At the recent workshop "Digital Economy and TFP: Foundation for Economic Growth Model Innovation in Vietnam", Mr. Tran Minh Tuan, Director of the Department of Digital Economy and Digital Society ( Ministry of Science and Technology ) said that in the draft Project on Digital Transformation of Enterprises submitted to the Prime Minister for promulgation, the drafting agency proposed a program to convert 1 million business households into enterprises in the spirit of Resolution 68 on private economic development.
In the world, the transformation of individual business households into formal enterprises is an important process for many developing countries. The goal of this process is not only to increase budget revenue but also to improve management efficiency, expand the social security network, increase labor productivity and promote the modernization of the economy . Many countries have implemented business household transformation programs with flexible approaches, providing many valuable lessons for countries that follow.
China
China is one of the countries with outstanding experience in transforming individual household businesses into formal enterprises, especially since the sweeping administrative reform in 2014. Before that time, the informal economy accounted for a large proportion of business activities in this country, with tens of millions of individual households operating without registering as enterprises. The Chinese government recognized that formalizing this sector was necessary to expand the tax base, improve economic management efficiency and promote sustainable growth.
One of the breakthroughs was a comprehensive reform of the business registration system. China abolished minimum capital requirements, simplified licensing procedures, and implemented an online registration system that allows businesses to complete the conversion process in just a few days. The administrative convenience has removed one of the biggest barriers to conversion, especially for small businesses that lack specialized legal capacity.
In addition to institutional reforms, China has also implemented a number of financial support policies to encourage household businesses to become enterprises. Newly established micro-enterprises are exempted from income tax in their first years of operation, and have access to preferential loans through the state banking system and credit guarantee funds. In addition, the government also supports basic business management training, accounting and financial management guidance to help household owners become familiar with business operations.
A combination of administrative reform, economic incentives, and technical assistance has helped millions of household businesses in China transform into formal enterprises in less than a decade. The expansion of the formal economy has not only contributed to increased government revenue but also provided workers with access to social insurance, health care, and long-term welfare policies. This success provides important lessons for developing countries as they develop policies to promote informal economic transformation.
India
India is one of the countries where individual businesses account for a large proportion of the economy, especially in rural areas and urban areas that are not evenly developed. Recognizing the role of the informal sector in job creation and growth, the Indian government has implemented many programs to promote the conversion of small businesses into formal enterprises, the most notable of which is the Udyam registration system implemented since 2020. This is a digital platform built by the Ministry of Micro, Small and Medium Enterprises (MSME), to simplify the conversion process and expand access to support policies for business households.
Before Udyam, registering a business in India was a complicated process, requiring a lot of paperwork and intermediary procedures, which made most individual businesses reluctant to enter the formal sector. With the new system, the registration process is greatly simplified, allowing people to complete the conversion in just a few steps online, without the need for paper documents, no fees, and no tax identification number or complicated financial reporting. Each business is assigned a unique identification number, making it easy to track activities, statistics, and government support.
Registering as a Udyam business opens up opportunities to access many preferential policies such as unsecured loans, interest rate support, tax exemptions in the initial period and priority in government contracts. In addition, new businesses can also participate in training programs on management skills, marketing and digital transformation. A key success factor in India's strategy is the close coordination between government agencies, banks, NGOs and local authorities to propagate, guide and provide technical support to people in the transition process.
After several years of implementation, the Udyam system has seen millions of household businesses formalize their operations, contributing positively to economic growth and enhancing national competitiveness. The Indian model is a clear demonstration that combining technology, simplified procedures and practical incentives can create a strong incentive for household businesses to transform into enterprises.
Indonesia
Indonesia is one of the countries with a high proportion of informal economy, with tens of millions of individual businesses operating without formal registration for many years. In order to improve economic management efficiency, expand the tax base and improve workers' welfare, the Indonesian government has promoted the program of converting household businesses into small and medium enterprises, with a comprehensive approach and closely linked to the social security system. The highlight of Indonesia's policy lies not only in simplifying registration procedures but also in creating strong enough economic and social incentives to convince people to leave the informal sector.
Since 2018, the Indonesian government has introduced a model to support the transformation of business models with a focus on social welfare, in which business households, after registering as formal enterprises, will be granted an identification number and immediately access to health insurance, pension insurance and unemployment support programs. This makes a clear difference compared to before, when individual household heads and workers in the informal sector often did not enjoy any social insurance. The link between corporate legal status and social security benefits has helped millions of households voluntarily participate in the formal system.
In addition, the government also applies an extremely low tax rate for newly established micro-enterprises, only 0.5% of revenue, to reduce the financial burden in the early stages. The electronic business registration system has also been deployed nationwide, helping business households to easily register for legal operations without spending much time or incurring large costs. In many localities, startup support centers have been established, playing the role of consulting, guiding, training management skills and providing market information to households after converting into enterprises.
It is through this approach of integrating procedural reforms, financial incentives and social security benefits that Indonesia has made significant progress in attracting small businesses to the formal sector. This model shows that if people see real benefits, they are willing to formalize their businesses and contribute positively to the sustainable development of the economy.
Source: https://khoahocdoisong.vn/cac-nuoc-chuyen-ho-kinh-doanh-thanh-doanh-nghiep-the-nao-post1555437.html
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