A productivity-driven development model–combining innovation with balanced development and allocation of private, public, human and natural capital–will be key for Viet Nam to achieve its goal of becoming a high-income economy by 2045, according to the World Bank's latest report.

The “Vibrant Viet Nam: Forging the Foundation of a High-Income Economy” report, launched on May 27, comes as the Government of Viet Nam is preparing its socio-economic development strategy for 2021-30 and a socio-economic development plan for 2021-25.

The report recommends policy options to help Viet Nam to maintain quality growth through more dynamic firms, more efficient infrastructure, skills, and a move toward a greener economy.

“Viet Nam is one of the greatest development success stories of our time. The country, however, is now at a turning point where some of its traditional drivers of growth are gradually weakening,” said Ousmane Dione, World Bank Country Director for Viet Nam. 

To achieve its ambition to become a high-income economy by 2045, Viet Nam must put productivity growth front and center of its economic model. In other words, it needs to grow not only faster but also better, he added. 

Viet Nam’s commitment to bold economic reform has been a major contributor to its remarkable economic success, said H.E. Robyn Mudie, Australian Ambassador to Viet Nam, adding that Australia is proud to have supported this report, which provides clear recommendations on how Viet Nam can harness productivity enhancing reforms to improve both the quality and equity of its future economic development.

Some of the forces that have propelled Viet Nam’s growth are now slowing. The country’s demographic dividend is fading, and global trade is declining, while other challenges - such as pollution and the rise of automation, are growing. The ongoing COVID-19 crisis could be an accelerator of these trends.

The report argues that to thrive in such changing environment, Viet Nam needs to strengthen its productive assets, with priority given to four following areas including dynamic firms, efficient infrastructure, skilled workers and opportunities for all and green economy. 

Encouraging competition and easing firm entry and exit ensures the flow of resources to the most innovative and productive firms. This can only happen in a supportive business environment that ensures access to finance, transparent regulations and legal protections.

Viet Nam has built up a large stock of infrastructure. It now needs to improve the efficiency and sustainability of infrastructure services, including financing, and operations and maintenance.

The country scores well on basic education, but it will need to promote university and vocational-technical skills that are becoming even more important for a productivity- led growth model. Those facing barriers entering the labor market, including ethnic minorities, should be provided with greater opportunities—to boost both social equity and economic growth as the population ages and the labor force shrinks.

Sustainable development requires more effective management of non-renewable natural resources such as land, forest and water; stricter pollution controls, including in major urban centers; and mitigation of adaptation to the inevitable growing impacts of climate change.