Vietnam stands at a critical turning point where research and development (R&D) is no longer an option but a necessity. As the country strives to escape the middle-income trap and join the ranks of high-tech nations, scaling up R&D investment will define its economic trajectory for decades to come.

R&D: A crucial missing piece

Nearly 40 years of economic reforms have propelled Vietnam into the ranks of the world’s fastest-growing economies. However, to sustain its momentum in the Fourth Industrial Revolution, Vietnam must dramatically enhance its R&D capabilities. Without this, the country risks being trapped between low-cost manufacturing economies and high-tech powerhouses.

Despite its importance, R&D remains an underdeveloped sector. Total R&D investment, including both public and private funding, is less than 0.7% of GDP - far below regional competitors. In contrast, China allocates 2.68% of GDP to R&D, enabling rapid technological advancement. Additionally, the gap between research and application in Vietnam remains significant, limiting the commercial viability of innovations.

Vietnam’s R&D workforce is also lacking in both quantity and quality. The country has fewer than 10 researchers per 10,000 people - only 7.6% of South Korea’s rate, 13% of France’s, 29.8% of Malaysia’s, and 58% of Thailand’s. Furthermore, over 84% of Vietnam’s R&D professionals work in the public sector, while the private sector - where most innovation occurs - accounts for less than 14%.

Higher education also falls short of supporting innovation. Only 29% of Vietnamese citizens aged 18-29 are enrolled in university, significantly lower than the 50% average in upper-middle-income countries. Additionally, Vietnam lacks globally competitive universities, research institutes, and private enterprises capable of leading large-scale R&D projects. The country’s research environment remains uncompetitive, driving many top scientists and engineers abroad in search of better opportunities.

Another major challenge is Vietnam’s fragmented R&D ecosystem. The government plays a largely regulatory role, while private companies operate independently, with little collaboration with universities and research institutions. Vietnam has also failed to fully leverage partnerships with global tech giants to transfer knowledge, develop talent, and attract R&D investment.

A bold strategy to accelerate R&D investment

Raising R&D investment to 2% of GDP by 2030 is not merely an ambition - it is an imperative. This increase would enhance national competitiveness and drive sustainable development. To achieve this goal, Vietnam needs a comprehensive strategy built on three pillars: increasing public R&D funding, incentivizing private-sector investment, and attracting global tech corporations. A coordinated approach across these areas will create a dynamic R&D ecosystem, positioning Vietnam as a leader in innovation-driven growth.

Government investment in R&D is the foundation for technological breakthroughs. Increased public funding signals strong national commitment, encouraging private-sector participation in research and innovation.

Global success stories demonstrate the power of public R&D investment. Israel allocates over 1% of GDP to publicly funded research, making it a global tech leader. South Korea directs government funding toward national research centers and high-tech industries like semiconductors, inspiring massive private-sector investment.

To follow suit, Vietnam should raise public R&D spending from the current 0.2% of GDP to 0.5% by 2025 and continue increasing it thereafter. This would provide the financial foundation needed to drive cutting-edge research and innovation.

Encouraging domestic enterprises to invest in R&D

Large domestic enterprises have the financial strength, talent, and management expertise to lead significant R&D projects. When these companies invest in innovation, they not only develop new technologies but also strengthen entire industry value chains, boosting overall economic growth.

Tax incentives can play a crucial role in supporting corporate R&D efforts. Policies such as tax deductions for R&D expenses and lower tax rates for high-tech ventures would encourage businesses to invest in fields like artificial intelligence, renewable energy, and semiconductor technology.

Talent retention is another critical issue. Vietnam is experiencing a brain drain, with top AI and data science professionals relocating to countries like Singapore, Japan, and the U.S., where salaries and career prospects are more attractive. The government must work with domestic enterprises to retain and develop top talent by offering competitive salaries, career development programs, and global research collaborations.

South Korea successfully addressed this challenge in the 1990s by supporting Samsung’s partnerships with universities, producing a new generation of skilled engineers and transforming Samsung into a global tech leader. Vietnam must adopt a similar strategy, integrating industry, academia, and government to create a high-quality research workforce.

Attracting global tech giants to establish R&D centers

Foreign investment in R&D not only brings capital but also accelerates knowledge transfer and local talent development. A prime example is Samsung’s $220 million R&D center in Hanoi, which not only drives technological innovation but also trains thousands of Vietnamese engineers.

To attract more such investments, Vietnam must position itself as a prime R&D destination by offering:

Tax exemptions for major R&D centers for the first 10-15 years.
Lower corporate tax rates for investments in cutting-edge technologies like AI, renewable energy, and semiconductors.
Simplified administrative procedures to reduce bureaucratic obstacles for foreign investors.
Leveraging global expertise: The key to accelerating Vietnam’s innovation capacity

While financial investment is critical, human capital remains the decisive factor in R&D success. Vietnam must maximize access to global knowledge by attracting top-tier international experts and leveraging its overseas talent pool.

Bringing leading global researchers to Vietnam can:

Provide direct access to cutting-edge scientific advancements.
Facilitate collaboration between Vietnamese researchers and international networks.
Create a mentorship system where foreign experts train and develop local talent.

To achieve this, Vietnam should introduce special policies such as long-term visas, tax incentives, and research funding to attract world-class experts.

Additionally, Vietnam has a vast pool of overseas talent working at top R&D centers worldwide. The government should develop programs that encourage these professionals to contribute to Vietnam’s innovation ecosystem - whether by returning home or collaborating remotely.

Building an integrated R&D ecosystem

Vietnam’s current R&D ecosystem is fragmented, lacking coordination between research institutes, businesses, and universities. To foster innovation, the government must actively facilitate these connections and integrate Vietnam into global R&D networks.

By aligning national policy with industry needs and global trends, Vietnam can break free from its reliance on low-cost manufacturing and emerge as a high-tech leader.

Now is the time for a bold and decisive R&D transformation.

With strategic investment, talent development, and global collaboration, Vietnam can transition from a manufacturing economy to an innovation powerhouse, securing its place among the world’s leading technology-driven nations.

Dr. Pham Manh Hung & Assoc. Prof. Dr. To The Nguyen
Lecturers, University of Economics, Vietnam National University, Hanoi