Vietnam's Ambitious Economic Transformation: Aiming to Become Asia's Next Tiger Economy by 2045

Vietnam is undertaking a comprehensive economic transformation with the ambition of becoming Asia's next "tiger economy" by 2045. Under the leadership of Communist Party General Secretary To Lam, the nation is shifting from an export-driven, low-cost manufacturing model to an innovation-led economy.

Central to this transformation is the promotion of private enterprise, marked by the passage of Resolution 68 on May 4, 2025. This resolution designates the private sector as the primary engine of the national economy, a significant departure from previous reliance on state-owned and foreign companies. The resolution aims to eliminate perceptions and prejudices about the private economy, ensuring equal competition rights and access to resources such as capital, land, technology, and human resources.

To support this shift, the government has introduced several incentives:

• Tax Incentives: New businesses are granted a three-year corporate income tax exemption from the date of incorporation.
• Administrative Reforms: A 30% reduction in business licensing and operating conditions aims to streamline administrative procedures and reduce compliance costs.
• Support for SMEs: Specialized credit channels and financial support mechanisms are established for small and medium-sized enterprises (SMEs), startups, and priority areas such as digital transformation and green transition.
• Research and Development (R&D): Private enterprises are permitted to allocate up to 20% of their post-tax profits annually to an R&D fund and can deduct up to 200% of R&D expenses from taxable income, encouraging innovation investment.

The government has set ambitious targets:

• By 2030: Vietnam aims to have 2 million active private enterprises, with the private sector contributing 55–58% of GDP and employing 84–85% of the workforce.
• By 2045: The goal is to have 3 million private enterprises, with the private sector accounting for over 60% of GDP.

In addition to policy reforms, Vietnam is making significant investments in high-tech industries, including semiconductors, artificial intelligence (AI), and renewable energy. In September 2024, President To Lam met with leaders from major U.S. technology firms such as Apple, Meta, and Google to bolster cooperation in these sectors. Notably, Meta announced plans to produce virtual reality glasses in Vietnam. Agreements were also signed with U.S. companies in areas like energy, AI, and data center development.

Infrastructure development is another cornerstone of Vietnam's economic overhaul. A $67 billion North-South high-speed railway is planned to enhance connectivity and stimulate economic growth. The development of nuclear energy is also a key component of the strategy to meet the nation's growing energy demands.

Vietnam aims to position itself as a global financial hub by developing special financial centers in Ho Chi Minh City and Danang. These centers are intended to attract international investment and elevate the country's financial services sector.

Despite these ambitious plans, Vietnam faces several challenges:

• Climate Change: Without action, climate risks could cost up to 14.5% of GDP by 2050.
• Aging Population: Vietnam is promoting healthcare improvements, extending retirement ages, and increasing female workforce participation to sustain economic momentum.
• Institutional Reforms: Resistance to institutional reforms and the dominance of state-owned enterprises (SOEs) pose significant hurdles.

The emphasis on private enterprise and innovation is expected to foster a more dynamic and competitive business environment, potentially leading to increased job creation and higher incomes. However, the transition may also result in social challenges, such as workforce displacement from traditional industries and the need for reskilling programs.

Vietnam's current economic transformation echoes the Doi Moi reforms initiated in 1986, which shifted the country from a centrally planned economy to a market-oriented one. The current reforms, sometimes referred to as "Doi Moi 2.0," aim to deepen market access, enhance regulation, and strengthen investor safeguards.

Vietnam's comprehensive economic transformation, underpinned by strategic investments, infrastructure development, and a strong emphasis on private enterprise, positions the nation on a trajectory toward significant growth and global integration. Addressing the accompanying challenges will be crucial to realizing these ambitious goals.