Vietnam’s shift from a centrally planned to a market economy has transformed the country from one of the poorest in the world into a lower middle-income country. Vietnam now is one of the most dynamic emerging countries in East Asia region.
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• Vietnam is approaching the crossroads of development. To boost GDP growth under labor and capital constraints, the country will have to rely more on gains driven by productivity. This will requ... Show More +ire considerable improvements in domestic innovation capabilities.• SWOT analysis of Vietnam’s science, technology and innovation (STI) system+ Strengths:- Strong economic performance and diminishing poverty levels.- Geographical location in one of the world’s most dynamic regions.- Sizeable labor force and favorable demographics.- Substantial national education effort and good secondary education performance.- Attractiveness for investment by multinational enterprises.- Export strengths in a range of sectors.- Good reputation in science and technology (S&T) fields such as mathematics, and specialization in agricultural research and biology.- Progress in creating and sustaining a set of organizations and institutions to support innovation.- Regional initiatives of national benefit.+ Weaknesses:- Low levels of productivity and income.- Inadequate framework conditions and disincentives for innovation.- Limited access to finance for enterprises.- Inefficiencies in state-owned enterprises.- Infrastructure deficiencies.- Weak performance of the teaching and learning system.- Low level of sophistication of production and exports.- Little innovation and even less research and development capacity in the business sector.- Weak performance of public-sector research.- Weaknesses in the S&T infrastructure as regards laboratories and research equipment.- Seriously underdeveloped information base for innovation policy making.- Inadequate STI governance arrangements and policy implementation.+ Opportunities:- Further developing the human capital and skills base involving the sizeable Vietnamese diaspora.- Nurturing a dynamic business sector and its innovation capabilities.- Diversifying and upgrading the economy.- Developing a healthy attitude to risk-taking.- Improving effectiveness of the innovation system in terms of economic and social impact.- Strengthening inclusive growth.+ Threats:- Unfavorable macroeconomic developments and a slowdown in growth.- Failure to improve the institutional and business environment by tackling banking system reform and corruption.- Increasing brain drain.- Failure to prepare for increased international competition.- A looming middle-income trap.• Recommendations:- Improving framework conditions for innovation- Improving public governance of the innovation system- Strengthening the human resource base for innovation- Fostering innovation in the business sector- Increasing the contribution of public research- Fostering innovation linkages Show Less -
November 24, 2014A CityStrength Diagnostic was conducted in Can Tho, Vietnam in June 2014 at the request of the city. A team of specialists from the World Bank Group worked with local officials, techn... Show More +ical staff, and stakeholders to identify priorities for investment and appropriate areas for action to help build resilience in Can Tho. The Diagnostic found that Can Tho can address the two primary threats to its socio-economic development goals—flooding and uncontrolled urbanization—by more proactively guiding urban growth to areas with lower flood risk, including the higher elevation areas near the heart of the city.The following actions and investments could have a transformational impact on the resilience of the city as a collection of initiatives implemented by Can Tho with more effectively coordinated support from development partners. Priority actions include:Strengthen institutional capacity and legislative frameworks for an effective, integrated flood risk management approach.Enhance the collection, sharing, and use of data on public assets, buildings, population, and risks.Improve the analysis of climate impacts in Can Tho by introducing standardized damage and loss assessment procedures that will enable local officials to quantify the impact of flooding on the local economy and budget.Strengthen financial management to enhance the sustainability of infrastructure investments and strengthen capital investment planning to facilitate better prioritization, monitoring, and achievement of economic development goals. Priority investments include: Focus on implementing flood protection measures in the urban core to make it a more attractive and safe place to live and do business.Use transport investments to guide urban growth to higher elevation areas and meet the needs of a modernizing city.Invest in sanitation to protect public health and support the economic base of the city.Continue to focus on urban upgrading as a means of addressing encroachment on drainage canals and targeting support to poor and vulnerable groups in the city. The CityStrength Diagnostic is informing follow-on activities in Can Tho. The Bank is preparing a new urban resilience project, an open data initiative, and a study of logistics and the role of Can Tho in the regional economy. Show Less -
HANOI, November 24, 2014 — Vietnam needs to rely more on productivity gains driven by innovation in order to boost its economy, according to a new joint study by the World Bank and Organization of Eco... Show More +nomic Co-operation and Development (OECD) released today.The study, The OECD-World Bank Review of Science, Technology and Innovation in Vietnam, looks at the key elements, relationships and dynamics that drive the Vietnamese innovation system and opportunities to enhance it through government policy.“Increased competition in globalizing markets means that it is more important than ever to invest early in advanced technological capabilities,” said Victoria Kwakwa, World Bank Country Director for Vietnam. “This will help Vietnamese enterprises better position themselves in global value chains.”Despite its historical record of scientific research, Vietnam’s innovation system in the modern sense is only emerging. Current science, technology and innovation capabilities are weak and the national innovation system is in a nascent and fragmented state. Research and development both in the public and private sectors still have a lot of room for improvement, according to the report.“Vietnam’s challenge is to achieve sustainable high GDP growth in a less buoyant international environment,” said Andrew Wyckoff, Director for Science, Technology and Innovation at the OECD. “To avoid falling into a ‘middle-income trap’, the country will need to considerably improve its domestic innovation capabilities.”The World Bank-OECD joint review provides several recommendations for policy makers to foster science, technology and innovation in Vietnam:• Improving framework conditions for innovation: The macroeconomic framework, the general business environment, product market regulations, the intensity of competition, openness to trade and foreign direct investment, business finance, the tax system, the level and quality of entrepreneurship, and the infrastructure are all framework conditions that together influence Vietnam’s innovation performance.• Improving public governance of the innovation system: Governments play a key role in providing long-term orientation on social and economic priorities, ensuring that resources for innovation are adequate, public actors perform well, and the various components of the innovation system link up and form a coherent whole.• Strengthening the human resource base for innovation: The country needs to turn a brain drain into a brain gain, increase the quality of education at all levels, provide more opportunities for upgrading skills of those already in the workforce, place more emphasis on entrepreneurship and soft skills, and facilitate knowledge exchange among universities, government research institutions, and the industry.• Fostering innovation in the business sector: Fostering business innovation will require essential improvements in framework conditions, as well as targeted innovation policy measures and effective means of attracting and embedding foreign-invested firms that can stimulate and promote innovation.• Increasing the contribution of public research: Future policy development for public research organizations and universities should enhance their relevance to the country’s economy and job market, address resource constraints, and more effectively steer and fund publicly sponsored research.• Fostering innovation linkages: Efforts are needed to strengthen collaboration on innovation between firms or between firms and public research actors. Show Less -
How do we know whether State Budget expenditures are efficient and affordable? Are public debt levels at 60 percent of GDP too high for Vietnam? How can the government improve transparency of the Stat... Show More +e Budget? These are important questions raised by the public and the media just as the National Assembly is debating revisions to the 2002 State Budget Law and reviewing the draft 2015 State Budget.Recent research by the World Bank has highlighted a number of reforms that could help to further modernize the State Budget system and enable it to meet the development challenges of a Middle-Income Vietnam. The State Budget Law sets out important “rules of the game” that have enabled strong management of public finances in Vietnam over the past ten years.State Budget spending has increased from 20 percent of GDP fifteen years ago to just under 30 percent in more recent years, making major contributions to Vietnam’s development by providing critical infrastructure and enabling greater spending to benefit the poor. For example, in poorer regions, where development needs and service delivery costs are high, State Budget policies have enabled up to seven times more public spending per person than in richer regions. Meanwhile, when the economy was overheating in 2011-2012, State Budget policies reduced government spending as a share of GDP but maintained critical spending on education, health and social protection. These developments have taken place in an environment with increased information available in the public domain on government revenue, spending and debt. This allows the public to participate in and raise questions on public finance decisions. There are clear accounting and reporting rules and regular independent auditing on the quality of government accounts. Fiscal decentralization policies have brought spending decisions closer to people providing more opportunity to reflect local choices and preferences in budget allocations.Given these achievements, what would be our top five recommendations for improvements to the State Budget Law?The first recommendation is to further strengthen State Budget transparency, to promote more public participation in the budget process at all levels of government and to improve accountability. For example, the State Budget submitted to the National Assembly and Local People’ Councils should be disclosed at the same time so that citizens can provide feedback. State Budget information should be communicated clearly and concisely to facilitate citizens’ understanding of and participation in budget discussions.Secondly, there is a need for more discipline in implementing approved spending plans. Actual spending has in recent years significantly exceeded planned spending. Such big changes affect the credibility and integrity of spending plans. To address this, we recommend that major changes to budget appropriations be approved through a supplemental budget. This should help to ensure stronger accountability to the legislature and promote more efficient spending.The third recommendation is to introduce medium-term budgeting, which is subject to annual updates, aligned with Socio-Economic Development Plans (SEDP), and linked with the Medium-Term Investment Plan (MTIP). At the moment SEDPs run for five years, whereas the State Budget is annual. A medium-term budget would provide projections of total revenue, spending and borrowing over the coming three to five years. This would enable the government and the public to estimate the cost and affordability of its development plans.The fourth recommendation is to consolidate reporting on all activities of the public sector so that the government, the National Assembly and citizens have a fuller picture of fiscal policy. This could be done through consolidated government financial statements with full information on revenue, expenditure, financial and non-financial assets, and liabilities. Like in other countries, the State Budget is not the only channel through which public services are delivered. In Vietnam there are for example extra budgetary funds and state enterprises. It is important to monitor risks to the State Budget emanating from these. As previous global crises have shown the biggest risks to the State Budget often come from extra budgetary public sector activities.The fifth recommendation, is to have a comprehensive framework for local borrowing. At the moment all local debt is treated outside the State Budget because local authorities are not allowed to run budget deficits. We recommend the comprehensive framework includes integration of local borrowing onto the State Budget, strengthening of local debt management capacity, and adoption of borrowing limits that are more closely related to borrowing capacity of local authorities. This can help provide much needed resources to meet infrastructure needs in selected provinces, whilst ensuring responsible and transparent local borrowing for high return public investments.The revision of the State Budget Law is a very important milestone. The agreed reforms will have an impact on the government’s public finance policies and the economy for many years to come. Much has already been achieved in the last ten years. We hope the government and the National Assembly will seize the opportunity to build a better State Budget system to help Middle-Income Vietnam grow even stronger in the future. Show Less -