The objective of this report is toinform the Government of Vietnam’s on-going efforts toenhance the competitiveness of the domestic private sectorand to facilitate foreign direct investment (FDI) spilloversand linkages. This report is anchored in the government’ssupporting industries (SI) policy framework that aims toupgrade the capabilities and technology of local enterprisesto facilitate supplier linkages with FDI, as well as enablethem to enter foreign markets. FDI’s spillover potential -the productivity gain resulting from the diffusion ofknowledge and technology from foreign investors to localeconomy - is considered the most valuable input to growthand development. Creating linkages is not automatic, asvarious supply-side constraints and market failures oftenhinder the process. International experience and academicresearch has shown that while many countries havesuccessfully attracted FDI, the record with capturingspillovers is mixed due to a variety of market failures.This report focuses on the operationalization of the FDIlinkage development agenda in Vietnam. Building on thediagnostics established by the aforementioned studies, itreviews both international and domestic experiences, andoffers recommendations to strengthen policies and programsto support enterprise competitiveness and linkages in Vietnam.
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