Four decades of “Doi Moi” (Economic Renewal) in Vietnam have shown that institutional reform can unlock new resources and create momentum for development. Today’s reform agenda goes even further, reshaping governance, the State apparatus, the allocation of powers and responsibilities, the role of the private sector, and the foundations for productivity driven by science and technology and innovation.Success should therefore be measured not by the number of new laws or policies but by the resources unlocked, capabilities strengthened, and development results achieved. The key question is how far these reforms have translated into greater dynamism among localities and businesses, and whether remaining gaps stem from policy design, implementation conditions, or the capacity to execute.
Institutional reform
The most important breakthrough does not lie in any single policy, but in a shift in the philosophy of governance - from a State that manages to a State that enables development.
The first shift is the abandonment of the mindset that “if it cannot be managed, it should be banned.” The legal system is increasingly intended not merely to serve the State’s management requirements, but to encourage innovation, unleash productive capacity, mobilize resources, and create a framework for new economic activities to emerge and grow.
Second is the dismantling of the “ask-and-give” mechanism, with a move from pre-approval to risk and data-based post-inspection. This means reducing administrative procedures and compliance costs, limiting inspections, safeguarding the freedom to do business, and creating a more transparent institutional environment for enterprises.
Third is a move from process-based management, in which performance is assessed primarily by compliance, toward management by objectives and evaluation based on outcomes. The restructuring of administrative units and the State apparatus has removed overlapping functions and intermediate layers, clarified responsibilities, and expanded the authority of those directly responsible for implementation.
These changes are intended not only to address bureaucratic inertia and avoidance of responsibility, but also to create a framework that encourages officials and agencies to exercise greater initiative and creativity in finding effective ways to achieve results and meet the needs of citizens and businesses.
Institutional reform is aimed at creating a business environment that is among the most favorable and attractive in the region. Initial results are already visible in both local development and business activity.
The Provincial Competitiveness Index (PCI) survey found that 79 per cent of businesses completing administrative procedures online said this saved them time, while 78 per cent also saw cost savings. The list of conditional business sectors, meanwhile, has been reduced, from 198 to 142.
The position of Vietnam’s private sector is also extending beyond the domestic market. Viettel controls around 85 per cent of core 5G network technologies. Unmanned aerial vehicle (UAV) companies such as Viettel, the CT Group, and Realtime Robotics control more than 70 per cent of core technologies and have begun exporting to developed markets.
More significant than the number of products is the shift from using technology to developing it, and from participating in existing markets to creating new products. The deeper significance of institutional reform is that it is generating development capabilities that the economy previously did not possess.
The two-tier local government model is also creating new development space. The redistribution of authority between the central and local governments and stronger decentralization to the grassroots level have created conditions for greater dynamism in many localities.
Quang Ninh province’s gross regional domestic product (GRDP) grew 11.89 per cent in 2025. In the first eight months of this year, State budget revenue hit 98.8 per cent of the annual target, while the manufacturing and processing industry grew 31.77 per cent and domestic non-budget investment reached VND182.732 trillion ($7.028 billion). The nearby city of Hai Phong’s GRDP grew 11.81 per cent in 2025 and continued to expand by 11.33 per cent in the first half of 2026, while State budget revenue rose 12.4 per cent. Ninh Binh, Phu Tho, Bac Ninh, and Hung Yen provinces have also posted double-digit growth.
Taken together, these changes point to a new development philosophy. Rather than citizens and businesses having to approach the government and seek permission, online public services are increasingly bringing services directly to them. Businesses are shifting from asking for permission to operate toward taking advantage of opportunities created by government, while grassroots authorities are gaining greater autonomy to resolve local issues without seeking approval from higher levels.
Between policy and practice
Though institutional reforms have generated positive changes, results remain uneven and have yet to fully reach the objectives of the reform agenda. The State apparatus has been streamlined, but workloads and implementation pressures at many levels have increased, and while decentralization has expanded, the capacity to exercise newly-delegated powers varies. This makes it necessary to distinguish between problems caused by policies that remain uncoordinated or lack the conditions required for implementation, and those stemming from weaknesses in implementation capacity.
A new policy with a worthy objective is not enough to deliver results. It must be coordinated with other policies and supported by the conditions needed to operate effectively.
The removal of the presumptive tax regime and tax exemptions for business revenue of up to VND1 billion ($38,462) are intended to help household businesses transition toward more professional management, with taxes based on actual performance rather than a fixed amount regardless of profit or loss.
However, the Law on Accounting still requires traditional paper invoices, supporting documents, and accounting books. Digital infrastructure is also not yet capable of connecting millions of household businesses through point-of-sale systems to track actual revenue and share transaction data with tax authorities. As a result, business owners still have to collect documents, pay for paper invoices, manually record and reconcile information, and file declarations through multiple steps. Compliance costs may therefore increase rather than fall.
To support the transition, the accounting system should move toward electronically-generated transaction data, with point-of-sale systems connected directly to tax authorities. This could significantly reduce accounting and tax compliance costs while giving businesses the data needed to assess performance and identify growth opportunities.
The same gap is evident in decentralization. Commune-level authorities now handle many of the everyday issues faced by citizens and businesses, but the resources and infrastructure needed to exercise their expanded powers have not always kept pace.
Management data remains fragmented across systems, while sharing and interoperability are incomplete. The restructuring of the administrative apparatus has made this challenge more acute. Experienced specialists must cover multiple localities, leaving some areas with limited professional capacity even as responsibilities increase.
This creates a paradox: authority has been delegated and intermediate layers reduced, but processing times have not necessarily fallen. Commune-level officials can face greater pressure when dealing with issues beyond their expertise or when they lack the data needed to make decisions.
Yet innovation requires new approaches to existing processes and solutions to problems that legislation may not have anticipated. Officials may know that a new approach would better address practical needs but still worry about how it would withstand inspection or audit: What is the legal basis? Which regulation authorizes it? Who approved it?
Protection only after an action has been reviewed may not be enough to encourage initiative. What is needed is a legal framework that provides officials with space to innovate before action is taken. Investment in digital infrastructure and platforms is therefore becoming critically important. The reform process needs its own “highways” and modern tools to carry the transition forward.
When the same policy produces different results, implementation capacity becomes decisive.
The reform agenda goes even further, reshaping governance, the State apparatus, the allocation of powers and responsibilities, the role of the private sector, and the foundations for productivity driven by science and technology and innovation.
Public investment disbursement provides a clear example of this. As of the end of August, nine ministries and central agencies and 19 localities had disbursement rates above the national average, while 24 ministries and central agencies and 15 localities remained below it.
Hanoi has the country’s largest public investment portfolio and faces some of its most complex site clearance challenges. Yet its public investment disbursement is currently leading the country.
This suggests that slow disbursement is not necessarily determined by the size of the investment portfolio or objective obstacles such as site clearance and construction conditions. It depends heavily on local implementation capacity.
More broadly, the gaps between policy direction and actual outcomes suggest that the bottleneck is increasingly shifting from institutions and policies toward the capacity to organize and implement them.
The path ahead should therefore not focus solely on breakthroughs within individual policies. Each policy needs to operate within a coherent institutional environment, with the conditions for implementation connected and interoperable so that reforms can generate tangible development results. That is the shift from reforming individual policies to building a new operating system for development.
(*) Professor Hoang Van Cuong is Vice President of the Vietnam Economic Association.
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