VN urged to boost productivity and skills for sustainable growth

VN urged to boost productivity and skills for sustainable growth

As traditional growth engines are losing steam, measures must be taken to improve the country's total factor productivity (TFP).

Workers at a automobile factory in Hải Phòng. VNA/VNS Photo

Việt Nam’s export-led and FDI-driven growth model has achieved significant progress over the past two decades, but traditional growth engines are losing momentum, prompting a need to enhance the country’s total factor productivity (TFP).

The IMF noted that while labour productivity has risen rapidly, it remains well below that of some ASEAN countries. Key constraints include skill mismatches, limited quality of vocational training, and a high rate of informal employment.

Around 18 per cent of workers are employed below their training level, while the foreign-invested (FDI) sector, which accounts for nearly 40 per cent of jobs and over 70 per cent of export turnover, offers substantially higher wages. This disparity has led to a 'brain drain' of skilled workers from domestic enterprises.

The IMF therefore recommended developing a comprehensive skills strategy focusing on vocational education, science, technology, engineering and mathematics (STEM), English and digital skills, while strengthening collaboration between schools, businesses and regulators to build a workforce capable of adapting to new technologies.

The institution further stressed that removing preferential treatment for state-owned enterprises and promoting fair competition would significantly improve investment efficiency and resource allocation.

Việt Nam plans to invest around US$185 billion, equivalent to 40 per cent of GDP, in major infrastructure projects during 2025–2035, including the North–South high-speed railway, Long Thành International Airport, metro lines in Hà Nội and HCM City, and two nuclear power plants in Ninh Thuận.

The IMF said this represents a rare opportunity for Việt Nam to achieve a major productivity breakthrough, provided it is accompanied by institutional, taxation, credit and public investment management reforms.

IMF simulations suggest that effective implementation of these reforms could raise medium-term growth by over two percentage points annually while keeping public debt sustainable. Success will largely depend on the quality of execution, transparency in project selection and fiscal management capacity.

To capitalise on these opportunities, the IMF identified digital transformation and innovation as Việt Nam’s 'new frontiers of growth' for the coming decade. Harnessing technology, artificial intelligence and big data could help the country overcome the middle-income trap, but this requires long-term investment in digital infrastructure, transparent institutions, and incentives for domestic enterprises to adopt advanced technology.

The IMF concluded that Việt Nam’s next stage of development will hinge primarily on efficient resource use and innovation capacity rather than the sheer volume of investment. 

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