Background

Institutions play a particularly important role in economic activity in all countries in general and in Vietnam in particular. In Why Nations Fail, Acemoglu and Robinson (2012) showed that a country’s long-term prosperity is determined primarily by its political and economic institutions. While current economic institutions determine future economic performance and resource allocation, current political institutions, through the distribution of political power in society, determine the choice of future economic institutions. An institutional system that supports long-term growth must be inclusive. On the one hand, it must provide the foundations necessary for a fully functioning market economy, including protection of property rights, freedom of contract, freedom of competition, and credible law enforcement mechanisms or institutions to resolve disputes. These foundations should encourage the vast majority of people to participate in economic activities, make the best use of their talents and skills, and enable individuals to pursue what they wish. The system must also provide credible law enforcement mechanisms or institutions to resolve disputes, as well as a transparent, trustworthy government whose interventions in the economy are predictable and foreseeable. On the other hand, it must ensure an equitable distribution of economic gains, helping these inclusive institutions endure and expand.

After nearly 40 years of Doi Moi (Renovation), Vietnam has built an increasingly inclusive system of economic and political institutions. The Sixth National Congress of the Communist Party of Vietnam in 1986 launched the renovation process and introduced a policy of developing a multi-sector economy, an approach that evolved through each subsequent Congress. The Resolution of the 12th National Party Congress states: “Vietnam’s socialist-oriented market economy operates fully and consistently in accordance with the laws of the market economy, while ensuring a socialist orientation appropriate to each stage of the country’s development. It is a modern, internationally integrated market economy; … the market plays the primary role in mobilizing and efficiently allocating resources for development and is the principal driver for unleashing productive forces; state resources are allocated according to strategies, master plans, and plans consistent with market mechanisms.” In particular, in setting the country’s development directions at the 13th National Party Congress, the Party called for comprehensive and coordinated improvements to the institutions for developing a socialist-oriented market economy, creating a favorable environment for mobilizing, allocating, and efficiently using resources, and promoting investment, production, and business activities. The Party’s policies and guidelines across different periods were subsequently institutionalized in the Constitution, laws, and subordinate legal documents, gradually creating a market-friendly legal framework that encourages all citizens to participate in economic activities and international economic integration. The political institutional system has also undergone adjustments toward greater decentralization to local authorities, strengthening the National Assembly’s role in budget oversight and allocation, and creating mechanisms to encourage citizens and the business community to participate in drafting legal documents, among other changes.

Efforts to reform and develop the market economy from 1986 to the present have transformed Vietnam from a less-developed country into one of the world’s middle-income countries. This is an important time for Vietnam to review and assess its market economy institutions to prepare for its transition to upper-middle-income status by 2030, with a view to becoming a high-income country by 2045. Overall, Vietnam’s economic institutions still offer considerable scope for reform to become a genuine foundation for the next stage of development. In the Fraser Institute’s (Canada) 2022 Economic Freedom of the World rankings, Vietnam ranked 99th out of 165 countries overall. Several component indicators ranked low, including Sound Money (105/265), Size of Government (106/165), and Freedom to Trade Internationally (113/165). Although Legal System and Property Rights ranked relatively well (78/165), its absolute score remained moderate at 5.15/10, below the East Asia and Pacific regional average of 5.75/10.

Several recent studies have identified limitations in Vietnam’s economic institutions that impede economic growth. First, regarding the economic legal system governing participants in the economy, many major issues remain to be addressed, including protection of property rights, the quality of the economic legal system, barriers to market entry, equality among economic sectors in business activities, and legal shortcomings in legislation on market exit (Tran Quoc Toan, 2024). Second, limitations in the legal framework governing the state apparatus include: (i) insufficient safeguards for the rule of law, particularly limits on and oversight of state power, to promote democracy, minimize abuses and overreach of power to the greatest extent possible, and contribute significantly to combating misconduct and corruption within the state apparatus; (ii) aspects of the division of responsibilities, coordination, and checks among state agencies in exercising legislative, executive, and judicial powers that remain inappropriate, particularly the Supreme People’s Court’s constitutional protection function (safeguarding the Constitution); (iii) a cumbersome state apparatus and a lack of consistency in legislation on administrative delegation and decentralization; and (iv) poor accountability among state agencies (Nguyen Van Cuong, 2021; Tran Quoc Toan, 2024; Le Minh Thong, 2025).

With the goal of becoming a developed, high-income country by 2045, economic institutional reform clearly must lead the way. Vietnam’s economic institutions need to be designed to inspire all citizens and businesses to innovate and harness the potential of the country and the times to reach beyond national borders; authority must be delegated to individual officials, civil servants, and public employees so that everyone feels secure in making decisions and taking responsibility in the interests of citizens, businesses, and the country. Expressed in internationally comparable figures, economic institutional reforms must bring Vietnam’s scores and rankings on both the overall economic freedom index and its component indicators in the coming years to levels equivalent to or above the average for high-income countries.

Given the important role of institutional reform, an in-depth study of economic institutions in Vietnam is needed ahead of the 40th anniversary of the launch of Doi Moi. Therefore, alongside an overall assessment of the economy in 2024, the Vietnam Annual Economic Review 2024 will focus on the theme “Advancing economic institutional reform in a new context”.

Research Objectives

The Vietnam Annual Economic Review 2024 by National Economics University (NEU) adopts the theme “Advancing economic institutional reform in a new context” with the aim of providing a comprehensive review of Vietnam’s economy in 2024. The report also assesses the current state of Vietnam’s economic institutions, thereby proposing policy recommendations for economic management in 2025 and important economic institutional reforms in the new context.

Based on this overall aim, the report pursues the following specific objectives:

• Clarify the international context and global impacts on Vietnam’s economy in 2024;
• Assess developments in Vietnam’s economy in 2024 through its main sectors (the real sector, external sector, monetary and financial sector, and fiscal sector);
• Assess the current state of economic institutions in Vietnam in two institutional areas: (1) the economic legal system and (2) the state apparatus involved in exercising state power in relation to the market;
• Assess the global and Vietnamese economic outlook for 2025;
• Propose policy recommendations for economic management in 2025 as well as policies to advance economic institutional reform in the new context.

Research Subject and Scope

The research subjects are Vietnam’s economy and its economic institutions.

Time frame: The study’s overall assessment of Vietnam’s economy covers 2024. Its assessment of the state of institutions focuses primarily on the 2000–2024 period. However, certain historical aspects will be examined from 1986, when renovation and opening up began.

Scope of content: The general economic overview will focus on the main sectors of the economy (the real sector, monetary and financial sector, and fiscal sector).

In this study, institutions are understood in the sense used in New Institutional Economics: the rules of the game that constrain individuals and natural persons participating in economic activities. The study is also limited to formal and external institutions, namely normative legal documents issued by state agencies.

This report examines two groups of institutions. The first comprises institutions that facilitate transactions to reduce transaction costs in economic activities, namely the economic legal system. The second comprises institutions related to the operation and interaction of state agencies, namely the legal system governing the state apparatus. Both legal systems require enforcement mechanisms within the state apparatus to be effective in practice. In Vietnam, given its political system with a single ruling party, enforcement mechanisms within the Party play a very important role in maintaining the effectiveness of the legal system.

Research Methods and Data

To achieve its research objectives, the report uses qualitative, statistical, comparative, analytical, and synthesis methods.

To assess the current state of the two groups of institutions, we will consolidate the content related to enforcement mechanisms for both groups in the section “Current state of the state apparatus.” This means that the section “Current state of the state apparatus” assesses not only the legal provisions and enforcement mechanisms of the “legal system governing the state apparatus,” but also the enforcement mechanisms of the “economic legal system.”

In addition, the report’s methodology for studying institutions incorporates an implicit comparison: it considers market mechanisms more efficient than bureaucratic, centrally managed, subsidy-based mechanisms in economic activities. This assumption draws not only on centuries of global economic development, as demonstrated by reputable scholars worldwide, such as North (1981), North (1990), and Acemoglu and Robinson (2012), but also on Vietnam’s nearly 40 years of economic transition from central planning to market mechanisms, which has delivered substantial achievements in economic development.

Research information and data are drawn primarily from official Vietnamese sources, such as the General Statistics Office (TCTK), the Ministry of Finance (BTC), the State Bank of Vietnam (NHNN), the Ministry of Planning and Investment (KH&ĐT), and the Ministry of Labor, Invalids and Social Affairs (MOLISA), among others, and international organizations such as the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), the World Bank (WB), and the Asian Development Bank (ADB), among others. The report also uses Fiingroup macroeconomic, financial, and securities data, as well as data from financial institutions and banks.

Report Structure

In addition to the Introduction, the report includes an Executive Summary and a Main Report. The Executive Summary will summarize the entire report in a nontechnical, reader-friendly style.

The Main Report is structured into three parts. As this is an annual economic review, Part I (Vietnam’s Economy in 2024) provides an overview of Vietnam’s economy in 2024. This part covers: (i) global economic developments in 2024 and their impact on Vietnam’s economy; and (ii) an overview of Vietnam’s economy in 2024 through its economic sectors (the real sector, external sector, monetary and financial sector, and fiscal sector).

Part II (Assessment of Vietnam’s Economic Institutions) aims to assess the state of Vietnam’s economic institutions over the recent period. This part covers: (i) the concept of economic institutions; (ii) the current state of the economic legal system; and (iii) the current state of the state apparatus supporting the market economy.

Part III (Economic Outlook for 2025 and Policy Recommendations) presents the global and Vietnamese economic outlook for 2025. Drawing on the findings in Parts I and II, it also offers recommendations on macroeconomic policies in general and policies to promote institutional reform in the new context.

About the Authors

Editors

Prof. Dr. Pham Hong Chuong earned his doctoral degree in Economics from National Economics University (NEU). He is currently President of NEU. His main research areas are economic growth, tourism economics, industrial policies, and management science.

Prof. Dr. To Trung Thanh earned his doctoral degree in Economics from the University of Birmingham, United Kingdom. He previously served as a member of the Policy Advisory Group (PAG) for the Ministry of Finance and the Macroeconomic Advisory Group (MAG) for the National Assembly’s Economic Committee. He is currently Head of the Department of Research Management and conducts research and teaches at the Faculty of Economics, College of Economics and Public Management, NEU. His main research areas are macroeconomic analysis, digital transformation and the digital economy, financial stability, and firm performance analysis.

Other Authors (in alphabetical order)

MSc. Nguyen Ngoc Anh earned her master’s degree in Finance from Macquarie University, Australia. She currently works at the Faculty of Economics, College of Economics and Public Management, NEU. Her main research areas are corporate financial analysis, corporate governance, the digital economy, and the circular economy.

Assoc. Prof. Dr. Vu Sy Cuong earned his doctoral degree in Financial Economics from Paris 1 Pantheon-Sorbonne University, France. He is currently Deputy Head of the Division of Financial Policy Analysis and teaches at the Faculty of Public Finance, Academy of Finance. He previously provided consultancy for projects of the National Assembly’s Economic Committee and Finance and Budget Committee, as well as international organizations. His main research areas include fiscal and monetary policy analysis, macroeconomic policy analysis, and state-owned enterprises…

Assoc. Prof. Dr. Le Thanh Ha earned his doctoral degree in Economics from the National Graduate Institute for Policy Studies (GRIPS), Japan. He currently conducts research and teaches at the Faculty of Economics, College of Economics and Public Management, NEU. His main research areas are energy finance, green finance, financial stability, digital transformation, international economics, and firm performance analysis.

Dr. Tran Vu Hai earned his doctoral degree in Economic Law from Hanoi Law University. He previously served as an advisory member for the Ministry of Justice, the Ministry of Finance, the Vietnam Chamber of Commerce and Industry, the Vietnam Lawyers Association, and many other organizations. He is currently Deputy Head of the Department of Science and Technology and conducts research and teaches at the Faculty of Economic Law, Hanoi Law University. His main research areas are policy and law in the fields of economics, business, and banking and finance.

Assoc. Prof. Dr. Nguyen Thi Thanh Huyen earned her doctoral degree in Development Economics from NEU. She is currently Vice Dean of the Faculty of Environment, Climate Change and Urban Studies, College of Economics and Public Management, NEU. Her main research areas are sustainable development, inequality, public finance, and urban finance.

MSc. Nguyen Thuy Lien earned her master’s degree in Development Economics from NEU and the International Institute of Social Studies (the Netherlands) in 2016. Nguyen Thuy Lien has in-depth expertise in competitiveness analysis, improvement of the investment and business environment, innovation, and institutional reform. She is currently Director of Viet Analytics Market Research Company.

Dr. Truong Thi Hoai Linh earned her doctoral degree in Economics from NEU. She is currently a senior lecturer at the School of Banking and Finance, NEU. Her main research areas are commercial bank management, bank accounting, and microfinance.

MSc. Dinh Tuan Minh earned his master’s degree from the Asian Institute of Technology (AIT), Thailand, in 1999 and pursued a doctoral program in the Economics of Technological Innovation at Maastricht University, the Netherlands, during 1999–2005. He currently works at the Center for Market Solutions to Socio-Economic Issues (MASSEI). His main research focuses on market mechanisms and their applicability to socioeconomic life from the perspectives of New Institutional Economics and Austrian Economics.

Dr. Pham Xuan Nam earned his doctoral degree in Economics from NEU. He currently works at the Faculty of Economics, College of Economics and Public Management, NEU. His main research areas are firm growth and the factors influencing it.

MSc. Tran Anh Ngoc earned his Master of Science in Accounting and Management from the University of Southampton, United Kingdom. He is currently a PhD candidate in Finance at the University of Lincoln, United Kingdom. He also teaches at the School of Banking and Finance, NEU. His main research areas are monetary and financial theory, corporate financial analysis, and financial inclusion.

MSc. Luu Thi Phuong earned her master’s degree in International and Development Economics from the Australian National University (ANU). She currently works at the Faculty of Economics, College of Economics and Public Management, NEU. Her main research areas are macroeconomic policies (fiscal and monetary policies) and applied economics.

Assoc. Prof. Dr. Le Thanh Tam earned her doctoral degree in Finance and Banking Economics from NEU. She is currently Head of the Division of Commercial Banking, School of Banking and Finance, NEU. She has participated in numerous research and consulting projects for the State Bank of Vietnam and international organizations such as the Asian Development Bank (ADB), the World Bank, the International Finance Corporation (IFC), and the United Nations organization for financial inclusion (UNSGSA), among others. Her main research areas are banking governance and supervision, microfinance, financial inclusion, and fintech.

Dr. Nguyen Quynh Trang earned her doctoral degree in Economics from NEU. She is currently a lecturer at the Faculty of Political Economy, University of Economics and Business, Vietnam National University, Hanoi. Nguyen Quynh Trang’s main research areas are strategies and master plans for socioeconomic development, macroeconomic issues, productivity, supporting industries, and human resource development.

Dr. Nguyen Thanh Tung earned his doctoral degree in Economics from Hitotsubashi University, Japan. He is currently a lecturer at the Faculty of Economics, College of Economics and Public Management, NEU. His main research areas include labor economics, development economics, industrial organization, and applied microeconomics.

Dr. Vu Thi Thuy Van earned her doctoral degree in Finance and Banking Economics from NEU. She is currently a lecturer in the Division of Securities Markets, School of Banking and Finance, NEU. Her main research areas are systemic risk in securities markets and corporate governance of listed companies.

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