Viet Nam 2045—Breaking Through: Institutions for a High-Income Future

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What will it take for Viet Nam to become a high-income country by 2045?

Viet Nam 2045—Breaking Through: Institutions for a High-Income Future explores the critical role of institutions in achieving this ambitious goal. The experience of a small number of countries that have made the leap to high-income status quickly shows that strong, effective institutions are essential. These countries improved how laws are implemented, built impartial public administrations, strengthened oversight, and invested wisely in public goods.                                                                                                                              

Why Institutions Matter

Viet Nam’s impressive progress in economic growth, poverty reduction, and human development is closely linked to steady improvements in its institutions. The state’s role is shifting—from directly providing goods and services to creating a supportive framework for private-sector growth. At the same time, the Vietnamese people increasingly support private enterprise, while expecting the state to ensure fairness and deliver quality public services.

A Focus on Institutional Functions

The report uses a practical framework that emphasizes what institutions do, rather than how they are structured. It highlights six key types of institutions:

• Market-creating institutions (like property rights and contract enforcement) that support business activity
• Market-stabilizing institutions (such as monetary and fiscal systems) that maintain economic stability
• Market-legitimizing institutions (like social protection systems) that ensure fairness and inclusion
• Market-complementing institutions that provide essential public goods, such as infrastructure, education, and health
• Market-regulating institutions that address broader policy goals and externalities
• Institutions for a capable and accountable state that enables the state to deliver on all the others

Institutional change is more than passing new laws. Real progress requires strong systems, capable organizations, and the right incentives to ensure that rules are followed and goals are met.

Viet Nam’s journey so far shows the power of gradual, consistent reform. Improvements in public investment, regulation, and civil service have already delivered results, but “a big push” is needed to reach high-income status.

Four priorities stand out: smarter public investments, clearer and more predictable regulations, a motivated and accountable civil service, and more efficient, empowered local governments.

What Needs to Happen Next

1. Smarter Public Investments

Viet Nam must increase both the quantity and quality of public assets, especially in infrastructure, health, and education. While public investment has grown, it still falls short of the levels typically observed in high-income countries. Improving how projects are selected, appraised, and managed—especially at the provincial level—will help ensure that investments deliver real value.

2. Clearer, More Predictable Regulations

Businesses need certainty. While administrative reforms have reduced some burdens, inconsistent application of laws and regulations remains a challenge. Viet Nam should continue to streamline procedures, build capacity for policy impact analysis, and ensure that regulations are applied fairly and transparently.

3. A Motivated and Accountable Civil Service

A high-performing public sector is essential. Viet Nam’s civil service is large, but future reforms should focus on building a smaller, more skilled, and motivated workforce. This means better pay, clear performance incentives, and stronger systems to prevent and address corruption. External oversight and a greater role for civil society and the media can help build trust and accountability.

4. More Efficient Local Governance

Provinces play a big role in public spending but have limited autonomy over revenues and administration. Giving local governments more flexibility, encouraging cooperation between provinces, and reforming fiscal arrangements will help ensure that resources are used efficiently and that fast-growing regions can meet their needs.

What Risks Does the Future Hold

For many countries, the process of transitioning to high-income status can often be hampered by interest groups that may influence policies that promote competition and innovation, and hinder reforms that build stronger institutions. Robust institutional frameworks that foster trust and transparency, especially in the private sector are key to ensuring competitiveness and economic resilience.

Why Institutions Matters for Viet Nam’s Future

Institutions are the “breakthrough of breakthroughs”. Stronger institutions will help Viet Nam deliver better public services, support private sector growth, and ensure that all citizens benefit from development. By focusing on these priorities, Viet Nam can build a solid foundation for sustainable, inclusive growth and achieve its vision of becoming a high-income country by 2045.