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Vietnam

Overview

Vietnam has had a centrally planned economy for a long time before shifting to a mixed and partly market economy in the 1980s. Today, Vietnam is a middle-income country with a medium human development index (UNDP HDI 2015). According to market analysts, it is among the most promising emerging markets and economies (cf. the emerging market grouping 'CIVETS' and the Next Eleven countries). Vietnam is characterised by its mixed economy type where the government plays a pivotal role, establishing five-year plans for economic development. Vietnam is a member of international and regional organisations such as ASEAN (which it joined in 1995), WTO, APEC and ACEM. The major industries in Vietnam are food, textile, machine-building, mining and petroleum. The share of agriculture in the economic output has decreased from around 25% to 17% between 2000 and 2014, correspondingly. The gross domestic product (GDP) growth rate of the country was significant during the last decade (growing from US$66 billion in 2006 to US$193 billion in 2015) with an average annual GDP growth rate of 6.12%. Major economies of ASEAN experienced a significant drop in their GDP in 2009, whereas Vietnam only had a slight decrease to 5.4% growth at that time (World Bank 2016).

The GDP composition by sector of origin looks as follows: 17.4% of agriculture, 38.8% of industry and 43.7% of the service sector. Vietnam has a labor force of almost 55 million people. The occupation by sector is mainly concentrated in agriculture (48%), while less people work in industry (21%) and services (31%). The unemployment rate fluctuates around 3%. The Inflation rate decreased from 23.0% in 2011 to 0.6% in 2015. According to the Asian Development Bank, Vietnam needs to continue developing into a full market economy in order to be integrated into global competitions and the global value chains in a long term perspective (Asian Development Outlook 2016). Much space for improvement is left in corruption and the environment for business. According to the Corruption Perceptions Index 2015, Vietnam takes the 112^th position out of 167countries. In the Doing Business report of 2015 the country ranks 90^th out of 189 - facts, which both mean a challenge for the economy of the country.

As said, Vietnam’s economic growth has been steady with renewed growth dynamics since 2012 (growth was back at above 6% in 2015). Balanced macroeconomic policies restored stability and investor confidence along with export-oriented manufacturing and growth of foreign direct investment (FDI). In 2011 Vietnam was one of the ASEAN region's major recipient countries of inward FDI. In 2015 Vietnam is the third among ASEAN countries by means of FDI inflows after Indonesia and Singapore (for the first time slightly above Malaysia). In addition, FDI inward stock skyrocketed from US$14.730m in 2000 to US$102.791m in 2015 and put Vietnam at 5^th position after Singapore, Indonesia, Thailand and Malaysia (UNCTAD 2016).

Despite the upward trends visible in several economic indicators (e.g. GDP growth, FDI inflows and inward stock), the gross domestic expenditures on R&D as a percentage of GDP (GERD) remained stable between 2002 (0.18%) and 2011 (around 0.2%). Still, in absolute values, it increased five times during the same period (2002-2011). In the context of ASEAN countries, Vietnam's R&D intensity (GERD/GDP) lies in between fellow Member States': Singapore (2.2%), Malaysia (1.13%), Thailand (0.4%) spend more, the Philippines (0.12%) and Indonesia (0.08%) less. Governmental expenditures on R&D account for the biggest share during the last decade: in 2010 around 75% compared to 20% from business and 4-6% from abroad (both multinationals and development cooperation). In terms of GERD by performing sector, the government sector is ahead (with around 65% of expenditure), followed by higher education (around 18%) and the business sector (15%) (OECD 2014; CRDS/JST 2015).

In recent years, Vietnam maintained an almost constant position in the Global Innovation Index (ranking 51^st in 2011 and 59^th in 2016). Regarding the Global Competitive Index, Vietnam showed a slight improvement from 65^th to 56^th position from 2011 to 2015 by enhancing basic requirements (e.g. infrastructure, macroeconomic environment and health and primary education).

Pillars of competitiveness according to the Global Competitiveness Index	2011-2012 (out of 142)	2012-2013 (out of 144)	2013-2014 (out of 148)	2014-2015 (out of 144)	2015-2016 (out of 140)
Global Competiveness Index (GCI) Ranking	65	75	70	68	56
Basic requirements	76	91	86	79	72
1 Institutions	87	89	98	92	85
2 Infrastructure	90	95	82	81	76
3 Macroeconomic Environment	65	106	87	75	69
4 Health and primary education	73	64	67	61	61
Efficiency enhancers	66	71	74	74	70
5 Higher education and training	103	96	95	96	95
6 Goods market efficiency	75	91	74	78	83
7 Labor market efficiency	46	51	56	49	52
8 Financial market development	73	88	93	90	84
9 Technological readiness	79	98	102	99	92
10 Market size	33	32	36	34	33
Innovation and sophistication factors	75	90	85	98	88
11 Business sophistication	87	100	98	106	100
12 Innovation	66	81	76	87	73

Table 1 Vietnam in the Global Competiveness Index 2011 - 2016
(See Schwab, The Global Competiveness Report 2011-2012, 2012-2013, 2013-2014, 2014-2015, 2015-2016, WEF)

Pillars of Innovation according to the Global Innovation Index	2011 (out of 142)	2012 (out of 144)	2013 (out of 148)	2014 (out of 144)	2015 (out of 141)	2016 (out of 128)
Global Innovation Index (GII) Ranking	51	76	76	71	52	59
Innovation input sub-index ranking	63	83	89	100	78	79
Innovation output sub-index ranking	42	59	54	47	39	42
Innovation efficiency ratio	20	27	17	5	9	11
1 Institutions	84	112	122	121	101	93
2 Human capital & research	85	107	98	89	78	74
3 Infrastructure	56	75	80	99	88	90
4 Market sophistication	39	49	73	92	67	64
5 Business sophistication	58	56	67	59	40	72
6 Knowledge & technology outputs	56	58	51	49	28	39
7 Creative outputs	31	70	66	58	62	52

Table 2 Vietnam in the Global Innovation Index 2011-2016
(See Dutta et al., The Global Innovation Index 2011, 2012, 2013, 2014, 2015, 2016 INSEAD)

Science, Technoloy & Innovation Policy

Along with its impressive economic growth since the 1980s, Vietnam has started to focus on science, technology and innovation (STI) development since the late 1970s. Vietnamese STI policy development may be divided into several phases. First, during the period from 1979-1986, science and technology (S&T) was fully controlled by the government, including the allocation of resources, R&D funding and providing educational activities. However, a governmental decision in 1981 allowed for the first time to sign R&D contracts, which laid the ground for establishing an STI system in the future.

The second phase of STI development in Vietnam started in 1987 with the removal of the state monopoly on R&D, meaning that private R&D organisations were allowed to make contracts with individuals and non-public organisations. In addition, a legal basis for intellectual property rights (IPR) was established and the National Council for Science and Technology Policy was founded (1992). Nevertheless the public funding of S&T was exclusively provided by governmental organisations, prioritising further S&T development and trends. The GDP growth accelerated and reached more than 8% (comparing to the early 1980s when it was less then 3%), which allowed Vietnam to achieve its socio-economic objectives and was also related to Vietnam's accession to ASEAN (1995).

The third phase of STI development began with the introduction of a reform of subsidies to a number of governmental research organisations (1996). Research centres were established (to strengthen links between S&T and production), innovation infrastructure started to develop (technology parks were founded), national laboratories were created and the first law on S&T was passed.

The fourth phase started with the introduction of the STI national strategy in 2003, which was meant to cover the period until 2010 (Science and Technology Development Strategy by 2010). It mainly aimed at identifying priority areas (e.g. biotechnology, ICT, mechanic-electronic technologies, etc.), improving the innovation infrastructure and speeding up the country’s industrialisation and modernisation processes (OECD 2014).

The general objectives of the strategy were:

Fostering international integration in terms of STI development by providing facilities for foreign investors, companies and research institutes to establish R&D units in the country
Changing funding mechanisms of public R&D organisations along with the creation of new national organisations to support innovation infrastructure development: the National Foundation for Science and Technology Development (NAFOSTED) in 2008 and the National Technology Innovation Fund (NATIF) in 2011
Reinforcing STI policy by establishing supporting units for the Ministry of Science and Technology of Vietnam, such as the State Agency for Technology Innovation (2007), the Vietnamese Science and Technology Evaluation Center (2006) and the National Agency for Technology Entrepreneurship and Commercialisation (2011)

Some quantitative goals were mentioned in the strategy. For instance, it was planned to achieve 1.5% of GERD as of the total GDP by 2010 (however, in 2011, GERD was 0.2% of GDP (OECD/World Bank 2014)), to increase the number of R&D institutes (between 1995 and 2005 the total number doubled from 519 to 1220 institutes) and to extend business expenditures on R&D (business share increased from 18.1% of all R&D expenditures in 2002 to 28.4% in 2011) (CRDS/JST 2015).

Today, Vietnamese STI policy development entered into a new phase, which is focused on establishing a sustainable national innovation system (NIS). Socio-economic development plans, IPR laws, and a national technology innovation fund were established along with a new S&T Development Strategy for the 2011-2020 period. The overall objective of the strategy is to develop S&T and to make it a key driving force of the economic development. Furthermore, by 2020, Vietnam plans to reach the level of S&T performance of its advanced ASEAN partners. Concerning specific targets, Vietnam is heading to:

Make science, technology and innovation drivers of economic growth. High-tech products of Vietnam should account for 45% of GDP. The speed of technology innovation is considered to reach 20% a year for the period 2016-2020. The transaction value of the S&T market is considered to be increased at least 15% per year on average
Increase the number of innovations registered for protection of about three times comparing to the 2006-2010 period (especially the number of innovations invented from the state key S&T programs)
Rise the total social investment in S&T to the level of about 2% of the GDP by 2020
Extend the number of officers in charge of scientific research and technological development to 11-12 persons per 10,000 people and to prepare qualified staff in terms of innovation management
Establish research institutes and organisations. By 2020, 60 basic research organisations working on the regional and international level, 5,000 S&T enterprises and 30 high-tech technology and enterprise incubators are considered to be created.

In addition to the above mentioned objectives, the Ministry of Science and Technology published some key directions for the S&T development (See: Vietnam Key Directions of S&T for the period 2016-2020).

Generally, the Vietnamese STI policy aims at improving economic indicators, integrating the country into the world economy and establishing a sustainable innovation infrastructure. The S&T strategy, which is the main tool to bring these objectives into practice, has exact tasks: reforming the R&D system and management mechanism (by restructuring the organisational system in Vietnam, changing financing mechanisms for R&D, encouraging private-public partnerships (PPP) in research and development), developing national S&T capacity (by establishing R&D centres of excellence, high-tech parks and technology transfer systems) and setting specific priority areas meant for development (ICT, biotech, new material and automatic technologies).

Figure 1: Strategic solutions for Vietnam Science and Technology Strategy
(Source: http://sstforum.org/2012/data/sp/1-5.Ta%20Doan%20TRINH.pdf)

Structure of Research System

Since Vietnam is a socialist economy, the government defines almost all activities and states development plans and programs. The Ministry of Science and Technology, being a governmental agency, performs functions of the state management of S&T, including carrying out S&T activities, developing S&T potential, managing intellectual property, setting standards, engaging in metrology and quality control, atomic energy and nuclear safety. The ministry is a complex organisation, which includes several state management function units:

11 departments
6 agencies
5 other supporting units (including the Directorate for Standards and Quality (STAMEQ)

Further it includes the following administrative units:

6 centres for S&T
5 offices of S&T related activities
6 institutes for development
2 funds
5 press agencies

Another important body in the Vietnamese research system is the National Council for Science and Technology Policy (NCSTP). The main function of the NCSTP is to advise the Prime-Minister concerning STI policy with the objective of making the country internationally competitive and to support the transformation to a knowledge-based economy. The Council’s operational expenditures are provided by the state budget with the help of the Ministry of Science and Technology. The council regularly invites a number of high-ranking experts and scientists to participate in the council’s research activities.

Another significant body is the Vietnam Academy of Science and Technology (VAST), which is a government agency (established in 1975), committed to carry out basic research in natural sciences and technology development, to provide grounds for S&T management, to shape policies, plans and strategies for the socio-economic development and to prepare qualified human resources for S&T management. Its organisational structure includes 57 subordinated units (33 research units (27 established by the government and 6 units by VAST), 6 administrative units, 4 self-financing units, 1 state enterprise and 7 other units). Additionally, about 600 R&D institutes and more than 150 universities exist in Vietnam.

Figure 2: Organisational Chart of Ministry of Science and Technology
(Source: http://www.most.gov.vn/Desktop.aspx/Introduction/Organizational-Chart/Organization_chart_of_MOST/)

Research performing organisations

As of 2012, over 950 public R&D organisations (pertaining to Ministries and other state organisations) exist in Vietnam (OECD 2014). The Ministry of Science and Technology plays a pivotal role in the implementation of S&T policies as well as in research. There are some supporting organisations, which assist the ministry in the implementation and initiation processes. Management and participation in policymaking functions are carried out by several ministry’s departments. For example, the State Agency for Technology Innovation (SATI) assists to fulfill state management functions and to organise activities of technology development. The National Agency for Science and Technology Information (NASATI) advises the minister in activities of S&T information, statistics, libraries and in the national database on S&T. The National Office of Intellectual Property (NOIP) advises and assists the minister in implementing management functions on intellectual property and in organising administrative activities of intellectual property. The National Agency for Technology Entrepreneurship and Commercialisation Development (NATEC) advises the minister in carrying out management functions for developing the technology market and in supporting the establishment of S&T enterprises. Administrative and policy implementation functions are carried out by the other departments. For example, the National Foundation for Science and Technology Development (NAFOSTED) operates to fulfill funding, loan provision, loan warranty and budget allocation for S&T purposes, improving the national S&T capacity building. The National Institute for Science and Technology Policy and Strategy Studies (NISTPASS) assists the minister to fulfill functions of studying S&T management strategies, policies and mechanisms. Other significant agencies are also involved in research performing processes to implement national strategies and innovation programs. For example, the National Technology Innovation Fund (NATIF) is a governmental financial institution, which provides preferential loans, subsidised loan interests, loan guarantees and grants expenses to organisations which implement and carry out research, technology transfer and innovations. The Directorate for Standards, Metrology and Quality (STAMEQ) assists the minister to fulfill state management functions of standards, metrology, and quality of commodities. The Vietnam Agency for Radiation and Nuclear Safety (VARANS) operates with functions related to nuclear safety, security of nuclear materials and nuclear units (Ministry of Science and Technology of Vietnam).

In addition to the Ministry of Science and Technology, other line ministries as well as two Academies operate public R&D organisations. Large parts of public sector research research is carried out by VAST, whose major research activities include: basic research in natural sciences and technology; research on natural resources and environment; application of research results of S&T into practice. VAST also trains and prepares high-quality human resources for S&T, organises postgraduate education in the field of STI and disseminates knowledge of scientific research. VAST researchers make proposals and supervise the implementation of key state scientific and technological programs, prepare reports and provide up-to-date information concerning trends in the field of STI. Furthermore, VAST tries to connect with researchers from all over the globe and to provide international cooperation in S&T with Vietnam and organises international conferences and workshops about S&T development. VAST has more than 4000 members, including about 198 professors, 751 doctors of science and around 900 masters of science (See: VAST Annual Report, 2014). In addition to VAST, the Vietnam Academy of Social Sciences (VASS) also runs research labs.

The university sector reports 88 R&D performing organisations (OECD 2014). Carrying out research at universities is, however, a fairly new concept in Vietnam. The major research performing universities in the country are the two National Universities in Hanoi and Ho Chi Minh City as well as the Hanoi University of S&T (HUST) and the Ho Chi Minh City University of S&T. The Ministry of Education and Training has been pushing for the establishment of 20 research universities. Some new research performing universities have been established with foreign support.

In 2000 the decision was made to create 17 National Key Laboratories, with three main goals: promoting creative scientific research whose results can be published in top international scientific journals; generating patented inventions which can be commercialised and contribute to improve the country’s S&T level; enlarging the pool of qualified scientists who can perform national S&T missions according to international quality standards. National investments in these laboratories has been modest and results mixed. The investment has been satisfactory in some areas including biotechnology, petro-chemistry and information security (OECD 2014).

R&D Statistics

In Vietnam, GERD as a percentage of GDP has not revealed significant growth during the decade 2002-2011 (0.18-0.2%). As mentioned earlier, the governmental share of GERD decreased since 2002 (from 74.1% to 64.5% in 2011), but public investments in R&D still remain the biggest. Business expenditures on research and development (BERD) climbed to almost one third of GERD in 2011 (for instance, in 2002 it was around 18%). Funding from abroad contributed 6.3% of GERD in 2010 (CRDS/JST 2015; OECD 2014).

In 2011, Vietnam had a total R&D personnel headcount of 134,781 researchers (while other ASEAN countries had much lower total figures: Malaysia had 96,961, Thailand 91,472, and the Philippines 18,111). This headcount consisted of 105,230 researchers, 9,781 technicians and 14,245 other supporting staff (data on research personnel is partly missing and was neither provided by the national government, nor by international organisations, such as the World Bank or UNESCO; status as of August, 2016).

By other significant indicators, Vietnam also appears in between other ASEAN countries. By number of publications, Vietnam-based researchers authored has 3,855 citable documents in 2015 (for instance, Malaysia has 22,357, Thailand 10,886, and Indonesia 6,040 citable documents in 2015). The total early-stage entrepreneurial activity indicator (TEA) in Vietnam is slightly above the average in Asia and Oceania (approximately 13%) with 15.3%. Still, the 'nascent entrepreneurial rate' (% of adults in the initial phases of starting a business) is only 2%, which is much lower than in factor-driven economies at the same level of development (12.4%) (according to Global Entrepreneurship Monitor). By number of patent applications, Vietnam presents low figures (99 national-level applications with inventors from Vietnam), while other ASEAN countries reveal quite high results (Malaysia (4,414), Thailand (1,037), the Philippines (636)).

Indicator	2011	2012	2013		2014		2015
Population size (mill) [1]	87.9	88.8	89.8		90.7		91.7
GDP (in billion US$) [2]	135.54	155.82	171.22		186.21		193.60
Total R&D exp [3]	US$ 236.7m (VND 5,293 billion)	--	--		--		--
GERD in %	0.2	--	--		--		--
Government R&D exp ( [4]	152,640.44 (3.413,185,000)	--	--		--		--
Business R&D exp [5]	67,227 (1.503,700,000)	--	--		--		--
Total R&D pers (HC) [6]	134,781	--	--		--		--
No of researchers (HC) [7]	105,230	--	--		--		--
Researchers per million inhabitants (HC) [8]	1,178	--		--		--		--

Table 3 Key Indicators – Vietnam’s economy, research, development

Indicator	Value	Year
Number of publications [9]	3,855	2015
Total early-stage entrepreneurial activity (TEA) rate [10]	15.3%	2014
Flow of Inward FDI [11]	US$ 11,800m (€ 10.451 billion)	2015
Stock of Inward FDI [12]	US$ 102,791m (€ 91.05 billion)	2015
Flow of Outward FDI [13]	US$ 1,100m (€ 0.97 billion)	2015
Number of patent applications [14]	99	2003-2013

Table 4 Key indicators – Vietnam’s business and research links

[1] Data from The World Bank (http://data.worldbank.org/); Current prices in US$

[2] Ibid.

[3] Data from UNESCO (http://data.uis.unesco.org/); Current prices in US$ and in Vietnamese Dong in ()

[4] Ibid.; Current prices in US$ and in Vietnamese Dong in ()

[5] Ibid.; Current prices in US$ and in Vietnamese Dong in ()

[6] Ibid.; Headcount

[7] Ibid.; Headcount

[8] Ibid.; Headcount

[9] Citables in Journals; Scimago 2016: http://www.scimagojr.com/countrysearch.php?country=vn

[10] Share of early-stage entrepreneurs in labour market population; Global Entrepreneurship Monitor: http://www.gemconsortium.org/country-profile/114

[11] UNCTAD World Investment Report 2016:http://unctad.org/en/publicationchapters/wir2016_AnnexTables_en.pdf

[12] Ibid.

[13] Ibid.

[14] National patent applications with inventors from Vietnam; Degelsegger/Philipp (2016): “Analysis of the ASEAN patent activity”, draft report, p.43

Facts on Science, Technology and Innovation