A Growth Strategy Rooted in Digital Transformation and Innovation
Across the spectrum of economic analysis, there is growing consensus that Vietnam’s future growth trajectory must be underpinned by internal drivers—productivity gains, technological advancement, and a robust culture of innovation. Yet, achieving this shift requires more than abstract agreement. It demands strategic prioritisation, institutional resolve, and an actionable roadmap.
Among the pillars being explored, the digital economy has emerged as a critical lever. More than a global trend, it presents a unique opportunity for Vietnam to leapfrog development stages, improve productivity, extend market reach, and cultivate endogenous sources of growth. But while digitalisation has gained prominence in official discourse, its practical implementation is running up against systemic bottlenecks.
Chief among these is the absence of a unified and coherent digital infrastructure. The national data architecture remains fragmented, digital identity systems are siloed, and data-sharing across government agencies is hamstrung by legal and institutional barriers. This structural deficiency is compounded by the limited digital readiness of small and medium-sized enterprises (SMEs), which make up the bulk of Vietnam’s economic base but frequently lack the capital and skilled workforce necessary for meaningful digital transition.
In a recent study, Dr. Nguyễn Bá Hùng underscored that Vietnam cannot expect digital transformation to act as a catalyst for growth without first investing in the foundational infrastructure. “What is required,” he argues, “is not merely the digitisation of administrative procedures, but a systemic overhaul of how the economy functions.” He advocates for the development of a national data backbone, enhanced digital interconnectivity across regions and sectors, and stronger digital governance, particularly within the public sector.
Innovation Still in Its Infancy
If digital transformation provides the tools, science and technology form the intellectual backbone of Vietnam’s growth aspirations. The shift from a low-cost, assembly-driven economy to one driven by innovation and high productivity rests on the country’s ability to nurture a functioning innovation ecosystem. But the reality on the ground remains sobering.
According to Dr. Quyết Thắng of Hanoi University of Science and Technology, Vietnamese firms continue to struggle with technology absorption. “We talk a great deal about innovation, but the actual technological capacity of domestic enterprises is weak. The shortage of high-skilled talent is severe, and the linkages between universities, research institutes, and businesses are still embryonic,” he said.
To remedy this, experts are increasingly advocating for the establishment of innovation hubs—integrated ecosystems that connect academia, industry, and government with transparent governance and flexible operational frameworks. These centres, they argue, could serve as launchpads for long-term R&D, experimentation, and commercialisation of new ideas. However, the current level of investment in R&D—both from the state and the private sector—remains modest at best.
Vietnam’s research institutions often operate in isolation from the market, and private firms are yet to regard R&D as a strategic priority. Intellectual property protections remain underdeveloped, funding for scientific research is patchy, and start-up ecosystems lack the structured support found in more mature economies.
The Private Sector as a Growth Engine
No credible growth strategy can exclude the private sector. It is this dynamic segment of the economy that holds the greatest potential for innovation, rapid adaptation, and the generation of high-value economic activity—provided it is afforded the right policy environment.
In his research, Professor Dr. Ngô Thắng Lợi points out that institutional shortcomings continue to constrain the private sector’s contribution. Regulatory opacity, limited competition, and persistent barriers to finance, land, and market access all serve to discourage private investment in transformative areas such as technology, R&D, and green innovation. The result is a domestic private sector that remains largely small-scale, technologically lagging, and only marginally integrated into global value chains.
Unlocking the potential of this sector requires a fundamental shift in state-business relations. The government must move beyond administrative support mechanisms to foster a truly competitive and enabling market environment. That means reducing compliance burdens, ensuring transparency, and offering meaningful incentives to encourage long-term investment in innovation and productivity.
Tax policy reform could play a pivotal role. Reducing the fiscal burden on SMEs and introducing targeted tax credits for innovation-related expenditures would send a strong signal to the market. Simultaneously, Vietnam must work to improve the legal framework governing intellectual property rights and develop policies that support entrepreneurial ecosystems—from incubators and accelerators to venture capital and industry-academic collaborations.
More broadly, a change in policy mindset is needed: from control to facilitation, from bureaucratic oversight to market-based incentives. Vietnam’s private sector does not merely need to be managed—it needs to be empowered.
Choosing the Right Growth Model
Vietnam stands at a crossroads. The low-hanging fruits of export-led growth, fuelled by cheap labour and foreign direct investment, are gradually losing their potency in an era marked by technological disruption, environmental constraints, and global economic realignment. What is needed now is a new paradigm—one that taps into domestic capacities, fosters innovation, and creates shared value.
This is not an easy transition. It requires recalibrating the state’s role in the economy, modernising institutional frameworks, and cultivating a culture of experimentation and risk-taking across all sectors. But the costs of inertia are high. Without decisive reforms, Vietnam risks being trapped in the middle-income tier, unable to make the leap to a high-income, innovation-led economy.
The way forward is clear, even if the path is complex: build a digital infrastructure worthy of the country’s ambitions, invest seriously in science and research, and unleash the creative energies of the private sector. If these elements can be aligned, Vietnam’s growth story may well enter a dynamic new chapter—one defined not by assembly lines, but by ideas, technology, and sustainable value creation.
