Viet Nam aims to become a high-income country by 2045, and a new report highlights the critical role of institutions in achieving this goal. The report, "Viet Nam 2045—Breaking Through: Institutions for a High-Income Future," explores how strong, effective institutions are essential for this transition.
The experience of countries that have quickly reached high-income status shows the importance of improving law implementation, building impartial public administrations, strengthening oversight, and investing wisely in public goods. Viet Nam's progress in economic growth and poverty reduction is linked to improvements in its institutions. The state's role is evolving from directly providing goods and services to creating a supportive framework for private-sector growth.
The report emphasizes institutional functions over structure and identifies six key types of institutions: market-creating, market-stabilizing, market-legitimizing, market-complementing, market-regulating institutions, and those enabling a capable state. Institutional change requires more than new laws; it needs strong systems and capable organizations.
Viet Nam's gradual reforms have delivered results but require "a big push" to reach high-income status. Four priorities include smarter public investments, clearer regulations, a motivated civil service, and efficient local governance.
Smarter public investments involve increasing both quantity and quality of assets like infrastructure and education. Clearer regulations provide businesses with certainty by streamlining procedures. A motivated civil service focuses on building a skilled workforce with better pay and performance incentives. Efficient local governance involves giving provinces more autonomy over revenues.
Future risks include interest groups influencing policies that hinder competition and innovation. Robust institutional frameworks fostering trust are crucial for competitiveness.
Institutions are vital for Viet Nam's future as they support private sector growth and ensure citizens benefit from development. By focusing on these priorities, Viet Nam can achieve sustainable growth by 2045.