Institutional breakthroughs enhance national competitiveness.

Over the past decade, Vietnam has achieved many outstanding successes in growth and poverty reduction. The draft Political Report submitted to the 14th National Congress of the Communist Party of Vietnam clearly states: "The political system is key, the economic system is central, and other systems are very important."

Báo Tin Tức•07/11/2025

Photo caption — Con Dao is a national tourist area with a comprehensive and modern infrastructure, possessing a strong brand and competitiveness with the region and internationally. (Illustrative photo: Huynh Son/TTXVN)

This policy reflects the inheritance and development of innovative thinking, while affirming that development institutions are the central pillar in the national development strategy for the period 2026-2035, particularly emphasizing the leading role of economic institutions in productivity, innovation, and national competitiveness.

However, the development process is still hampered by many "institutional bottlenecks" such as overlapping legal systems, an unequal business environment, limited policy implementation capacity, and unclear decentralization and accountability mechanisms. These limitations diminish the dynamism of the private sector, stifle innovation, and affect the competitiveness of the economy.

In the context of digital transformation, green economy, knowledge economy, and deep integration, the need to improve institutions has become more urgent than ever. A modern development institution is not only a complete legal framework but also requires restructuring the relationship between the State, the market, and society, creating a favorable environment for sustainable growth.

Developments in the Party's thinking

Over eight Party Congresses since the milestone of comprehensive reform in 1986 (from the Sixth to the Thirteenth Congresses), the Party's understanding of the economic system has continuously developed, from an administrative management mechanism to a complete socialist-oriented market economy. While the Sixth Congress paved the way for a shift in thinking, the Ninth Congress established the theoretical foundation for a socialist-oriented market economy. The Tenth and Eleventh Congresses continued the views on perfecting the institutional structure. By the Twelfth and Thirteenth Congresses, institutional thinking reached a modern, integrated, and development-oriented level. This consistent process reflects the Party's vision of building a dynamic, transparent, and efficient economic system, creating a foundation for sustainable growth and enhancing national competitiveness in the new era.

The policy of "continuing to comprehensively and synchronously build and perfect the institutions for rapid and sustainable national development; in which the political institution is key, the economic institution is central, and other institutions are very important" in the draft Political Report submitted to the 14th National Congress of the Communist Party of Vietnam reflects the strategic vision of the Communist Party of Vietnam in the transitional period to a new era of development – the era of the digital economy, the green economy, and deep international integration. First and foremost, this is a continuation and development of the institutional reform thinking that has been formed through many previous Congresses. While previous Congresses focused on perfecting the socialist-oriented market economy institutions, this draft Political Report broadens the vision, considering development institutions as a comprehensive system, interconnected between political, economic, and social institutions, ensuring the harmonious operation of the entire socio-economic system.

Secondly, this policy affirms the decisive role of institutions in rapid and sustainable development. Domestic and international experience shows that countries with transparent, dynamic institutions capable of promoting innovation and protecting the legitimate rights of economic entities tend to have higher productivity and competitiveness. Identifying political institutions as key reflects the need to strengthen leadership capacity and ensure political stability – the foundation of development; while placing economic institutions at the center affirms that the economy is the pillar that provides material resources for development.

Thirdly, this policy has profound practical significance in the context of Vietnam entering a new stage of development with many challenges: slowing growth, weak innovation, low competitiveness, climate change, and strong digital transformation. A comprehensive, transparent, and effective development system will be a prerequisite for unlocking resources, especially from the private sector, promoting sustainable development, and enhancing the nation's standing.

Fourth, this policy reflects the "institutional development" mindset – viewing institutions not merely as management tools, but as drivers of development, ensuring economic growth goes hand in hand with social progress and environmental protection. This represents a new development in the Party's thinking, consistent with modern governance trends and the goal of making Vietnam a developed, high-income country by 2045.

The main institutional bottlenecks in the economy.

Firstly, the legal framework and economic policies are overlapping. Vietnam's legal system currently comprises over 300 laws and codes, with many important legal documents already enacted. However, one of the key obstacles to perfecting the socialist-oriented market economy in Vietnam is this overlapping. For example, in the areas of land, investment, and bidding, the level of overlap is very high. Therefore, reviewing and adjusting the laws to overcome the overlaps between the Land Law and the Bidding Law, especially in the articles related to "investors," "joint ventures," "economic organizations," and "land-use projects," is essential for the more effective operation of the socialist-oriented market economy.

Secondly, there is an institutional bottleneck regarding property rights in the socialist-oriented market economy. In the context of building a socialist-oriented market economy, property rights – including tangible assets (such as land, factories, machinery) and intangible assets (such as copyrights, industrial property rights, inventions, trademarks) – are key factors in ensuring efficient resource allocation and encouraging innovation. The institutional framework for property rights in Vietnam – both tangible and intangible – is at a crossroads between theory and practice. For tangible assets, ownership limitations and administrative procedures remain significant obstacles; for intangible assets, although the legal framework has improved, connections to capital markets, commercialization, and business support systems are still incomplete. Improving the institutional framework for property rights is both a prerequisite for stimulating stronger private sector development and a crucial factor in enhancing national competitiveness and promoting innovation.

Thirdly, the institutional framework for accessing resources such as capital, land, and technology remains limited. In reality, most private enterprises face difficulties in obtaining credit due to a lack of collateral, complex documentation, and higher interest rates compared to state-owned or foreign-invested enterprises. Regarding land access, a 2024 survey by the Vietnam Chamber of Commerce and Industry (VCCI) showed that nearly 74% of businesses had to postpone or cancel their business plans due to complicated land-related administrative procedures. Furthermore, the mechanisms supporting the transfer and application of new technologies are not truly effective, hindering the private sector's innovation and productivity improvement. As a result, private enterprises struggle to accumulate sufficient resources to invest in innovation and participate deeply in global value chains, thereby slowing down the process of enhancing competitiveness and reducing the private sector's role in driving national economic growth.

Impact on innovation and national competitiveness

The private sector is currently a crucial pillar of Vietnam's economy, contributing approximately 50% of GDP and employing nearly 85% of the workforce (VCCI, 2024). However, when institutions lack incentives for development – through complex administrative procedures and limited access to resources – private enterprises cannot fully play their innovative role as expected. 35% of businesses reported still having to "pay additional informal costs" to complete investment procedures (VCCI, 2024). Consequently, many businesses remain stuck in the processing stage, lacking investment in technology and the capacity to lead higher value chains.

Regarding institutional quality, according to UNDP assessments, up to 60% of private enterprises reported being "discriminated against" in accessing resources compared to state-owned enterprises (VCCI, 2024). These limitations hinder the formation of medium and large-scale enterprises capable of leading innovation and participating deeply in global value chains – thus preventing the country's competitiveness from improving as expected.

In reality, labor productivity in Vietnam's domestic private sector is still only about 36% of that of the state sector and 22% of that of the FDI sector (VCCI, 2024). Although the private sector makes a significant contribution, most are still small businesses lacking the resources to invest in R&D and high technology. Without addressing institutional bottlenecks, Vietnam will struggle to escape the "middle-income trap" and achieve a highly competitive position internationally.

In the context of digital transformation, green economy, knowledge economy, and deep international integration, Vietnam needs to shape a new, more constructive, modern, and flexible institutional model for development to meet the requirements of rapid, sustainable development and global integration. This institutional model must ensure the central role of the market, alongside the guidance and leadership of a developmental state, creating a favorable environment for innovation and enhancing national competitiveness.

First and foremost, institutions must be built in a constructive and market-oriented direction; in which the State does not deeply intervene in economic activities but focuses on policy planning, perfecting the rules of the game, and ensuring fair competition. The market needs to be given a leading role in resource allocation, especially capital, land, energy, and data – factors that determine productivity in the digital age.

Furthermore, the new institutional model must be digital and green. Digital institutions require that all public administration and public services be digitized, transparent, and data-integrated, minimizing transaction costs for citizens and businesses. Alongside this, green institutions are a cornerstone for Vietnam's transition to a sustainable growth model, aiming for net zero emissions by 2050. A green finance mechanism, a carbon market, and preferential policies for renewable energy projects and clean technology innovations need to be established.

Finally, Vietnam needs to build an effective knowledge-based and decentralized system, where knowledge, science, and innovation become key drivers. The legal framework should encourage businesses to invest in research and development (R&D), protect intellectual property, develop a digital workforce, and foster strong connections between businesses, universities, and research institutes. Simultaneously, it is necessary to strengthen decentralization and accountability for local governments, making the economic system more dynamic and adaptable to global changes and international integration standards.

In summary, the institutional model that Vietnam needs to aim for in the new phase is a constructive, digital, green, knowledge-based, and decentralized institutional model; in which the State plays a guiding and constructive role, the market is central, businesses are the agents of innovation, and the people are at the center of development. This is the foundation for Vietnam to break through, catch up with the trends of the times, and firmly advance into the era of green, digital, and knowledge-based development.

Source: https://baotintuc.vn/kinh-te/dot-pha-the-che-nang-cao-nang-luc-canh-tranh-quoc-gia-20251107115528783.htm