BOOK CHAPTER
Chapter 7

Case study: The Effectiveness of Research and Innovation Management at Policy and Institutional Levels in Vietnam

Pham Thi Ly (2014)

Source: Ly T Pham (2014): Chapter 7, p140-163. Asa Olson and Lynn Meek et al. Effectiveness of Research and Innovation Management at Policy and Institutional Levels: Cambodia, Malaysia, Thailand and Vietnam. OECD Publishing.

Preamble

Vietnam is one of South East Asia’s fastest-growing economies. It has experienced consistently high annual rates of economic growth during the past two decades which have helped to raise living standards and have enabled the more rapid development of infrastructure. The World Bank now classifies Vietnam as a “lower middle-income” economy. Measured in terms of purchasing power parity, its gross national income per capita in 2011 was USD 3 260, which was higher than Cambodia’s (USD 2 260), but lower than Thailand’s (USD 8 390) or Malaysia’s (USD 15 190) (World Bank, 2012). According to the World Economic Forum’s Global Competitiveness Reports (2012), Vietnam is making significant economic progress because of its efficient labour market, its impressive innovation potential given its stage of development and its large internal market – it has a population of about 90 million. It is also rapidly developing a strong export sector. Economic progress is constrained, however, by inflationary pressures with inflation reaching almost 20% in 2011, an excessively restrictive regulatory environment, restraints on the freedom of international trade, and the poor quality of the country’s capital infrastructure, particularly its roads and ports. It also has low education enrolment rates at the upper secondary and tertiary levels, and corruption is described as being “frequent and pervasive” (World Economic Forum, 2012). Like Cambodia, its economy is factor-driven, that is, reliant mainly on low-skilled labour and natural resources.

The Communist Party of Vietnam is constitutionally “the force leading the State and Society” (Article 4 of Vietnam’s Constitution of 1992, as revised in 2001). The constitution also makes explicit reference to the development of science and technology as “a primary national policy”, playing “a key role in the country’s socio-economic development” (Article 37). Resolutions approved at Party Congresses, held at five-year intervals, express national priorities and provide guidance to the government. Ever since 1986, these congresses have affirmed the national importance of the development of science and technology. Party Congress VI (1986), for example, identified science and technology as being a key momentum to progress the comprehensive renovation of the nation. Party Congress VII (1991) confirmed that science and technology were the foundation of industrialisation and modernisation. Party Congress VIII (1996) and Party Congress IX (2001) considered science and technology as the top national priorities and the foundation of industrialisation and modernisation. Party Congress X (2006) emphasised the important role and momentum of science and technology in a knowledge-based economy. Party Congress XI (2011) opened pathways to promote the capacity of science and technology in playing a key role in the modernisation of national production and in achieving the fast and sustainable development of the country. Most recently, Resolution No.20-NQ/TW, dated November 1, 2012, “On the development of science and technology to serve industrialization and modernization country under conditions of socialist orientated market economy and the international integration”, identified the reasons for weaknesses in scientific research activities, namely leaders’ insufficient awareness, inadequate investment, lack of effective policy development and monitoring mechanisms, loose connections between state agencies, and so on.

Indeed, Vietnam’s performance in scientific research and technological development has been unspectacular. Compared with neighbours such as Thailand and Malaysia, Vietnam lags a long way behind in all areas of research and innovation. Vietnam’s research and innovation capacity is limited by various factors, including:

 The relatively small proportion of university lecturers who are qualified at PhD level –only 14.4% of all higher education lecturers in Vietnam have doctorates.

 The bureaucratically fragmented and cumbersome mechanisms used to allocate research funds.

 The fragmented provision of research services – by 2011, Vietnam had more than 1 600 science and technology research institutes and centres, nearly all of them quite small and unconnected to any national co-ordinating body.

 A shortage of world-class scientists – according to the Ministry of Science and Technology (MOST), Vietnam has a shortage of talented scientists who are able to head large international or even national research projects.

 Lack of co-operation between leading scientists in research institutes and universities.

 Continued separation between research and teaching – which has led to a waste of resources and limited the training quality in universities and research institutes.

There are various laws that relate to science and technology in Vietnam. These include the Law of Science and Technology 2000, which provides a legislative foundation for the public support of research and innovation in Vietnam. There is also the Law of Intellectual Property (revised in 2009), the Law of Technology Transfer 2006, the Law of Standards and Technical Regulations 2006, the Law of Product and Goods Quality 2007, the Law of Nuclear Power 2008, the Law of HiTech 2008, and the Law of Measures 2011. Recent important additional documents include the Party’s Central Committee Resolution on the Development of Science and Technology for serving the Industrialization, Modernization and Global Integration (Resolution No. 20-NQ/TW, Nov 2012), the Strategic Plan for the Development of Science and Technology 2011-2020, the draft revision of the Law of Science and Technology (to be submitted to the National Assembly for approval on May, 2013), and a Ministry of Science and Technology (MOST) Proposal for the Development of Science and Technology, serving the Industrialization, Modernization, and Global Integration, 2012.

Budget allocation arrangements for research and innovation in Vietnam are complex and bureaucratic. Although the Ministry of Science and Technology (MOST) is designated as the governmental agency responsible for research and innovation, the Ministry of Planning and Investment (MPI) and the Ministry of Finance (MOF) both play additional important roles because of their shared responsibilities for allocating the national budget for scientific and technological research. Two other ministries, the Ministry of Education and Training (MOET) and the Ministry of Internal Affairs (MOIA), also play a role, as do the 58 provincial and 5 municipal governments across Vietnam. Currently, about 2% of the state budget is allocated to science and technology – about USD 650 million. MOST manages 57% to 60% of this budget (Figure 1). The balance is independently managed by MPI, which allocates funds directly for infrastructure investment. MOST’s share of the budget is heavily committed: by agreement with MOF, it must allocate funds to other ministries for expenditure on salaries for research staff members as well as for the support of ministry-supported research institutes and centres.

MOET, for example, which has responsibility for 54 universities and colleges, receives its research budget in this way.3 It then allocates a research budget to the universities and colleges for which it is responsible. Though MOST is held accountable for expenditure of the state budget on science and technology, it is left with only about 10% of that budget to allocate in support of national research and innovation initiatives.

(Figure 1. Funding of research in Vietnam)

The effects of this form of budgeting are readily apparent. The lack of a single co-ordinating authority and the way funds are dispersed across so many ministries and local governments means that accountability processes for the expenditure of the national science and technology budget on national priorities are weak. Funds not spent on scientific and technological research are routinely reallocated for use on other priorities, particularly at the provincial and municipal level. Unspent funds are also routinely refunded to the state. In 2007, for example, MOST refunded USD 6.25 million to the state, rising to USD 16 million in 2011.4 This situation has occurred repeatedly over recent years. According to the MOF, annual financial plans for science and technology are normally later than other expenditure plans, which leads to the slow budget allocation. In addition, in some cases research organisations are not ready to spend the budget they are allocated and government agencies have to wait for substitutions of research projects.

Some provincial and municipal governments are unable to spend their budgets within a fiscal year, as required, and they are not allowed to carry forward unspent balances to the following year. This kind of rigidity is maintained from year to year, despite protests, and nothing appears to change.

There are also anomalies in the patterns of allocation of research funds to different kinds of institutions. According to a former rector of the National Economics University, Prof. Le Du Phong, the Hanoi University of Science and Technology, which is a “key” university with a significant record of research achievement, received a research budget of only USD 875 000 in 2011-12, whereas the General Labour Union of Vietnam, which is not a research agency, received a research budget of about USD 1 million. Similarly, the General Shipping Corporation of Vietnam, a state-owned business enterprise, received more for research (USD 650 000) than many large key universities, including the Hanoi University of Agriculture (USD 590 000).

Vietnam clearly lags behind other countries in region in research funding. Nguyen and Pham (2011) report that investment in science and technology (S&T) development in Vietnam in 2006 was USD 428 million, or 0.17% of GDP. In 2012 the figure increased to USD 650 million, or 0.27% of GDP. Though this proportion was higher than for Indonesia (0.05% of GDP) or the Philippines (0.12% of GDP), it was much lower than for Thailand (0.3% of GDP or USD 1.79 billion), Malaysia (0.5% of GDP or USD 1.54 billion) or Singapore (2.2% of GDP or about USD 3 billion). In terms of returns on investment, Vietnam produced eight publications in international peer reviewed journals per million dollars (US) of investment. This productivity rate is the same as Thailand and Indonesia, and a little higher than Malaysia, but it is much lower than Singapore (13 publications per million dollars (US) of investment)8. Ca and Hung (2008) report that in universities in Vietnam the majority of funding comes from international sources. One of the ambitious aims of Resolution 14/2005 was to increase funds generated by scientific research and related services to 25% of total higher education revenue by 2020. Given the fact that revenue generated by scientific research in universities counts for only 3.4% at present, it seems this ambition has been set without any strong evidence base (Wilkinson and Chirot, 2010).

With regard to the research funding, in an interview dated Sept 23, 2012, MOST’s Minister, Nguyen Quan, has stated: “The most challenge is [that] the majority of research funding is from the State budget. In developed countries, non-state budget accounts for a large number, usually 3-5 fold, or even 10-fold, but in Vietnam, 70% from the State budget whereas only 30% from the private sector’’. He also expressed concern that “although the budget is limited, almost half of its allocation is often misused or mis-managed”. In addition, research funding and financial procedures in Vietnam remain largely rigid, as it takes around more than one year to receive a research budget. Former minister of MOST, Dang Huu, said: “Such a bureaucratic mechanism and rigid financial procedure generally makes researchers unhappy. Everything must be planned and registered in advance resulting in a blockage of creativity”.

Public funding of science and technology in Vietnam is slowly increasing as a proportion of GDP, from 2001-05, it accounted for 0.53% of GDP, and from 2006-10 it accounted for 0.67%. Private investment expenditure on science and technology is much more limited – around 30% of public expenditure. As a consequence of recent increases in the state budget for science and technology, the value of government-funded research projects has increased. At the same time, the number of sub-projects designated by the state has also increased, so there never seems to be sufficient funds to achieve significant research outcomes. Furthermore, research funds are contingent on compliance with detailed expenditure guidelines and financial accountability mechanisms, with researchers expected to collect and provide all official invoices (known as “red” invoices) if they want to complete their research, however small the amount. Indeed, the state agencies responsible for research are often seen as paying more attention to strict adherence to financial procedures than to the research outcomes. It is not uncommon for researchers to complain that the system of public funding of research in Vietnam is rigid andover-regulated.

The future looks more promising. The government plans to increase public expenditure on science and technology. It intends to achieve a level of 1% of GDP over the period from 2013 to 2015, rising to 1.5% to 1.7% over the period from 2016 to 2020. A draft version of the revised Law of Science and Technology proposes more reliance on competition to distribute research grants and a more restrictive approach to the provision of research funds. Institutions will be favoured if they can demonstrate that they are capable of doing research and achieving technology transfer, or that they can effectively administer significant research funding packages. This is likely to benefit organisations such as the National Foundation for Science and Technology Development and the National Foundation for Technology Innovation. In addition, business enterprises are being strongly encouraged to participate in research and innovation by being given land leases as well as credit loans from the Development Bank of Vietnam. They may also be permitted to make use of high-tech equipment available from national key labs and incubation hubs. It is also proposed that business enterprises should reserve a certain proportion of their budget for research and innovation. The concern here, though, is that most business enterprises in Vietnam are small to medium in size, and will have only modest funds available to support research and innovation are likely to be modest.

Although the draft Law of Science and Technology of 2012 appears more advanced than the Law of Science and Technology of 2000, four ministries will continue to be responsible for science and technology. MOST is primarily in charge of the state management of science and technology across Vietnam. MPI is in charge of planning and submitting financial expenditure in line with recommendations from MOST, as well as having a voice in approving investments in infrastructure of science and technology. MOF is in charge of proposing and submitting financial expenditures for science and technology on the basis of recommendations from MOST on the structure and ratios of the state budget for science and technology. MOIA develops personnel plans for science and technology in co-ordination with MOST. Other ministries, and all provincial and municipal governments, must co-ordinate with MOST in developing and implementing their research plans. The absence of a single co-ordinating body is evident.

(To be continued. Full paper with footnotes and references can be downloaded here)