ASEAN's digital economy: opportunities for Vietnam's growth

On March 31, 2022, the Prime Minister of Vietnam issued Decision No. 411 approving the national strategy for developing the digital economy and society by 2025, with a vision toward 2030, assigning the Ministry of Information and Communications to lead its implementation.

With this strategy, the Vietnamese government aims for dual goals: developing a digital government, digital economy, and digital society, while also fostering Vietnamese digital technology enterprises that can compete globally, realizing the aspiration of a strong and prosperous Vietnam, where people enjoy wealth, comfort, and happiness.

The digital economy is one of the three main pillars of the comprehensive digital transformation outlined in the Party's XIII Congress Resolution. According to the Ministry of Information and Communications, Vietnam's digital economy contributed 12% to GDP in 2020. By 2023, this figure rose to 16.5%, with an annual growth rate exceeding 20%.

On the occasion of the National Digital Transformation Day (October 10), VietNamNet hosted an online roundtable discussing the theme: "Vietnam's Opportunities for Digital Economic Cooperation within ASEAN."

ASEAN is a region strongly promoting digital transformation. Countries have advanced in building e-Governments, developing digital economies and societies, establishing policy frameworks, and fostering digital transformation within ASEAN to maximize the benefits of digital technology, making ASEAN a highly competitive entity. How can Vietnam seize opportunities from the region to connect digitally and promote its national digital economy strategy?

We are honored to introduce three participants in the program:

- Ambassador Pham Quang Vinh, former Deputy Minister of Foreign Affairs in charge of Vietnam's relations with Southeast Asian countries and former head of SOM ASEAN for Vietnam.

- Mr. Goh Keng Phang, Economic Counselor at the Singapore Embassy in Vietnam.

- Mr. Jason Bay, Country Director (Vietnam market), Sea Limited Group.

Nearly a decade ago, in 2015, ASEAN reached a historical milestone with the Kuala Lumpur Declaration on the Establishment of the ASEAN Community 2015 and the Vision for the ASEAN Community 2025 signed in Malaysia. Accordingly, the ASEAN Community was formed based on three pillars, one of which is the ASEAN Economic Community.

How do you evaluate the dynamics and transformations of the ASEAN Economic Community, especially during the COVID-19 pandemic, and how has digital transformation shaped its direction and future?

Ambassador Pham Quang Vinh: 2015 marked the beginning of the ASEAN Community, but the integration process had been underway for about 20 years prior. Since 2015, the ASEAN Community has been built on three pillars: the ASEAN Political-Security Community, the ASEAN Economic Community, and the ASEAN Socio-Cultural Community.

For the Economic Community, the key question is: How to turn ASEAN into a single market? Nearly a decade later, ASEAN is now a market of 700 million people with an economy valued at approximately 3.8 trillion USD and a trade volume of around 3.8 trillion USD. Currently, ASEAN is the fifth-largest digital economy in the world.

During the COVID pandemic three years ago (2020), Vietnam held the chairmanship of ASEAN. At that time, we had only one in-person meeting and had to rely on the Internet to conduct other summit meetings. Not only meetings, social interactions, but even transportation and all physical connections were hindered by COVID. The disruption of supply chains had a significant impact. How could we continue to interact economically domestically and between countries in the region and the world was a significant challenge.

Therefore, after a necessary period of several months, we gradually became more reliant on binding Internet measures and dominant digital tools. After three years of the COVID pandemic, people, especially consumers, have become accustomed to various forms of e-commerce or digital commerce.

In 2021, one year after Vietnam’s chairmanship, ASEAN leaders issued a statement in Brunei on economic recovery and promoting the digital economy. That was the starting point. In 2023, leaders initiated negotiations for the Digital Economy Framework Agreement (DEFA). This will serve as a common platform for ASEAN cooperation towards developing the digital economy in the region. We hope this framework agreement will be completed next year.

The ASEAN integration process is a long journey. We have worked together to build a cohesive and integrated economy in the region. We have discussed e-commerce and the digital economy, but the COVID pandemic has propelled us further, and the real need for this has become clear.

Vietnam and Singapore have two proud milestones: 50 years of diplomatic relations and 10 years of the Vietnam-Singapore Strategic Partnership. Following this cooperative legacy, I recall in the early decades, we spoke a lot about VSIP (Vietnam-Singapore Industrial Park) as a symbol of the economic relationship between the two countries.

In this decade, digital transformation is taking place robustly, and Singapore is pioneering many initiatives for digital economic cooperation with countries in the region, including Vietnam. We are in a strong digital age; thus, digital economic cooperation could become a new VSIP alongside other unique aspects of economic cooperation between the two countries?

Mr. Goh Keng Phang (Economic Counselor, Singapore Embassy in Vietnam): The Vietnam-Singapore Industrial Park (VSIP) has proven to be a very successful cooperative model for both countries. We started in 1998 in Binh Duong, and it has now expanded to 18 industrial parks across 13 provinces in Vietnam. This model has also stimulated development in second and third-tier cities in the country. This year, we have commenced construction of industrial parks in Lang Son and Ha Tinh.

However, the digital economy is somewhat different. It is not limited by any physical distance and can span across all sectors. Therefore, there are many opportunities for digital cooperation in various fields. Even in traditional manufacturing, VSIP will continue to provide manufacturers, especially electronic producers, a solid platform to establish their production bases in Vietnam. This is something VSIP has done very well, and it will continue to excel in this area.

In the future, as a step forward to help manufacturers in Vietnam enhance their skills and leverage smart manufacturing techniques, the Singapore Agency for Science, Technology and Research has signed a Memorandum of Understanding (MOU) with the Vietnam National Innovation Center to promote advanced manufacturing techniques in Vietnam.

In urban solutions or smart city spaces, we can also experiment with smart solutions at VSIP in Vietnam. For instance, VSIP Binh Duong, one of our newest industrial parks, is designed to integrate smart technologies into all industrial park operations, from managing energy, water, and waste to traffic and security management.

In the e-commerce sector, Singaporean companies have invested heavily in Vietnam, benefiting the Vietnamese economy and improving the daily lives of its citizens.

A prime example is SEA Group, which has created numerous jobs and provided many conveniences for Vietnamese consumers through its e-commerce platform, Shopee. I have just witnessed a new initiative launched by Shopee, where they collaborate with small and medium enterprises (SMEs) in Vietnam to help them leverage e-commerce technology to quickly reach more consumers, whether in Vietnam or globally.

These are just a few examples of the numerous opportunities for collaboration in the digital economy.

In 2015, when SEA Group invested in Vietnam and established the FDI company Shopee, specializing in online shopping, Vietnamese consumers had no culture or habit of digital consumption, e-wallets, or financial apps. But now, Gen Z and Gen @ in Vietnam, including myself, are almost inseparable from online shopping.

According to Google's e-Conomy Southeast Asia 2022 report, by 2025, Vietnam's digital economy is projected to reach 49 billion USD, with e-commerce contributing 32 billion USD. The rapid growth of e-commerce indicates that it is becoming a key pillar of the digital economy, contributing significantly to Vietnam's digital economy.

Based on nearly a decade of experience in the Vietnamese market, how does SEA/Shopee assess the potential of Vietnam's e-commerce in contributing to the country's digital economy?

Mr. Jason Bay (Country Director, Sea Limited Group): I think we are living in an incredibly exciting time. About 10 years ago, e-commerce was a fringe trend, and we began investing in Shopee in Vietnam when the market was still very small.

However, due to Vietnam's demographic structure, the vibrancy of its economy, and its people, I see clear potential. That's why we chose Vietnam as one of our first investment markets. Ambassador Pham Quang Vinh has accurately stated that the COVID pandemic was a turning point for the development of the digital economy, revealing the entire potential of e-commerce.

In the context of 2020, it was essential to use digital technology as a tool to enhance resilience against COVID, ensuring that society and the economy could continue to operate without being disrupted, leading to worse situations than before. With no direct interaction, we saw that digital technology helped improve the situation.

However, post-pandemic, we are seeing that e-commerce and digital transformation, in general, are not just about resilience. They also improve lives, enhance economic productivity, and stimulate economic growth. When we talk about the ASEAN context, we are discussing market expansion and market access.

The Vietnamese government aims for a 30% contribution to GDP from the digital economy by 2030. This is a very ambitious goal, but I believe it reflects the enormous potential we all see in ASEAN, especially in Vietnam. Based on what we can observe, this goal is achievable.

We are committed to supporting the Vietnamese government in achieving this goal within the context of Vietnam and certainly within the broader ASEAN context.

In traditional economic connectivity, Singapore has always been viewed as a "gateway" within ASEAN due to its high openness and being the logistics center of the region. Vietnam sees Singapore as a potential export market, supported by numerous agreements to boost bilateral economic relations. How can Vietnam connect with Singapore as a "gateway" to the region in terms of the digital economy? What aspects can both sides share in terms of digital economic connectivity within ASEAN?

Mr. Goh Keng Phang: I believe that not only Singapore but also Vietnam is an important digital focal point in ASEAN. Vietnam is rapidly becoming prominent as a digital focal point in the region. You mentioned that Vietnam's digital economy contributed 12% to GDP in 2020, and this figure increased to 16.5% in 2023, with an annual growth rate of 20%.

This is significant and rapid progress. On the other hand, Singapore's role is to build a robust ecosystem to support the development of the digital economy in the region. Therefore, we welcome partners interested in co-developing in this field.

A few examples in finance: we currently have around 220 venture capital funds. This is crucial for technology companies, especially deep tech startups, as they require more time and funding to develop technologies, conduct research, and eventually commercialize their products.

We have a diverse and high-quality workforce in Singapore and welcome skilled workers and entrepreneurs from around the world, including from Vietnam, to tap into our ecosystem.

In terms of opportunities, Singapore creates space and opportunities for businesses, innovators, and investors to interact and develop new ideas. For example, we organize the Singapore Tech Innovation Week annually, gathering entrepreneurs and innovators from around the world to create new solutions together.

I think we have strengths in many different areas; Vietnam and Singapore share many synergies that we can achieve by connecting these two digital focal points in ASEAN.

Ambassador Pham Quang Vinh: In reality, we have discussed connectivity, which is crucial for regional integration. Previously, Singapore was also a driving force for ASEAN's economic integration. Now, as we transition to digital transformation, it is crucial to determine how to connect 10 ASEAN countries in the digital space.

Singapore, Vietnam, Malaysia, Thailand, and several other countries are at different stages of digital development.

Therefore, the ability to connect is one aspect, but another is: How can we connect with each other? First, this is very important. We must share experiences, learn from each other, and support one another. Previously, we had an initiative for ASEAN integration, where more developed countries supported less developed ones to grow together. Now is the time to do the same; the experiences from the past are invaluable.

The second point is that we should not only connect within the region but also connect to the world. Thus, Singapore plays a crucial role. I believe Singapore will not only connect Vietnam but also connect all of us to the world. Surely, Vietnam will be part of that.

Mr. Jason Bay: The ASEAN Integration Initiative (IAI) has been around for many years, and this is incredibly important. It becomes even more significant now due to all geopolitical challenges, the emergence of potential regional trade blocs, and tensions restructuring some major alliances and power associations in our vicinity and globally.

We have a familiar concept in ASEAN: the ASEAN centrality. If we want to be a region with 700 million people and a multi-trillion dollar economy, then integration with the rest of the world will be better if we do it in our way.

To achieve this, we must first connect with each other because otherwise, we will enter the world with 10 different economies and vastly different standards. I must be honest; Singapore is a small nation, while Vietnam is much larger. For a small country like Singapore, what is its relevance to the rest of the world? Therefore, the issue of ASEAN unity becomes essential. If you lack that unity, you cannot become central to anyone else's calculations.

Currently, a flight from Hanoi to Singapore takes about 3.5 hours. A container ship from Haiphong port to Singapore takes a minimum of four days. This physical journey essentially remains unchanged, but digital economic connectivity can make the physical journey busier and more routine.

Shopee is an e-commerce platform connecting the entire Southeast Asian market. I can imagine what a cross-spatial connectivity journey between markets via Shopee would look like if we consider Shopee as a digital gateway. How can Vietnam enhance its e-commerce opportunities with ASEAN, or in other words, how can it expand its digital economy opportunities connecting with the ASEAN market?

Mr. Jason Bay: Yes, the answer is definitely yes. I originally trained as an electrical engineer, so from a technical perspective, physical distance is important. But when thinking about computers and electronics, logical distance is just as important, if not more so. So when we talk about logical distance in e-commerce, what does that mean?

With e-commerce, you are not limited. And I think Keng Phang made this clear: we are not bound by geography. If we can use digital technology to connect different regions, it will help bring us all together, with sufficient scale and increasingly sophisticated use of AI algorithms to manage production and supply chains.

I worry less about physical distance. So what matters is managing the narrowing of logical distance, and some reasons why this distance exists could be legal barriers, language and cultural barriers, difficulties in financing trade, and forms of licensing, right?

In this regard, we need governments to lead and set direction, but as a member of the private sector, we are very willing to contribute our part here.

A few years ago, Shopee realized that our scale, influence, and regional experience provide the ability to facilitate digital exports and imports within ASEAN. We call this capability the Shopee International Platform (SIP), and without SIP, I believe one of the problems that SMEs face is that they encounter numerous barriers.

For example, if you are a small Vietnamese business wanting to expand into Singapore or possibly Malaysia, you will first need to establish a representative office. Then you have to hire staff who speak the local language, arrange trade and credit financing, shipping costs, open a bank account, bear currency risk, and conduct market research to see if your product has potential.

After that, you need to arrange customs clearance, and all these tasks become more streamlined and manageable if you have a certain scale. But if you are a small Vietnamese business with only a few dozen employees, I think it would be very difficult to commit such resources and endure that level of risk. Therefore, what the Shopee International Platform can do is provide AI chatbots to support customer service and translation, helping Vietnamese sellers communicate with foreign customers.

Next, trade logistics issues, shipping, customs clearance, and currency exchange are all handled by Shopee. From the seller's perspective, they are essentially sending their products to a warehouse in Vietnam. Meanwhile, from the buyer's side, they receive products from a Shopee warehouse in Singapore or Malaysia.

Thus, this eliminates many difficulties, both financial and non-financial, related to barriers that prevent smaller companies from making the leap to export to the region. If a company is large enough, I think they can do this on their own, but for smaller companies, I often introduce SIP by asking: Why do we need to spend money on market research before earning a dime when, through such a platform and product...

You can realize actual revenue from your export markets, then we can assess which markets have greater potential. If needed, you can open a direct office to scale up. We have seen great interest in this feature. Over the past few years, more than 350,000 SMEs and 1,000 Vietnamese brands have begun their journey of expansion across the ASEAN region through the Shopee International platform.

Another thing we are doing this year is collaborating with ASEAN Day. In fact, this is a great initiative from Vietnam in 2020 during the pandemic. Vietnam established the ASEAN Online Shopping Day campaign, held in August, as ASEAN Day is on August 8. We encourage our sellers to offer attractive discounts on this day to stimulate more trade transactions between ASEAN countries.

Mr. Goh Keng Phang: Before I came to Vietnam to take on the role of Economic Counselor, I was actively involved in the committees of the ASEAN Economic Community (AEC). I have worked extensively on the technical issues of narrowing both physical and digital gaps between the 10 ASEAN countries.

I believe one of the things we have mentioned is the Digital Economy Framework Agreement (DEFA). However, beyond DEFA, even in our

traditional areas like goods trade, it's vital because ultimately, goods still need to be transported from one country to another.

I think that in the area of goods trade, we are working to find ways to speed up the customs clearance process to help goods reach consumers faster and support businesses. Also, in the area of services and investment, companies like SEA Group that operate cross-border play a significant role that we need to discuss, helping them expand their business across the region.

Ambassador Pham Quang Vinh, in the context of traditional economic connectivity within the region, ASEAN has a legacy of Free Trade Agreements (FTAs) and initiatives for development cooperation and infrastructure connectivity. The digital economy must, of course, be built on the foundation of connectivity and digital transformation, with new implications. What strategic and institutional opportunities does ASEAN have, and how can a regional framework be established given the varying levels of development and digital transformation capabilities among member countries?

Ambassador Pham Quang Vinh: Firstly, we have established a foundation to advance further in the development of the digital economy, thanks to the economic integration efforts made so far. Secondly, our economies are connected in the region, which is beneficial for continued cooperation.

Next, we need to look at how we conduct business in the digital space, but in my observation, we still need to link and connect the digital space with the physical space. If we have a facilitated digital space, the physical space must also operate smoothly, so these two areas can support each other. ASEAN's efforts in traditional economic integration have laid the groundwork for us to continue developing the digital economy.

The second point is that we have all the Free Trade Agreements (FTAs), and we have discussed regional FTAs within ASEAN as well as with dialogue partners like India. A positive aspect is that we also have provisions to promote digital economy development, but we need to upgrade these provisions. We need to exert more effort if we want to accelerate digital economy development efforts within the bloc. That will serve as a foundation for us to advance further.

Thirdly, we have bilateral FTAs that include provisions related to the digital economy, such as those between Singapore and Australia, Singapore and the United States, or some other countries collaborating with the US. For instance, under APEC, the Indo-Pacific Economic Framework also has digital aspects in its economy and cooperation.

I believe that all these experts can complement each other, but first, the region needs to build on the efforts and foundations we have established so far to create a digital economy within ASEAN. Therefore, when talking about ASEAN centrality, we must be strong, we must be a robust collective before we can reach out to the world and expand into a larger region.

We are discussing countries in Southeast Asia or ASEAN with different levels of development. Certainly, this is something we have encountered in the past when trying to achieve economic integration in the region. Now there are two main types of disparities: one is the level of digital or technological development, and the other is the differences in the legal framework.

We need to integrate these: one is how we have done it in the past, and now it can continue to be implemented in the present and future. First, we need to establish a roadmap that everyone feels comfortable with, and together we cooperate. Second, we will take a step-by-step approach to achieve our goals. A step-by-step approach means those who can implement quickly will do so, while those who need more time will proceed more slowly.

At some point in the future, we need to reach a consensus on our objectives. In this process, we need to support each other. This is the spirit of the ASEAN community. I believe that in the digital field, we will have to do the same. Moreover, Southeast Asia is amid a dynamically developing region. Everyone needs us. Major countries and large technology corporations are flocking here.

If we can collaborate, we will have much power and advantages to work with them. I think that will be our way to utilize the advantages of the level of economic development and digital economy development in each country as well as in the region to move forward together.

ASEAN's digital economy: opportunities for Vietnam's growth

ASEAN is currently undergoing a robust digital transformation. How can Vietnam seize opportunities from the region to enhance its digital connectivity and advance its national digital economy strategy?

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