According to economist Pham Chi Lan, Vietnam can only achieve sustainable double-digit growth when institutional reform is placed at the center, business freedom is protected, and the policy environment becomes truly transparent. In this interview with VietNamNet, she offers her perspective on what it would take to realize this ambition.

Vietnam has set a target of achieving average GDP growth of 10% or more in the coming years. In your view, what is the key condition for making this target sustainable?

Pham Chi Lan: In my opinion, institutional reform and the protection of business freedom must be placed at the heart of development policy. No matter how much new capital is mobilized, how many stimulus packages are introduced, or how many new FTAs are signed, these measures will only be effective if businesses and citizens trust the law, believe in policy consistency, and see competent enforcement from the state apparatus.

Sustainable high growth cannot be built on expanding investment or exploiting more resources. It must rest on productivity, innovation, and the competitiveness of domestic enterprises - coupled with improved income levels and greater consumer purchasing power.

Consumption accounts for about two-thirds of GDP, and the domestic market remains the primary playing field for most Vietnamese businesses. If income growth slows, the middle class shrinks, and the domestic market lacks sufficient demand, it becomes extremely difficult to motivate businesses to invest or expand production capacity - even if public investment or exports are increasing.

That’s why reforming the business environment isn’t just about reducing institutional costs. It’s also about creating better jobs, increasing incomes, boosting consumption, and building a large, competitive domestic market. This includes reducing monopolies and encouraging new business models and technologies, even among small businesses and household enterprises.

The goal of 10% growth is both an aspiration and a stern test of our institutional capacity. What matters isn’t the number itself, but how we achieve it. If high growth is based mainly on expanded investment and credit, while institutional reform, oversight, and execution lag behind, then the long-term cost will be very high.

On the other hand, if this goal becomes a genuine driver for reform - removing barriers for businesses, protecting business freedom, and boosting productivity and innovation - then it could put us on a positive development trajectory. High growth is only sustainable when it comes from the internal strength of businesses and the people.

How would you assess the competitiveness and productivity of Vietnam’s private enterprises as we pursue this high-growth goal?

Private enterprises now contribute over 51% of GDP. So if Vietnam is to grow at double-digit rates, this sector must also grow at double-digit rates.

Looking back at nearly four decades since Doi Moi, Vietnamese businesses have come a long way. Starting almost from zero - when private enterprise was viewed with suspicion, and there was a lack of capital, technology, and legal frameworks - they’ve grown into exporters earning billions of USD, and bold investors in high-risk industrial and tech sectors. These are remarkable achievements, largely born of their own perseverance.

But at the macro level, especially in terms of productivity, there’s still a significant gap between the current state of domestic enterprises and what’s required for sustainable 8–10% growth. This gap reflects not only internal limitations but also institutional weaknesses and inefficient resource allocation. When businesses spend excessive time and resources on red tape, overlapping inspections, or unclear regulations, there’s naturally less left for technology, workforce training, or R&D.

I don’t believe Vietnamese businesses are “afraid of innovation.” The truth is, they are forced to innovate in a policy environment full of risks - where every long-term investment decision carries anxiety about unpredictable regulatory changes. In such conditions, it’s understandable that some choose caution or delay technology upgrades. But ultimately, that’s a cost borne by both the business and the broader economy.

So to raise productivity, we can’t just tell businesses to try harder. We need bold institutional reform and better legal implementation. If we reduce institutional costs, and ensure policy is stable and predictable, the potential for productivity and competitiveness among Vietnamese businesses is far greater than what we see today.

Among the current growth drivers - public investment, FDI, and domestic private enterprises - which do you see as the decisive long-term engine?

To me, the long-term engine of Vietnam’s growth must be the domestic private sector.

Public investment plays a role in paving the way. FDI brings capital, technology, and market access. But no sector can replace the internal strength of Vietnamese businesses - where knowledge, competitive capacity, and the country’s spirit of innovation are concentrated.

In fact, we’ve already seen the emergence of a sizable group of private companies willing to tackle difficult sectors that require modern management and long-term vision. This proves that Vietnamese businesses can reach the regional level - if they’re supported by a stable, transparent, and innovation-friendly policy environment.

However, for this sector to truly become the growth engine, the most critical task is to remove long-standing barriers - from policy uncertainty and high compliance costs to unequal access to resources. If the business environment still makes firms “afraid to grow,” then sustainable growth remains out of reach.

So, if we truly see the private sector as the key driver, the first thing that must change is not the wording in official documents, but the mindset of the state. The government must shift from control and licensing to rule-setting, post-audit enforcement, and real protection of property rights and business freedom. When the rules are clear and predictable, the private sector will naturally take the lead - because its internal strength will have been unleashed by the right institutions.

Some argue that Vietnam should prioritize domestic enterprises over FDI in the next phase of development. What is your view?

In my view, framing it as a choice between “FDI or domestic enterprises” is misleading.

Vietnam still needs FDI - that’s a fact. In many industries, we lack long-term capital, core technology, modern management capacity, and international business networks that multinational corporations can provide.

Moreover, when properly managed, FDI can create positive competitive pressure, forcing local firms to improve standards, and providing opportunities for collaboration and learning.

But we also need to recognize that for years, we’ve focused too much on FDI numbers - registered capital, number of projects, job creation - without asking the right questions: What have Vietnamese firms learned? How much do they participate in the value chain? Are they gaining real opportunities to scale up?

If FDI simply relies on cheap labor and tax incentives, while most of the added value stays with foreign firms through design, technology, distribution, and support industries, then the long-term benefits to our economy will be limited.

That’s why I believe the next phase of policy must move from “attract at all costs” to “selective, conditional attraction.” Key conditions should include the extent of linkage with domestic firms, technology transfer, participation of local labor and suppliers, and value added created in Vietnam. At the same time, we must build a truly level playing field, where Vietnamese firms have equal access to land, credit, information, and opportunities - instead of being disadvantaged on home turf.

A sustainable economy is one where domestic enterprises are strong enough to both cooperate with and compete fairly against FDI.

Tu Giang & Lan Anh

To be continued...