Vietnam is aiming high, with plans to elevate its status to a high-income nation by 2045. This audacious goal signifies a pivotal shift in Vietnam’s economic trajectory. The vision of the country’s General Secretary, To Lam, is for a period of ascendance, driven by technological innovation and industrial modernisation. However, realising this vision is more than just words, and Vietnam faces significant hurdles like institutional barriers and global economic uncertainty.

The Communist Party of Vietnam (CPV), the country’s ruling party, is expected to officially adopt the ‘era of ascendance’ at its 14th National Congress in January 2026. Alongside Prime Minister Pham Minh Chinh, To Lam is championing economic modernisation, digital transformation, and industrial advancement. While these objectives are commendable, their implementation has been inconsistent. Vietnam continues to be heavily reliant on low-cost manufacturing and foreign direct investment (FDI), raising questions about its long-term economic sustainability.

Despite governmental incentives for tech-based industries and digital infrastructure, bureaucratic inefficiencies and inconsistent regulations continue to stifle private sector growth. Without institutional reforms that build transparency and streamline decision-making, Vietnam risks economic stagnation instead of economic growth.

Currently, Vietnam’s economic strategy does not adequately address the rise in US trade protectionism. The US’s drive to bring production home and impose higher tariffs could disrupt Vietnam’s export-oriented model. And while Vietnam is part of major trade agreements such as the CPTPP and RCEP, structural barriers prevent it from fully leveraging these deals.

Building stronger economic connections with the US, particularly in high-value sectors like semiconductor manufacturing and digital services, will put Vietnam in a favourable position. To maintain its competitive edge amid changing global supply chains, Vietnam needs to adopt a more proactive trade diplomacy strategy.

Vietnam has set an annual GDP growth target of 6-7 per cent, a goal threatened by inefficient resource allocation. Despite significant public investment in regions like the Red River Delta and Southeast, some high-growth regions remain underfunded, leading to infrastructure and service bottlenecks.

Urbanisation is on the rise in Vietnam, with the urban population growing from 30.5 per cent in 2010 to 41.5 per cent in 2022. Major urban centres like Ho Chi Minh City are facing growing infrastructure pressures, while rural provinces like Thanh Hoa are grappling with depopulation. To ensure sustainable and inclusive growth nationwide, a more dynamic long-term investment strategy is crucial.

The CPV’s anti-corruption campaign, known as the ‘burning furnace’, has strengthened public trust in governance. However, it has also led to unintended consequences such as bureaucratic paralysis, with officials hesitant to approve major economic and infrastructure projects.

A more balanced approach is needed, enforcing accountability without hindering decision-making. Clear regulatory mechanisms can provide much-needed clarity for both domestic and foreign investors.

According to the World Bank, high-income economies are those with a GNI per capita above US$13,205 (the 2023 threshold). Vietnam’s current GNI per capita is around US$4,110, a significant gap requiring major economic transformation to bridge.

Lessons can be learned from South Korea and Singapore, both of which successfully transitioned to high-income status through targeted reforms, human capital development, and investment in innovation. In contrast, other Southeast Asian countries have lagged behind due to persistent structural constraints.

Vietnam’s next steps should include prioritising education reform, research and development, and integrating domestic firms into global supply chains. Decree No. 111/2015/ND-CP aims to boost Vietnam’s supporting industries, but progress has been slow.

However, escaping the middle-income trap is not just about reaching an income threshold. Long-term success hinges on institutional quality, economic complexity, and a robust innovation ecosystem. At the National Conference on Breakthroughs in Science, Technology, Innovation and National Digital Transformation in January 2025, To Lam highlighted the need for investment in science and technology. Despite the government allocating 3 per cent of its annual budget to research and development, actual implementation has been weak. To address this, Vietnam plans to increase funding to 2 per cent of GDP by 2030, aligning with the Politburo’s Resolution No. 57 (December 2024).

The ‘era of ascendance’ is more than a slogan — it’s a test of Vietnam’s ability to overcome structural limitations and emerge as a high-income economy. The next two decades will determine whether the country achieves this goal or remains mired in economic stagnation.

The path forward requires decisive action: institutional reforms to improve governance, policies that attract high-value investment, and a strategic shift towards innovation-driven growth. With the right blend of state-led direction and market-driven dynamism, Vietnam has the potential to ascend to new heights in the global economy.

Do Khuong Manh Linh is a fellow in political science and international relations at the Institute of Politics and International Relations, Ho Chi Minh National Academy of Politics, Vietnam.

Originally published on East Asia Forum under the title “Can Vietnam’s ‘era of ascendance’ break the middle-income trap?”.