Science and technology, innovation, and digital transformation have grow to be key drivers of financial progress in Vietnam over current years, strengthened by main Party and State insurance policies. These three pillars haven’t solely improved productiveness and progress high quality but in addition accelerated the shift towards a more fashionable and sustainable improvement mannequin.
To obtain annual double-digit financial progress throughout the 2026-2030 interval, Politburo Resolution No. 57-NQ/TW, issued on December 22, 2024, recognized science and technology, innovation, and nationwide digital transformation as the primary engines of socio-economic improvement. The Resolution marks a strategic shift from a progress mannequin depending on capital and low-cost labor to 1 pushed by productiveness, technological development, and innovation. This transition hinges on addressing three main challenges: financing, human sources, and institutional reform.
Meanwhile, Politburo Resolution No. 68-NQ/TW, issued on May 4, 2025, positions the non-public sector as a number one power in advancing science and technology, innovation, and digital transformation. Yet financial constraints stay a key barrier. Small and medium-sized enterprises (SMEs) account for 97 per cent of non-public companies in Vietnam, however many face restricted financial capability and poor competitiveness.
In response, the Vietnamese Government has launched financial insurance policies to assist science and technology, innovation, and digital transformation as half of its progress agenda. Funding will be mobilized by three foremost sources: the State finances, home and overseas companies, and different organizations.
Current state of financial useful resource mobilization
R&D funding
Over current years, funding for R&D in Vietnam has remained comparatively restricted in scale, although it has proven indicators of enchancment. According to stories from varied organizations and the Ministry of Science and Technology, Vietnam’s R&D expenditure stands at simply over 0.4 per cent of GDP, or solely one-quarter of the two per cent goal stipulated below the Law on the State Budget.
By comparability, international R&D spending stood at 2.62 per cent of GDP in 2021, or more than five-times the extent in Vietnam (World Bank, 2021). Relative to regional friends akin to Singapore, Thailand, and Malaysia, Vietnam’s R&D spending stays low, starting from one-quarter to one-half of these nations’ ranges.
By financial sector, the State sector continues to account for the biggest share of R&D spending, although its proportion has regularly declined, to 48.94 per cent in 2023. The non-State sector has expanded quickly and now performs an more and more vital function, accounting for 40.99 per cent in 2023. However, funding mobilized from overseas sources stays modest and has regularly declined as a share of whole R&D funding over time.
By funding supply, the enterprise sector represents the biggest contributor to R&D funding, accounting for round 58 per cent of the nation’s whole R&D spending in 2023. However, relative to GDP, enterprise expenditure on R&D in Vietnam stood at solely 0.2 per cent. Meanwhile, R&D expenditure by increased training establishments stays disproportionately low relative to their function in science, technology, innovation, and digital transformation, notably as a lot of college analysis funding nonetheless originates from the State finances.
Businesses stay the biggest buyers in R&D, with spending concentrated primarily amongst home non-public enterprises, adopted by State-owned enterprises (SOEs). R&D funding by foreign-invested enterprises, nevertheless, stays restricted.
In phrases of funding sources, most R&D actions undertaken by companies are financed internally, with enterprise funding reaching VND24.6 trillion ($946 million), equal to 74 per cent of whole enterprise R&D expenditure.
Financial assist uptake
The authorities has launched a spread of financial assist insurance policies for companies, together with incentives for technological innovation, credit score assist packages, technical consulting, and mission implementation help. However, in line with the National Agency for Science and Technology Information’s enterprise innovation survey, the proportion of companies receiving assist stays modest, primarily by technology innovation packages (23.3 per cent of surveyed companies) and credit score assist insurance policies (24.1 per cent).
By enterprise measurement, small enterprises have acquired more assist throughout all classes than bigger companies, whereas medium-sized enterprises have acquired comparatively much less consideration. This means that authorities assist insurance policies have, no less than initially, centered on smaller companies.
Significant assist for SMEs has come from the SME Development Fund, established in 2019 below Decree No. 39/2019/ND-CP, dated May 10, 2019. The fund gives preferential loans to revolutionary startups, companies taking part in industrial clusters, and companies built-in into worth chains. However, disbursement ranges and the worth of indirectly-approved loans by business banks have steadily declined. Both the quantity of supported initiatives and the worth of financial help fell between 2019 and 2023.
Assessment and coverage implications
Progress made and remaining constraints
Vietnam has adopted a coverage requiring a minimal of 2 per cent of State finances expenditure, just lately elevated to three per cent, for science and technology analysis, together with each infrastructure funding and recurrent analysis spending. However, implementation has remained difficult in apply.
Financial insurance policies supporting enterprise R&D and science and technology actions have delivered some preliminary outcomes. A proportion of companies have accessed authorities assist, together with funding for technological innovation, credit score packages, technical help, and project-based assist. These insurance policies have additionally inspired companies to allocate sources to R&D, making the enterprise sector the biggest contributor to nationwide R&D spending.
Vietnam has launched a number of strategic initiatives geared toward reforming the mobilization and use of sources for R&D and innovation, notably following Politburo Resolution No. 57. However, more concrete implementation insurance policies are wanted to translate these strategic priorities into apply.
Despite progress, important limitations stay in insurance policies designed to mobilize sources for science, technology, and innovation in Vietnam. Total R&D expenditure stays low at round 0.5 per cent of GDP, far beneath ranges seen in South Korea, China, Malaysia, and Thailand. Both the size of R&D funding and the stability between public and non-public funding stay weaker than in many middle-income economies in the area.
The evaluation additionally reveals that financing for science, technology, and innovation actions in Vietnam continues to rely closely on State finances assist. Though rules require no less than 2 per cent of whole State finances spending to be allotted to R&D, this threshold has by no means been totally met in apply.
Ministry of Finance information (2025) reveals that the best allocation was in 2024, reaching just one.97 per cent. Limited funding unfold throughout quite a few initiatives has resulted in comparatively small common grant sizes. In addition, a lot public spending on science and technology is channeled by ministries and companies, producing appreciable administrative prices and procedural burdens, regardless of current enhancements.
Public funding in R&D infrastructure additionally stays restricted, with capital expenditure accounting for lower than 50 per cent of whole public R&D spending. As a consequence, infrastructure for prototyping and scaling new applied sciences stays underdeveloped, leaving many innovation initiatives stalled on the laboratory stage. This limits researchers’ entry to finish innovation cycles, hinders commercialization efforts, and reduces Vietnam’s attractiveness to high-tech initiatives, which require supporting ecosystems together with suppliers, laboratories, and testing amenities (World Bank, 2025). Weak public analysis infrastructure additionally limits companies’ potential to depend on public-sector experimental assist for innovation.
Low ranges of R&D funding from each the general public and non-public sectors have additional constrained the event of coaching and analysis infrastructure, notably in high-tech industries. In apply, Vietnam’s non-public sector has but to grow to be a significant driver of innovation, as many companies proceed to depend on imported applied sciences or incremental enhancements quite than unique R&D outcomes.
Businesses, notably SMEs, proceed to face main boundaries in accessing State-backed financial assist funds. Loan utility procedures stay advanced and pricey, whereas rates of interest and compensation phrases are sometimes considered as unattractive. Businesses even have restricted consciousness of State assist insurance policies for R&D, science and technology, and innovation. At the identical time, alternatives for companies to take part in public science and technology initiatives and packages stay restricted.
Tax incentives for innovation have had solely modest results. While companies do make investments in innovation and R&D, many fail to formally file these expenditures in ways in which qualify for tax incentives. Broader challenges additionally stay, together with governance mechanisms for R&D actions and analysis workforce capability. Other useful resource mobilization insurance policies have solely just lately been launched and nonetheless lack clear implementation pointers.
Policy suggestions
To strengthen a progress mannequin pushed by science and technology, innovation, and digital transformation in Vietnam, stronger coverage reforms are wanted to mobilize financial sources. Several coverage priorities are proposed.
First, set up co-financing mechanisms for enterprise R&D, below which the State would fund 30-70 per cent of mission prices, with enterprises contributing the rest. This would assist share dangers and enhance SMEs’ potential to check new applied sciences.
Second, pilot authorities procurement or buying mechanisms for revolutionary merchandise developed by companies, creating market demand for startups. Tax incentives for R&D must also be expanded in line with insurance policies that settle for increased funding dangers in science, technology, innovation, and digital transformation.
Third, simplify and streamline disbursement procedures for SME assist funds, whereas introducing low preferential rates of interest of round 2-3 per cent, drawing on the experiences of South Korea and China, and extending mortgage tenors. The governance of assist funds must also shift towards market-based ideas.
Fourth, strengthen consciousness campaigns and steerage for companies on tax and financial incentives associated to R&D, science and technology, and innovation, whereas simplifying entry procedures.
Fifth, introduce stronger assist mechanisms to assist companies combine into international and home worth chains, enabling entry to superior applied sciences and sources for R&D and innovation. Support must also be expanded for mental property registration and the transition to science and technology enterprises, making companies eligible for presidency financial help.
Sixth, reform public sector financial administration for science and technology actions by simplifying State finances procedures and putting larger emphasis on accountability for closing outcomes, whereas decreasing administrative intervention.
Seventh, strengthen public-private partnership mechanisms in R&D and innovation. However, cautious consideration should be paid to technology choice, as worldwide expertise reveals that poor selections can result in wasted sources and missed alternatives.
Eighth, improve State finances funding in technology infrastructure, together with each {hardware} and software program techniques.
Ninth, make investments more closely in human capital improvement for R&D and innovation.
Tenth, set up stronger mechanisms to advertise significant public recognition of researchers and analysis achievements, transferring past symbolic or purely ceremonial approaches.
(*)Associate Professor Vu Sy Cuong is from the Academy of Finance.