Making a digital future happen

Vietnam needs to prepare for the vital changes required in creating a digital economy.

Making a digital future happen

Vietnam is working towards becoming one of the world’s top 10 largest software and digital content outsourcing countries, with about 1 million employees in the IT field by 2020, Permanent Deputy Minister of Foreign Affairs Bui Thanh Son told the “ASEAN 4.0: Entrepreneurship in the Fourth Industrial Revolution” seminar held in Hanoi last year. Indeed, a recent study by Amazon Web Services (AWS) found that the country is recording among the highest increases in expenditure on cloud computing in the world, at 64 per cent. Its immense potential in IT and cloud computing and wide smartphone coverage serve as key drivers in it materializing its dream of successfully developing its digital economy.

Digitized perspective

The digital economy has been defined as a core pillar for economic growth, creating breakthroughs for each country as the world enters Industry 4.0, according to Deputy Minister of Industry and Trade Cao Quoc Hung. Many technological solutions have been built in all sectors and brought huge new benefits. Vietnam has existing advantages to build an ecosystem for developing its digital economy, based on the internet and supporting platforms including non-cash business transactions, public services, and relevant policies (e-government, smart cities, etc.).

Sixty-seven per cent of Vietnam’s population have internet access, putting it among the world’s largest internet users, according to figures from the Ministry of Industry and Trade (MoIT), with 70 per cent of mobile subscribers using 3G and 4G networks and each person owning on average 1.7 smartphones. The scale of the digital economy is estimated to reach $9 billion in 2018, or 4 per cent of GDP, having tripled from $3 billion in 2015. It’s projected to grow to $15 billion by 2021 and $33 billion by 2025.

Mr. Dang Thanh Son, Partner at Baker & McKenzie Vietnam, told VET that Vietnam’s internet penetration rate, together with its spending potential and its young, aware population, demonstrate that the country is already equipped with promising building blocks to build a thriving digital economy. Traditional economy and digital economy were once two terms that were mutually exclusive. However, Vietnam is well aware that digital transformation is now no longer a choice but a “must”. The country shows the potential to boast an economy that seamlessly intertwines the traditional economy and digital economy.

The accelerated growth of Vietnam’s digital economy ranks only third behind Indonesia and Thailand in Southeast Asia. “The prospects are clearly high for Vietnamese people and Vietnamese businesses,” said Mr. Denis Brunetti, President of Ericsson Vietnam, Myanmar, Cambodia & Laos. “The government will focus on eliminating cash, replacing it with digital transactions (e-commerce, mobile payments) within the coming years, and this is a very good vision and strategy. Vietnam has truly embraced the digital economy, and this will help the country leapfrog further stages of socioeconomic development in the years to come.”

When sharing a 2018 report reviewing current policies on data management and impacts on the economic growth and the development of small and medium-sized enterprises (SMEs) in five Asian economies, including Vietnam, Ms. Lim May-Ann, Executive Director of the Asia Cloud Computing Association (ACCA), said digital transformation is a combination of positive market trends being enhanced by government policy, rather than a sudden revolution.

In many economies, she went on, rapid evolution into a digital economy is from the ground-up rather than top-down. In Vietnam, this is happening as well, but it is not an even distribution of digital development - the market is allowing many young people in cities to work on digitizing the economy. However, the challenge for government policies is that they must catch up to allow for digital inclusion, to allow all Vietnamese people to participate in the digital economy.

Incredible changes

Vietnam is currently witnessing digital transformation occurring across all sectors, ranging from trade and payments to healthcare, education, transport and tourism, at an impressive pace, according to Mr. Son from Baker & McKenzie. Vietnam’s transportation, e-commerce, online marketing, and online travel industries have digitalization either well underway or businesses already successfully operating off digital platforms.

Digitalization increases the visibility of the industry or business, enables it to better connect with customers, and improves efficiency and productivity. This not only leads to enhanced customer services and loyal relationships between business and customer, but also increased sales. Digitalization encourages further innovation by getting the industry or business more aware of trends and possibilities offered by technologies. At this pace, Mr. Son said, a $33-billion digital economy by 2025 is perfectly feasible.

 

Another area in Vietnam that has been attracting a lot of attention in recent years is its burgeoning fintech market. More than 40 new fintech companies have been launched in the country in the past five years given the country’s rising middle class and growing mobile and internet penetration rates. Its fintech market is forecast to reach $7.8 billion by 2020. While digital payment solutions account for most of the market, personal finance and corporate finance services are expected to increase greatly in number in the years to come.

The first industry to take advantage of digitalization was information, communications and telecommunications (ICT), in 1993, according to Mr. Brunetti. This industry’s digitalization transformed Vietnam by connecting everyone in the country with each other and with the outside world, driving a socioeconomic miracle that saw the poverty rate fall from 53 per cent in 1993 to less than 3 per cent in 2018, while also generating a sustained and increasingly inclusive average GDP growth rate of more than 6 per cent per annum in the same period. Vietnam has also become a middle-income economy since the advent of digital mobile telecoms, and an increasing number of economic sectors contribute to Vietnam’s GDP today.

Looking forward, he said, the future of ICT is to digitally transform all other industries, such as manufacturing, adopting digital technologies such as cloud robotics, edge computing, machine learning, artificial intelligence (AI), big data analytics, automation, virtual reality, and augmented reality. These digital technologies will make industries such as manufacturing “smarter” and more efficient, increasing workplace productivity growth and the country’s competitiveness on the international stage. Smart agriculture, intelligent transport, e-health, and e-education, among others, will also benefit from industry digitalization, creating “smart cities” or “smart nations” driven by 4G and 5G IoT capabilities.

Retail, transportation, and services will benefit the most from digitalization, according to Mr. Trinh Duy Hoang, Market Analyst Manager at Vietanalytics, a local market researcher. These industries are estimated to expand in scale and growth speed in domestic and overseas markets in the near future, especially in IT-based services, which will record exponential growth. Digitalization in transportation would help reduce operation costs and bolster productivity.

Meanwhile, Ms. Natasha Beschorner, Senior ICT Policy Specialist at the World Bank’s Global ICT Department, noted that the digital economy must integrate the digital services of both the government and businesses, especially as cash is still the most common and credible means of payment in Vietnam. 

Navigating challenges

As with many other countries, Vietnam is riddled with challenges, such as upskilling its workforce, adapting to rapidly-changing technologies, and keeping regulations up to speed in regard to technology. In respect to the last challenge, Mr. Son noted that Vietnam has been issuing policies to foster its digital economy but often such policies and relevant authorities are inconsistent or overlap with one another, and as a result lack a sense of direction.

He recommended Vietnam continue to make efforts to rid itself of regulatory red tape to lessen unnecessary burdens on investors, both foreign and domestic alike, by adopting “regulatory sandbox approaches” for new businesses and startups. With that in mind, ensuring consistency in upcoming policies and enhancing transparency in the implementation and enforcement of regulations would make Vietnam’s path towards the digital economy it envisions smoother and more efficient.

Developing a digital economy is not a task for Vietnam only, said Mr. Dang Hoang Hai, General Director of MoIT’s Vietnam eCommerce and Digital Economy Agency (iDEA). As it has been moving so fast and has had enormous impact, many countries have started to draw up strategies for the development of the digital economy after never considering it previously, he explained.

However, he argued, though the country has issued policies to facilitate the development of the digital economy, they are separate and disconnected. “There is a lack of direction and national strategy on this matter,” he believes. “Our job is to connect these policies in a way that creates a big picture for the growth of the digital economy in Vietnam.”

Meanwhile, according to Mr. Brunetti, the main challenge is ensuring that 4G networks continue to expand rapidly in 2019 and 2020 while accelerating the launch of secure and trusted 5G IoT networks in 2020 and onwards. 5G ought to be considered strategic critical national infrastructure, particularly since it will connect to and impact every industry and every aspect of business and social lives. Hence, it’s imperative to ensure Vietnamese operators work with trusted partners in accelerating the deployment and availability of 5G IoT networks since this is the key enabling platform for Industry 4.0 and industry digitalization. VIR

 
 

Other News

.
Vietnamese enterprises need cash to revive
Vietnamese enterprises need cash to revive
FEATUREicon  07/10/2021 

Nguyen Quoc Ky, Chairman of Vietravel, a big tourist company in Vietnam, said that due to the impact of the 4th wave of Covid-19 epidemic, the entire tourism industry of Vietnam has been closed since May 2021.

Business associations unhappy with weekly tests for vaccinated, recovered workers
Business associations unhappy with weekly tests for vaccinated, recovered workers
BUSINESSicon  07/10/2021 

Several business associations in HCM City have called for scrapping a requirement that workers commuting to the city from elsewhere need to undergo a weekly test for COVID-19 regardless of their vaccination or recovery status.

Govt' to consider zero-interest loans for all airlines
Govt' to consider zero-interest loans for all airlines
BUSINESSicon  07/10/2021 

The Vietnam Aviation Business Association asked the Government to consider a proposal to slash 30 per cent off the airlines' income tax for 2020 and the first half of 2021.

Vietnam’s power development plan to boost LNG sector
Vietnam’s power development plan to boost LNG sector
BUSINESSicon  06/10/2021 

The outlook for Vietnam’s emerging liquefied natural gas (LNG) sector remains promising as the country’s need for the product is large to serve its power development plan, according to Fitch Solutions.

Serious worker shortage looms as factories resume operations after prolonged lockdown
Serious worker shortage looms as factories resume operations after prolonged lockdown
BUSINESSicon  06/10/2021 

Companies in HCM City and other industrial hubs like the neighbouring provinces of Binh Duong and Dong Nai are struggling with a labour shortage after the pandemic.

Vietnamese products at risk of trade violation investigations
Vietnamese products at risk of trade violation investigations
BUSINESSicon  06/10/2021 

The Trade Remedies Authority of Vietnam (TRAV) have warned that Vietnamese products are at risking of falling foul of anti-dumping and trade defence investigations. 

State to divest from six major enterprises, raking in US$600-800 million in Q1/2022
State to divest from six major enterprises, raking in US$600-800 million in Q1/2022
BUSINESSicon  06/10/2021 

The State Capital Investment Corporation (SCIC) is expected to divest capital from six major enterprises in the first quarter of next year, fetching between VND15 trillion and VND20 trillion (US$652-870 million) for the State budget.

VIETNAM BUSINESS NEWS OCTOBER 6
VIETNAM BUSINESS NEWS OCTOBER 6
BUSINESSicon  06/10/2021 

Enterprises survive the COVID-19 storm

Lefaso rejects rumours on Nike’s moving production out of Vietnam
Lefaso rejects rumours on Nike’s moving production out of Vietnam
BUSINESSicon  05/10/2021 

Recent rumours spreading on social media on Nike’s moving production out of Vietnam to China and Indonesia are incorrect, stated Phan Thi Thanh Xuan, Vice Chairwoman and General Secretary of the Vietnam Leather and Footwear Association.

Evergrande’s debt bomb a lesson for Vietnam
Evergrande’s debt bomb a lesson for Vietnam
FEATUREicon  06/10/2021 

Experts believe that the huge debt of $300 billion incurred by Chinese Evergrande will have an indirect impact on Vietnam.

Vietnam fails to collect tax from cross-border e-commerce
Vietnam fails to collect tax from cross-border e-commerce
FEATUREicon  06/10/2021 

As trading activities on e-commerce platforms bring huge profits, collecting tax has become a burning issue for many countries.

Red boards with this phrase appear densely on Hanoi streets
Red boards with this phrase appear densely on Hanoi streets
BUSINESSicon  05/10/2021 

“Shop for rent”, “space for rent”, “house for rent”, … are the phrases that appear most on the streets of Hanoi after two months of social distancing.

Ministry forecasts Vietnam’s GDP growth this year at 3%-3.5%
Ministry forecasts Vietnam’s GDP growth this year at 3%-3.5%
BUSINESSicon  05/10/2021 

The Ministry of Planning and Investment has projected the country’s gross domestic product (GDP) growth in 2021 at 3%-3.5%, down 0.5 percentage points from the rate forecast in September.

Businesses reopen in HCM City, but challenges remain
Businesses reopen in HCM City, but challenges remain
BUSINESSicon  05/10/2021 

After months of social distancing the reopening of the HCM City economy on October 1 has brought cheer to both businesses and the public.

VIETNAM BUSINESS NEWS OCTOBER 5
VIETNAM BUSINESS NEWS OCTOBER 5
BUSINESSicon  05/10/2021 

 Project aims to enhance trade remedy capacity as Vietnam joins new-generation FTAs

Hanoi removes 28 administrative procedures in investment
Hanoi removes 28 administrative procedures in investment
BUSINESSicon  05/10/2021 

Hanoi’s authorities have decided to remove 28 administrative procedures in the field of investment.

VIETNAM BUSINESS NEWS OCTOBER 4
VIETNAM BUSINESS NEWS OCTOBER 4
BUSINESSicon  04/10/2021 

Vietnam develops rural tourism through digital transformation

Construction ministry proposes legal amendment to prevent 'land fever'
Construction ministry proposes legal amendment to prevent 'land fever'
BUSINESSicon  05/10/2021 

Many real estate brokers lack professional knowledge and ethics and do ‘hit and run’ business, causing losses to customers by giving wrong advice or even cornering the market and causing artificial land fever.

Vietnam warned of serious air pollution in motorization period
Vietnam warned of serious air pollution in motorization period
FEATUREicon  05/10/2021 

Vietnam is about to enter the motorization period when the market will boom and the air will become polluted. Policies on restricting the use of old-technology vehicles and encouraging green, clean vehicles are needed.

Focus turns to stamping out hotbeds, greening the economy
Focus turns to stamping out hotbeds, greening the economy
FEATUREicon  05/10/2021 

The acceleration of vaccinations will help restore production and business activities, and expand green production zones and a green workforce for the economy.

 
 
 
Leave your comment on an article

OR QUICK LOGIN