Highly skilled workforce and fiscal incentives key to driving high-tech growth

June 17, 2026 | 16:17

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As Vietnam seeks to move up global value chains, workforce quality is becoming a key competitive advantage. Assoc. Prof. Nguyen Dinh Tho examines how fiscal policy can help build a skilled workforce to support the country's high-tech ambitions.

By Assoc. Prof. Nguyen Dinh Tho Vice president Institute of Strategy and Policy on Agriculture and Environment

In the context of deep integration and the continuous shift of global high-tech supply chains, people have become a key asset determining the core competitiveness of each nation. For Vietnam to break through, escape the middle-income trap, and achieve high economic growth in the next decade, developing a highly skilled workforce capable of supporting investment, innovation and industrial upgrading will be essential.

Building a fiscal support mechanism for education and training that combines practical learning and practical work is key to connecting the ecosystems of education, research and employment, helping create a workforce that is better aligned with labour market demand and the needs of investors.

Vietnam needs to establish a sufficiently robust financial mechanism to encourage the convergence of the education, research, and employment ecosystems. Businesses will not voluntarily open their facilities and provide experts to train students if they do not see clear financial benefits and a legal framework to protect that investment.

Breakthroughs in legislation on corporate income tax need to be institutionalised soon to encourage businesses to participate in on-the-job training. The Ministry of Finance must issue detailed legal guidelines allowing all on-the-job training costs to be accounted for as deductible expenses when calculating taxes for employers. All expenses, from equipping practical training facilities and consumables to remuneration for on-the-job mentors, must be fully deductible.

Businesses committed to implementing a dual-system training programme should be allowed to retain up to 10 per cent of their corporate income tax obligations for reinvestment in personnel. This financial resource should not be a tax exemption to increase shareholder profits, but a legally binding fund that obligates businesses to directly reinvest in upgrading practical facilities, research and development, and especially in paying trainee salaries.

This mechanism offers a double benefit: the government optimises public funds, while businesses directly create a workforce that meets their current technological standards. Such support also provides a solid foundation for stronger cooperation between employers and learners, helping students gain practical experience and improve employment prospects after graduation.

The philosophy of vocational training and a training mechanism closely linked to practical experience has proven its value in leading industrial powers. Vietnam needs to benchmark against and learn from the models of Germany and Japan.

In Germany, approximately half of high-school graduates choose to pursue vocational education. Germany's dual-study, dual-work training system attracts over 1.2 million young people, accounting for more than half of those choosing non-academic professional training after secondary school.

At a higher level, dual-degree university schemes, a hybrid combination of academic degrees and practical vocational certificates, currently account for about 4.8 per cent of all higher education students in Germany. Early vocational guidance and training, combined with up to 70 per cent practical experience in businesses, is the secret to Germany maintaining the lowest youth unemployment rate in Europe and possessing the strongest manufacturing industry in the world.

Similarly, in Japan, the 'learning by doing' system is also heavily invested in by the government. Most notably, the KOSEN system under the National College of Technology, a five-year engineering programme, enrols students immediately after junior high school. It combines high school and college-level practical education, integrating rigorous internships and extensive collaboration with industries. The Japanese government recently launched the Professional Universities model to promote applied science.

These institutions require students to undergo large-scale internships, with over 40 per cent of the curriculum focusing entirely on practical, workplace training.

Vietnam is entering a period in which workforce quality will become a decisive factor in attracting investment and participating more deeply in global value chains.

Vietnam will quickly train a high-quality workforce. Transferring the power of practical training to businesses (following the 70-20-10 model, where 70 per cent is hands-on, 20 per cent is social guidance, and 10 per cent is academic theory) will break down the "ivory tower" of traditional education methods.

Vietnam will soon create a highly skilled, flexible, mobile workforce capable of immediately meeting the stringent demands of global supply chains. Unlike previous generations who were only strong in basic processing, the new generation of professional workers will directly anticipate and master priority economic sectors that shape the future.

In the high-tech sector, this includes AI, the semiconductor industry, and IT, in-depth training will create experts serving the low-level economy (using drones and unmanned aerial vehicles), the space economy (satellite and telecommunications technology), and the green economy (renewable energy and carbon credits).

Furthermore, this workforce will be the core for developing the knowledge economy, the smart economy, and the creative economy. For the service sector, professional training through on-the-job experience will elevate the quality of the restaurant and hotel service industries, as well as transportation, delivery, and logistics networks, to international standards.

With its emphasis on allowing the retention of 10 per cent of corporate income tax for reinvestment in personnel, and the removal of training costs for practical work, such fiscal policy is the most powerful macroeconomic catalyst.

By abolishing outdated entrance exams and channelling students according to their professional strengths, ensuring they are in the right jobs and following the models of Japan and Germany, we will comprehensively optimise human capital.

When businesses are empowered to recruit before enrolment, and students are guaranteed a clear career path from the start, Vietnamese education will truly become a solid springboard, propelling the country to join the group of developed industrial nations.