Institutional Bottlenecks and Viet Nam’s Prospects for Growth and Development

Policy Brief - English Version

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Institutional Bottlenecks and Viet Nam’s Prospects for Growth and Development

February 16, 2023

The quality of public institutions is often seen as a critical factor in economic growth and development. While institutions in high-income countries tend to perform better than in low and middle-income countries, the evidence fails to show a consistent relationship between institutional quality and economic growth. This suggests that we need to approach the analysis of institutions with caution. Since institutions are shaped in fundamental ways by the historical, cultural and social context in which they arise, generalizations based on imported models of governance often miss the mark. Viet Nam is an example of a country that has achieved rapid economic growth with public institutions that do not conform to international norms.

This report is the third in a series of UNDP policy briefs in 2023. It considers institutional bottlenecks to growth in Viet Nam. The main conclusion is that institutions do matter, but often in unexpected ways. The first part of this policy brief looks at the relationship between good institutions as conventionally defined, and economic performance, taking as a starting point a recent World Bank report. The second section examines the Vietnamese case in more detail, focusing on the long-term problems of fragmentation of authority and the commercialization of state agencies. A discussion of the policy implications of the analysis follows, and the final section concludes.