According to economists, two major driving forces accelerating globalization are the development of science and technology, and the removal of barriers in trade and investment activities.

In the VUCA era (volatility, uncertainty, complexity, and ambiguity), if a country wants to make a breakthrough, it needs to put science and technology as a top priority.

Vietnam is losing its comparative advantages when joining the global value chain. Absolute advantages can be created through science and technology research activities.

Vietnam’s investments in R&D (research and development) in science and technology remain too low. Instead of committing the 2 percent GDP investment in R&D like other countries, Vietnam spends only 0.4 percent of GDP, or just $2 billion.

Small and medium sized enterprises are not financially capable of budgeting for R&D activities as technology has been changing too rapidly.

“With the current investments in scientific and technological R&D, Vietnam can hardly catch up with the world, let alone outpace them,” said Le Huy Khoi from the Institute for Strategic and Policy Studies under the Ministry of Industry and Trade (MOIT).

“I had a working session at Hoa Phat Group. The steel manufacturer is building a mill in Quang Ngai. In order to satisfy the requirement on low carbon emissions, Hoa Phat has made heavy investment to set up a new system with modern technology and equipment. However, the technology and equipment still cannot satisfy European standards,” Khoi said.

He said that Vietnamese enterprises seem to have begun too late in investing in technology and innovation to join the global value chain.

Vietnam is now a signatory of many next-generation Free Trade Agreements (with no grace period for underdeveloped countries) and multilateral FTAs, such as CPTPP (the Comprehensive and Progressive Agreement for Trans-Pacific Partnership).

With bilateral agreements, Vietnam can improve its capability step by step. With multilateral agreements, other partners are ready, while Vietnam is still behind.

However, Khoi is not pessimistic and thinks that Vietnam’s businesses are dynamic and can do many big things.

“I know that some Vietnamese enterprises now can satisfy 100 percent of requirements set by Europe. Cosmos, after two years of investing in technology, joined Honda’s automobile manufacturing value chain in Vietnam. Viettel’s products in supporting industries now can join Boeing’s chain,” he said.

Regarding investment in R&D, Khoi mentioned Samsung's R&D center in Vietnam with 3,000 workers. Many Vietnamese, after being trained overseas, have returned to Vietnam and worked for the center. 

Vietnam spent money to train workers, while Samsung can use the workers, and the patent and copyright belong to Samsung.

Khoi said to bring efficiency to the nation’s development, Vietnam needs to accelerate R&D activities in Vietnam and apply R&D results for Vietnamese enterprises.

The ‘technological boundary’

R&D and innovation activities are increasingly global thanks to changing organizational functions inside multinationals. The companies are internationalizing R&D activities with higher speed and on a larger scale.

R&D and innovations are considered the keys that help enterprises improve their competitiveness, productivity, and meet requirements in the globalization era.

However, innovation activities in Vietnam are facing challenges.

Nguyen Hoang Phuong, Chairman of the Council of Asia-Pacific Development Research Institute, said he once had the chance to visit a corporation in top three in Asia with annual revenue of $320 million. The corporation has 324 workers. Its sale division which sells products to 68 countries worldwide, just has eight workers. Its R&D institute has 60 workers.

The situation is different in Vietnam. An enterprise has revenue of $50 million, but uses 500 workers in northern, central and southern regions. So, the added value created by one Vietnamese worker is low.

Khoi has found four major problems:

First, there are still many barriers in the innovation ecosystem and still no legal framework for new products and services. The technology application, development, renovation and product commercialization remain weak, while the connection among parties involved in the innovation process is loose.

Second, Vietnamese workers lack in-depth knowledge, high technology and necessary skills. Only 11 percent of workers had high qualifications in 2022, and only 26 percent of workers had experienced training.

Third, Vietnam’s rankings remain low which reflects low innovation. Fourth, innovation in enterprises remains weak because most are small and medium sized, with modest capital and workforce. 

Binh Minh