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An upgraded development model for Vietnam must put productivity growth front and center: “Productivity isn’t everything, but in the long run it is almost everything” as Nobel Laureate Paul Krugman put it.

WorldBank Recommends Vietnam Priotize Enhancing Productivity
Recently, WorldBank released a report titled “Vibrant Vietnam: Forging the Foundation of a High-Income Economy” which provides analyses and policy recommendations on how Vietnam can maintain quality growth in the next decade.
The report suggests that a productivity-driven development model–combining innovation with balanced development and allocation of private, public, human and natural capital–will be key for Vietnam to achieve its goal of becoming a high-income economy by 2045.
An upgraded development model for Vietnam must put productivity growth front and center: “Productivity isn’t everything, but in the long run it is almost everything” as Nobel Laureate Paul Krugman put it. An asset-based perspective is helpful.
The wealth of a nation is determined by how well it manages its portfolio of assets—its produced capital embedded in firms (private capital) and infrastructure (public capital); its human capital shaped by education, skills, health, and opportunity; and its natural capital including land, water, forests and the ecological services on which life depends.
Countries that augment the stock and continuously improve the quality of their capital endowments reap long-term growth that is widely shared and sustainable through generations.
What does a productivity-focused development strategy look like in practice? Vibrant Vietnam identifies priorities and proposes concrete policies to strengthen the country’s productive assets: 
a. Dynamic firms. Encouraging competition and easing firm entry and exit ensures that resources will flow to the most innovative and productive firms. This can only happen in a supportive business environment that ensures access to finance, transparent regulations and legal protections.
b. Efficient infrastructure. Vietnam has built up a large stock of infrastructure. What matters now is to improve the efficiency of financing and delivering additional construction, and, perhaps even more importantly, operations and maintenance. This will raise the quality of services that infrastructure provides.
c. Skilled workers and opportunities for all. Vietnam scores well on basic education, but advanced university level and vocational-technical skills are under-supplied. Skill upgrading will raise wages and boost domestic consumption. And those facing barriers entering the labor market or suffering from limited information during their education and job search, including ethnic minorities, must get greater opportunities—not just for reasons of equity but also for economic efficiency as the labor pool shrinks.
d. Green economy. Sustainable development involves a shift from liquidating natural assets for short-term growth to using natural resources—including land, clean air and water—far more efficiently. In wealthy countries, natural capital increases rather than declines. There are many opportunities for more effective natural resource management, stricter pollution control, and preparing for inevitable climate change impacts.
Government will continue to play the central role in shaping the upgrade of Vietnam’s growth model. The goal is to build a high-income market-led economy over the next two decades. The new growth strategy must embrace markets that guide the most efficient allocation of resources by facilitating competition and deploying taxes and other price instruments that guide market behavior. 
It should modernize institutions including effective rules and regulations that avoid adding to existing distortions. And it can rethink incentives such as smart public support and investments where justified by social benefit. For governments at all levels to do so requires comprehensive skill and involves a considerable amount of discretion. Building stronger administrative capacity, including improvements in governance where Vietnam currently underperforms, must therefore be an essential component of an upgraded development strategy.

DIEP NGUYEN