The demand for skills has beenincreasing significantly in Vietnam, due to a combination ofinter-industry employment changes, capital accumulation andsome evidence which is consistent with skill-biasedtechnical change. As a result employment opportunities fortertiary graduates now exist in most sectors. Highereducation graduates are also shown to contribute positivelyto firm productivity. On the one hand, this evidenceprovides a strong justification for further expansion andimprovement of higher education in the country. On the otherhand, low research and development (R&D) capacity,increasing evidence of skill bottlenecks and the stillinequitable distribution of higher education opportunities,combined with broad institutional and financing constraints,suggest that the higher education system does not yet havethe tools it needs to adapt to the growing and changingneeds of an increasingly dynamic economy. Moving towards afirst-class high performing higher education system willrequire a set of reforms that create a more flexible anddiverse system, with, among other characteristics, moreprivate sector participation and greater emphasis onresearch with the potential development of centers ofexcellence. To get there, Vietnam will need to createsupporting governance and financing frameworks, with arevised role for the public and private sector. It mayconsider pursuing a reform agenda in three stages:strengthening the framework for a competitive highereducation system, helping universities improve the relevanceof decision making for the emerging social and economicneeds, and further investments in building a first classhigher education system.
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