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PPA midterm

I, Introduction
After more than 30 years of renovating, from the old Soviet model of central planning economy to
market economy, Vietnam has achieved remarkable economic growth and social progress when it
maintained a stable average economic growth from 6% to 7% and also lifted millions of people out of
poverty. Nonetheless, Vietnam’s economic growth model is not considered as sustainable because it was
heavily driven by the accumulation of capital and labor instead of productivity and innovation, spreading
the concern for the future downturn of the economy. It is widely prevailed that innovation is the critical
factor for the growth of productivity. In recent years, the government has imposed multiple policies and
programs in order to stimulate the research and development (R&D), startup community, technology
transfer etc. This paper will analyze the recent innovation policies to evaluate the effect of those policies
on the stimulation of innovation in Vietnam and also pay great attention to the weaknesses in order to give
recommendations for a better performance in the future.
II, Overview of the policy
In the past few years, Vietnam’s economic development strategy has been embraced by the word
‘’innovation”. The 2013 Law on Science and Technology has defined ‘’innovation” as “the creation and
application of scientific and technological achievements and solutions and management solutions in order
to improve socio-economic development efficiency, and increase productivity, quality and added value of
products and goods”. There is little doubt about the role of innovation in the economy that innovation not
only increases the productivity and competitiveness but also expand the consumption and investment, in
this respect, many developing countries has imposed their own innovation policy in order to stimulate
innovation. Nevertheless, Innovation policy has a broad range of different definitions and usage, it can be

used to imply all other policies that effect on innovation, that can be technological policy, education
policy, etc. In Vietnam’s context, there could be some overlapped between policies as innovation
stimulation needs multidimensional approach. However, in this paper, the policies that are analyzed will
be policies which directly aim toward the innovation such as R&D, intellectual right law, and support of
start-up companies, etc.
III, Policy question
a. What kind of approach the government should undertake to stimulate the innovation?
b. What effect does the innovation policy have in the progress of innovation?
c. How to improve the result of innovation policy?
IV, Hypothesis
If the government impose the innovation policy, the national innovation performance will be better?
V, Potential Stakeholders
+ The State: National Congress, the cabinet and Ministry for Science and Technology, Ministry of
Finance, Ministry of Planning and Investment, local governments and local departments.
+ Academic institution: Public and Private academic institutions.
+ Business Community: domestic enterprises, start-up companies, foreign technological companies.


VI, Preliminary ideas
Situation in reality: Vietnam’s economy is in cross-road, the growth model that depends on the cheap
labor and capital accumulation has shown its weaknesses. After the global economic crisis in 2008,
Vietnam has struggled to maintain its high economic growth rate and become heavily dependent on the
Foreign Direct Investment (FDI). On the other hand, the technological and innovation progress were
shrinking without adequate support from the government when Vietnam only ranked 100 th worldwide in
R&D according to the Global Innovation index.
Authority: The Central Committee of Vietnam Communist Party, approved the resolution for modifying
the growth model and quality. The government branches are to follow and impose legal documents to
actualize the resolution of the Party. The ministry of Science and Technology is responsible for managing
and supervising the innovation policy.
Indicators: Businesses receiving public support for innovation by size, business R&D intensity, Gross
domestic spending on R&D, The Global Innovation Index.
End-Means Relationship (Virtual World)
Goals: Policy makers realized that they need to propose solutions to gradually modify the economy
growth model to make it becomes healthier and ensure the long-term growth in order to avoid the middleincome trap. To obtain this ultimate goal, innovation is one of the key source, therefore one of the
intermediate goals is the expansion of innovation to drive the economy to be more competitive.
Ideas for action: There are many arguments on the approach that government should take to create
incentives for innovation. Some says it will be better if the government just focus on the ensuring
property rights and competition rather than intervention. In contrast, as evidences from the developing of
East Asia miracle has shown, the role of the state is considerable to manage a good national innovation
system and innovation policies in order to narrow the gap of innovation with more developed countries.


The idea of innovation policy in Vietnam is to establish a sound framework of government intervention
that can simultaneously ensure the efficiency of innovation policy and market competition.
Cause-Effect Relationship (Real World)
Action:
+ Build the National Innovation System (NIS).
+ Promote the R&D expenditure in businesses through R&D support policies.
+ Support start-up companies through Government Support Program for Start-up Ecosystem and
Innovation
+ Attract foreign technological companies to invest and operate by establishing Hi-tech Park.
Result: After 2 years of government’s effort, the result is quite positive when Vietnam jumped up from
59th to 47th in 2017 The Global Innovation Index. Most indicators showed positive trend of improving
such as R&D, Infrastructure in Information and Communication Technologies(ICT). The operation of HiTech Park is progressive and likely to develop further in the future. However, the rank of Vietnam is still
not high in some indicators and it even witnessed a downgrade in business sophistication especially
knowledge workers.




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