Vietnam's rise in digital transformation

December 13, 2021 | 08:46 am GMT+7

Digital transformation in the economy is expected to contribute significantly to the policy of improving efficiency in Vietnam.


According to the World Bank, the use of digital platforms, e-commerce sites, social networks and specialized applications in Vietnam has increased sharply in response to the COVID-19 epidemic, from 48% businesses in June 2020 to 73% in January 2021. During the same period, the rate of enterprises investing in digital solutions - such as installing equipment and software for business operations - quadrupled from 5% to 21%.

In addition, the Vietnamese Government has stepped up efforts to streamline procedures and provide public services to the people through digital tools. The number of online public services increased from 169 in March 2020 to over 1,900 services in October 2020.

By February 2020, more than 2,000 services had been standardized and integrated into the National Public Service Portal, from driver licensing to tax registration and business registration. Accordingly, traffic and transactions rose by ten times within one year, from January 2020 to February 2021.

Although the new trend of applying digital technology under impact of the COVID-19 pandemic has been encouraged, the level of expertise of users is still relatively limited. Digital platforms are mainly used to streamline simple business functions such as business administration, sales and payment methods.

Only large enterprises with sufficient financial and human resources are able to use digital tools in production planning, supply chain management, and manufacturing operations.

The World Bank's survey themed “Firm-level technology adoption in Vietnam 2020” shows that new technology application is at an early stage in Vietnam. Only 6% of businesses in Vietnam used cloud computing for business tasks and under 2% of businesses used big data or artificial intelligence for marketing.

Only about 6% of manufacturing enterprises used additive manufacturing (AM) or other advanced techniques, and less than 2% used robots.

The low level of digital innovation in the private sector is explained by limited business needs, inadequate government support and underdeveloped "digital" businesses.

Limited demand of businesses stems from uncertainty about the return on technology investment, weak internal capacity to use technology, financial constraints, and legal issues.

More than 75% of small and medium sized enterprises and about 63% of large corporations did not know about the return on technology investment and whether the investment is suitable for their needs.

Less than 60% of small and medium sized enterprises said they either lack information about existing technologies or lack the skills to use them. In addition, Vietnamese businesses said that access to foreign finance is still limited.

Government support was not enough for digital businesses or for those looking to invest in digital tools. Support from the public sector still focused on research and development (R&D) rather than on technology upgrading and commercialization, including adoption and diffusion of existing technologies, according to the World Bank survey.

Locally developed digital-based e-commerce platforms, such as Sendo and Tiki, could compete with regional rivals such as Lazada and Shopee. But Vietnam still had fewer digital businesses (about 250 businesses) than other countries in the South East Asia such as Malaysia (450 businesses) and Indonesia (530 businesses). 

Protecting privacy

The rapid development of technology gives people more ways to access and share information on the internet, but also facilitates more sophisticated attacks on security and personal data.

The government's challenge is to strike a balance between allowing access to information and protecting users of digital tools, the World Bank warns.

According to the Global Cybersecurity Index, Vietnam has a fairly good level of cyber protection, 25th out of 194 countries and territories, 4th out of 11 Southeast Asian countries and 7th in the Asia-Pacific region.

Vietnam has promulgated the Law on Cybersecurity, effective from January 1, 2019. The law requires businesses to cooperate and comply with the law when operating in Vietnam. Also, IT companies must store data about Vietnamese users on servers located in the country.

Vietnam is a leader in the export of consumer electronics products - including half of Samsung's high-end smartphones and over 80% of Intel's central processing units for personal computers. But these products are still scarce in the domestic market due to restrictions placed on these foreign corporations.

These products are often imported by other countries and domestic consumers have to pay higher prices, while the profits are enjoyed by wholesalers and retailers.

The World Bank said that digital transformation in the economy is expected to make a significant contribution to improving efficiency in Vietnam. Such a transition has actually been accelerated by the COVID-19 shock as trade and services have become increasingly digitized in response to social distancing policies. A boom in e-commerce has occurred. In 2020, Vietnam was the fastest growing market in East Asia.

These are very promising steps.