Vietnam's Reform 2.0: Lessons from 40 years of Đổi mới and the shift to production-factor markets

Dr. Nguyễn Đình Cung, former director of the Central Institute for Economic Management (CIEM), said that institutional reform under “Reform 2.0” hinges on “the execution factor,” noting a shift in thinking at the highest levels of the country.

Key lessons from 40 years of Reform

Dr. Cung summarized the biggest lessons from Vietnam’s Reform as three points.

First, Vietnam must persist with a market-based economy. He described the approach as “the market, the market, and more market,” but stressed it must be a modern, integrated market with healthy competition rather than a distorted “patronage” market.

Second, policies should be grounded in confronting reality: assess the truth correctly, face the truth, and then issue policies and make adjustments. He said reforms only have real meaning when they originate from practical problems in life, enterprises, and people, using market tools to address them.

Third, reform succeeds only with decisive implementation. While the State plays a pivotal role, the implementation process should involve independent experts, business associations, and citizens to ensure policies move in the right direction, with oversight and without distortion.

What is different in Reform 2.0

Dr. Cung said the core thinking of “Reform 2.0” is not fundamentally different from the continuation of the transition to a full, modern, integrated market economy. However, compared with the first reform stage—focused mainly on developing the goods and services market—“Reform 2.0” must go deeper into production-factor markets.

He defined production-factor markets as those that determine the mobilization, allocation, and use of resources such as land, capital, labor, science and technology, and related resources.

State role and the “Win–Lose” nature of incentives

Dr. Cung said the State’s role must change. The State needs to be strong enough to ensure fair competition, eliminate the “patronage” mechanism, and allocate resources based on efficiency.

He also characterized “Reform 2.0” as more complex than the first stage because the current resource-allocation mechanism is linked to many rights and interests. The first reform was largely “Win–Win,” while the second reform is “Win–Lose,” where society benefits but some groups lose privileges.

Cause and development: national interest and a new growth model

Dr. Cung said the national interest is the biggest driver for the second reform. The direction is to establish a new growth model with science and technology, innovation, and digital transformation as main drivers, aiming to raise productivity and efficiency.

He argued that to increase efficiency, the market is the best tool for resource allocation—first allocation efficiency, then technical efficiency through technology—consistent with the resolutions.

Challenges: bottlenecks distorting resource allocation

Dr. Cung said the major challenge of “Reform 2.0” is removing bottlenecks that distort the resource-allocation mechanism.

Land bottleneck

He said that if land and real estate remain mainly places to store assets, seek price differentials, and collect rents, efficient resource allocation is difficult. He argued that to shift toward a productivity- and innovation-based growth model, this distortion must be addressed first.

Credit capital bottleneck

He also cited credit capital. When land becomes the most profitable channel, capital flows there instead of into production. If credit is drawn into real estate, manufacturing enterprises lack capital and science and technology remain only “slogans.”

In his view, incentives must be realigned so speculation becomes less attractive and investment in production and innovation becomes more attractive.

Using market mechanisms to realign incentives

Dr. Cung said this can be done through market mechanisms rather than administrative orders. He cited a real estate tax as an important tool to reduce speculative incentives by making holding real estate more costly and encouraging actors to abandon speculation.

Impact and analysis: changing incentives and behavior

Dr. Cung said the core of the second reform is changing incentives and behavior. If large profits can be earned easily through land and planning information, it will be difficult to expect people to devote themselves to production, research, or innovation.

He added that removing bottlenecks is not difficult because the Resolution already calls for gradual removal. He said gradual removal helps people see the direction is correct for the common good and national interests, creating positive social responses and a “new social state” with substantial impact.

Science and technology: start from business needs

On science and technology, Dr. Cung said it must start from business needs. Enterprises are the main users of technology. When the business environment forces competition on productivity, quality, and innovation, enterprises will demand technology themselves.

He said the State’s role should be to create a development space and support the connection between technology supply and demand, rather than maintaining “patronage” mechanisms in research, technology transfer, or project approvals.

Growth targets and execution: the decisive factor

Dr. Cung said remaining committed to a two-digit growth target in a world with complex geopolitics may present problems. He supported high targets because they create spirit and aspiration, but said the prerequisite is to change the growth approach, not just set a number.

He argued that high growth cannot be sustained by expanding credit, monetary stimulus, or pushing capital into superficial growth sectors. For fast but sustainable growth, Vietnam must shift to a productivity-, quality-, efficiency-, and competitiveness-based model, using science and technology, innovation, and digital transformation as main drivers.

He emphasized that society must see real change. When businesses and people observe institutional changes, efficient resource allocation, trust, and behavior shifts, social resources can be mobilized automatically. In that case, even if growth does not reach 10% but remains around 8–9%, society would still support because it sees the country moving in the right direction.

Conversely, he said if growth targets are discussed without changing the substantive meaning of growth, people and businesses will not adjust expectations and behavior, and the target will quickly become a slogan. The core, he said, is whether Vietnam can create a new growth mechanism, new growth drivers, and new trust for the private sector.

Implementation: calm execution and independent evaluation

Dr. Cung said the decisive factor for Reform 2.0 is execution. To reform the growth model successfully, Vietnam needs capable executors, an appropriate implementation team, and suitable execution methods.

At this stage, he said the priority is not issuing many new regulations, but addressing practical issues: where bottlenecks exist, fix them; where development is hindered, remove them. After specific bottlenecks are addressed, only then should a coherent legal system be designed for the new development stage. He said reform requires calm rather than haste, and work should be delegated to a truly professional team.

He added that policy proposals cannot remain only within policy-making agencies. While ministries and sectors have policy-making roles, proposals should be tested, critiqued, and evaluated by independent forces to ensure quality and feasibility.

Conclusion: changing the State’s role

In sum, Dr. Cung said the first thing the State must change is its role. When the role changes, management tools must change, the administrative apparatus must change, and governance capacity must change accordingly. He described this as a synchronized reform process rather than partial fixes.