entrepreneur” training to teach bookkeeping, cash flow management, expense tracking, tax reporting, and basic accounting software. Participants receive a “Digital Financial Handbook” to manage revenue, costs, and profit transparently. - Financial and Market Linkages:
Partner with banks, local funds, and e-commerce platforms to offer startup credit packages (200–500 million VND) for new enterprises, along with brand development guidance, QR payment setup, and online sales integration.
Upon completion, participants receive a “New Enterprise Certified” credential from VAPEDCO—serving both as legal recognition and a trust signal for partners, banks, and customers.
Long-Term Impact: Building a New Generation of Local Enterprises
If Vietnam can transform just 1 million household businesses into formal enterprises within five years, the economy would gain 1 million new legal entities—a 60% increase in the total number of active businesses. Each transition could formalize 3–5 workers, expanding the tax base and strengthening financial transparency.
More importantly, these will form the “foundational enterprise layer”—supplying, distributing, and servicing sectors that link local economies to regional value chains. As they mature, Vietnam’s private sector will gain a broader, more resilient foundation, reducing reliance on a handful of large corporations.
Conclusion: “Growing Up to Grow Strong”
The shift from household business to enterprise is not merely bureaucratic—it is a mindset revolution, embracing transparency and professionalism.
When a household owner opens their books, registers legally, and adopts enterprise-level management, they don’t just expand scale—they elevate status: from small operator to genuine business owner.
And when millions of Vietnamese take that step, we will witness a new wave of local entrepreneurs—dynamic, transparent, financially capable, and globally minded. They will form the backbone of a strong, integrated, and sustainable private economy.
VAPEDCO’s role in this journey is to guide the path—turning vision into system, and potential into power.
Because in this new era, every household that “graduates” into an enterprise is not just an individual success—it is a national leap forward.
