Innovating the growth model to break through and avoid the middle-income trap

In the context of increasingly fierce global competition, strong supply chain restructuring and a new industrial revolution reshaping the world economy, the 14th National Congress of the Communist Party of Vietnam is expected to establish landmark decisions for the country's long-term development.

Speaking to VNA reporter in Paris, Professor Nguyen Van Phu, Director of Research at the French National Center for Scientific Research (CNRS), said that the economic orientations set out at the 14th Congress marked an enting strategic shift to build a foundation for sustainable and high-quality growth for Vietnam in the coming period.

According to Professor Nguyen Van Phu, the focus of economic orientations at the 14th Congress is to innovate the growth model, shift from depending on cheap labor, exploiting raw resources and attracting foreign direct investment (FDI) in quantity to a development model based on knowledge, high technology, innovation and labor productivity.

In particular, the private economic sector is identified as the central driving force of growth, along with strong investment in education, science and technology, digital transformation and building a national innovation ecosystem.

He emphasized that this is the key to Vietnam avoiding falling into the middle-income trap or the middle-growth trap, a situation where growth will only remain at 6-7% for a long time without being able to break through to higher development stages.

From the practical research, Professor Nguyen Van Phu believes that if productivity and growth quality are not strongly improved, it will be difficult for Vietnam to consolidate its long-term development foundation, despite the remarkable achievements in the recent period.

In reality, although Vietnam maintains a growth rate of 7-8% per year and reaches 27.62 billion USD of FDI disbursed in 2025, the highest level in the past 5 years, the economy still depends heavily on the FDI sector, with about 70% of export turnover coming from this business sector.

Meanwhile, domestic enterprises are still limited in capital, technology and management capacity. Competition in the region is increasingly fierce as economies such as India, Indonesia, Thailand and Malaysia are stepping up attracting high-quality FDI in strategic areas such as semiconductors, data centers, electric vehicles and the green economy with very strong incentive policies.

According to Professor Nguyen Van Phu, in that context, the messages of the 14th Congress need to emphasize a selective and upgraded development strategy.

First of all, it is necessary to selectively attract FDI, prioritize projects associated with technology transfer, innovation and closely link with the "Make in Vietnam" orientation.

Along with that is strong institutional reform, reducing administrative procedures, increasing transparency, improving reliability in policy making and predictability. Supporting the private economic sector to form "locomotive enterprises" with regional and global competitiveness is also considered by him a key task.

At the same time, it is necessary to focus on developing strategic industries such as semiconductors, artificial intelligence (AI), biotechnology, healthcare, digital economy, green economy, along with clean and high-quality agriculture.

Professor Nguyen Van Phu especially noted that a new highlight in the development orientation is the strategy of attracting non-FDI financial flows through the construction of the International Financial Center (IFC) in Ho Chi Minh City and Da Nang City.

Although the initial scale is still modest, this "one-stop-shop-one-stop-shop" model is expected to diversify capital sources for the economy, reduce dependence on traditional bank and FDI credit, and promote digital transformation and green transformation.

According to the orientation, Ho Chi Minh City is identified as a center for financial transactions, banking and capital markets, with the goal of attracting from 5-20 billion USD in initial financial capital by 2027, while Da Nang focuses on developing financial technology (fintech), start-ups, technology investment funds and green finance.

Professor Nguyen Van Phu believes that if effectively implemented, these IFCs can attract 10-15 billion USD in financial capital flow each year until 2030, thereby contributing to GDP through more effective capital allocation and reduction of transaction costs.

However, he also noted that Vietnam will have to compete directly with highly developed IFCs such as Singapore and Hong Kong (China), while the domestic capital market is still limited in scale, liquidity and high-quality financial human resources.

In general, the orientations of the 14th Congress are correct and necessary, but success depends on the decision on the ability to implement quickly, consistently and substantially. Vietnam is no longer the "cheap default choice".

To maintain its position in the leading group of the Association of Southeast Asian Nations (ASEAN), Vietnam must compete with institutional quality, innovation and policy reliability.

In 2026, therefore, it is a pivotal year: if reform is promoted, Vietnam can strengthen its role as a new production and financial center of the region; otherwise, the risk of stagnating in the middle-income trap and gradually losing the advantage over India or Indonesia is completely present.

Discussing institutional improvement and the investment-business environment, Professor Nguyen Van Phu highly appreciated the fact that the draft documents submitted to the 14th National Congress for the first time identified the private economy as the "most important driving force" of the economy, and at the same time considered institutional improvement as the key to removing development bottlenecks.

However, he said that to create trust and real motivation for the business community, including Vietnamese businesses and overseas investors, it is necessary to focus on removing some key bottlenecks.

Administrative reform needs to be implemented substantially, due to complicated procedures, lack of stability and transparency, which are increasing costs and risks for businesses.

Promoting digitalization according to the "one-stop, one-stop" model will significantly shorten the time for project approval to help businesses focus on production and innovation, while creating trust for foreign and overseas Vietnamese entrepreneurs who are familiar with an effective and stable business environment.

In addition, enhancing transparency and ensuring equal competition in access to land, credit and resources is considered a prerequisite to unlock resources for the private economic sector and attract capital, technology and knowledge from outside.

Completing the mechanism for monitoring, protecting ownership and intellectual property rights according to international standards will unlock resources, reduce risks for investors and facilitate the formation of large-scale private enterprises. This is also a key factor to attract capital, technology and knowledge from abroad and overseas Vietnamese.

Professor Nguyen Van Phu also emphasized the need to improve capital access and promote innovation, especially for small and medium enterprises, through developing the private capital market, encouraging venture capital funds, green finance and tax incentives for innovation activities.

Along with that is education-training reform and policies to attract talent, especially overseas Vietnamese with experience and a global network, through tax incentives, salary incentives, startup and research support programs. However, there should be regulations on scientific integrity to avoid using scientists both domestically and internationally with problems with ethics.

Professor Nguyen Van Phu proposed that the Party and State focus on strategic sectors to serve the country's development needs based on innovation, such as STEM, high-tech, healthcare, new energy and renewable energy, clean and high-quality agriculture, economic governance, etc.

Specifically, Vietnam needs to further promote the training of high-quality human resources for these strategic sectors. IFCs in Ho Chi Minh City and Da Nang need to quickly build a training program for financial experts and economic managers necessary for their operations.

At the same time, build a mechanism to connect "state-business-scientific-house" (for example, the form of doctoral training according to the French CIFRE model) to develop scientific research, serve the needs of businesses, and improve the internal strength of the economy in the field of research and development.

Professor Nguyen Van Phu affirmed that if the above bottlenecks are removed through concrete actions and quick implementation, the orientations of the 14th Congress can strengthen market confidence, improve growth quality and make Vietnam an attractive destination for high-quality investment, towards the national development goal by 2045. On the contrary, if it only stops at statements, Vietnam will find it difficult to break through in an increasingly fierce regional competitive environment.

In the context of extensive international economic integration, affected by US-China strategic competition, supply chain restructuring and the 4.0 Industrial Revolution, Professor Nguyen Van Phu said that the 14th National Congress of the Communist Party of Vietnam needs to provide special orientations and mechanisms to effectively mobilize resources from the overseas Vietnamese community, especially Vietnamese entrepreneurs and intellectuals in France.

According to the Professor, overseas Vietnamese not only contribute in bribes - estimated at about 16 billion USD in 2025 - but also bring technological knowledge, management experience and valuable international connectivity networks. This is a strategic resource for Vietnam to achieve high growth targets associated with green transformation and digitalization.

To effectively exploit this resource, it is necessary to shift from a "mobile" approach to a "real mobilization" based on transparent institutions and an equal investment environment.

According to him, the 14th Congress needs to concretize the viewpoint of considering overseas Vietnamese as an inseparable part of the nation through perfecting the legal framework, ensuring ownership and financial investment without discrimination in nationality, along with tax incentives for green and high-tech projects.

Considering the establishment of an overseas Vietnamese Investment Fund with the participation of overseas Vietnamese in governance is also considered a direction to effectively mobilize this resource in strategic areas such as digital infrastructure, AI and renewable energy.

At the same time, it is necessary to implement programs to attract Vietnamese experts abroad through long-term visas, salary incentives, taxes and research support, as well as build a digital platform to connect domestic intellectuals, businesses and projects with the overseas Vietnamese network.

For the Vietnamese community in France, it is possible to prioritize strengths such as AI, biotechnology, healthcare, digital finance and green economy.

The Congress should expand the mechanism for overseas Vietnamese to participate in policy advisory councils, business consulting and governance programs, regardless of whether they are inside or outside the political system, thereby bringing advanced governance experience from Europe to the private economic sector and state-owned enterprises, contributing to the formation of large-scale, regional-competitive corporations, both private and state-owned.

According to Professor Nguyen Van Phu, if supported by an independent monitoring mechanism and seriously implemented, these orientations can mobilize more financial and human resources from overseas Vietnamese by 2030, thereby helping Vietnam overcome the middle-income/average growth trap and enhance its position in the global value chain.

For overseas Vietnamese in France, this is also an opportunity to promote the role of an economic and knowledge bridge between Vietnam and Europe, making a practical contribution to the sustainable development of the country.

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