Viet Nam’s Path to High-Income Status Through Business-Friendly Regulatory Reforms

The World Bank report highlights Viet Nam's progress under Resolution 68 in simplifying business regulations but calls for bold reforms, digital transformation, and risk-based approaches to unlock productivity growth and achieve high-income status by 2045. Prioritizing strategic sectors and improving institutional coordination are key to sustaining economic momentum.


CoE-EDP, VisionRICoE-EDP, VisionRI | Updated: 18-12-2024 09:13 IST | Created: 18-12-2024 09:13 IST
Viet Nam’s Path to High-Income Status Through Business-Friendly Regulatory Reforms
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The World Bank, in collaboration with Vietnam’s Prime Minister’s Advisory Council on Administrative Procedure Reform (ACAPR), has published a detailed report highlighting the urgent need to improve business regulations to foster productivity growth and achieve high-income status by 2045. Vietnam’s remarkable economic progress over the last three decades has been driven by export-oriented policies and foreign direct investment (FDI), but to sustain this momentum, structural reforms in regulatory governance are crucial. Resolution 68 (2020-2025), a government-led initiative, aims to streamline administrative procedures, cut compliance costs, and reduce regulatory burdens by at least 20%. By December 2023, the program had simplified or removed over 2,789 business regulations, signaling notable achievements. However, challenges persist, particularly the lack of baseline data for measuring progress, uneven engagement across ministries, and a limited focus on the most impactful reforms. Regulatory inefficiencies remain a significant barrier to innovation, market-entry, and economic dynamism, highlighting the need for more strategic and transformative measures in the coming years.

Streamlining Regulations to Unlock Business Potential

While Resolution 68 has made progress, the report underscores that Vietnam’s regulatory quality still lags behind regional peers like Malaysia and Thailand. Businesses frequently cite cumbersome licensing requirements, inconsistent public service delivery, and complex administrative procedures as key obstacles. For instance, obtaining construction permits or import licenses in Vietnam often requires lengthy approval processes with significant uncertainty, deterring investment and innovation. The current approach, which focuses on reducing the number of documents or shortening processing times, is incremental and insufficient to address systemic challenges. Many of these procedures continue to rely on manual submissions and in-person visits, reflecting the limited adoption of digital-first solutions. The report identifies sectors like renewable energy, technology, and advanced manufacturing as critical to Viet Nam’s economic transformation. Streamlining regulations in these high-growth industries could unlock new opportunities, attract investment, and accelerate productivity gains. A case study on wind turbine manufacturing revealed that regulatory bottlenecks, such as unclear incentives and administrative delays, are slowing the sector’s growth despite its vast potential to contribute to Vietnam’s green economy.

Digital Transformation for Efficient Regulatory Delivery

Digitalization is a cornerstone of regulatory reform, and Vietnam has made some progress with initiatives like the National Public Service Portal (NPSP) and digital payment platforms. However, most administrative processes remain partially digitized, requiring businesses to submit paper documents and visit government offices for approvals. The report emphasizes the need for a fully integrated, end-to-end digital government-to-business (G2B) service delivery system. A key recommendation is the implementation of the “Once-Only” principle, where businesses provide information to government agencies only once, and the data is seamlessly shared across ministries. This requires strengthening Vietnam’s data interoperability framework and transitioning from unstructured documents, such as PDFs, to standardized, machine-readable formats. By leveraging digital technologies, Viet Nam can significantly reduce compliance burdens, improve transparency, and enhance the efficiency of regulatory delivery. Additionally, the report calls for a legal framework that fully supports digital-first approaches, ensuring that electronic submissions are treated as original and legally valid documents.

Addressing Resource Misallocation for Productivity Growth

The report identifies resource misallocation as a major constraint on Viet Nam’s productivity growth. In a healthy economy, resources such as capital and labor should flow toward the most productive firms, but in Vietnam, less productive businesses often survive while high-potential, innovative firms struggle to scale. This misallocation stifles competition, slows economic transformation, and reduces overall productivity. Regulatory barriers exacerbate this challenge by discouraging market entry and limiting access to finance for small and medium enterprises (SMEs) and startups. The report highlights that regulatory reform can promote a process of “creative destruction,” where inefficient firms exit the market and resources are reallocated to more productive businesses. This would require prioritizing reforms in industries with significant growth potential, such as electronics, information technology, and renewable energy. Targeted reforms, including risk-based licensing and inspections, could lower entry barriers and encourage innovation, enabling Vietnam to transition to a high-productivity economy.

Strengthening Institutional Oversight and Coordination

The effectiveness of regulatory reform depends on strong institutional oversight and coordination, and while Viet Nam has made strides in this area, gaps remain. APCA, the agency leading Resolution 68, plays a central role in overseeing implementation, but limited resources and weak accountability mechanisms have hampered its efforts. Ministries often struggle to calculate compliance costs accurately, leading to inconsistent reporting and delays in reform implementation. The report recommends strengthening APCA’s capacity through additional resources, training, and clearer mandates to coordinate reforms across ministries. Furthermore, inter-agency collaboration should be improved to address regulatory overlaps and ensure coherence in policy implementation. Establishing clear accountability mechanisms and encouraging greater private sector participation through public consultations and feedback channels are essential to driving reforms forward. Businesses consulted for the report acknowledged the government’s efforts but emphasized the need for more ambitious measures to address systemic challenges.

Toward a Modern and Transparent Regulatory Environment

Viet Nam’s progress under Resolution 68 provides a strong foundation for future reforms, but achieving high-income status by 2045 will require bolder and more transformative measures. The report proposes adopting a risk-based approach to business licensing, where regulatory intensity is calibrated based on the risk level of each economic activity. This would enable a more targeted and efficient allocation of government resources while reducing burdens on low-risk businesses. Additionally, introducing a horizontal legal framework for licensing would standardize processes, eliminate inconsistencies, and improve transparency. Future regulatory reforms should prioritize high-growth sectors, promote end-to-end digital solutions, and focus on measurable outcomes, such as reduced compliance costs and increased investment. By aligning its regulatory framework with international best practices and embracing digital transformation, Vietnam can create a modern, transparent, and business-friendly environment that drives sustained productivity growth and economic resilience. This will not only unlock the potential of domestic enterprises but also position Vietnam as a competitive player in the global economy.

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