Vietnam’s traditional growth model is facing major challenges, and modern, adaptive institutions will be key to ensuring its success, according to the “How will Vietnam blossom? Reforming institutions for effective implementation” report released by the World Bank (WB) in Vietnam on May 18.

In recent times, Vietnam has set out six priorities for economic development: the opening of trade activities; digital transformation; international integration; green growth; financial sustainability and inclusion; and infrastructure upgrades.

“In priorities such as trade facilitation, international integration, and digital transformation, Vietnam has been doing well,” said Ms. Tran Thi Lan Huong, Senior Governance Specialist at the WB. “However, in priorities such as sustainable development, green development, and infrastructure development, which require the participation of the private sector or public-private partnerships, Vietnam has not done so well.” The report suggested that the country improve coordination between the central and local levels, strengthen its financial capacity, and increase its implementation ability, accountability, and transparency.

The report explained Vietnam’s successes and failures in achieving the six priorities through five groups of institutional reforms: steady institutions; harmonized and effective administrative procedures; successful use of market tools; enforcement of regulations and rules; and more engaged procedures to increase transparency and accountability. “The five groups are tools that will give the government a viewpoint on reform,” said Mr. Mai Tien Dung, former Minister and Chairman of the Office of the Government.

Vietnam has carried out many institutional reforms over the last decade, and while implementation has been good it has been uneven. “Vietnam’s per capita GDP has increased five-fold over the past three decades, while the country’s institutions have not adapted to that rate of change since the ‘Doi Moi’ (Renovation) era in the late 1980s,” said Ms. Carolyn Turk, WB Country Director in Vietnam. “Institutional reform synchronization can help a country avoid the middle-income trap by improving its effectiveness in responding to new and complex challenges arising domestically and globally.”

In addition to institutional reforms, Mr. Truong Gia Binh, Co-founder, Chairman, and CEO of the FPT Corporation, mentioned digital transformation as an important factor helping Vietnam escape the middle-income trap. “It is a key that helps Vietnam reach standards and overcome the middle-income trap,” he said. “The WB should participate in this process as Vietnam will need much capital.”

In the period to come, Vietnam’s transformation from a middle-income country to a high-income country will be more challenging than from a low-income country to a low-middle income country, so it must increase its effort three-fold compared to the 2010-2020 period. “In order to reach its ambition of becoming a high-income country by 2045, Vietnam has to do more,” said Mr. Jacques Morisset, WB Lead Economist and Program Leader for Vietnam. The WB has suggested that on its road to becoming a high-income country, Vietnam needs to build an institutional platform for effective implementation, which consists of the five groups of reforms mentioned above. The quality of the determinants in each group also impacts the effectiveness of implementation, the report pointed out.

“Vietnam has determined its development priorities, which are reflected in a number of national strategies and resolutions, but the key to success is effective implementation,” Mr. Tran Viet Dung, Senior Country Officer at the WB, concluded.