A striking feature of Vietnam’s remarkable progress over the last few decades is the rapid pace of urbanization. In 1986, there were fewer than 13 million urban residents. Today there are 30 million. Cities have become strong growth poles, with urban areas growing twice as fast as the national average rate, and contributing over half of the country’s gross domestic product.
The increasing importance of Vietnam’s urban areas in driving growth is not surprising. It is widely acknowledged globally that urbanization, if managed well, can lead to higher productivity and growth, through positive agglomeration effects such as larger, more efficient labor markets, lower transaction costs and easier knowledge spillovers. However, a closer look suggests that the current urbanization process in Vietnam needs a major rethink to ensure that it contributes fully to the goal of achieving a high-income country.
Vietnam needs to reshape its urbanization process to create more efficient cities – cities that have sufficient population densities, are well connected internally and regionally, and well managed. In addition, in line with Vietnam’s strong preference for social equity, cities will need to ensure inclusion of all residents, with no groups or area “left behind.”