Viet Nam aims for higher-value segments in global chains

Viet Nam is entering a pivotal stage of development. After years of growth based on abundant labor and strong investment capital flows, the economy now faces a fundamental question: what will be the driver for the next journey?

At the 14th Party Congress, Viet Nam reaffirmed its strategic vision: heading toward double-digit GDP growth and reaching higher average income status by 2040. However, recent trends show that the road ahead is by no means easy.

This was analyzed in a January 2026 study by David Dapice from Columbia University, one of the experts who has closely followed Viet Nam's economic progress for many years.

He pointed out that the goal of double-digit growth is a very high threshold. Even after achieving impressive GDP growth of nearly 8 percent in 2025, Viet Nam's average growth rate for the 2020–2025 period was only 5.7 percent, much lower than the over 7 percent in previous years and far from the 8–10 percent annual target.

This slowdown is not merely cyclical: it reflects structural changes. In recent years, growth rates have shown signs of decelerating compared to the previous period.

The labor force is no longer expanding as fast as before, the process of labor transition from agriculture to industry is nearing its limit, while the demographic advantage is gradually narrowing.

This means that Viet Nam cannot continue to rely primarily on expanding the scale of capital and labor to maintain high growth momentum.

Total Factor Productivity (TFP), the most comprehensive measure of innovation and efficiency, needs to be placed at the center of the growth strategy.

Dapice calculated that to maintain a 7 percent growth rate over the next decade, Viet Nam's productivity needs to increase by about 3.6–4 percent per year, a major leap compared to the level of about 2.7 percent in the 2010s.

It is concerning that the contribution of TFP to growth is on a downward trend. While in the early 2000s, TFP contributed more than half of GDP growth, this figure has recently fallen below 45 percent.

Meanwhile, Viet Nam's economy still depends heavily on low value-added assembly activities. For example, only about one-third of the value of Viet Nam's booming electronics exports is produced domestically, meaning 35–40 percent of local added value, compared to 55–60 percent in China and over 70 percent in South Korea. 

If it continues to only play the role of an outsourcer in the global supply chain, Viet Nam will find it difficult to escape the middle-income trap.

However, the good news is that Vietnamese leaders are clearly aware of this reality. A series of recent reforms, especially the four new Politburo resolutions, often called the “four pillars,” emphasize promoting the private sector, technological dynamism, legal reform, and deeper global integration.

In mid-2025, the National Assembly also passed a historic administrative overhaul, merging the country's 63 provinces and cities into 34 larger units to streamline the administrative apparatus and “create a foundation for sustainable growth.”

These steps aim to enhance Viet Nam's institutional and organizational productivity, addressing the soft factors that help drive innovation.

Expert Chris Malone, from Dalberg Global Advisor, said for reforms to truly create a transformation, Viet Nam needs a unified strategic framework that can connect issues of scale, specialization, and innovation. 

Part of the solution will be developing regional economic clusters as a platform to lead Viet Nam's next growth phase. These steps will enhance Viet Nam's institutional and organizational productivity, addressing the soft factors that help drive innovation.

Economic clusters

In economic history, regional economic clusters have proven to be powerful drivers for upgrading productivity and added value. A cluster is not just a concentration of businesses in the same industry in one locality; it is a complete ecosystem.

This ecosystem includes linked businesses, suppliers, service providers, a highly skilled workforce, and even specialized training facilities and research institutes in a specific field.

When a region reaches sufficient scale, it can develop deep specialization and become a leading global hub in a particular industry.

Thanks to this, the nation can retain a higher percentage of added value domestically and drive faster innovation.

Source: Vietnamnet