Nation thinking big with digital overhaul

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As a fundamental part of its Socioeconomic Development Plan until 2025, Vietnam is set to boost digital transformation and foster a digital economy in the service of individuals and businesses,

with a new hallmark scheme on supporting industrial enterprises in smart production development.

Nation thinking big with digital overhaul
Local tech firms have grown quickly thanks to cooperation in digital infrastructure and finance. Photo: Shutterstock

Established in 1961, Hanoi-based Rang Dong Light Source and Vacuum Flask JSC (RALACO) has over the last decade become a massive investor in digital transformation via high-tech applications, with 20 per cent of pre-tax profits earmarked for research and development (R&D) annually.

RALACO is now constructing in Hanoi’s Hoa Lac Hi-tech Park a factory to manufacture high-tech electronic products, which will become operational around autumn 2024. Since 2020, RALACO has been cooperating with South Korea’s Seoul Semiconductor to introduce into Vietnam the world’s most modern LED SunLike technology, which can help protect eyesight, increase concentration and stabilise biorhythm.

“A wave of businesses of all types applying high technology and digital transformation has begun in Vietnam,” Kieu Nguyen Viet Ha, an expert from the Ministry of Industry and Trade’s (MoIT) Department of Science and Technology, told VIR. “Many companies are doing the same as RALACO, such as PetroVietnam, Electricity of Vietnam, Vietnam National Coal and Mineral Industries Group, Vietnam Industrial Construction Corporation, and Truong Hai Auto Corporation.”

Boosting digital transformation

Inspired by great benefits from digital transformation, the government two weeks ago enacted the Programme on Economic Recovery and Development which underlined the imperative need to speed up the removal of all impediments against enterprises and investors through the application of high technology and digital transformation in all administrative procedures.

The government promulgated Resolution No.12/NQ-CP at January’s government cabinet meeting, which also underscored the increased implementation of the National Digital Transformation Programme adopted in June 2020. The Ministry of Information and Communications is tasked to combine with other ministries, agencies, and localities to accelerate the implementation of this programme, the National Strategy on E-government Development of 2021-2025, and the National Committee on Digital Transformation.

One month ago, the government released Resolution No.01/NQ-CP on tasks guiding the realisation of the socioeconomic development plan in 2022. This resolution also highlighted the urgent need to “boost national digital transformation and innovation as well as build a digital economy and society in a practical and effective manner. It is necessary to boost the pilot application of some business, product, and service models with new tech and to create the best conditions for the breakthrough development of some sectors including tourism, services, transport, and logistics, with all procedures to be simplified.”

Also, under Vietnam’s Socioeconomic Restructuring Plan for 2021-2025 when a relatively high economic growth rate of 6.5-7 per cent has been set, the National Assembly underlined that digital transformation “will be drastically deployed, with the construction of a digital economy, a digital government, and a digital society in the 2021-2025 period.”

This plan targets that during this time, the nation’s average labour productivity will annually expand 6.5 per cent, with that of the manufacturing and processing industry annually climbing 6-7 per cent. Labour productivity is projected to increase over 6.5 per cent annually, and the contribution of total factor productivity to GDP will be 45 per cent last year.

“The three pillars of this process are digital government, digital economy, and digital society with emphasis on a robust relationship between the public and private sector,” said PM Pham Minh Chinh at a recent meeting on the issue.

Vietnam has set a goal to become one of the top 30 nations in the world in digital access with the vast majority of its population to gain access to mobile devices and the internet in the near future. Minister of Public Security To Lam said his ministry has almost completed the digital national citizen ID database, a cornerstone for the next steps of the process. Governor of the State Bank of Vietnam Nguyen Thi Hong said investment in digital transformation projects have hit about $661 million annually. Up to 90 per cent of Vietnam’s banks have established and operated their own digital banking systems.

For example, as from January 21, BAC A BANK debuted its latest corporate banking app version with many changes in design and function, making it more convenient for users with laptops and mobile phones. The version, with high security standards, provides maximum safety and processing speed for all customers.

The new feature allows users to conveniently perform all transactions right from the time they access the app. Users can change their own avatars and desktop images, and share the transaction screens easily on other platforms such as Messenger, Zalo, Skype, and Viber with just one touch.

New scheme

The Ministry of Industry and Trade has just submitted to the government a draft scheme on supporting industrial businesses in applying Industry 4.0 technologies via digital transformation for smart production development for the rest of the decade. Under the draft scheme, expected to be enacted by the government in early 2022, about 36 per cent of Vietnam’s businesses will implement digital transformation effectively in 2025 and the rate will increase to 85 per cent by 2030. The rate of enterprises with breakthrough digital transformation will be at least 12 per cent in 2025 and 32 per cent in 2030.

The rate of businesses that will be supported by the government in raising awareness and improving skills in digital transformation aims to be 100 per cent in 2025. Meanwhile, the rate of businesses having projects involving digital transformation and Industry 4.0 technology application and getting directly supported by the scheme’s experts will be 10 per cent in 2025 and 30 per cent in 2030.

To reach these goals, the draft scheme has highlighted many solutions, including the application of sandboxes and the formulation and enactment of sets of criteria on determining levels of digital transformation among enterprises, which will make it favourable for the state to offer incentives to these businesses.

“All foreign investors are to be offered the best conditions and policies for cooperating with domestic enterprises in deploying new investment and business models in service of activities in digital transformation and smart production development,” read the draft, also noting that there will be special policies to support enterprises in digital transformation.

Ha of the MoIT, who directly drafted the scheme, told VIR that digital transformation will help enterprises further join global supply chains, cooperate with foreign partners, and improve their competitiveness.

“Businesses will also have values in developing new business models, products, and services while also increasing their ability to satisfy customers and improve their corporate governance,” Ha said. “For example, before constructing the factory to manufacture high-tech electronic products in Hoa Lac Hi-tech Park, RALACO already developed an R&D centre. The factory and centre will help the company boost digital transformation. If the scheme is adopted, it also benefits RALACO.”

RALACO’s general director Nguyen Doan Thang said the company has succeeded in mastering eight key electronic technologies, and has weathered difficulties to attain profits, with an on-year rise of 17.8 per cent in 2020 and 11.5 per cent in the first nine months of 2021, when export turnover rose 47 per cent on-year.

Adam Sitkoff – Executive director American Chamber of Commerce in Hanoi

In today’s world, you cannot separate the digital economy from the general economy. Digital transformation significantly reduces costs, provides products and services for a broader range of consumers, and increases access to newer and bigger markets. Vietnam has already experienced strong growth in e-commerce, fintech, edtech, and the creative economy, and changes in behaviour during the pandemic have accelerated that growth.

To reach its full potential, Vietnam must encourage an open and interoperable regulatory environment that enables access to information, data privacy, protection of intellectual property, cybersecurity, and free, fair, and reciprocal trade in digital services. Our member companies are eager to partner with Vietnamese companies to enable their digital transformations and foster a new generation of tech startups to support Vietnam’s goal of the digital economy accounting for 25 per cent of GDP by 2025.

Homegrown tech companies have grown rapidly thanks to partnerships in digital infrastructure and finance with the global tech ecosystem. We encourage the expansion of these partnerships by ensuring that regulations do not prevent growth. The free flow of data, which allows Vietnamese companies to access global services such as data centres and international finance in the digital payments sector, is critical to continuing rapid development.

Data protection is a vital component of this, and we applaud the government’s efforts to start building a data protection policy ecosystem. We encourage a regulatory environment that puts users at the centre of new policies.

There is great promise in the high-tech sector in Vietnam and I believe robust dialogue between the government and private sector can lead to optimal outcomes.

Source: VIR

Nguyen Van Than, Chairman of the Vietnam Association of Small and Medium-sized Enterprises, said up to 70% of Vietnamese small and medium enterprises are outside the digital economy, and only about 20% are learning about it.

The digital economy in Vietnam accounts for about 8.2% of GDP. The development potential of the Internet and digital economy components is still quite large.

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