Hanoi (VNA)ღ – Vietnam’s determination to ride the global trend of digital transformation is seen in leaders’ pronouncements, general awareness among the population and actions on the ground.

Party General Secretary Nguyen Phu Trong has said: “It is necessary to promote national digital transformation, develop the digital economy and society to create breakthroughs in improving productivity, efficiency and competitiveness of the economy.” How pervasive the transformation has to be in society has been emphasised by Prime Minister Pham Minh Chinh. Since it will have a profound effect on socio-economic activities, cooperation between State and private sectors is needed, he said, adding that the three key pillars of digital transformation are digital government, digital economy and digital society. The leadership of the country has pushed the development of the digital economy with several policies and resolutions. Vietnam promulgated the Law on High Technology in 2009. Five years later, the Politburo issued Resolution No 36 on "promoting the application of information technology to meet the requirements of sustainable development and international integration". Vietnam is one of the first countries in the world to launch a National Digital Transformation programme with far reaching goals like having 80 percent of level-4 online public services – allowing users to make online fee payment- provided via different means including smart phones; and 90 percent dossiers at the ministerial and provincial levels and 80 percent of those at the district level handled online by 2025. The country hopes to be among the top 50 countries in the United Nations’ E-Government Development Index and in the top 30 in innovation and cybersecurity. It targets the digital economy to account for 20 percent of Vietnam’s GDP by 2025.

The potential

With a population of nearly 100 million people and the second fastest growing economy in the region, a dynamic young population and quick access to high technology, experts estimate that Vietnam has the potential to reap great benefits from digital transformation. The country has signed 17 free trade agreements with more than 60 countries, including big markets like the United States, the European Union, Japan, China, the Republic of Korea and the Association of Southeast Asian Nations. According to a report on Vietnam's digital potential conducted by strategic economics consultancy company AlphaBeta, digital technology, if exploited to the maximum, could deliver economic value of up to 74 billion USD for Vietnam by 2030, equivalent to 27 percent of the country’s GDP in 2020. The report identifies eight key technologies for the digital economy in Vietnam: mobile Internet, cloud computing, big data, artificial intelligence (AI), financial technology (Fintech), Internet of Things (IoT) and remote sensing, advanced robotics and additive manufacturing. Vietnam has many advantages to develop the digital economy, in particular having 70 percent of its citizens under 35, educated and tech-savvy, not to mention a literacy rate of over 98 percent among the people aged from 15 to 35. About 70 percent of the population uses smartphones. The education sector has also promoted the application of information technology in teaching, learning and management, achieving many important results in recent years. The PISA 2020 report published by the Organisation for Economic Cooperation and Development (OECD) showed that Vietnam's online learning in line with the COVID-19 prevention and control regulations has many positive points compared to other countries and territories. Specifically, Vietnam has 79.7 percent of high school students studying online. This rate is higher than the overall average of OECD (67.5 percent). The COVID-19 pandemic has slowed down Vietnam's economic growth, but also created a special opportunity to promote economic growth through technological applications, innovation and digitisation. Minister of Information and Communications Nguyen Manh Hung said about 5,600 digital technology enterprises were set up this year, raising the total to 64,000. Their total revenue is estimated to reach135 billion USD in 2021, a year-on-year increase of 10 per cent. “Digital enterprises are the core of promoting Vietnam’s digital transformation to convert all Vietnamese enterprises into digital enterprises, all Vietnamese organisations into digital organisations, and all citizens into digital citizens," he said.

Wide reach

Indicating the reach of the digital transformation process, Vo Quang Lam, Vice President of Vietnam Electricity (EVN), said that national power utility was supplying electricity to 29.5 million customers, of which 50 percent have had electronic meters installed for remote data reading. Since 2012, EVN has used e-invoices and it has provided electricity services equivalent to level 4 public services. EVN has delivered 12 electricity services on National Public Service Portal after it came into operation in 2019. By the end of November 2021, 55 percent of transactions by individuals and businesses on the portal were for electricity related services. EVN plans to apply AI and Blockchain technology in their production and business, he said. According to the e-Conomy Southest Asia report by Google, Temasek and new partner Bain & Company, Vietnam led leading the region in terms of digital growth with an average rate of 27 percent in 2015-2020 period. The country’s digital economy has increased from 3 billion USD in 2015 to 12 billion and 14 billion USD in 2019 and 2020, respectively. Nguyen Thi Hong, Governor of the State Bank of Vietnam, said payment via mobile devices in Vietnam has grown 90 percent in the number of transactions and 150 percent in value every year. A survey by consultancy McKinsey revealed that the share of Vietnamese customers using digital banking tools at least once a month doubled from 41 percent in 2017 to 82 percent in 2021, making the country one of Asia-Pacific’s fastest growing markets for digital banking. The national database on population and citizen ID card becoming operational was a significant step in the renovation of e-governance to meet the demand of regional and international integration, said Prime Minister Chinh, adding that it contributes to accelerating national digital transformation. The national database on population is the most important among the six national databases to help form an e-Government, a digital society and digital economy.

Challenges ahead

In addition to the positive results achieved in all three pillars of the transformation process - digital government, digital economy and digital society, there are still shortcomings that need to be solved, experts say, noting that Vietnam’s e-Governance ranking is still low.

Despite moving up two places to 86th in the 2020 global e-government growth index, Vietnam stands sixth in Southeast Asia, behind Singapore, Malaysia, Thailand, Brunei and the Philippines.

Vietnamese enterprises in general, especially small and medium enterprises (SMEs) that account for 98.1 percent of the total number of Vietnamese companies, and contributing up to 45 percent of the country’s GDP - are still not aware of the role of digital transformation in the Fourth Industrial Revolution.

While digital transformation is considered a key solution to help SMEs survive, a survey by the Vietnam Software and its service Association (VINASA) found 69 percent of surveyed businesses did not know which partners to choose to implement their digital transformation process, 72 percent did not know where to start and 92 percent did not know what digital transformation entailed.

Studies have found that investment cost is a top digitisation barrier for Vietnamese SMEs.

There is a difference between the realisation of digital transformation between large-scale enterprises and SMEs.

It’s obvious that big enterprises have the advantage in terms of capital and production scale, so the application of technology will have immediate impacts and even the high cost is acceptable.

Meanwhile, SMEs have to carefully consider the short, medium and long-term benefits of the process while not having access to the needed capital to implement it.

A 2021 report on business transformation prepared by the Department of Business Development under the Ministry of Planning and Investment in collaboration with the USAID LinkSME Project revealed that up to sixty percent of the 1,300 businesses that participated in a survey said the cost of digital technology was a headache, especially because of the COVID-19 pandemic, which has reduced their revenue and access to capital.

Changing business habits and mindsets is another stumbling block. Some businesses said that after applying a software, employees have displayed reluctance to use it or even refused it. This attitude makes it difficult for enterprises to achieve digital transformation goals.

Potential solutions

Information and Communications Minister Hung said that digital transformation was more like an institutional revolution rather than a technological evolution, so the Government should lead the way, fostering the building of digital institutions.

𒈔 “Only by adopting innovation and creation can Vietnam escape the middle-income trap,” he said.

Regarding mindset challenges in digital transformation, Nguyen Duc Hai, director of LitCommerce, said it was imperative to determine input and output and then model all aspects of a business accordingly.

To help businesses succeed in digital transformation, a set of guiding documents should be compiled, suggested Nguyen Duc Thuan, vice president of Vietnam Association of Corporate Directors.

Speaking at the forum "New approach to enterprise digital transformation - Get it right to win" organised by the Vietnam Chamber of Commerce and Industry (VCCI) recently, he said the most important solution was that enterprises are supported when they opt to use technological tools associated with digital transformation.

Thuan also underscored the need to set up a coordination system and groups of experts to assist companies in the process.

At the third edition of a national forum on the development of Vietnamese digital enterprises in Hanoi on December 11, Prime Minister Chinh said digital transformation was a global trend that would serve all people, and therefore, it requires a global and people-oriented approach.

He identified six key implementation aspects of the process: raising awareness; perfecting institutions; developing digital technology enterprises; developing digital human resources; and developing infrastructure.

꧙ The PM emphasised that the role of State management must be strengthened to create favourable conditions for the development of digital technology enterprises./.