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Overview

Vietnam’s

Embarking on an Efficient,
Urbanization

Inclusive, and Resilient Pathway

at a Crossroads
 Overview

Vietnam’s
Urbanization
at a Crossroads
Embarking on an Efficient,
Inclusive, and Resilient Pathway

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Cover photo: HuyThoai

Vietnam’s Urbanization at a Crossroads - Overview i

 Contents
Contents of the Full report vi
Foreword viii
Acknowledgment ix

Preface 1

Vietnam’s urbanization is increasingly underdelivering its benefits due to

inefficient resource allocation 5
Vietnam has experienced dispersed and disconnected development 6
As a result, Vietnam is not fully harvesting the benefits of urbanization 9
And it is facing a growing challenge of inefficiency... 13
...consistent with weak agglomeration economies and mounting congestion forces 14
Lack of strong interfirm and spatial linkages contribute to weak agglomeration economies 16

Three spatial policies that have shaped Vietnam’s unique urbanization

are no longer fit for purpose 17
Vietnam’s unique urbanization pattern has been shaped by three spatial policies 18
These policies initially served Vietnam well, but are increasingly unfit for purpose 21
Vietnam’s urbanization is now at a crossroads: need to make hard but necessary choices 22

To sustain momentum, Vietnam needs an urbanization strategy

tailored to its diverse regions 23
Sustaining long-term economic growth requires a more efficient use
of land, labor and fiscal resources... 24
...while considering that different places have different strengths and challenges 25
Three inter-related policy actions are needed to realize efficiency 29
Photo: Dirk Spijkers/The World Bank

Vietnam can promote spatial efficiency without sacrificing spatial equity 41

Endnotes 44
References 46

ii Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview iii

 Boxes
O.1 The benefits of density: A closer look at agglomeration economies 10
O.2 Underlying competitive and comparative advantages differ across regions 27

Figures
O.1 Vietnam’s pace of urbanization accelerated after Đổi Mới, but has generally
remained below that of the rest of the region 6
O.2 Aggregate urban land area has grown dramatically since 2010 8
O.3 Vietnam has experienced a limited shift of people to cities even as labor has
shifted from agriculture to manufacturing and services 12
O.4 On the decline - the first tier’s agglomeration premium, 2011 and 2016 13
O.5 Districts in Hanoi and HCMC fall in the agglomeration diseconomies range of the
relationship between labor productivity and labor pool size in 2011 and 2016 15
O.6 Vietnam’s industrial linkages are weak 16
O.7 Vietnam’s two-tier structure is influenced by three spatial policies 18
O.8 Policy recommendation framework 30

Maps
O.1 The economic dominance of Hanoi and the HCMC is evident in 2017
nighttime lights data 7
O.2 Foreign-owned firms are spatially concentrated in and around Hanoi and HCMC,
with smaller concentrations in second-tier coastal locations 20
O.3 Areas of comparative advantage in Vietnam by region 27

Photo: Chris Slupski/The World Bank

Table
O.1 Policy recommendations for fostering agglomeration economies and the
promotion of regional integration 43

iv Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview v

 Photo: Olegdoroshenko/The World Bank
Contents of the Full Report
Foreword 11
Acknowledgments 12
Abbreviations 13
Overview 15
Introduction 15
Overview of Vietnam’s urbanization 15
Urban development context 15
Framework of this study 19
Reader’s guide to this report 21

PART I. VIETNAM’S URBANIZATION AND SPATIAL ECONOMIC

TRANSFORMATION PROCESSES 25

Chapter 1. Spatial patterns of industrialization and productivity 26 The socioeconomic costs borne by migrant workers 95
Institutional and structural constraints on labor mobility 98
Key findings 26 Enhancing agglomeration economies through
Introduction 26 improving labor mobility 103
Recent growth of industries and services 27 Policy reforms to facilitate labor mobility 105
Industrial linkages and spatial clustering 34 Annex 3A Ho khau residence certificate
Spatial variation in industrial structure and growth 37 registration system 110
Spatial patterns of productivity, agglomeration economies, and congestion forces 41 Annex 3B Profile of migrants in Vietnam 113
Summary 59
Annex 1A Average labor productivity of Vietnamese firms by labor size in Chapter 4 Recasting land management
six productivity groups and FDI-strong districts 61 and urban planning 119

Chapter 2. Temporal and spatial patterns of demographic and physical urbanization 66 Key findings and key policy actions 119
Introduction: Why talk about land and planning? 120
Key findings 66 Key issues 121
Introduction 66 Policy recommendations 128
Population structure and migration 67
Physical and spatial growth of urban areas 79 Chapter 5 Strengthening fiscal and financing
Mismatch among the demographic, physical, and economic growth of urban spaces 84 policies for more efficient urbanization 138
Summary 87
Key findings and key policy actions 138
Introduction 139
PART II. KEY SPATIAL POLICIES AND INSTITUTIONAL BINDING CONSTRAINTS
Fiscal policy framework and equalization effects 139
ON EFFORTS TO RESHAPE VIETNAM’S URBANIZATION PATHWAY 91
Infrastructure investment demands and
financing constraints 147
Chapter 3 Easing constraints on labor mobility 92
Implications of current fiscal and financing policies 149
Policy recommendations 151
Key findings and key policy actions 92
Annex 5A Background on fiscal environment 154
Introduction 93
Annex 5B Overview of urban infrastructure
Evidence of constrained labor mobility 93
investment gaps and subnational financing sources 160

vi Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview vii

 Foreword Acknowledgment
Since embarking on comprehensive economic reforms (Đổi Mới) over 30 years ago, Vietnam has been one This report was prepared by a team led by Zhiyu “Jerry” Chen and Đặng Đức Cường. The core team consisted
of the world’s great development success stories. Aided by strong foreign direct investment (FDI) inflows, the of Mark Roberts, Mansha Chen, Songsu Choi, Lawrence Tang, SangHyun Cheon, Phan Công Đức, and
country’s economy has sustained fast, stable, and broad-based growth that has produced impressive welfare Fanny Quertamp. The Overview document accompanying this report was prepared by Mark Roberts, Francis
gains for the vast majority of the population. Contributing to Vietnam’s success has been a vigorous process Ghesquiere and Zhiyu “Jerry” Chen with significant inputs from the rest of the core team. Chapter 1 was
of urbanization that has seen the share of the population living in towns and cities climb from less than 20 prepared by SangHyun Cheon, Songsu Choi and Mark Roberts, with inputs from Minjin Lee, Chapter 2 was
percent in 1986 to more than 36 percent today. Through the spatial concentration of people, skills, and prepared by Mark Roberts, SangHyun Cheon and Songsu Choi with inputs from Minjin Lee, Chapter 3 was
economic activity, urbanization has promoted prosperity by means of denser labor markets and agglomeration prepared by Lawrence Tang and Mansha Chen with inputs from Fanny Quertamp and Vũ Hoàng Linh, Chapter
economies. 4 was prepared by Mansha Chen with inputs from Trịnh Thị Hòa, and Chapter 5 was prepared by Đặng Đức
Cường with inputs from Songsu Choi. Songsu Choi and Zhiyu Jerry Chen provided guidance and directions for
Driven by a confluence of policies related to labor mobility, land management and planning, and overall structure and messaging of the chapters. Geospatial analysis of this study was led by SangHyun Cheon
intergovernmental fiscal relations, a two-tier urbanization system has emerged in Vietnam. Within this system, and Phan Công Đức, with early-stage inputs from Katie L. McWilliams.
the FDI-fueled economic dominance of the first-tier Hanoi and Ho Chi Minh City economic regions has been
accompanied by widespread, spatially dispersed urbanization and growth in the remaining second-tier areas Other important contributors were Đặng Hùng Võ, Keiko Inoue, Dilip Parajuli, Caryn Bredenkamp, Harry
of the country. The inefficiencies of this system have manifested themselves in recent years in rising congestion Edmund Moroz, Elena Glinskaya, Nguyễn Thị Nga, Shigeyuki Sakaki, David Lord, Abedalrazq Khalil, Diji
costs and declining returns from agglomeration economies in the major urban areas. Chandrasekharan Behr, Trần Thị Vân Anh, Nguyễn Thị Lệ Thu, Helle Buchhave, and Giang Tam Nguyen.
This study benefited tremendously from discussions and brainstorming with the following colleagues: Martin
In its march toward upper-middle-income status, and on to high-income status within the next generation, Rama, Peter Ellis, Dean Cira, Phan Thị Phương Huyền, Hoàng Thị Hoa, Nguyễn Huy Dũng, Obert Pimhidzai,
Vietnam must ensure that the efficiency and productivity of its economy will continue to improve. The country’s Sebastian Eckardt, Madhu Raghunath, Jacques Morisset, Đỗ Việt Dũng, Vũ Hoàng Quyên, Đoàn Hồng Quang,
spatial structure and urbanization patterns will therefore play a major role in fulfilling its long- term economic Phạm Minh Đức, Hardwick Tchale, Kai Kaiser, Jen JungEun Oh, Aristeidis I. Panou, Steve Jaffee, and Sergiy
potential. However, this study found that Vietnam’s policy makers are at crossroads in devising the country’s Zorya.
spatial and urbanization policies.
This study was conducted under Victoria Kwakwa (Vice President, East Asia and Pacific [EAP] region), with
Part I of this report examines Vietnam’s urbanization trends and spatial economic transformation processes, the general guidance of Ousmane Dione (Country Director, Vietnam) and Abhas Jha (EAP Practice Manager for
including its spatial patterns of industrialization, productivity, and demographic and physical urbanization. Part Urban and Disaster Risk Management) at the inception stage, and Francis Ghesquiere (EAP Practice Manager
II assesses spatial policies related to the labor mobility, land use and urban planning, and fiscal and financing for Urban and Disaster Risk Management) at the preparation and finalization stages.
policies that have shaped Vietnam’s urbanization process and its outcomes. The report posits that Vietnam’s
policy makers can choose to follow a path that maintains the spatial policies that have served the country The team extends its appreciation to other guidance received from Sameh Naguib Wahba (Global Director,
well until now, but whose costs are becoming increasingly evident. Alternatively, lessons from the current Urban and Disaster Risk Management, Resilience and Land Global Practice), Benoit Bosquet (Regional
urbanization process can guide the adoption of policy reforms that facilitate a transition from a labor-intensive Director, Sustainable Development, EAP), Achim Fock (former Portfolio and Operation Manager, Vietnam),
and low-efficiency growth model to one that leverages urbanization as the key driver of productivity and Steffi Stallmeister (Portfolio and Operation Manager, Vietnam), and the management of other Global Practices.
efficiency. The report was also informed by a series of background papers. Authors of and contributors to these background
papers who have not already been named are the International Development and Infrastructure Network
To sustain long-term, productivity-fueled economic growth while minimizing large inequalities between
Research Lab at Hongik University, Republic of Korea (research associates: Jung-a Kim, Ji-eun Kim, and Haein
regions, Vietnam must utilize land, labor, and fiscal resources more efficiently. This in turn requires a collective
Cho), Vũ Hoàng Linh, Nguyễn Việt Cường, Minjin Lee, Trịnh Thị Hòa, and Katie L. McWilliams.
effort at the central and local government levels to promote agglomeration economies and tackle congestion
forces in leading urban centers, while also promoting regional integration that connects people and firms The team was fortunate to receive excellent advice and guidance from the following peer reviewers at various
in poorer areas with those in richer ones. This report prescribes three main areas of institutional reforms to points in the report preparation process: Peter Ellis, Andre Bald, Yoonhee Kim, Javier Sanchez-Reaza, Soraya
achieve these higher-level goals: (1) easing constraints on labor mobility; (2) strengthening planning and land Goga, Uri Raich, Brian G. Mtonya, Jacques Morisset, and Nguyễn Đình Cung. Although we are very grateful for
use regulations; and (3) improving the responsiveness of fiscal allocations to the needs of fast-growing and the guidance received, these reviewers are not responsible for any remaining errors or omissions.
higher-efficiency urban areas.
In preparing the report, the team benefited from strong partnership and feedback received during several
Urbanization will continue to be an important feature of Vietnam’s development, but at this critical juncture, as workshops and consultations that were organized and involved participants from the Central Institute of
the government of Vietnam finalizes its socioeconomic development strategy for 2021-30, policy makers can Economic Management, Ministry of Construction (MOC), Ministry of Planning and Investment (MPI), Ministry
pursue reforms that will enable urbanization to support a more efficient and sustainable development pathway. of Agriculture and Rural Development, National Economic University, and Ho Chi Minh City, especially
This report hopes to help policy makers understand the country’s current spatial and urbanization trajectory, members of the Prime Minister’s Economic Advisory Group (PMEAG), including Vũ Viết Ngoạn, Trần Du Lịch,
and it recommends integrated and coordinated actions to chart a better way forward. and Vũ Thành Tự Anh. We are thankful to the Urban Development Agency (UDA) and Vietnam Institute of
Urban and Rural Planning (VIUP) of the MOC, Development Strategy Institute (DSI) of MPI, and Department of
Planning and Architecture (DPA) of HCMC for their close engagement and suggestions throughout this study.
We would particularly like to thank Nguyễn Đình Cung for his leadership and support in organizing stakeholder
Ousmane Dione
consultations and discussions with the government and being the key counterpart for this work.
Country Director, Vietnam Bruce Ross-Larson was the principal editor of the overview, and Sabra Ledent edited the main report. Đoàn Thanh
Hà, working with Patricia Anne Janer from the map unit of the World Bank, was responsible for design, production,
and dissemination of the report. Nguyễn Hồng Ngân provided overall guidance on dissemination of the work. Last
but not least, we thank Nguyễn Thị Hương Giang and Trần Hải Yến for their great administrative support.
We also appreciate the funding support received from the Korea Research Institute of Human Settlements
(KRIHS) in the Republic of Korea.

viii Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview ix

 Preface
Vietnam’s Urbanization at a Crossroads looks at how Vietnam’s policy
makers can improve the efficiency of the country’s urbanization process
and, in so doing, take the next step up the international ladder of
development, while simultaneously pursuing equity and sustainability.
The report describes how the country’s main spatial policies have
helped to shape its urbanization to date, contributing to a unique two-
tier urbanization and industrialization structure. The first tier consists
of Hanoi and Ho Chi Minh City (HCMC), together with their economic
regions, and the second tier of the remainder of Vietnam’s regions.1
The study on which this report is based examined the efficiency, or lack
thereof, in the use of land, labor, and fiscal resources inherent in this
two-tier system.

This report argues that urbanization in Vietnam is at a crossroads whereby

its policy makers face a choice between two paths. On the one hand,
they can follow the path that continues the spatial policies that have
served the country well in recent decades, but whose costs are becoming
increasingly evident because of the changing structural conditions and the
dispersed and disconnected development to which they have given rise.
Or they can take the path of rethinking their approach to urbanization,
adopting a strategy that places enhanced efficiency in the use of
resources at its center by considering the needs and strengths of its
diverse regions. Such a strategy will require policies to (1) better activate
agglomeration economies while managing congestion costs in the Hanoi
and HCMC economic regions and the large urban centers in the second-
tier regions; and (2) promote greater regional integration between (as well
as within) the two tiers. These policies should be further underpinned by
a commitment to ensuring universal access to good-quality education,
health, and other basic services.

Photo: Tron Le/The World Bank

Although the first path is, arguably, the easier one in the short term, it
is likely to come at an rising cost to Vietnam’s long-run development
prospects. By contrast, the more difficult path offers the potential to
ensure Vietnam’s continued development success, leading it to the
upper echelons of economic development.

1 Vietnam’s General Statistics Office (GSO) divides the country into six socioeconomic
regions. The first-tier regions are Hanoi and HCMC and their respective economic
hinterlands of the Red River Delta region and the Southeast region. The second-tier
regions are the Northern Midlands and Mountains, the Central Highlands, the North
Central Coast and Central Coast, and the Mekong River Delta. The six regions cover 58 This Overview builds on and complements the main report
provinces and five provincial-level municipalities.
“Vietnam’s Urbanization at a Crossroads”.

1 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 2

 Labor mobility,
Overview: skills, and access to

Vietnam’s
services
Easing constraints on labor mobility and
improving skills and access to social

Urbanization at
and basic services among migrants and
their families.

a Crossroads Vietnam’s
two-tier
urbanization &
Vietnam is climbing the international ladder of prosperity while almost
industrialization
eliminating extreme poverty and avoiding widespread spatial inequality among
structure
its regions. Real GDP per capita has increased more than 4.5 times since 1990,
while the share of the population living in extreme poverty declined from
almost 53 percent in 1992 to a mere 2 percent in 2016.1

Contributing to this success has been, until recently, an accelerating process of

urbanization that has seen the share of Vietnamese living in towns and cities
climb from just less than 20 percent in 1986 to more than 36 percent today.2By
concentrating people, skills, and economic activity in urban areas, urbanization Fiscal and financing
has helped to promote prosperity through denser labor markets, the spillover Land and planning Improving the responsiveness of fiscal
of ideas between businesses and people, and the creation of networks of local Strengthening planning and land allocations to the more complicated
suppliers. use regulations to integrate infrastructure needs of fast-growing
physical, industrial, and and higher-efficiency urban areas
Vietnam’s remarkable success in recent decades justifies optimism that it can demographic development and to and better tailoring spending within
continue to rise to upper-middle-income status and on to high-income status coordinate development across each of Vietnam’s six socioeconomic
within the next generation. This progress will require the continued growth of local jurisdictions. regions to their economic strengths,
productivity through the movement of labor from lower- to higher-productivity
while striving to ensure that all
activities and the growth of productivity in each activity. But dispersed and
people in all regions have access to
disconnected development leading to rising inefficiency costs, together with
good-quality education, health, and
changing structural conditions, will make such a goal difficult to achieve if
other basic services.
Vietnam’s current spatial and urbanization policies remain in place.

To ensure continued rapid development, Vietnam’s policy makers need to For each of these areas, the specific policy actions detailed in this report can foster not only
rethink their approach to urbanization, adopting a new strategy that places greater efficiency and sustained economic growth, but also the inclusiveness and resilience
enhanced efficiency in the use of land, labor and fiscal resources at its center of urbanization. Importantly, the three areas of reform are interwoven and therefore
and that considers the needs and strengths of its diverse regions. Such a must be pursued together. For example, without accompanying measures to improve the
strategy requires, in turn, bold policy reforms in three inter-related areas: responsiveness of fiscal allocations, the easing of constraints on labor mobility will serve only
to exacerbate the pressure on infrastructure in Vietnam’s leading economic centers.

3 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 4

 Vietnam has
experienced dispersed
and disconnected
development
Vietnam’s urbanization
Following the initiation of the Đổi Mới reforms in 1986, Vietnam’s pace of
demographic urbanization picked up sharply (figure O.1).3 Although between
1980 and 1986, the growth rate of the share of Vietnam’s population living

is increasingly
in urban areas was a meager 0.3 percent a year, it picked up to 0.9 percent
a year between 1986 and 1990 before peaking at 2.2 percent a year between
2000 and 2010. Yet despite this acceleration, Vietnam’s pace of urbanization

underdelivering its
has, until very recently, remained below that of developing countries in the
rest of the East Asia and Pacific (EAP) region. Even at its peak, Vietnam’s pace
of urbanization remained 0.6 percentage points below that of the rest of

benefits due to inefficient

the region. The shortfall in pace compared with China was even starker—1.0
percentage point. Although China’s pace of urbanization at its peak implied
a doubling in its level of urbanization every 21.7 years, Vietnam’s peak pace

resource allocation
implied a doubling every 31.5 years.

FIGURE O.1 Vietnam’s pace of urbanization accelerated following Doi Moi,

but has generally remained below that for the rest of the region

Compuound annural growth rate(%)

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0
1950-60 1960-70 1970-80 1980-86 1986-90 1990-2000 2000
Photo: BBbirdZ/The World Bank

Vietnam EAP developing China

Source: World Bank team’s calculations based on data from United Nations World Urbanization
Prospects: 2018 Revision database (https://esa.un.org/unpd/wup/).

Note: “EAP developing” countries include all non–high-income economies in the East Asia and
Pacific (EAP) region. Growth rates are calculated as compound annual growth rates of the urban
share of the population over 10-year intervals, except for 1980–86, 1986–90, and 2010–17. The
first vertical dashed line divides pre-1986 and post-1986 growth; the second divides pre-2010 and
post-2010 growth.

5 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 6

 Underlying Vietnam’s headline pace of Red River Delta region around Hanoi and By contrast, Vietnam’s second-tier regions FIGURE O.2 Aggregate urban land area has
urbanization has been the emergence the Southeast economic region anchored by have relatively low concentrations of urban grown dramatically since 2010
of a distinctive two-tier urban and HCMC.4 Together, in 2014 these two regions population and nonagricultural jobs. Even so,
industrialization structure. This structure were home to 35.2 million people, or 38.9 these regions, which vary in resources and 2.5
2.19
combines an economically dominant first tier, percent of Vietnam’s overall population, and thus areas of economic strength,6 remain
home to more than 55 million people. They 2.0
whose success has largely been driven by together they dominate Vietnam’s economic
include a heterogeneous landscape of urban 1.5
foreign direct investment (FDI) inflows that landscape, as is evident in nighttime lights
settlements, ranging from the relatively
accelerated dramatically following the Đổi satellite imagery (map O.1). The two regions 0.94
large municipalities, or secondary cities, of 1.0 0.77
Mới reforms, with a second tier characterized accounted for more than 70 percent of 0.68
Da Nang and Can Tho, to provincial cities
by dispersed industrialization and national nonagricultural employment and 0.5
and scattered towns and townships. More 0.14
development. The first tier consists of the almost 75 percent of national nonfarm firm generally, the second tier has experienced 0.
twin economic engines of Hanoi and HCMC revenue in 2016.5 spatially dispersed urbanization since 2010, 1996 2006 2010 2012 2017
and their respective economic regions—the although levels remain low. Growth has been
driven in part by employment growth in the Source: World Bank team’s analysis based on Defense
MAP O.1. The economic dominance of Hanoi and the HCMC is evident in 2017 nighttime
secondary and tertiary sectors, consistent Meteorological Satellite Program–Operational Line Scan
lights data with rural transformation and scattered
(DMSP-OLS) and Visible Infrared Imaging Radiometer
Suite (VIIRS) nighttime light data, https://Ngdc.Noaa.Gov/
industrialization. Eog/.
Note: Aggregate urban land area is the percentage of
Within this two-tier structure, development national land area that is categorized urban through
night time light data threshold per the methodology
has been not only dispersed, but also outlined in Chapter 2 of the Main Report.
disconnected both within the individual
tiers and between the two tiers. The
2.196 Vietnam’s relatively low levels of internal
disconnected development within the tiers is
2.196 - 10 migration because of the limited access of
10 - 20 the consequence of the very rapid and poorly
migrants to social services, which stems from
20 - 53 planned physical expansion of urban areas.
53 - 80 the restrictions of the ho khau residence
Spatially dispersed rural industrialization,
80 - 120 registration system9 and a lack of affordable
120 - 160
combined with high concentrations of FDI
housing for migrants in urban areas. Between
160 - 200 on the peripheries of the Hanoi and HCMC
2005 and 2014, Vietnam experienced an
Source: World Bank based on Visible Infrared Imaging 200 - 789.737 regions, have contributed to the conversion
Radiometer Suite (VIIRS) nighttime light data, https:// average annual rate of interprovincial
of land from agricultural to nonagricultural
ngdc.noaa.gov/eog/viirs/download_dnb_composites. migration of 0.52 percent a year, while
html. uses on a massive scale over the last decade.
its average annual rate of interregional
Vietnam’s “urban” areas, as detected using
Note: Color schemes represent different nighttime migration was 0.36 percent. These rates are
light (digital number) values. Warmer color nighttime light data, expanded four times
below those of other countries at a similar
represents higher level of urbanization and economic more over the seven years from 2010 to
development. stage of growth and development. For
2017 than they did during the previous 14
example, migration across provinces in the
Disclaimer: The boundaries, colors, denominations, years from 1996 to 2010 (figure O.2).7 As a
and other information shown on any map in this work Republic of Korea (which are much larger
do not imply any judgment on the part of The World
result, between 2000 and 2015 Vietnam’s
geographic units than provinces in Vietnam)
Bank concerning the legal status of any territory or the urban population density remained at 1,890
endorsement or acceptance of such boundaries. was 1.5 percent a year during its economic
residents per square kilometer, which is low
transition from the 1950s to 1990s.
compared with that of other countries.8

7 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 8

 As a result,
Vietnam is
not fully
harvesting the
benefits of
urbanization Box O.1

Historically, urbanization has helped deliver

development to countries both through
The benefits of density: A closer look at
the structural transformation that has agglomeration economies
accompanied it and the benefits of density,
which arise from the concentration of Economists refer to the benefits of density to people and businesses as agglomeration
people, skills, and economic activity in cities economies. Such benefits can arise through at least four mechanisms. First, the thick
(box O.1).10 These benefits of density include labor markets that characterize cities can generate better matches between workers and
the better matching of workers with jobs as businesses so that each person is more likely to find his or her “perfect” job. Second, cities
a result of deeper and broader local labor can support the growth of a large array of specialized suppliers of goods and services
markets, the growth of large networks of that provide the intermediate inputs fueling the growth of the local economy. Third, the
local suppliers, and the enhanced spillover close geographic proximity of people and businesses can produce an (often unintended)
of ideas between workers and businesses spillover of ideas as workers and businesses learn from each other through observation
that act as the spark for local innovation and interaction. And, fourth, the costs of providing large and lumpy infrastructure such
and national growth. They also include the as a mass rapid transit system can be spread over more people, with substantial cost
fact that, within cities, the fixed costs of benefits. However, realizing the full benefits of cities also requires effectively managing the
providing large-scale infrastructure can be agglomeration diseconomies-or negative congestion forces-that arise from the pressure of

Photo: Matthew Nolan/The World Bank

spread over many people. Higher-density urban populations on infrastructure, basic services, land, housing, and the environment.
(that is, less dispersed and less sprawling) Empirical evidence from Brazil, China, Colombia, India, and Indonesia suggests that
urban development has furthermore been agglomeration economies in developing countries are strong, but the evidence from Vietnam
found to be associated with less crime, in this report suggests fewer benefits, as is discussed further in this overview and in chapter
more green density, fewer vehicle miles 1 of the report.
traveled, and reduced energy use. 11
Source: World Bank, based on Chauvin et al. (2017); Duranton (2016); Roberts, Gil Sander, and Tiwari (2019);
World Bank (2009).

9 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 10

 Consistent with this situation, in recent
decades Vietnam has drawn large amounts FIGURE O.3. Vietnam has experienced a limited shift of people to cities even as labor has
of labor from agriculture into industry and shifted from agriculture to manufacturing and services
services. As of 2016, about 60 percent of
the country’s total employment was in the
secondary and tertiary sectors (that is,
a. Typical pattern
in industries and services), contributing
around 85 percent of GDP. However,
dispersed and disconnected development
means that, although many of these jobs
have been in urban areas, significant
numbers have not (figure O.3). Indeed,
with 35.2 percent of its population living
in officially defined urban areas in 2017,
Vietnam’s level of urbanization remains low
compared with that of developing countries
in the East Asia and Pacific region overall,
where 54.7 percent of the population lived
in officially defined urban areas in 2017.12
RURAL URBAN
This combination of strong structural
transformation with more limited spatial
transformation is the result of the three
main spatial policies described later in this
overview. As a result, although Vietnam b. Vietnam’s pattern
has enjoyed some of the fruits of structural
transformation, it has not enjoyed the full
benefits of urbanization and the density
that is associated with it.

URBAN
Frank Mckenna/The World Bank

RURAL

11 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 12

 And is facing a growing … consistent with
challenge of inefficiency… weak agglomeration
Vietnam’s failure to harvest the full benefits
of urbanization is linked to the inefficiency
At the same time that the first-tier regions are
suffering from a diminishing agglomeration
economies and
mounting congestion
in its urban system. Generally, the benefits premium, within the second-tier regions
of density are manifested in the productivity relatively large municipalities and provincial

forces
advantage—agglomeration premium—a cities are not developing as regional centers
country’s leading regions or cities exhibit of production. In most provincial cities outside
over its other regions. Unfortunately, in the two metropolitan regions, the tertiary
Vietnam the agglomeration premium is sector has grown more strongly than the
difficult to assess because data constraints secondary sector—that is, urban districts
The erosion of the first tier’s agglomeration premium and the failure of
prevent the calculation of gross value added located 20 kilometers or more outside the
secondary cities to develop as regional centers of production suggest
(GVA), a crucial input to the calculation of two metropolitan regions have a job growth
a weakness of agglomeration economies within Vietnam. It is also
productivity, for the country’s regions. This rate that is three times higher for the tertiary
consistent with evidence of mounting congestion forces in the first-tier
analysis therefore uses instead the aggregate sector than for the secondary sector. This
regions, arising from a failure to adequately address the pressure of
revenue of firms per worker as an imperfect trend reflects the fact that most provincial
urban populations on, among other things, infrastructure, basic services,
proxy of a region’s labor productivity.13 By this cities support the consumption and local
and the environment.
measure, the labor productivity of Vietnam’s service activities of their own provinces
first-tier regions, Hanoi and HCMC, was around instead of having strong bases in tradable
Consistent with this finding, a Vietnamese district’s labor productivity is
20 percent higher than that of its second- sectors, such as manufacturing, or high-value
positively related to the size of the labor pool within only a 10-kilometer
tier regions in 2011, but it then declined tradable services. Overall, the provincial
radius of its center—a finding applicable only to a pool of about 2
significantly to less than 14 percent in 2016 cities, particularly those outside the two
million workers, after which the relationship turns negative (figure O.5).
(figure O.4). Although percentage-wise this still metropolitan regions, have not experienced a
The negative turn is consistent with the negative costs of congestion
represents a sizable advantage, if the pace of manufacturing-based industrial transition. In
overpowering the benefits of density. The congestion costs arise in this
decline in the benefits derived from density other words, these secondary cities function as
case mainly from the deficient urban infrastructure and shortcomings in
is sustained, the first tier’s agglomeration “consumer cities” as opposed to “production
the supply of basic services. The result is agglomeration diseconomies.
premium will be down to less than 5 percent cities,” reflecting a process of urbanization
Examination of dense employment sites also reveals that such areas
by 2030. without strong industrialization.
contain many old, inefficient firms that are still standing because of
FIGURE O.4. On the decline – the first tier’s agglomeration premium, 2011 and 2016 inefficient land markets and poor planning systems. The districts in
Hanoi and HCMC, which possess the largest labor pools, fall squarely in
the agglomeration diseconomies range of figure O.5.
25
20,1 1
20
Source: World Bank team’s analysis of data
from General Statistics Office of Vietnam,
15 13,25 Enterprise Census, 2011 and 2016.

Note: The agglomeration premium is

calculated as the percentage by which the
10 average labor productivity of the first-tier
regions exceeds that of the second-tier
regions. Labor productivity is (imperfectly)
5 proxied by the aggregate revenue of firms
per worker.

0
2011
2011 2016
2016

13 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 14

 Lack of strong interfirm and
FIGURE O.5 Districts in Hanoi and HCMC fall in the agglomeration diseconomies range of the
relationship between labor productivity and labor pool size, 2011 and 2016

4,000
spatial linkages contribute
2011
to weak agglomeration
Labor productivity (VND, millions)

2016

economies
3,000

2,000 Although foreign-owned firms

contribute to the first tier’s
economic dominance and to the
overall growth of the economy,
1,000 they lack integration with each
other and with domestic firms, and
they lack spatial integration in
their host regions (figure O.6). Thus
much of Vietnam’s FDI-generated
0
0e+00
0e+00 1e+06
1e+06
2e+06
2e+06
3e+06 employment has been in more
weak spatial rural districts on the peripheries
Total labor within 10 km of a district center (millions) linkage
of the Hanoi and HCMC regions.
Source: World Bank team’s analysis of data from General Statistics Office of Vietnam, Enterprise Census, 2011 and 2016.
weak industrial That employment has been largely
Note: A district’s labor productivity is (imperfectly) proxied by the aggregate revenue of its firms per worker. linkage
generated by single-firm complexes
that exhibit high self-sufficiency in
Evidence of mounting congestion forces can be flooding.15 As for air quality, although it is not at
support services such as logistics
found in the severe traffic congestion prevalent the levels of some other Asian cities, Vietnam’s
and employee housing, thereby
in, for example, Hanoi. Although recent data are cities nevertheless suffer from poor-quality air,
contributing to the pattern of
difficult to come by, between 2006 and 2011 the as evidenced by levels of fine particulate matter—
dispersed and disconnected
number of registered cars in Hanoi rose by 179 in particular, PM2.5 levels—that exceed the World
development within the first tier.
percent and the number of motorcycles by 85 Health Organization’s standard for safe air.16 In
percent. Even though vehicle-kilometers did not 2013 the total welfare costs associated with this FIGURE O.6. Vietnam’s industrial and spatial
With FDI-generated employment
rise in proportion, insufficient investment in road pollution amounted to an estimated 5.2 percent linkages are weak
concentrated in relatively isolated,
space and in public transport alternatives, as of national GDP.17
single-firm complexes on the rural peripheries of Hanoi and HCMC, agglomeration economies
well as poor traffic management, contributed to
are likely also weak because of the absence of spatially integrated labor markets and the
the rising traffic congestion.14 Further evidence Evidence of congestion extends as well to
consequent weak knowledge spillovers (see box O.1).
of mounting congestion forces can be found the overcrowding of schools and health care
in the fact that, as a result of insufficient facilities. In Hanoi and HCMC, for example,
Foreign-owned firms’ lack of linkage and integration in the Hanoi and HCMC regions may be
connections to the sewerage system and average class sizes are typically 50–60 students.18
explained in part by the inadequate infrastructure investment that is contributing to strong
insufficient treatment capacity, 80 percent of This overcrowding diminishes the quality of
congestion forces in these regions, as well as by deficient planning within these regions. It can
Hanoi’s wastewater is directly discharged into its teaching, which in turn undermines learning
be further explained by the existence of strong incentives (subsidies) for firms to locate in more
rivers. Thus roughly half of the city’s population outcomes. Consistent with this finding, although
rural areas. These features derive from Vietnam’s three main spatial policies, described in the
lives in areas classified as “heavily polluted.” Vietnamese children can overall expect to
following section.
Meanwhile, only one-quarter of Hanoi’s area complete 12.3 years of schooling by age 18,
has a fully functional drainage system, which, this number falls to 10.2 years once years of
because of the city’s rainfall patterns and lack schooling are adjusted for their quality based on
of green infrastructure, contributes to frequent harmonized international test scores.19

15 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 16

 Vietnam’s unique
urbanization pattern
has been shaped by
three spatial policies
The distinctive characteristics of Vietnam’s two-tier urbanization and

Three key spatial policies

industrialization structure, as well as the existence of the structure itself,
can be largely explained by the interaction of FDI flows and the country’s
three main spatial policies in the areas of labor, land, and fiscal transfers

that have shaped

(figure O.7). The development of the first-tier regions has, through FDI
inflows, been strongly market-driven, whereas the development of the
second-tier regions has been more supply-driven. The reason: the three

Vietnam’s unique
spatial policies have sought to intentionally guide development to the
second tier through subsidies and redistributive intergovernmental transfers,
as well as by constraining labor mobility.

urbanization are no longer

FIGURE O.7. Vietnam’s two-tier structure is influenced by three spatial
policies

fit for purpose Labor mobility

Migration policies
have constrained
labor mobility

Land
Large-scale rural industrialization
and land conversion have driven
spatially dispersed urbanization

Fiscal
Photo: Peter Nguyen/The World Bank

Equity-based fiscal transfers redirect

resources from high population to
low population growth regions

Disclaimer: The boundaries, colors, denominations, and other information shown on any map in
this work do not imply any judgment on the part of The World Bank concerning the legal status of
any territory or the endorsement or acceptance of such boundaries.

17 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 18

 As for FDI inflows, Vietnam has been a magnet for these since Đổi Mới began in 1986. In 2018 FDI MAP O.2. Foreign-owned firms are spatially concentrated in and around Hanoi and HCMC, with
inflows accounted for almost 30 percent of all gross fixed capital formation in Vietnam, and the smaller concentrations in second-tier coastal locations
stock of FDI inflows reached just over 60 percent of GDP, up from 27.6 percent in 1995.20 These
inflows, which have been instrumental in the growth of the Vietnamese economy, have been
heavily concentrated in and around Hanoi and HCMC, with smaller concentrations in a handful
of second-tier locations along the coast (map O.2). Thus, of 52 districts with 20,000 or more
employees in foreign-owned firms, 46 are in the Hanoi and HCMC metro regions.

The country’s three main spatial policies are in the following areas:

• Labor mobility and skills: Constraints to geographic labor mobility, imposed by limited access
to social services, are rooted in the restrictions of the ho khau residence registration system
and lack of affordable housing for migrants in urban areas.

• Land and planning. Widespread rural industrialization has been vigorously promoted through
the provision of heavily subsidized, sometimes even free, land and other facilities. It is a result
of loose regulation of rural to urban land conversion and land use planning.

• Intergovernmental fiscal transfers. The current system of fiscal transfers from the central
to local governments strongly favors equality between regions (spatial equity) over spatial
efficiency—a policy that is contributing to leading urban areas being starved of the resources
they require to meet the infrastructure needs of their growing populations.

Taken together, these policies amount to a classic strategy of attempting to bring jobs and
services to the people rather than encouraging people with the desire and right skills to move
to the jobs and services. The strategy has thus been one of discouraging people from moving
to the metropolises of Hanoi and HCMC by raising the socioeconomic costs of migration, while
simultaneously attempting to bring more industrial jobs and associated infrastructure to them.

Source: World Bank team’s analysis based on data from General Statistics Office of Vietnam, Enterprise Census, 2016.

Note: One blue dot represents five foreign firms.

Disclaimer: The boundaries, colors, denominations, and other information shown on any map in this work do not imply any
judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of
such boundaries.

19 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 20

 These policies initially Vietnam’s
served Vietnam well, urbanization
but are increasingly is now at a
unfit for purpose crossroads:
Vietnam’s spatial policies have had the presumably intended effects need to make
hard but
of improving spatial equity, restraining migration, and limiting the
emergence of slums in major urban centers, which are a common woe
for many other urbanizing developing countries. Over the three decades

necessary
since the launch of Đổi Mới, Vietnam’s development strategy, including
its three main spatial policies, succeeded remarkably, producing stable,
broad-based economic growth and the near eradication of extreme
poverty. The strategy’s success was partly attributable to large initial
supplies of local surplus agricultural labor and to Vietnam starting from choices
such a low productivity and development base. Those conditions allowed
FDI-fueled Hanoi and HCMC to grow without necessarily running into Urbanization in Vietnam is therefore now
a labor constraint, despite the disincentives to migration. At the same at a crossroads at which its policy makers
time, even though the jobs created in second-tier regions through rural face a choice between two paths. On the
industrialization may be rooted in small-scale and low value-added one hand, they can follow the path that
activities, workers’ productivity in those jobs has been much higher than continues the spatial policies that have
in the agricultural jobs they left. served the country well in recent decades,
but whose efficiency costs are becoming
Nevertheless, lurking behind Vietnam’s spatial and other development increasingly evident because of the
policies are inefficiencies related to the dispersed and disconnected dispersed and disconnected development
development that has resulted from the use of land, labor, and fiscal to which they have given rise. Or they can
resources. These inefficiencies have become even more evident as rethink their approach to urbanization to
Vietnam confronts emerging structural challenges—the depletion of embark on a new pathway that is based on
local surplus agricultural labor and the demographic transition to below- making better use of urbanization as the
replacement fertility—which leave the country with only two more key driver of productivity, efficiency, and
decades of positive labor force growth.21 economic growth. Although changing the
pathway will be difficult in the short term
The inefficiencies associated with Vietnam’s spatial policies also help because of the significant policy changes
to explain the underlying weakness of labor productivity growth in it requires, that choice will ultimately
the nonprimary sector, which averaged only around 1.2 percent a year prove more rewarding in terms of the
between 2006 and 2016, despite the continued strong growth of real GDP development benefits it delivers.
Photo: benziiiz/The World Bank

per capita. Once the easy productivity gains from the transfer of surplus
agricultural labor into the secondary and tertiary sectors have soon
come to an end, 22 Vietnam’s long-term growth of real GDP per capita will
become constrained by low productivity growth in the nonprimary sector.
Thus without action Vietnam faces the threat of a long-term slowdown of
economic growth.

21 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 22

 Sustaining long-term
economic growth
requires a more efficient
use of land, labor and
To sustain momentum, fiscal resources...
Vietnam needs an To sustain its development momentum, and ultimately complete the

urbanization strategy
transition to upper-middle-income status followed by high-income status,
Vietnam must take fuller advantage of the potential of urbanization
to spur productivity and movement into higher value-added activities
within the secondary and tertiary sectors. Policy must therefore address

tailored to its diverse

the problems associated with dispersed and disconnected development
within and between the two tiers. This can be achieved by focusing
on two closely related basic principles: first, fostering agglomeration

regions
economies and better tackling congestion forces in urban centers
and, second, promoting regional integration. Regional integration of
Vietnam’s tiers, and within each tier, will enhance labor mobility and,
more generally, factor mobility, thereby boosting agglomeration in
the right places (both overall and within each tier). At the same time,
regional integration in the long run connects people and businesses
in poorer places with those in richer ones through enhanced migration
flows and transport infrastructure. In doing so, it counteracts regional
divergence. Underpinning these principles should be a commitment to
ensuring that everyone, whether they live in the metro regions of Hanoi
and HCMC or the rural areas of the second-tier regions, has access to
good-quality education, health, and other basic services. This will allow
enhanced labor mobility to permit those people and families who choose
to do so to respond to the pull of better job and economic opportunities
through migration instead of moving because of distress and concern
about lack of access to basic services. Migrants will, furthermore, be
Photo: Tran Phu/The World Bank

equipped with the requisite skills needed to ease their integration into
the cities and areas to which they move.

23 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 24

 ... while considering
that different places
have different strengths
and challenges
In implementing the basic principles just stated, policy also needs to
take into account regions’ different strengths and challenges. Vietnam’s
policy makers should consider distinguishing between the following
three basic types of place:

• The metro regions of Hanoi and HCMC, which represent Vietnam’s

national economic heartbeat. These metro regions are characterized
by relatively diverse urban economies and large skill bases and
therefore the potential to generate strong agglomeration economies.
At the same time, however, they are confronted by strong and
mounting congestion forces. Addressing these forces requires
tackling complicated infrastructure needs.

• Secondary cities within Vietnam’s second tier such as Da Nang

and Can Tho that act as regional economic centers.23 These cities
have the potential to generate agglomeration economies based
on specialization in distinctive areas according to the underlying
competitive and comparative advantages of the regions in which
they are located (box BO.2.1). Although these cities face important
infrastructure challenges that go beyond those of smaller urban
settlements and rural areas, these challenges are not necessarily as
complicated as those of the metro regions.

• Rural areas within the second tier, which exhibit only limited further
scope for productivity gains through industrialization. These areas
have simpler infrastructure needs related to the effective delivery
of quality basic services. However, because of the higher likelihood
of migration among younger adults, these areas are also likely to be

Photo: Qui Nguyen/The World Bank

the ones most severely affected by Vietnam’s demographic trends
and the challenges of aging populations. These areas also suffer from
a lack of connectivity, which has contributed to their disconnected
development.

25 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 26

 Photo: BokaCro/The World Bank
Box O.2.

Underlying competitive and comparative

Vietnam’s six economic regions vary
advantages differ across regions considerably in their underlying resource
endowments and, therefore, their underlying
Map O.3 Areas of comparative advantage in Vietnam by region areas of comparative and competitive
advantage. Vietnam’s six socioeconomic
NORTH WEST
NORTH WEST LQ
LQ NORTH EAST
NORTH EAST LQ
LQ
regions vary considerably in their underlying
Growing - maize & other cereals 105.59 Mining - hard coal 12.65
resource endowments and therefore in
Growing - tea tree 58.06 Mining - chemical & fertilizer minerals 12.61
their underlying areas of comparative and
Operation of sports facilities 9.45 Manufacture - comms equipment 5.16
competitive advantage. Although Hanoi and
Manufacture - dairy products 9.34 Manufacture - computers & equip 4.38
HCMC have the underlying advantage of large
Manufacture - optical instruments & equip 7.39 Manufacture - basic precious / other metals 3.99
skill bases and markets that make them natural
potential breeding grounds for high value-
RED RIVER DELTA LQ added tradable activities in manufacturing
RED RIVER
Manufacture DELTA
- motorcycles LQ
2.83 and services, the other regions have resource
Manufacture - motor parts & accessories 1.93 endowments that make them better suited to
Manufacture - communication equip 1.79 specialization in other activities (map BO.2.1).
Other specialized construction activities 1.69 The Mekong River Delta region reveals a
Manufacture - electronic components 1.63 comparative advantage in agriculture and
fishery processing and the Central Coast
NORTH CENTRALCOAST
NORTH CENTRAL COAST LQ
LQ
region in agriculture. Even within the broad
7.82 SOUTH CENTRAL COAST LQ
socioeconomic regions, however, there are
Crop production - support activities 4.87 Repair - transport equip, exc motor vehicles 7.21 differences of competitive and comparative
Manufacture - sugar 3.56 4.13 advantage. Although the Central Coast region
Manufacture - malt liquors & malt 3.27 Manufacture - games & toys 3.57 overall has a comparative advantage in
Manufacture - starches & starch products 3.04 Site preparation 3.5 agriculture, its prominent urban center, Da
Manufacture - dairy products 3.34 Nang, shares some of the potential advantages
of agglomeration with Hanoi and HCMC.
CENTRAL HIGHLANDS LQ
Disclaimer: The boundaries, Source: World Bank team’s analysis of data from General
52.3 colors, denominations, and other Statistics Office of Vietnam, Enterprise Census, 2016.
information shown on any map
Forestry support services 47.76
in this work do not imply any Note: LQ denotes location quotient, which is a measure of
Growing - other perennial crops 45.47 judgment on the part of The a region’s specialization in any given industry. LQ is equal
World Bank concerning the to the share of an industry in a region’s total employment
Plant propagation 28.77 legal status of any territory or the divided by the share of the same industry in national
endorsement or acceptance of
Growing - rubber tree 16.07 employment. An LQ value of greater (less) than 1 indicates
such boundaries.
that a region is more (less) specialized in an industry than
the country overall. n.e.c. = not elsewhere classified.
MEKONG LQ SOUTH EAST
SOUTH EAST LQ
LQ
MEKONG LQ
11.15 Other manufacturing n.e.c 1.72

Manufacture - luggage, handbags etc. 4.76 Manufacture - other rubber products 1.69

Manufacture - other textiles n.e.c 4.74 Management consultancy 1.68

Retail - automotive fuel in specialized store 3.4 Manufacture - footwear 1.58
Wholesale - rice 3.31 Manufacture - sheets, panels & boards 1.58

27 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 28

 Figure O.8. Policy recommendation framework

Three inter-related
policy actions are needed Bold policy actions
to realize efficiency are needed from:
Implementing the basic policy principles in a tailored manner will require
overhauling Vietnam’s three main spatial policies, along with prioritizing
spending and investment in each region to better align with both the
strengths of its regions and the challenges they face. It also requires better,
more integrated urban and spatial planning within the metro regions of Hanoi
and HCMC and the secondary cities of Vietnam’s second tier. Vietnam’s policy
makers will have to make choices and accept that development may not be
best served by dispersing industrialization widely across the country.

More concretely, three main areas of institutional reform are recommended

(Figure O.8): Labor Land & Planning Fiscal &
• Ease constraints on labor mobility, improve skills and access to social mobility regulation resource
and basic services among migrants and their families. allocation

to enhance policy principles:

• Strengthen planning and land use regulations to integrate physical,
industrial, and demographic developments and to coordinate
development across local jurisdictions.

• Improve the responsiveness of fiscal allocations to the more

complicated infrastructure needs of the metro regions and major
secondary cities in order to take better advantage of agglomeration
economies and address excessive congestion forces. Also better tailor
spending within each region to its economic strengths, while ensuring that
all people in all regions have access to good-quality education, health, and
other basic services. Agglomeration Regional Universal
These three areas of reforms are closely linked because success in one is economies integration access
dependent on progress in the others. For example, without measures to to social
improve the responsiveness of fiscal allocations, the easing of constraints on
labor mobility will only exacerbate the pressure on infrastructure in Vietnam’s
services
leading economic centers. Given this, although these areas of policy reform
may have different levels of priority within the government of Vietnam, the
adoption and implementation of them need to be considered and planned in
a coherent fashion.
Within these main areas, the specific policy actions shown in Table O.1 map not only to
improved efficiency and thus maintaining Vietnam’s development momentum, but also to the
inclusiveness, equity, and resilience of urbanization.

29 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 30

 Labor markets are most efficient when workers are matched with the jobs to which they
are most suited and in which they will be the most productive. This applies at the regional
level between the regions that form the two tiers of Vietnam’s urbanization and industrial
structure. It also applies at the metropolitan level, within individual regions. At the regional
level, Vietnam discourages geographic labor mobility both explicitly, through the high
socioeconomic costs borne by migrants because of the restrictions of the ho khau residence
registration system, and, implicitly, by failing to provide the resources needed to meet the
infrastructure and affordable housing needs of Hanoi, HCMC, and secondary cities in the
second-tier regions.
Although the efficiency and welfare costs of policy-induced disincentives to regional labor
mobility in Vietnam have not been rigorously assessed,24 studies of other countries suggest
that they could be substantial. For example, it has been estimated that the real GDP per
capita and welfare benefits associated with fully dismantling China’s hukou household
registration system would be several orders of magnitude greater than those arising from the
construction of the country’s national expressway network.25 Similarly, in Indonesia aggregate

Recommendations 1
productivity losses stemming from policies that indirectly discourage regional mobility
have been estimated at almost 22 percent.26 Meanwhile, within individual regions Vietnam’s
weak agglomeration economies are in part associated with the lack of fully integrated labor
markets within the Hanoi and HCMC regions that results from, among other things, poor
planning and inadequate investment in spatially connective infrastructure.
Improving labor mobility requires loosening key institutional and structural constraints that

Ease constraints on labor

discourage migration, particularly by families. Addressing the wide-ranging constraints on
labor mobility requires the following multipronged approach.

mobility, improve skills and

Action 1.1: Reduce the socioeconomic costs to migrants of the residence registration
system. Although the central government’s emphasis on residence registration as a
prerequisite to working in a city is not as strong as it once was, 27 the ho khau system

access to social and basic continues to deter migration, especially for families with children. Reforms of the system
should be considered to lower the disincentives to family migration and so expand the size

services
and deepen the quality of labor pools in metropolitan regions and secondary cities such as
Da Nang and Can Tho within Vietnam’s second tier. Reforms should
• Eliminate restrictions on access to public services based on residence registration. At
present, regulations link public services to the household residential registration and
prevent migrants accessing the hospitals, health centers, and public schools located where
they are not registered. A key reform would unlink service access from registration and
provide a way for migrants without permanent residence to access public services.
• Reduce obstacles to permanent registration. As an alternative, providing migrants
with permanent status faster and at a lower cost would lower the barriers they face to
accessing public services. This would entail shortening the time required before residents
can apply for permanent status and simplifying the requirements city governments impose
Photo: Wina Tristiana/The World Bank

on permanent status applicants.

• Adopt reforms specifically for migrant families. Along with relaxing registration
requirements or decoupling access to services from registration, the central government
should expand the provision of basic education to satisfy the currently unmet needs of the
children of temporary residents. It should consider providing fiscal incentives and subsidizing
efforts by local governments to improve school facilities and buildings, improve student-
teacher ratios, and provide migrant families with financial assistance. Equal access to basic
health services, such as vaccination and basic medical consultation, should also extend to

31 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 32

 children of temporary residents. These reforms would help minimize the intergenerational
transmission of poverty and in the long run contribute to building human capital within cities,
which has been shown empirically to be a key determinant of urban success.28

Recommendations 2
Action 1.2: Expand the supply of affordable housing. Although largely devoid of the kinds
of slums observed in other developing country cities, almost 30 percent of Vietnam’s urban
population lived in poor-quality housing in 2015.29 Closing the affordable housing gap requires
allocating the land needed to develop affordable housing and improve the regulation of
land markets, supported by integrated spatial and sectoral planning. Vietnam has already

Strengthen planning and land

established a good policy framework to support affordable housing development. However,
the central government needs to implement the existing policies in partnership with local
governments and the private sector. Parallel efforts should
• Support urban redevelopment. Incremental approaches, such as upgrading and
redeveloping settlements, should be supported in the Hanoi and HCMC metro regions
use regulations to integrate
and large secondary cities in the second tier to increase the supply of affordable housing.
Urban upgrading should be scaled up to provide underserved neighborhoods with basic the physical, industrial, and
demographic development
infrastructure. Meanwhile, microfinance instruments, integrated with technical assistance,
would help households carry out home improvements and incremental expansion.

of urban areas and to

• Expand housing finance incentives for private sector development. Innovative approaches
to housing finance are needed to stimulate an increase in affordable housing, particularly
rental housing. Restructuring existing programs and customizing financial products to
better meet the needs of the market should be encouraged. Subsidies and finance for
private landlords supplying low-income rental housing should be considered. coordinate development
across local jurisdictions
Action 1.3: Improve fiscal planning for urban service delivery and skills development. The
central government must recognize its critical role in helping metro regions and secondary

Photo: Hung Nguyen Viet/The World Bank

cities expand the access of migrants and their families to public and social welfare services
and to training programs for skills development. These cities have been extremely concerned
about the overburdened urban infrastructure and public services that give rise to mounting
congestion forces, but they have not received the support they need from the central
government to respond to migrant inflows. The central government should
• Adopt fiscal reforms to help cities meet the demands for urban service delivery,
infrastructure investment, and skills development. Empirical analysis is needed to
determine the fiscal and investment gaps of cities, which the central government
should then address through higher local taxes, fiscal transfer mechanisms to provide
cities with additional resources, fiscal incentives to cities for equitably providing basic
services to migrants, and other mechanisms. Increased labor mobility through reforms
of the household registration system must be accompanied by expansion of vocational
training programs for migrants to equip them with the skills they need to readily meet
the demands of businesses and urban residents. Expanding the supply and availability of
vocational training and skills development programs in partnership with the private sector
is needed to improve labor productivity in the major urban areas that continue to attract
most migrant workers.
• Improve the collection and use of migration data. The national census should be improved
to fully account for migrants regardless of their registration. The central government
should ensure that comprehensive and accurate migration data are collected and used
to design national poverty reduction and social welfare programs and to determine fiscal
sharing arrangements with local governments. Local governments should use the data
to inform the full incorporation of migrants, regardless of their residence registration, in
their development of integrated spatial, infrastructure, and socioeconomic plans.

33 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 34

 Rapid expansion of urban land was enabled by a lack of planning and regulatory control over • Reform the urban classification system to include more practical and action-oriented
agricultural land conversion and a practice of allocating land resources based on artificially monitoring that emphasizes performance and dynamic growth. The system’s indicators
deflated government set prices30 to attract investors and facilitate land acquisition. Faced should switch from focusing mostly on inputs and static size to including dynamic
with the central government’s incentives, local governments in rural districts have sought indicators of city characteristics and growth potential: migration, land use change,
to generate revenue and develop land for, among other things, the establishment of small- environmental quality and disaster risks, job accessibility, spatial distribution of jobs
scale industrial parks and zones. Coupled with limited investment in spatially connective and population, land and housing prices and rents, and so on. Such indicators would
infrastructure, the expansion of urban land area that has occurred has been associated with help identify infrastructure gaps and investment priorities and support detailed spatial
dispersed and disconnected development. regulations for development.

Action 2.2: Improve market-based mechanisms for land valuation and allocation. The
The unregulated and uncoordinated spatial development pattern in Vietnam not only
existing practice of allocating land resources based on artificially deflated government
impedes agglomeration economies and exacerbates congestion costs, but also contributes
set prices should be discontinued to discourage speculation that promotes excessive land
to a greater vulnerability to climate risks. As highlighted earlier, lower-density development
conversion on city peripheries. Vietnam’s land valuation method should more closely align
(that is, more dispersed and more sprawling) also tends to be associated with less green
with international standards by, for example, increasing the frequency of appraisal from every
density, more vehicle-kilometers, and higher energy use.31 As a result, Vietnam’s practices
five years to every year and gradually introducing a mass appraisal method based on reliable
of land conversion and development and spatial planning, including the integration (or
transaction data and statistical modeling.
lack thereof) of the two, raise significant challenges in terms of ensuring a sustainable and
efficient urbanization pathway. Low-density urban expansion and rural industrialization
Action 2.3: Densify and redevelop city centers. Insufficient infrastructure, especially
are supplanting natural areas and farmlands, stressing the ecological system and exposing
high-capacity public transport, and a lack of market or planning mechanisms to intensify
more people and assets to disaster risks. This situation poses a prominent challenge to
land use contribute to strong congestion forces and low efficiency in the centers of the
Vietnam’s future urbanization process. To reverse the pattern of dispersed and disconnected
Hanoi and HCMC metro regions and large secondary cities. Various mechanisms should be
development and promote the economic and demographic integration and densification
explored, such as property taxation to counter land hoarding and speculation, small-scale
of Vietnam’s urban centers, the underlying policies, regulations, and processes for land
joint redevelopment by land users, land pooling or land readjustment based on a consensus
conversion, land allocation, and spatial planning must change.
of land users, and the relocation or redevelopment of industrial or other low value-added
activities. Cities also need to prioritize the development of public transport and realign and
Action 2.1: Strengthen control of rural to urban land conversion. Rural to urban land
intensify land uses along the transit corridors.
conversion has been massive in recent decades (figure O.2). It has been driven by the
incentive to generate local revenue and by the central government’s incentive related
Action 2.4: Strengthen the role and integration of spatial planning. Land use plans
to the allocation of fiscal resources and granting of planning authorities (notably the
and construction plans should be better integrated and used to spatially coordinate the
urban classification system ).32 Clear-cut frameworks and effective mechanisms for spatial
key projects in socioeconomic development plans and sectoral plans. The national spatial
regulation are urgently needed to better control land conversion and protect agricultural land
planning system should account for place-specific strengths and regional differences in
and other natural resources. The central government should
comparative and competitive advantages while developing a portfolio of places based on
their social, economic, environmental, and geographical characteristics. Provincial plans
• Introduce regulation of development zones in land use plans and more stringent
should offer coordination and a differentiated development vision to support the planning
development control of peri-urban and rural areas in construction plans. Criteria for
and development of cities and districts.
delineating development zones, the rights and responsibilities related to development, and
the protection of different areas must be more clearly defined. Any land use conversion
Action 2.5: Explore more effective mechanisms for regional and metropolitan
outside of the current construction areas should require cost-benefit analyses of alternative
coordination. For example, coordination committees of the key socioeconomic regions
scenarios. Criteria and steps for proposing changes to development zones should be
could have authority for regional and metropolitan planning, along with associated
identified and strictly enforced. Regulations of development zones should be consistently
functions, budgets, and human resources. Other funding mechanisms for interprovincial
stated in land use plans and urban construction plans as a basis for defining development
and interregional collaboration, such as special matching grants for regional infrastructure
boundaries, spatial expansion directions, and land use and development controls.
development, could be explored.
• Provide clear national guidance and coordination for planning, developing, and monitoring
industrial parks. Industrial park planning should be based on the national socioeconomic
development plan and tailored place- and region-specific economic development
strategies. Regional planning should carefully analyze the competitive advantages of each
province and propose differentiated strategies for developing them. Thus clear national
ministry directives should guide the provinces in consolidating the existing industrial
parks and approving new ones based on location, infrastructure, and economic potential.

35 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 36

 Although fiscal transfer systems and rules commonly contain a redistributive element,
Vietnam’s system takes this to the extreme. The system works on the principle of
“equalization and regional balance,” heavily redistributing revenues collected from the
country’s first-tier provinces, particularly HCMC and the surrounding provinces, to its less
developed second-tier provinces, including the Central Highlands region and, even more,
the Northern Midlands and Mountains and Mekong River Delta regions. Although this
redistribution has arguably contributed to the relatively low spatial inequality among
Vietnam’s regions, it also deprives areas with fast population growth of the resources needed

Recommendations 3
to meet infrastructure and basic service requirements, which in turn exacerbates congestion
forces and undermines agglomeration economies. Vietnam shows a negative relationship
between a region’s rate of population growth and the increase in average resources that it
receives through transfers. The cores (municipalities) of Hanoi and HCMC have particularly
suffered. Their expenditure and investment budgets are lower than the national average,

Improve the
both total and per capita. HCMC’s public investment growth, both total and per capita, was
negative over 2011–15.

responsiveness of fiscal
By failing to provide HCMC, Hanoi, and large secondary cities with the resources they need to
meet their growing infrastructure needs, the fiscal transfer system contributes to both local
labor markets’ lack of spatial integration and firms’ lack of strong linkages. These outcomes in

allocation and investment turn contribute to the general weakness of agglomeration economies in Vietnam. The inability to
adequately respond to growing infrastructure needs also exacerbates congestion forces.

financing policies for A renewed, differentiated approach could address Vietnam’s urbanization challenges and
infrastructure investment demands. In particular, the Hanoi and HCMC economic engines

metro centers and large

need to increase infrastructure investments that contribute to boosting agglomeration
economies, ameliorating congestion forces, and improving integration with the surrounding
metropolitan regions. The varied needs and fiscal capacities of different regions and

secondary cities provinces require differentiated policies and mechanisms to support faster and more
efficient growth. Because Vietnam’s unitary budget currently lacks regional fiscal allocation
mechanisms, improving regional integration will require a new financing policy or
mechanism. A comprehensive approach simultaneously addressing governance and execution
of infrastructure projects should be developed and piloted first in a region with a high
demand for regional integration and improved agglomeration, such as the Southeast region.

For this recommendation, three types of policy actions are proposed: fiscal allocation and
planning, resource utilization, and financing policies.

Fiscal allocation and planning

Action 3.1: Fine-tune the fiscal allocation formula to respond to the greater needs of
the metro centers and large secondary cities and to reward efficient performance. The
current equity-based revenue sharing formula does not consistently achieve equalization of
Photo: Bui Hoang Lien/The World Bank

per capita transfer revenue across all provinces and regions. To support more efficient growth
for high-demand and fast-growing cities, the new formula should

• Provide for higher retained revenues for Hanoi and HCMC to allow investment per capita
growth in those cities to be maintained at least at the national average.

• Provide for higher retained revenues for provinces in the Southeast and Red River Delta
regions that have investment per capita growth lower than the national average in order
to increase investment growth to support their high population growth and economic
potential.

37 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 38

 • Increase fiscal allocations for investment in the Central Highlands region, the only region • Establish institutional arrangements for interprovincial investments, potentially led by
in which investment per capita declined over the past few years. the Ministry of Planning and Investment, along with specific financial support norms and
monitoring and evaluation requirements.
Action 3.2: Integrate provincial budgeting and capital planning to maximize revenue.
The effectiveness and efficiency of capital investments can be significantly improved if • As a financial incentive for such joint arrangements, allocate earmarked matching funds
the Department of Finance and the Department of Planning and Investment coordinate from central budgets—the provinces should be required to provide matching funds in their
investment programming at the provincial level to account for the potential revenue from local budgets—or allocate funds restricted to certain items of the investment.
investments in infrastructure and from newly serviced land that becomes available for
auction. Specifically, the central government should Action 3.6: Pilot commercial lending for provinces to expand investment financing
options. The central government should improve the financing regulatory framework so
• Issue regulations and guidance on integrated medium-term and annual provincial that net fiscal contributor provinces, which are supposed to be creditworthy and yet have
capital and revenue planning to maximize local revenue generated from investments in significant gaps for infrastructure financing, can pilot borrowing from commercial banks first
infrastructure. before expanding to other provinces. Specifically, the central government should

• Pilot a system for integrated capital and revenue planning in several of the largest cities. • Adopt institutional and legal reforms of local government borrowing to create clear
stipulations on recourse mechanisms if a provincial government defaults and specific
Resource utilization regulations for assessing the credit risks of loans to provincial governments.

Action 3.3: Pilot a property tax to support local fiscal autonomy. Over the long term, • Pilot a program in several net contributor provinces for new ways of permitting provinces
Vietnam can empower provinces to leverage local revenues from property and land use to access commercial bank financing.
taxes—an important source of local government revenues in many fiscally decentralized
countries. The central government should initially focus on the country’s two growth engine
regions. Specifically, it should

• Introduce a local property tax for Hanoi and HCMC, which have been given special
development mechanisms by the National Assembly and have developed real estate
markets and functional cadastral systems.

• Design the property tax to apply only to houses and land values in the first phase.

Action 3.4: Increase the potential of land-related fiscal resources. Currently, under
the build-transfer model that most provinces employ, local governments engage in both
infrastructure investment and land transfer in a single build-transfer contract. The clear
advantage is that the public sector does not invest its scare resources, but the contracts limit
the capacity of local governments to benefit from consequent increases in land value. The
financial benefits from land value increases could be much higher if cities

• Invest directly in trunk infrastructure through their own budgets or through special-
purpose vehicles before they transfer the use of land to private sector partners.

• Assess their land stocks and investment needs annually to ensure that general budget
revenue and the yearly land auction plan align with infrastructure demands.

• Ensure that the investments comply with approved spatial plans.

Financing policies

Action 3.5: Develop financing to support interprovincial and interregional linkages. To

enable the provinces in a region to engage in joint regional infrastructure investments the
central government should provide matching grants as financial incentives to reduce the
financing obligations of the provinces. The design of such a financing mechanism should

39 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 40

 Vietnam can promote
spatial efficiency
without sacrificing
spatial equity
By fostering agglomeration economies, better managing congestion forces,
and spurring regional integration against the backdrop of universal access
to basic services and spatially differentiated strategies, Vietnam can
promote spatial efficiency to achieve growth and sustainability without
necessarily sacrificing spatial equity (see table O.1):

• Improved mobility of labor supported by better access to social and

basic services will also ensure that urbanization remains inclusive, not
only for those who decide to migrate, but also for those who do not.

• Tighter control and regulation of land use conversion and planning

accompanied by better horizontal and vertical coordination will
facilitate more sustainable growth of urban areas.

• Realigning fiscal policies to foster agglomeration economies and

promote regional integration does not have to be a zero-sum game,
nor does it need to lead to a trade-off between equity and growth.
Interpersonal welfare inequalities are expected to improve as a result
of efficiency and productivity-led growth, which would be better
accessed through improved mobility of labor. Better access to social
and basic services by residents and migrants in key urban centers will
also enhance the inclusiveness aspects of urbanization.

Photo: Tony Pham/The World Bank

41 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 42
 Endnotes
Table 01. POLICY RECOMMENDATIONS FOR FOSTERING AGGLOMERATION ECONOMIES AND
THE PROMOTION OF REGIONAL INTEGRATION

EFFECTS

INSTITUTIONAL 1. The data on real GDP per capita and extreme poverty cited in this paragraph come from the World
POLICY ACTIONS Sus-
ELEMENTS Bank’s World Development Indicators (WDI) database (https://databank.worldbank.org/source/world-
Growth Equity taina-
development-indicators#). Real GDP per capita is defined in constant 2011 international dollars at
bility
purchasing power parity (PPP) exchanges rates, while extreme poverty is defined using the global poverty
line of $1.90 a day, also expressed in constant 2011 international dollars.
• Reduce the socioeconomic costs to migrants
of the residence registration system
√ √
2. Based on data from the United Nations’ World Urbanization Prospects: 2018 Revision database (https://
population.un.org/wup/), which relies on national definitions of urban areas. According to some
Labor mobility • Expand the supply of affordable housing √ √ estimates, the share of Vietnam’s population that lives in urban areas may be considerably higher (see
OECD 2018 and box 2.1, chapter 2, in this report).
• Improve fiscal planning for urban service
delivery and skills development
√ √ 3. The Sixth National Congress of the Communist Party of Vietnam called for Đổi Mới in December 1986. The
actual policy changes came into effect in 1988–89.
• Strengthen control of rural to urban land
conversion
√ √ 4. In the remainder of this overview, Hanoi and its surrounding Red River Delta region are often referred to
simply as Hanoi, and HCMC and its surrounding Southeast economic region as HCMC. The Red River Delta
region includes Hai Phong, a municipality that holds provincial status.
• Improve market-based mechanisms for land
valuation and allocation
√ √
5. Based on data from the 2016 Enterprise Survey of Vietnam. Of the two regions, the Red River Delta is
spatially larger and slightly more populous, with 19.5 million people in 2014, of whom 7.1 million live in
Land & planning
regulation
• Densify and redevelop city centers √ √ √ the core. This compares with the Southeast’s population of 15.7 million, of whom 8 million live in the
core. Hanoi and HCMC municipalities are the respective cores of the Red River Delta and Southeast
• Strengthen the role and integration of spatial regions.
planning
√ √ √
6. See the discussion in box O.2.
• Explore more effective mechanisms for
regional and metropolitan coordination
√ √ 7. Urban extents, as measured using nighttime light data, may include areas that are formally defined as
rural. For other research using nighttime light data to identify urban extents, see Dingel, Miscio, and
Davis (2019); Ellis and Roberts (2016); and Zhou, Hubacek, and Roberts (2015).
• Fine-tune the fiscal allocation formula to
respond to the greater needs of the metro
centers and large secondary cities and to
√ √ √ 8. See World Bank (2016).

reward efficient performance 9. The ho khau residence registration system was implemented in urban areas in 1955 and nationwide
from 1960. Each household is given a registration booklet recording the name, sex, date of birth, marital
• Integrate provincial budgeting and capital status, occupation, and relationship to household head of all household members. In principle, no one
planning to maximize revenue
√ can be listed in more than one household registration booklet. The ho khau is intended to be tied to
place of residence and to provide access to social services such as housing, schooling, and health care in
• Pilot a property tax to support local fiscal that location. As in China, changing one’s registered location is difficult and time-consuming.
Fiscal &
resources autonomy
√ √ √
allocation 10. See the World Bank’s 2009 World Development Report for an in-depth analysis (World Bank 2009).

• Increase the potential of land-related fiscal

resources
√ √ 11. See Ahlfedlt and Pietrostefani (2019), whose findings are based on a meta-analysis of the literature on
the effects of density. The authors caution that their findings are best understood as referring to large
cities in high-income countries.
• Develop financing to support interprovincial
and interregional linkages
√ √ 12. It has been argued that Vietnam’s official level of urbanization considerably understates its “true”
level of urbanization (OECD 2018). This issue, along with the implications for the analysis presented, is
• Pilot commercial lending for provinces to considered in detail in chapter 2 of this report.
expand investment financing options
√

43 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 44

 References
13. The aggregate revenue of a region’s firms is an imperfect proxy of its GVA because it double counts
intermediate products and raw materials in the measurement of output. How much a region’s aggregate
revenue of firms per worker overstates its average labor productivity therefore depends on the extent
of this double counting, while how mismeasured a region’s labor productivity is relative to other
regions (and thus how faulty the measurement of its agglomeration premium) depends on the relative
seriousness of the double counting problem across regions.
• Ahlfedlt, Gabriel M., and E. Pietrostefani. 2019. “The Economic Effects of Density: A Synthesis.”
14. Economic and Policy Services Pty Ltd. (2014). Journal of Urban Economics 111: 93–107.

15. World Bank (forthcoming). • Bosker, Maarten, Uwe Deichmann, and Mark Roberts. 2018. “Hukou and Highways: The Impact
of China’s Spatial Development Policies on Urbanization and Regional Inequality.” World Bank,
16. PM2.5 refers to particulate matter of 2.5 microns or less in diameter.
Washington, DC.
17. World Bank and Institute for Health Metrics and Evaluation (2016).
• Bryan, Gharad, and Melanie Morten. 2018. “The Aggregate Productivity Effects of Internal
18. Based on data from the General Statistics Office of Vietnam. Migration: Evidence from Indonesia.” Journal of Political Economy 127 (5).

19. https://databank.worldbank.org/data/download/hci/HCI_2pager_VNM.pdf. • Chauvin, Juan Pablo, E. Glaeser, Y. Ma, and K. Tobio. 2017. “What Is Different about Urbanization
in Rich and Poor Countries? Cities in Brazil, China, India and the United States.” Journal of
20. Data from https://unctad.org/sections/dite_dir/docs/wir2019/wir19_fs_vn_en.pdf (UNCTAD FDI country fact
Urban Economics 98: 17–49.
sheet for Vietnam).

21. World Bank (forthcoming). • Coxhead, Ian, Nguyen Viet Cuong, and Linh Hoang Vu. 2015. “Migration in Vietnam: New
Evidence from Recent Surveys.” World Bank, Washington, DC.
22. The share of national gross value added generated by Vietnam’s agriculture sector had fallen to only
around 15 percent by 2017. • Dingel, Jonathan, Antonio Miscio, and Donald Davis. 2019. “Cities, Lights, and Skills in
Developing Economies.” Working Paper No. 2019-50, Becker Friedman Institute for Economics,
23. Da Nang and Can Tho are both municipalities that hold provincial status. Hai Phong, which is also a
University of Chicago.
municipality and holds provincial status, is in the Red River Delta region and therefore is considered part
of Hanoi’s economic region.
• Duranton, Gills. 2016. “Agglomeration Effects in Colombia.” Journal of Regional Science 56.
24. See Coxhead, Cuong, and Vu (2015).
• Economic and Policy Services Pty Ltd. 2014. Motorization and Transport in East Asia: Motorcycle,
25. See Bosker, Deichmann, and Roberts (2018). Motor Scooter and Motorbike Ownership and Use in Hanoi. Final Report.

26. See Bryan and Morten (2018).

• Ellis, Peter, and Mark Roberts. 2016. Leveraging Urbanization in South Asia: Managing Spatial
Transformation for Prosperity and Livability. Washington, DC: World Bank.
27. Coxhead, Cuong, and Vu (2015).

28. See, among many studies, Glaeser and Maré (2001); Glaeser, Gottlieb, and Ziv (2014); Quintero and • Glaeser, Edward, and David Mare. 2001. “Cities and Skills.” Journal of Labor Economics 19 (2).
Roberts (2018); Moretti (2004); Rauch (1993); and Roberts, Gil Sander, and Tiwari (2019).
• Glaeser, Edward, Joshua Gottleib, and Oren Ziv. 2014. “Unhappy Cities.” NBER Working Paper No.
29. Based on data from the World Bank’s World Development Indicators (WDI) database (https://databank. 20291, National Bureau of Economic Research, Cambridge, MA.
worldbank.org/source/world-development-indicators#).

• Moretti, Enrico. 2004. “Estimating the Social Return to Higher Education: Evidence from
30. This is often referred to as a “dual price” land market, in which the state’s set price is 30–70 percent
lower than the market price in general.
Longitudinal and Repeated Cross-Sectional Data.” Journal of Econometrics 121: 175–212.

31. See Ahlfedlt and Pietrostefani (2019). • OECD (Organisation for Economic Co-operation and Development). 2018. OECD Urban Policy
Reviews: Viet Nam. Paris: OECD Publications.
32. For an overview of the urban classification system, see the report’s introduction.
• Quintero, Luis E., and Mark Roberts. 2018. “Explaining Spatial Variations in Productivity:
Evidence from Latin America and the Caribbean.” Policy Research Working Paper 8560, World
Bank, Washington, DC.

45 Vietnam’s Urbanization at a Crossroads - Overview Vietnam’s Urbanization at a Crossroads - Overview 46

 • Rauch, James. 1993. “Productivity Gains from Geographic Concentration of Human Capital:
Evidence from the Cities.” Journal of Urban Economics 34 (3).

• Roberts, Mark, Frederico Gil Sander, and Sailesh Tiwari, eds. 2019. Time to ACT: Realizing
Indonesia’s Urban Potential. Washington, DC: World Bank.

• World Bank. 2009. World Development Report 2009: Reshaping Economic Geography.
Washington, DC: World Bank.

• World Bank. 2016. East Asia’s Changing Urban Landscape: Measuring a Decade of Spatial
Growth. Washington, DC: World Bank.

• World Bank. Forthcoming. SEDP Policy Note: Keep Growth Going. Hanoi: World Bank.

• World Bank and Institute for Health Metrics and Evaluation. 2016. The Cost of Air Pollution: Environmental Benefits Statement
Strengthening the Economic Case for Action. Washington, DC: World Bank.
The World Bank Group is committed to reducing its environmental footprint.
• Zhou, N., Klaus Hubacek, and Mark Roberts. 2015. “Analysis of Spatial Patterns of Urban Growth In support of this commitment, we leverage electronic publishing options and
print- on-demand technology, which is located in regional hubs worldwide.
across South Asia Using DMSP-OLS Nighttime Lights Data.” Applied Geography 63: 292–303.
Together, these initiatives enable print runs to be lowered and shipping
distances decreased, resulting in reduced paper consumption, chemical use,
greenhouse gas emissions, and waste.

We follow the recommended standards for paper use set by the Green Press
Initiative. The majority of our books are printed on Forest Stewardship Council
(FSC)– certified paper, with nearly all containing 50–100 percent recycled content.
The recy- cled fiber in our book paper is either unbleached or bleached using
totally chlorine-free (TCF), processed chlorine–free (PCF), or enhanced elemental
chlorine–free (EECF) processes.

More information about the Bank’s environmental philosophy can be found at

http://www.worldbank.org/corporateresponsibility.

47 Vietnam’s Urbanization at a Crossroads - Overview

Overview
Overview

Vietnam’s
Vietnam’s
Urbanization
Urbanization
atat
a Crossroads
a Crossroads
Embarking
Embarking
on anon
Efficient,
an Efficient,
Inclusive,
Inclusive,
and Resilient
and Resilient
Pathway
Pathway