Vietnam’s digital transformation strategy
Vietnam aims to conduct and implement the Digital Transformation in institutions and the administration (e-Government), establishing an e-society, through all sectors of the economy including trade, payments and transaction, transportation and logistics, industry and agriculture, tourism, education and training, healthcare and sports.
The National Digital Transformation Programme 2025 includes some of these goals:
- 80 percent of online public services at level 4 to be online with access on mobile devices;
- 90 percent of work records at ministerial and provincial levels to be online while 80 percent at district level and 60 percent at commune level are processed online;
- All national databases including those for population, land, business registration, finance, and insurance are online and connected, with shared data on a government reporting information system;
- Inspection of state management agencies are done through digital and information systems;
- Annual labour production to be increased by 7 percent; 8 percent by 2030;
- 50 percent of banking operations by customers to be fully online;
- 50 percent of population to have a digital checking account;
- 70 percent of customer transactions made through digital channels;
- 50 percent of decisions on lending, small and consumer loans of individual customers made digitally and are automated;
- 70 percent of work and service records at credit institutions to be processed and stored digitally; and
- Fiber optic internet infrastructure covers 80 percent of households and 100 percent of communes.
The strategy also outlines the roles and responsibilities of ministries, industries, and local governments in leveraging new digital technologies such as Cloud Computing, Big Data, Mobility, Internet of Things (IoT), Artificial Intelligence (AI), Blockchain and social media to save time and costs of building and operating information systems, automation and optimizing work processes.
It is also important for the strategy to factor in the building a support system for monitoring and operating safety and network security in service of e-government; building a system for analyzing and processing big data to serve the task of ensuring national cybersecurity; building a support system for coordination and response to cybersecurity incidents; developing and enhancing the Government’s specialized digital signature authentication system.
Difficulties faced by Vietnam when implementing their digital transformation strategy
Several difficulties and challenges need to be tackled. Some of these issues include:
- Lack of a centralized or integrated database
Currently, each ministry and each province has its own database, using different software and they cannot be used efficiently in an integrated system. For example, data on traffic accidents by the Police cannot be used by healthcare services. The Ministry of Information and Communication is in charge to establish a unique software and connect the various data centres to a unified system. Amongst the national databases to be developed, databases on population, land, enterprises, finance, insurance, agriculture, education, health, employment, and social security are to be prioritized. Some other goals when developing centralized databases include developing and operating specialized network infrastructure stably; connecting 04 administrative levels from central to commune level; building a government cloud computing platform; developing the National Data Sharing and Integration Platform; developing the National Electronic Authentication and Identity Exchange Platform; developing application platforms on mobile devices for all e-government and digital government services.
2. High usage rate of cash payments
Despite the growth of digital payments, the proportion of cash payments in Vietnam is still higher than expected. According to the State Bank of Vietnam, by the end of 2020, the proportion of cash in total means of payment was 11.5%. By the end of April 2021, it increased to 11.53%, equivalent to about VND1.43 quadrillion. Meanwhile, the project to develop non-cash payment in Vietnam for the period 2016-2020 aimed at the proportion of cash on the total means of payment would be less than 10% by the end of 2020.
People in rural, remote and isolated areas, ethnic minorities still prefer cash. Even on e-commerce platforms, only a limited number of merchants transact using digital payments. The healthcare and education sectors are also not actively promoting digital payments.
3. Institutional and legal issues
Vietnam has to revise and amend several laws and legal regulations such as the Law on E-Transactions 2005, Law on Archive, Law on Digital Government, Law on E-Transactions, Law on Cybersecurity 2018, Law on Commerce and Trade, Law on Credit Institutions, Law on Information Technology, Law on Tax Administration, Law on Intellectual Property, Labour Code and Criminal Code etc. Promulgating a Law on E-Government. Vietnam has signed 14 FTAs and remains committed to Transparency and Openness. There is hope that Vietnam could implement these commitments according to international standards. However, several legal issues would still take time to be resolved. One such issue the government needs to address would be to determine if the database of a business should be treated as intellectual property and what are the legal implications of such a classification.
4. Manpower
The Digital Transformation will lead to a loss of a quarter to a third of jobs in the logistics and agro-processing sectors. However, it could also lead to a new labour demand through productivity, resulting in positive job gains. While Vietnam has a young and educated working population that learns fast, there are very few high-ranking, professional CEOs that are able to manage a company in an integrated world due to language barriers and technological differences.
5. High concentration of small businesses
A large proportion of Vietnam’s private enterprises are micro-businesses with 5 million household businesses in the cities and 5 million farmers in rural regions. These businesses make up the informal economy and they do not have a professional accounting system. These businesses often pay tax on a lump sum basis after negotiating with the relevant tax officer. While some are connected to Internet for daily business activities, they still need financial support and training to implement a proper Digital Transformation. They need to reorganize their business to allow for a successful digital transformation. Data Security is also a crucial issue to prevent attack on the database of the business. These businesses need to be willing to adopt digital payments in place of cash transactions.
6. Under-developed info-communications infrastructure
The info-communications infrastructure and network in mountainous regions remain under-developed. There is a need for Vietnam to upgrade it in order to attract domestic and foreign direct investment into these areas.
7. Cybersecurity
Vietnam recorded more than 3900 Cyber Attacks in the first 7 months of the year 2021, equating to it being placed at No.25 out of 194 countries in the 2020 Global Cyber Security Index. Cyber-attacks cost Vietnam over $1 billion last year, cybersecurity firm Bkav said in a report in January. With the digital economy expected to reach US$52 billion by 2025, there needs to have a strategic security plan put in place to cope with the increasing amount of data in the economy. Ensuring cybersecurity is considered a key factor for successful digital transformation and sustainability, and an important part that cannot be separated from the digital transformation journey.
8. Widening gap between adopter and non-adopters of technology
Digital transformation will lead, among others, to a substantial loss of jobs. Job losses as a result of technological transformation tends to impact lower workers more so than higher wage workers and this will contribute to the widening of the income gap between the rich and the poor in Vietnam.
Opportunities and challenges during Vietnam’s Digital Transformation
The Covid 19 pandemic helped to accelerate Digital Transformation with people working at home, students learning online and online shopping. Vietnam is an open economy with total export-import turnover reaching 120% of GDP. The government administration and the business community must both work together to implement Digital Transformation to protect Vietnam’s long term economic interests. A successful digital transformation would help to improve competitiveness of the economy and the business.
A strong social partnership is critical for a successful digital transformation. The best way to implement it is to convince the business community. Vietnam needs big investments to upgrade the Internet services and to incentivize smaller businesses to adopt new technology. The party leadership and the state officials have to adapt quickly to manage Vietnam’s Digital Transformation but some of them are not quick enough to master the transformation. Monopolies in state-owned enterprises are also an issue as there is insufficient control on these monopolies. Vietnam’s weaknesses in the digital transformation process are related to the lack of discipline, cooperation and strategic perseverance. Vietnam needs to address these weaknesses to accelerate digital transformation so as not to fall behind internationally. If the government is able to partner with private enterprises to facilitate Vietnam’s digital transformation, there would be many business opportunities that would present itself in Vietnam.
Possible areas of partnerships with other companies or countries
There are many opportunities for partnership and cooperation with Vietnamese IT-companies to implement the Digital Transformation. Vietnamese companies would need partners to assist with the linking up with international companies further up the value chain, to implement digital accounting solutions, to improve efficiency of existing supply chains, to create an efficient sandbox to connect different ministries, to connect agriculture to international markets and partners, to develop e-tourism and e-sport, tele-medicine and online learning. If necessary, the IT-company could implement pilot projects to trial and demonstrate the efficiency of the Digital Economy in practice. It is beneficial to the region if Vietnam’s digital transformation plan serves as a platform for greater cooperation and integration within ASEAN as it would also serve as the foundation for better relations in other areas too.
Dr. Le Dang Doanh
Sep 2021
Dr Doanh is an independent economic consultant in Hanoi, and also a board member of the Association Of Economists, Vietnam. He was also appointed by the UN General Secretary as the Member of the Committee for Development Policy from Jan 2016 to Dec 2018. Previously, he was the Member of the Board at the Vietnam Institute of Development Studies; Senior Economist, Advisor to the Minister of Planning and Investment of Vietnam; President of Central Institute for Economic Management (CIEM); and member of the (Advisory) Research Commission of the Prime Minister (PMRC) of Vietnam.