Overview: Charting Vietnam’s Next Leap—Productivity, Innovation, and the Quest for High-Income Status

Hinh T. Dinh ()
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Hinh T. Dinh: Policy Center for the New South and Economic Growth and Transformation

Chapter 1 in Vietnam's Economic Leap, 2025, pp 1-11 from Springer

Abstract: Abstract Vietnam’s impressiveDoi Moi reforms economic performance has been largely driven by capital accumulation and labor force expansion rather than productivity improvements. This growth model faces diminishing returnsLow-income Countries as the country approaches middle-income status. The country’s industrialization has been predominantly led by foreign direct investment (FDI) and integration into global value chains (GVCs), with limited spilloverOECD (Organisation for Economic Co-operation and Development) benefits for domestic firms. Rising wages, low export value-added per capita, and shortages of skilled labor are eroding Vietnam’s competitiveness, while infrastructure bottlenecks and carbon-intensive manufacturing further expose vulnerabilities. To break free from these structural constraints and achieve high-income status, Vietnam must transition from an investment-driven to a productivity-led growth model by following a strategy combining smart investment and innovation. This transformation hinges on developing competitive domestic firms with stronger technological capabilities, fostering technology absorption and diffusion through improved foreign–local linkages, and promoting incremental innovation tailored to local needs. Complementary reforms in human capital—addressing skills mismatches, enhancing STEM education, and supporting labor participation—are vital.

Date: 2025
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DOI: 10.1007/978-3-032-08904-5_1

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