Viet Nam has experienced remarkable productivity growth over the past three decades, leading to a significant increase in per capita GDP and lifting millions out of poverty. The shift of labour from agriculture to non-agricultural sectors has been a major driver of this growth. However, the potential for further growth based on labour reallocation is diminishing, as the supply of low-cost labour from agriculture declines and demographic changes occur.
To maintain momentum, new drivers for productivity growth are needed, which are discussed in this paper. The quality of the labour force and the functioning of the labour market will be pivotal for future growth. and sustained economic growth will depend on increasing productivity through innovation, skills development, technology and higher value-added production. At the same time, this economic transformation must be inclusive, job-rich, and translate productivity gains into broad-based increases in labour income.
This paper provides a framework for understanding the systemic changes in Viet Nam’s economy and the challenges to which labour market institutions and policies need to respond. It serves as a background document and “theory of change” for the evolution of Viet Nam’s economic model and the reform of its Employment Law which will take place from 2023 to 2025.
We invite you to explore the insights presented in this paper, shedding light on the interconnectedness of labour market institutions, policies, and broader national policy areas. By understanding and harnessing these connections, we can achieve inclusive, productive, and sustainable economic growth in Viet Nam.
