The “Rising Era” demands breakthroughs in R&D

Vietnam needs more enterprises investing in R&D 

Why do you believe that investing in R&D should be a focus for Vietnam's future development? 

Mr. Cuong Dinh Tran: Without R&D, we will never have anything of our own and will find it difficult to climb higher in the value chain, let alone lead the market. In the past decade, we have witnessed once-dominant technology giants being completely replaced due to a lack of new ideas. Conversely, new names have emerged at unprecedented speeds and scales. 

For example, South Korea's largest company today started as a small trading company selling dried fish and noodles. Their R&D center was established in 1987 with two main goals: researching applied technology to develop products and basic technology to create long-term growth drivers and global competitiveness. 

With a strategy to create state of the art technologies, they evaluate the current leading technologies in each R&D project, identify who owns them, and set goals to either catch up or develop better. These world-class goals have sparked research challenges and motivation, helping them achieve outstanding results. They recruit talent beyond South Korea's borders, going to top universities worldwide and hiring the best students. 

As a result, in 2024, this company ranked second in the world for the number of patents, with nearly 93,000 active ones. They are also among the world's most valuable names, accounting for about 20-22% of South Korea's total GDP and contributing half of the country's growth in 2024. Vietnam needs such enterprises. 

According to the 2024 EU Industrial R&D Investment Scoreboard, among the top 2,000 companies worldwide with the highest R&D investment, the US and China take the lead, accounting for 60% of the total number of companies and 60% of total investment—nearly 748 out of €1,257b. Following them are Japan, South Korea, Taiwan, and Germany. Vietnam has only one company in the top 2,000, with an investment of nearly €100m—a very modest figure.

Resolution 57 sets a goal that by 2030, 60% of the 2% GDP investment in R&D will come from private enterprises, approximately US$9b, a significant increase from the current level. Achieving this goal requires decisive policies and incentives from the government regarding targeted subjects, technology, infrastructure, procedures, and processes. Developed countries like the US and Japan also have policies supporting their enterprises with billions of dollars for high-tech investment. 

It's important to note that investment is only a necessary condition, not a sufficient one. The key is to invest in finding solutions to societal problems. However, if we don't start, we will never reach the goal.

Determined to make a difference 

Recently, we have talked a lot about the new "rising era" for the country. Observing recent economic and social developments and market trends, what gives you optimism? 

Mr. Cuong Dinh Tran: To leap forward, we must do things differently and make breakthroughs. If we continue the status quo, at best, we can only move forward, but it will be difficult to achieve a true "rise". I believe that recent efforts to streamline and simplify the administrative apparatus, as well as other science and technology-focused strategies, signal Vietnam's determination to make a difference. 

I hope the administrative reform efforts will address some of the bottlenecks that businesses have been advocating for years, such as creating a favorable business environment, streamlining administrative procedures, reducing processing times, and ensuring clear and transparent policy implementation. These recommendations reflect a desire for a more efficient, productive, and ultimately more innovative public administration system. 

Additionally, streamlining the apparatus helps save the budget for more targeted investments, such as increasing salaries for civil servants to attract and retain talent in the public system. We are not short of talent or people with a desire to contribute. The issue is having mechanisms to attract and retain them and motivate them. A country cannot develop without talented people in the public system. 

You mentioned improving labor productivity, starting with the public system. This is something we have talked about for many years, but the improvement seems modest. What do you think is the key point that, if addressed, will significantly improve productivity? 

Mr. Cuong Dinh Tran: I believe the key factor is digitalization. Machines offer numerous advantages, including speed, scalability, durability, accuracy, and transparency in handling repetitive tasks. This aligns with the government's current and ongoing initiatives. However, the primary challenge lies in the speed of implementation. 

Looking globally, many countries have improved their public systems with a focus on digitalization. The closest example is Singapore. In 2014, they launched the Smart Nation initiative, with three main pillars: digital economy, digital government, and digital society. Their goal is clear: to improve people's lives and create new economic opportunities. One of the key focuses of this initiative is the digital transformation of the public sector to restructure work processes, re-architect technology infrastructure, and transform services, not only facilitating citizens and businesses but also changing the way officials and civil servants work. 

A simple example is that citizens can quickly and easily complete administrative procedures at home through the public service system. Registering a business online takes only 10-15 minutes, without having to interact with administrative officials or repeatedly supplement documents. Data sharing between agencies is seamless, helping the government manage more effectively and facilitating businesses.I believe digitalization can significantly improve state governance and enterprise management. Digitalization is also the foundation for automation and AI applications. Our ultimate goal is still to improve productivity, both in the public system and society as a whole. I also hope that with this reform effort, along with budget savings, Vietnam will create mechanisms to promote the creativity of civil servants. 

As a businessman and employer, what challenges do you think Vietnam faces in training a high-quality workforce to meet the demands of developing new industries at higher levels of the supply chain? 

Mr. Cuong Dinh Tran: In terms of quality and capability, I find our workforce comparable to that of other countries. Our young people are intelligent, eager to learn, quick to adapt, creative, flexible, and generally possess a high sense of responsibility. However, there are areas that need improvement, such as advanced professional skills and soft skills like communication, time management, and conflict resolution. Specifically, I believe we need to enhance discipline and professionalism, including proactivity in work and understanding processes. Addressing these issues will require focused efforts in education, training, and international integration. 

To achieve high income, we must increase productivity, and improving workers' skills is one of the core solutions. 

According to the General Statistics Office, Vietnam's labor productivity in 2024 was about VND221.9m per worker (equivalent to US$9,182), which is relatively low compared to other countries in the region. In Southeast Asia, Vietnam's labor productivity surpasses only that of Cambodia, Myanmar, and Laos, and is merely 13% of Singapore's productivity, as reported by the International Labor Organization.

Not only is our productivity low, but the growth rate of productivity is also not high. Of course, it could be hard to achieve high productivity in agricultural production, manual labor, or labor-intensive industries. Vietnam aims to attract FDI to boost productivity by drawing in high-tech industries. However, data indicates that from 2011 to 2020, the labor productivity growth rate in the FDI sector decreased by 1.8% per year. The main reason, according to the General Statistics Office, is that foreign investors in Vietnam choose cheap labor with simple production processes and low added value. This is a situation we seek to change. To attract high-tech investment, as well as investments in the digital and green economies, Vietnam must implement more attractive policies beyond cheap labor and land incentives. Additionally, we need to establish a solid foundation for a green and digital ecosystem. 

Having accompanied the business community since the early 1990s, do you believe now is the time to create a synergy between the state and enterprises to achieve a new breakthrough in development? 

Mr. Cuong Dinh Tran: I have never doubted the entrepreneurial spirit and startup spirit of the Vietnamese people. Looking out on the streets, one can see bustling trade from early morning to late at night, with various business models. Regardless of the official unemployment rate, do we see anyone idle? Very few. If they are not formally employed, they find other ways to generate income. 

The challenge we face is to move beyond the trend of merely striving for 'enough to eat”. We must aim to grow, professionalize, and compete with countries in the region and around the world. When discussing the global stage, it is the grand ambitions and the determination to surpass the ordinary that we need. 

Besides the low productivity issue, our competitiveness also lags behind several countries in the region. In 2018-2019, Vietnam ranked 67th in the national competitiveness index, while China, South Korea, Japan, and Singapore ranked 28th, 13th, 6th, and 1st respectively. Vietnam remains at a low level on the value ladder. I am hopeful that we will enter a new development phase with significant breakthroughs in the coming period. Although there have been positive signs, much work remains to be done to turn these hopes into reality. 

In my work, I have had the opportunity to interact with leaders of many leading Vietnamese enterprises. They are an admirable group of entrepreneurs who have risen from poverty and small-scale production, overcoming numerous challenges and difficulties. They tirelessly strive to steer their businesses to new heights and conquer the global market. No large economy can thrive without large enterprises. I look forward to seeing the Vietnamese business community become more united and develop robustly, growing into giant corporations with global stature and competitiveness. 

Thank you! 

*Note to the audience: The responses reflect the views of the interviewee and do not necessarily represent the views of EY global organization or its member firms. 

*A condensed version of this article has been published in the Vietnam Investment Review’s Tet edition for the period of 27 January to 9 February 2025.