Vietnam is setting an ambitious target for the next development phase: average labor productivity growth of 8.5% per year between 2026 and 2030. This goal is not incremental — it is strategic and existential.
According to Prof. Vu Minh Khuong (Lee Kuan Yew School of Public Policy, NUS), productivity does not leap forward through small improvements. It rises only when an economy undergoes deep systemic transformation.
If Vietnam continues with its current growth model, productivity gains will likely remain stuck around 5–6%, far below what is required to escape the middle-income trap.
Why 8.5% Productivity Growth Is Both Risky — and Necessary
Labor productivity is the most reliable measure of long-term national prosperity. It determines:
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real wage growth
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investment attractiveness
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competitiveness in global value chains
Vietnam has achieved middle-income status, with GDP per capita nearing USD 5,000. But without a sharp productivity acceleration, the country risks “growing old before growing rich.”
Setting a high target sends a clear signal:
Vietnam is prepared to pursue unprecedented reforms, not cosmetic adjustments.
The rapid advance of AI, data, and digital technologies makes this moment uniquely favorable — but only if structural barriers are removed.
Three Frontlines of Reform — Starting with the Most Dangerous One
Prof. Khuong identifies three strategic battlefields for productivity reform:
1. “Structural Kill Zones” — the Core Problem
This is the most decisive battlefield.
Structural kill zones are incentive systems that:
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suppress motivation
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distort benefits
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erode trust
History shows reforms succeed only when benefits are clearly aligned.
Vietnam’s agricultural breakthrough under Khoán 10 worked because it directly addressed farmers’ incentives. Similar logic applies today across:
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state-owned enterprises
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private firms
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FDI enterprises
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public services
When income, rewards, and career progression are directly linked to productivity outcomes, behavior changes rapidly.
Ignoring this layer while focusing only on technology or procedures will lead to stagnation.
2. Operational Bottlenecks
Even good reforms fail if execution is blocked.
Examples include:
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weak market integration
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slow administrative processes
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fragmented coordination between agencies
Without addressing operational bottlenecks, productivity initiatives stall regardless of intent.
3. Technical Constraints
This includes:
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infrastructure
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human capital
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technology adoption
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R&D investment
These matter — but only after incentives and operations are aligned.
Five Strategic Breakthroughs to Lift Productivity
Once structural barriers are removed, Vietnam can accelerate productivity through five major levers:
1. Restructure the Economy Around High-Value Sectors
Global experience (Korea, Germany, Taiwan) shows productivity grows fastest when driven by leading sectors.
Vietnam should focus on 5–7 strategic industries, such as:
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digital services & software
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semiconductors & chip design
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smart logistics
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green energy & hydrogen
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biotech & pharmaceuticals
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AI and robotics
2. Build the “Productivity Triangle”: Government – Business – Academia
Successful economies share a common structure:
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Government sets direction
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Businesses drive innovation
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Universities & research institutes supply knowledge
Vietnam must strengthen this innovation network, deeply embedded in industry needs.
3. Develop Industry Clusters and Ecosystems
No country achieves rapid productivity growth with fragmented industries.
Global examples — Shenzhen, Bangalore, Suwon, Dublin — show clusters act as productivity engines.
Vietnam’s major cities must evolve into clearly defined growth poles, not generalist urban centers.
4. Data, Digital Transformation, and AI
In the coming decade, AI is the decisive productivity multiplier.
Vietnam needs:
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interoperable national data systems
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open AI platforms
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AI deployment across taxation, customs, healthcare, logistics, and public services
Governments that use AI at scale move faster, cheaper, and with higher trust.
5. Talent Development and Absorptive Capacity
Technology matters only if people can absorb it.
Key lessons:
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Germany: dual vocational training
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Singapore: SkillsFuture
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Taiwan: ITRI as a technology incubator
Vietnam must:
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shift from degree-based to skill-based training
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retrain 20–25 million workers
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scale national AI and digital-skills programs
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attract global experts
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invest heavily in universities and research institutes
Mobilizing Internal Strength and External Power
Vietnam’s productivity surge must rest on four pillars:
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Internal capabilities: people, firms, institutions, data
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High-quality FDI in AI, semiconductors, Industry 4.0
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Government leadership in technology adoption
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World-class innovation ecosystems and clusters
The government must lead by example — becoming the largest AI user in the country.
The Core Principle
Productivity does not increase through small optimizations —
it rises through system-wide transformation.
If Vietnam decisively dismantles its structural kill zones and synchronizes reforms across incentives, technology, talent, and governance, the country can enter a take-off phase similar to:
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Korea in the 1980s
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Ireland in the 1990s
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China in the 2000s
The 2026–2030 period may well determine whether Vietnam becomes a high-income economy by 2045 — or remains trapped below its potential.
Learn more about Misamex’s knowledge in Vietnam:
m. (+84) 902 944 134 | e. xnyder@misamex.vn | w. https://misamex.vn/
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