Science, Technology and Innovation Spending: Is 2% of GDP Achievable?

Nghị quyết 57-NQ/TW commits Viet Nam to lifting science, technology and innovation spending toward 2% of GDP, a target that would roughly double current effort and place the country in the range occupied by innovation-driven middle-income economies rather than commodity- or manufacturing-led ones. The target is directionally right. Whether it is achievable on the timeline implied by the resolution depends less on political commitment, which appears genuine, than on budget architecture that was not designed to channel resources at this scale or speed into research and innovation activity.

Where Viet Nam starts from

Viet Nam’s STI spending, combining public and private sources, sits well below the level implied by its manufacturing-heavy growth model and its ambition to move up the value chain. The gap to regional benchmarks is largest on the private side. Economies that have reached or approached the 2% threshold, such as Korea in its earlier development phase, did so with business enterprise expenditure on research and development providing the majority of the total, not government budgets acting alone. Viet Nam’s private sector contribution remains comparatively small, concentrated in a handful of large domestic conglomerates and foreign-invested manufacturers, with limited depth among small and medium enterprises.

This composition matters for the credibility of the 2% target. A target defined as a share of GDP can technically be hit through public spending alone, but doing so would require a public R&D budget far larger, relative to the rest of the state budget, than any comparator economy has sustained, and would not reproduce the innovation ecosystem that the resolution’s authors are plainly trying to build.

The budget architecture problem

The more binding constraint is not the size of the envelope but the mechanism for spending it. Public research funding in Viet Nam still runs substantially through annual budget cycles and administrative allocation to research institutes and universities, a structure that is poorly suited to funding higher-risk, longer-horizon innovation activity of the kind that a 2% target implies. Competitive, peer-reviewed grant mechanisms exist but remain a small share of total public STI spending, and disbursement rules designed for conventional public expenditure, requiring spending to match the fiscal year and discouraging carryover, sit awkwardly with the multi-year, uneven spending profile typical of research projects.

On the private side, tax incentives for business R&D exist on paper but have seen limited take-up, partly because eligibility and documentation requirements are more burdensome than the benefit is worth for many firms, and partly because the incentive structure was not designed with innovation-intensive sectors such as software or advanced manufacturing specifically in mind.

What would need to change

Reaching 2% of GDP by the resolution’s target date would require both more money and a different way of spending it. On the public side, this means shifting a larger share of the STI budget toward competitive, multi-year grant instruments with disbursement rules that tolerate the uneven spending profile of research, and building the evaluation capacity to allocate that funding on scientific merit rather than administrative convenience. On the private side, it means redesigning R&D tax incentives around the compliance capacity of small and medium enterprises rather than assuming firms have the accounting infrastructure that large conglomerates possess, alongside co-financing instruments that share early-stage risk with private investors rather than asking firms to bear it alone.

The 2% target is a reasonable statement of ambition and a defensible one given where Viet Nam wants its growth model to go. It is not, however, primarily a budget-envelope problem. It is a public financial management problem, and closing it will depend on reforms to how STI money moves through the system at least as much as on how much money is committed to it in the first place.