To achieve double-digit GDP growth during the 2026-2030 period, Vietnam must fundamentally transform its growth model from one driven by scale to one driven by depth. In this transition, improving Total Factor Productivity (TFP) and reforming public investment are widely viewed as two critical pillars capable of delivering breakthroughs in economic growth.
According to Mr. Le Xuan Ba, former Director of the Central Institute for Economic Management (CIEM), Vietnam is standing at a historic crossroads that requires a fundamental shift in development thinking. He noted that Vietnam’s average annual economic growth rate during the 1986-2025 period stood at some 6.51 per cent, still far below the performance of economies that experienced periods of rapid catch-up growth, such as South Korea, with 9.58 per cent a year (1960-1990), China with 10.02 per cent (1978-2018), and Japan with 8.49 per cent (1947-1977).
“To enter the group of high-growth economies with GDP expanding by more than 10 per cent, Vietnam cannot continue to rely on an extensive growth model that depends primarily on capital accumulation and natural resource exploitation,” he emphasized.
Raising TFP’s contribution
According to Mr. Ba, TFP is the decisive factor in transforming Vietnam’s growth model. The indicator measures the overall efficiency of production inputs - capital and labor - and reflects progress in technology, management, and, critically, institutions. Data show that while TFP’s contribution to GDP growth has been increasing, estimated at 46.4 per cent in 2024, it must be pushed above 50 per cent to generate a meaningful breakthrough and sustain double-digit growth.
“International experience shows that countries seeking high growth must raise TFP’s contribution to above 50 per cent,” Mr. Ba said. “Achieving a TFP breakthrough requires a comprehensive set of coordinated solutions, with the core being the improvement of economic institutions so that institutions are no longer the ‘bottleneck of bottlenecks’.”
The five-year implementation of National Assembly Resolution No. 31/2021/QH15 on the economic restructuring plan for the 2021-2025 period underscores the scale of the challenge. A report from the Institute of Strategy and Economic-Financial Policy shows that of the 27 targets set, only 23 currently have sufficient data for evaluation. Ten of the 23 are likely to be achieved, nine face significant difficulties, and four are expected to fall short.
Notably, among the four targets unlikely to be met are two critical quality-related indicators: workplace productivity growth and the share of spending on science and technology. The root causes lie in the slow pace of institutional and policy development and the persistence of cumbersome administrative procedures.
Fixing capital efficiency
From another perspective, Dr. Can Van Luc, Chief Economist at BIDV and Member of the National Financial and Monetary Policy Advisory Council, said achieving 10 per cent growth in the next phase will require not only higher TFP but also sustained increases in capital investment. “According to our estimates, capital will continue to contribute about 45-47 per cent to economic growth in the coming period,” he explained. “Labor will account for around 5-6 per cent, down from about 8 per cent at present, while TFP is expected to rise to above 50 per cent from the current level of around 47 per cent.”
BIDV calculations show that public investment accounted for 17.2 per cent of total social investment during the 2021-2025 period, and every additional dollar of public investment attracted $1.61 in private investment. This highlights the role of public investment as a key driver and a source of “seed capital” for the broader economy.
However, the efficiency of capital use has become a growing concern, placing significant pressure on both the scale and quality of growth. The Incremental Capital-Output Ratio (ICOR), a key measure of investment efficiency, remains alarmingly high, particularly in the State sector. While the ICOR for the overall economy during 2016-2021 stood at 9.1, the figure for the State sector rose from 13.03 in 2010-2015 to 17.8 in 2016-2021.
This level is four to five times higher than that of other fast-growing economies during their take-off phases, with South Korea and Japan, for example, recording ICORs of only around 3.2. According to Dr. Luc, to achieve annual GDP growth of 10 per cent in the next phase, with total social investment equivalent to about 40 per cent of GDP, Vietnam’s ICOR must be reduced to around four. Only then can it address the problems of an imbalanced capital structure, widespread inefficiency, and the accumulation of stalled projects.
Data shows that about 80 per cent of total investment capital is currently allocated to infrastructure, while only 20 per cent goes to sectors that generate TFP breakthroughs, such as science and technology (0.45 per cent), education (10.3 per cent), and healthcare (4.2 per cent). This imbalance is constraining Vietnam’s ability to shift towards productivity-driven growth.
In addition, delays in public investment disbursement persist, with disbursement reaching only 84.47 per cent of the 2024 plan. Notably, nearly 3,000 stalled projects remain entangled in unresolved obstacles, resulting in wasted resources and lost time.
Breakthrough recommendations
To realize the goal of double-digit growth, experts recommend prioritizing the restructuring of public investment while generating new momentum through higher TFP and improved human capital quality.
According to Dr. Luc, the core solution lies in reshaping public spending towards productivity-driven growth. He proposed cutting the share of public investment in transport and energy infrastructure from the current 80 per cent to around 50-55 per cent, while sharply increasing spending on sectors that generate TFP. Specifically, education and training should account for about 20 per cent of total public investment, approaching international benchmarks; healthcare spending should rise to 10-12 per cent; science and technology investment should increase to 3-5 per cent; and greater resources should be allocated to green transformation and climate change mitigation to support sustainable development and international integration.
At the same time, Vietnam should develop a more scientific and up-to-date framework for evaluating public investment projects, with support from international organizations such as the International Monetary Fund and the World Bank, to bring the ICOR down to the target range of four to five.
From a management perspective, Dr. Luc said it is essential to control the number of projects and reallocate capital from slowly-disbursing projects to those with strong implementation capacity.
Alongside public investment reform, Mr. Ba urged the government to accelerate institutional improvements and human resource development to create a reinforcing effect across the economy.
A key priority, he said, is building a developmental and integrity-based State - fair, objective, and accountable - and establishing institutions that enable growth. Reforms should create a more open legal environment that strongly promotes new economic models, particularly the private sector, allowing it to fully play its role as a growth engine.
“This must also be reflected in efforts to remove obstacles in key framework laws, which the government is urgently reviewing and revising to ensure consistency, decentralization, and the elimination of slow and overlapping planning,” Mr. Ba said.
On mobilizing private capital and household resources, he emphasized the need for effective policies to attract remittances and create a favorable business environment to tap idle domestic resources, estimated at around $60 billion. Public investment, he emphasized, should act as a catalyst to lead and attract private capital, not replace it.
Regarding human capital development, Dr. Luc highlighted the need for a decisive shift in education and training from passive to active learning, with stronger links between theory and practice. He also called for greater autonomy and accountability for public training institutions to improve workplace quality and, in turn, raise labor’s contribution to economic growth. “Establishing a new growth model based on quality, efficiency, and greater autonomy - supported by a flexible and effective institutional framework and a thoroughly restructured public investment system - is key for Vietnam to achieve breakthrough growth of 10 per cent or higher during the 2026-2030 period and move towards becoming a high-income developed country,” he concluded.
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