Vietnam must take four steps to boost innovation in its economy, a new World Bank report has said.

“Sustaining high growth over an extended period will depend on an aggressive agenda to spur
learning and innovation”, according to The World Bank and the Ministry of Planning and Investment of Vietnam, authors of the report. “The reiterative process of seeking new technologies to improve production is at the heart of an innovation-led economy”.

1. Increasing business competition

First, it should increase competition within industries. “Raising competitive pressures will force firms to seek knowledge to stay in business”, it said.

A lack of competitive pressure creates an environment where “labour productivity does not have to grow to ensure a firm’s survival”, leading to stagnant growth, it wrote.

According to the 2015-2016 Global Competitiveness Report, Vietnam ranked 56th out of 140 countries on overall competitiveness.

2. Keep updated with tech trends

Second, it should help firms keep up with tech trends, exposing local companies to global production technologies and processes. This “gives an advantage to the fastest-learning firms and prepares them to seek ‘frontier knowledge’”.

“While Vietnam has numerous interventions and programs for accelerating technology learning in firms, few are effective, the World Bank said. “Many are too slow or bureaucratic,and they lack experienced, successful technology entrepreneurs and managers”, it added.

3. Boost R&D

Third, the country should improve the quality and quantity of its research and development efforts, and focus on skills training.

It envisions Vietnam’s government research institutes and tertiary education institutions providing insights and connections to international examples, “responding to the need for relevant knowledge and skills”.

Currently, “R&D is conducted almost exclusively in the public sector” and “only a few dozen [units] have reputations for doing useful, high quality work”, it wrote.

Local entrepreneurs have a “poor opinion” of the government’s research quality and their collaboration with private sector. “Substantial reform in [government research institutes] and universities — and tighter links between them — should be a central element that precedes funding increases”, it added.

Vietnam has separate systems for conducting public sector research and for training researchers through the education system, which “raises the costs of both systems while lowering effectiveness”, it said.

4. Improve standards of education

Fourth, the nation should improve the quality of universities and institutes of higher learning. This requires greater independence from the communist government.

At present, decisions to set up more education institutions “are still subject to governmental review or approval”, it found, where “even the most independant tertiary education institutions operate within narrow confines for spending, generating revenue, and establishing salary and enrollment policies”.

“Total undergraduate enrollment increased by 57 percent between 2005 and 2012. But the country barely kept pace with its competitors in G20 and OECD countries”, it found.

“Accelerating technological change means that this problem will worsen unless bolder and quicker reforms are adopted”, the World Bank warns.

However, the report concluded that Vietnam is on the right path: “The government’s effort to create new model universities in partnership with economically advanced countries is a step in the right direction. This experiment should be replicated and rapidly scaled up throughout the system.”

Image by William, licensed under CC BY-ND 2.0