Deal or License? Structuring Around Foreign Ownership Limits in Vietnam
July 11, 2025
Vietnam’s Digital Transformation and Innovation: Route to 6.5% Annual Productivity Gains
July 16, 2025Vietnam’s long-term productivity depends on more than technology or capital. Legal and institutional frameworks now decide whether Total Factor Productivity (TFP) can rise fast enough to reach high-income status by 2045.
Over the last decade, the government introduced ambitious reforms to improve standards, measurement systems, and enforcement capacity. Yet significant execution gaps remain. This article explains how legal modernization and stronger institutions can turn national goals into lasting productivity gains—and why investors should prepare for both challenges and opportunities.
The Productivity Policy Context: From Strategy to Implementation
Vietnam’s productivity policies have evolved through several phases. Early reforms prioritized investment promotion and trade liberalization. During the 2010s, policymakers began aligning standards and quality benchmarks with global practices to integrate further into supply chains.
Resolution No. 57 marked a significant step. It set the target for TFP to account for over 55% of GDP growth by 2030 and linked accountability for progress to ministries and provincial authorities. This emphasis reflects Vietnam’s recognition that productivity improvements must come from quality rather than quantity.
Figure: Growth Rates of Factors
This chart highlights how, despite improvements, TFP growth has often lagged behind capital accumulation as the primary driver of overall GDP performance. The data shows the importance of reforms that not only encourage investment but also increase the efficiency of how resources are used.
Why Legal Reform Is Essential for Productivity
Raising productivity requires consistent rules and predictable enforcement. Regulations define expectations for businesses and consumers, establish compliance benchmarks, and outline accountability.
Vietnam has recently drafted new laws on standards and product quality and revised metrology regulations. These measures aim to support fair competition, strengthen technical capabilities, and improve trust in Vietnamese goods.
Legal modernization is critical. Without strong enforcement, reforms risk fragmentation and low credibility. Investors frequently cite regulatory uncertainty as a barrier to scaling high-value operations.
New laws also aim to standardize requirements across provinces. For example, the draft Law on Product Quality clarifies procedures for compliance, assigns responsibilities for certifying conformity, and sets consequences for violations. While these reforms will reduce inconsistency, they also require substantial institutional investment to succeed.
Rising Labor Costs: The Urgency of Productivity Reform
Even the best-designed policies can lose momentum if rising costs erode competitiveness faster than reforms can deliver gains. Over the last decade, Vietnam has seen manufacturing wages climb steadily, narrowing the traditional labor-cost advantage that once attracted large volumes of foreign investment.
This chart shows how Vietnam’s average manufacturing wages have risen to nearly the same levels as Thailand, and are approaching Malaysia’s. While higher wages reflect improvements in living standards, they also intensify pressure on firms to upgrade processes, invest in automation, and adopt new technologies to sustain margins.
Rising labor costs mean that simple factor accumulation—adding more workers and factories—can no longer drive growth at the same pace. Productivity gains must now come from higher efficiency, better training, and faster digital adoption. For many investors, Vietnam’s appeal increasingly depends on whether legal reforms and support systems can help businesses offset these cost pressures through innovation and process improvements.
The experience of other economies underscores this dynamic. As Thailand’s wages climbed during the 2000s, firms shifted focus to higher-value manufacturing and digital integration. Malaysia combined regulatory simplification with incentives for automation to maintain export competitiveness despite wage growth. Vietnam will face the same imperative over the next decade: to make rising incomes compatible with sustained productivity growth.
Case Study: Reforming the Law on Enterprises
The 2020 revision of the Law on Enterprises offers a valuable example of how legal change can unlock growth—and why implementation is critical. Before the update, companies faced uncertainty around shareholder rights, governance structures, and reporting. These gaps raised costs and slowed approvals.
The revised law clarified the roles of boards and supervisory bodies, streamlined business registration, and introduced electronic filing. Companies reported faster approvals and more predictable compliance processes. For example, standardized templates for charter documents and clear guidance on share transfer procedures reduced ambiguity and helped investors plan with confidence.
However, early implementation revealed gaps. Some provincial authorities applied more conservative interpretations, resulting in delays. Others lacked digital infrastructure for electronic filings. Over time, the Ministry of Planning and Investment addressed these challenges through training and updates. This experience showed that reform cannot stop at the legal text; institutions must have the skills and resources to deliver on policy intent.
Comparative Snapshot: Vietnam, Thailand, and Malaysia
Vietnam is not the only country pursuing legal reform to drive productivity. Both Thailand and Malaysia have implemented targeted measures over the past decade to raise TFP and strengthen regulatory institutions. Comparing Vietnam’s trajectory to these peers highlights both progress and remaining gaps.
Thailand has focused on simplifying licensing procedures and integrating digital platforms for business registration. The Thailand 4.0 initiative established clear milestones for innovation spending and digital adoption. By contrast, Vietnam’s Resolution No. 57 emphasizes standards and metrology but still faces more fragmented institutional capacity.
Malaysia has built a reputation for predictable enforcement and transparent compliance benchmarks. The country’s MyDigital plan created a central coordinating agency and set clear timelines for rolling out e-government services across ministries. While Vietnam has made strides, implementation at the provincial level remains inconsistent.
| Aspect | Vietnam (Resolution 57) | Thailand (Thailand 4.0) | Malaysia (MyDigital) |
|---|---|---|---|
| Focus Areas | Standards, metrology, product quality | Digital licensing, innovation incentives | E-government, digital infrastructure |
| Institutional Capacity | Fragmented across provinces | Centralized agency coordination | Strong central oversight |
| Enforcement Consistency | Improving but variable | Generally consistent | High consistency |
| Key Challenge | Skills and monitoring gaps | Limited SME digital readiness | Funding scale and speed |
A Forward-Looking Perspective: Turning Reform into Results
Vietnam’s ambition is clear: achieve high-income status by 2045 and ensure TFP contributes over half of GDP growth by 2030. Legal reforms and stronger institutions are the foundation for this goal. But progress depends on translating policy into measurable outcomes.
Timely action will be critical. Draft laws on standards, metrology, and product quality need to pass without delay. Regulators must invest in training, adopt modern compliance systems, and coordinate more effectively across agencies. Public-private partnerships can help translate complex standards into practices companies can implement, especially in small and medium-sized firms.
The lessons from the Law on Enterprises and regional examples prove that clear regulations, paired with institutional readiness, can drive real change. If Vietnam applies this dual focus to its productivity agenda, it can avoid common pitfalls and sustain momentum.
At Lotus Venture, we believe that companies and investors who understand this evolving legal landscape will be in the best position to manage risks and seize new opportunities. As reforms gather pace, those who adapt early will lead Vietnam’s next phase of growth.
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