Vietnam bets on homegrown conglomerates, taking a page from South Korea's chaebol playbook

At a sprawling construction site in Hanoi, Vietnam's largest conglomerate, Vingroup, is laying the groundwork for a high-speed rail line — the first time a private company has led a major infrastructure project in the communist state. The move is a calculated bet by the Vietnamese government to restructure an economy long dependent on exports and foreign direct investment, as US tariff policy upends the global trade order.

According to the Financial Times on Friday, the area around the construction site already resembles a Vingroup kingdom. High-rise apartments and luxury villas built by its subsidiaries line the streets, which are filled with cars and motorcycles the group manufactures. Vingroup has also won the contract for a total $5.6 billion high-speed rail project linking Hanoi to the tourist destination of Ha Long Bay. Once the 120-kilometer line is complete, the journey that currently takes two and a half hours is expected to shrink to just 30 minutes.

Projects of this scale were traditionally the domain of state-owned enterprises. But the Vietnamese government has changed course, aiming to nurture large, diversified conglomerates like Vingroup to drive future economic growth.

Leading that strategy is Communist Party General Secretary To Lam, widely regarded as the most powerful Vietnamese leader in decades. As he pushes sweeping bureaucratic and economic reforms, he has drawn inspiration from South Korea's chaebol model to cultivate national champion companies — giving them priority consideration for major projects and easing their access to land and financing.

Nguyen Ba Hung, an economist at the Asian Development Bank, said the approach amounts to "an acknowledgment by the government itself that the capacity of domestic firms has not kept pace with the economy's ambitions and demands."

Resolution 68, a private-sector development blueprint the government released last year, calls for nurturing at least 20 large enterprises capable of joining global value chains by 2030 and doubling the number of private businesses to 2 million. The resolution formally elevates the private sector — long relegated to a supporting role behind state-owned and foreign firms — to "the most important driving force of the national economy."

Hung said the resolution "appears to have boosted confidence in the private sector, prompting it to begin investing in long-term assets such as infrastructure," adding that the policy draws "significant inspiration from South Korea's chaebol model."

The chaebol system was one of the key drivers of South Korea's rapid industrialization from the 1960s onward, the Financial Times noted. The government encouraged the growth of family-owned, diversified conglomerates by providing incentives, low-interest financing and tax benefits, and assigned them export targets that helped transform the South Korean economy. The model also drew criticism, however, for fostering monopolies and squeezing out small and medium-sized enterprises.

Vietnam's push to build homegrown corporate giants stems from its heavy reliance on foreign-investment-driven growth. The country benefited enormously as manufacturers fled China amid the US-China trade conflict, relocating production facilities to Vietnam to avoid tariffs. The United States remains Vietnam's largest export market, absorbing roughly one-third of the country's total exports. But that dependence also means a single shift in US tariff policy can rattle the entire economy.

Confidence in state-owned enterprises has also eroded. Once a pillar of Vietnamese growth, some state firms have accumulated massive debt or become entangled in corruption allegations, undermining their credibility.

Tyler Nguyen, chief market strategist at HSC Securities, said the new resolution aims to "create a more level playing field where domestic private firms can compete more fairly with foreign and state-owned companies," describing the strategy as resembling the development path taken by the "Four Asian Tigers" — South Korea, Taiwan, Hong Kong and Singapore.

Vingroup has already secured contracts for at least two high-speed rail lines and is involved in Hanoi's urban rail development. Automaker Thaco has entered the bidding for a massive $67 billion north-south high-speed rail project spanning the length of Vietnam.

Experts also name steelmaker Hoa Phat Group and IT firm FPT as candidates to emerge as future "Vietnamese chaebol."