Hanoi (VNA) – Bold institutional reforms are crucial for Vietnam to escape the “middle-income trap” and achieve its ambitious goal of becoming a high-income nation by 2045, a process that will require strategic vision, close coordination, and sustained investment in implementation capacity, according Shantanu Chakraborty, Country Director of the Asian Development Bank (ADB) for Vietnam.
"Reform is like a marathon, not a sprint,” requiring strategic vision, close coordination, and sustained investment in implementation capacity to reach the finish line successfully, the ADB official stressed.
A boost for national competitiveness
After nearly four decades of “Doi moi” (renewal) with achievements recognised by the international community, Vietnam moved from a low-income to a middle-income country. This is a historic milestone, but also the beginning of a more complex and challenging development stage.
Vietnam’s growth model, long reliant on capital and cheap labour, is nearing its limits. The economy faces structural challenges of the “middle-income trap,” such as declining investment efficiency, low productivity growth, and a global value chain position still concentrated in processing and assembling with limited added value.
In this context, ADB considers Vietnam’s ongoing comprehensive institutional reform a bold and necessary undertaking. If implemented decisively and effectively, ADB noted, the reform will generate far-reaching impacts, providing a strong boost to the country’s competitiveness in both the medium and long term.
The most immediate and tangible impact lies in improving the business environment. According to ADB, simplifying administrative procedures in long-standing bottlenecks such as licensing, land, and project approvals will create a dual effect - reducing delays to unlock public investment while lowering costs and increasing predictability for the private sector. This will establish a fairer and more transparent “playing field,” helping enhance investment efficiency and giving Vietnamese businesses fresh competitive momentum both at home and abroad.
ADB stressed that Vietnam’s business environment must also align with international standards. This would not only make the country more attractive to strategic foreign investors but also serve as essential preparation for domestic enterprises to compete on the global stage.
A more dynamic public administration, capable of responding swiftly to economic changes, would provide a strong foundation to remove bottlenecks, support production, and help businesses seize opportunities from next-generation free trade agreements (FTAs) such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (RCEP).
At the same time, reform will drive productivity and enable more efficient allocation of resources. A leaner and more effective public administration will cut unnecessary operating costs and ease compliance burdens for both the state and businesses.
According to ADB, this will allow the Government to strategically channel resources into future-shaping areas such as essential infrastructure, high-quality healthcare and education - the foundations of long-term development. In parallel, as barriers are lifted, the private sector can optimise investment returns and confidently channel capital toward the most productive and high–value-added production and business activities.
An efficient allocation of resources—by both the state and the market—is the key to breaking through the limits of the old growth model and unlocking stronger momentum for the economy as a whole.
Beyond pure economic gains, institutional reform carries a deeper significance - strengthening sustainability and resilience for the country. ADB emphasised that a stronger public area after reform will exercise state management more effectively, serving as a capable “steersman” to balance growth and development goals. This balance lies in fostering healthy market competition while protecting the environment and ensuring social welfare. In other words, a robust institutional system is the tool to address the downsides of a market economy, reduce inequality, and bring the country closer to achieving sustainable development goals (SDGs) in a practical way.
Three pillars for success
Drawing on its international experience, ADB noted that implementing large-scale reform that reshapes the entire social structure is a highly complex and challenging process. Such transformation is never smooth and will inevitably face transitional hurdles, requiring thorough preparation and synchronous solutions. These challenges may include temporary disruptions in public services and governance, dislocation for certain groups and communities, and new demands on the capacity of the civil service.
Based on its extensive experience in supporting institutional and structural reforms across the Asia–Pacific, ADB identified three key pillars for Vietnam to successfully navigate its reform - strong commitment and consistency in strategy, developing a skilled workforce, and having a monitoring and evaluation mechanism that ensures effectiveness and adaptability.
From the perspective of a long-standing and trusted development partner, ADB affirms that Vietnam’s pursuit of institutional reform is both the right choice and a turning point. It holds the key to unlocking a new phase of qualitative growth, overcoming medium-term challenges, and realising the country’s ambitious long-term goals.
The road ahead remains challenging, but with strategic vision, close coordination, and strengthened implementation capacity, Vietnam is well positioned to succeed in this historic “marathon,” ADB said./.
