Institutional Reform: Vietnam’s Quest to Evolve Into an Innovation Powerhouse
Sydney Finver | Sydney Smith
Image Source: https://www.independent.co.uk/travel/asia
In the last decade, Vietnam has undergone a remarkable technological transformation, positioning itself as one of Asia’s emerging innovation hubs. Once ranked 59th in the Global Innovation Index; Vietnam is now ranked 44th, second among the 37 lower-middle-income economies. This upward trajectory reflects Vietnam’s expanding talent pool, startup ecosystem, and government support. According to Australia’s National Science Agency (CSIRO), 85% of the top 500 Vietnamese businesses have upgraded their technology, 81% have invested in research and development (R&D), with 41% focusing their R&D efforts on core technologies. Vietnam’s institutional reform prioritizes innovation, including key sectors such as semiconductor development, software, financial technology development, and artificial intelligence, which have ultimately allowed Vietnam to reshape its economic landscape.
The Vietnamese startup ecosystem is thriving, with six privately held startups valued at over $1 billion (unicorns) and 5,500 startups in 2025. A leading example, VNLife, is a technology unicorn, offering a compelling array of products that expand beyond a national scale. The company offers a broad range of multifunctional products ranging from banking enablement, digital payment systems, travel, and retail solutions. A pioneer in the digital payment sector, VNlife introduced national interoperable QR code payments, which have now successfully expanded to cross-border payments with countries such as China, Japan, and South Korea. VNlife’s payment platform offers a multifunctional product that integrates cybersecurity, AI, big data, and blockchain, enhancing operational efficiency. Ho Chi Minh City and Hanoi have become the pillars for developing businesses, together attracting nearly $2.8 billion in capital flows, with VNLife contributing $0.5 billion alone.
One of the primary reasons that Vietnam is poised to expand and accelerate its technological innovation is the government’s development of initiatives and policies that promote creativity and protect intellectual property (IP). On August 13, 2025, Vietnam introduced a comprehensive amendment to its IP Law that serves as a protection mechanism for tech corporations. This amendment established a legal framework that will continue to push technological innovation in Vietnam by improving accessibility, encouraging business development, and enhancing the enforcement mechanisms of IP rights. Additionally, on July 1, 2025, Vietnam implemented the Law on the Organization of the People’s Courts, which includes provisions for the creation of two specialized IP courts: one in Ho Chi Minh City and one in Hanoi. These two cities are the primary hosts of centralized entrepreneurial startup ecosystems, making them ideal hubs for IP adjudication. This represents a significant advancement in stark contrast to the Vietnamese government’s previous IP enforcement. Under the earlier Intellectual Property Rights Infringement Prevention Cooperation Program, only 5 of the 776 IPR cases in 2023 were managed through judicial proceedings.
The advancement of STEM education and tech-centered fields is another catalyst driving innovation growth in Vietnam. The government is advancing STEM education through a higher education network incentivized through a performance-based funding approach. Universities demonstrating a robust STEM research and training program will receive priority in investment aligned with regional socio-economic development. Through this approach, Vietnam is compelling universities to contribute significantly to national innovation objectives. In 2024, Vietnam produced over 57,000 IT graduates, with more than 400 universities offering STEM-based programs. The government aims to expand enrollment to 1 million STEM students by 2030. This rapid growth in the talent pool is expected to foster greater competition and ingenuity in technology sectors, positioning Vietnam as a regional leader in technological development.
Through strategic initiatives aimed at promoting technological invention and education, the Vietnamese government has established a sustainable framework to drive the nation’s innovation momentum. Major objectives are underway that will put Vietnam’s long-term visions into action. In December 2024, Vietnam’s Politburo issued Resolution 57-NQ/TW, which identifies key priorities necessary to both advance Vietnam’s science and technology development and to leverage these achievements as catalysts for economic growth. The components of the resolution focus on strengthening Vietnam’s higher education system, attracting international talent, and elevating its position on the world stage. The resolution introduces a phased strategic timeline, spanning from transitioning into a science and technology-driven nation by 2030 to achieving global competitiveness by 2045. Strategic objectives for 2030 include earning a position among the top three nations in ASEAN for AI R&D, and ranking among the top 50 countries globally for e-government and digital economy. By 2045, Vietnam anticipates breakthrough innovation, with the emergence of at least five Vietnamese tech firms achieving regional and global influence.
Although Vietnam is making substantial headway in developing a tech ecosystem that fosters ingenuity, its current institutional framework underscores particular vulnerabilities. Unfortunately, the nation does not have the capacity to evolve fast enough to adapt, let alone dominate, in the technological market, given the speed at which technology evolves in modern day. This issue is largely enforced by low national investment in innovation, limited availability of high-skilled labor, and heavy dependence on foreign technology and infrastructure. Perhaps the most evident problem Vietnam faces is its dependence on assembly and end-stage processing within the technology supply chain. As of 2024, a staggering 24% of the national GDP is attributed to manufacturing. Looking at a regional neighbor, South Korea also has 24% of its GDP in manufacturing; however, the nation is a global powerhouse in advanced technology, with its economy anchored by a large, high‑skill service sector that champions industries such as electronics and automobiles. Vietnam’s economy is unusually dependent on manufacturing and is stuck in a low-value trap that prevents it from becoming globally competitive. South Korea’s success can be a testament to Vietnam’s potential.
Vietnam is currently facing the same lower-middle-income stagnation that South Korea managed to escape in the mid-2000s through aggressive R&D initiatives that pivoted the nation toward innovation-driven development. The state-coordinated R&D programs proved lucrative, pushing the nation’s R&D expenditure to a global peak of 5.2% of GDP in 2022 (second globally) and securing fourth place in the Global Innovation Index. Although Vietnam’s R&D investment was 0.4% in 2023, it is on a path similar to South Korea’s. The nation can position itself to break the manufacturing trap by fully translating its 2045 ambitions into tangible innovation capacity.
The ongoing challenges Vietnam faces– difficulty of regulatory adaptation to fast-evolving technologies, low national investment in innovation, limited availability of high-skilled labor, and heavy dependence on foreign technology and infrastructure– are precisely what Vietnam’s 2045 initiatives are working to resolve. To become a leading nation in technological development, Vietnam must first prioritize shifting its institutional frameworks and expanding its citizens’ capacity to prosper and drive the vision of world-class technology status. Vietnam is actively working to increase government investment, expand opportunities for skilled labor development, and attract FDI, and is making remarkable progress towards reaching its 2045 goals.
In achieving an education and innovation-friendly regulatory framework as the initial momentum for national development, Vietnam is ushering in a new era. Vietnam’s modernized frontier paves the way for potential technology specializations to arise, including ingenuity in smart climate and agriculture, as well as healthcare and medical technologies. The implementation of an adaptive innovation policy would mark a critical turning point in Vietnam’s international standing. Offering judicial stability will no doubt spur growth in foreign direct investment (FDI). In aggregate, Vietnam is clearly establishing a shift towards an economy based on intellectual capital, where innovation stands as the cornerstone of national advancement.
Sydney Finver (Barnard ’28) is an editor for the Columbia Emerging Markets Review studying Economics, Social History, and Political Science. She is passionate about understanding how domestic policy decisions influence broader economic and geopolitical dynamics. In her free time, she enjoys listening to British Invasion and 1970s rock music.
 |
|