Moving forward with vital innovation hub

Prime Minister Nguyen Xuan Phuc takes a close look at the National Innovation Centre model Photo: Le Toan

The discourse revolving around Industry 4.0 in Vietnam was sparked in 2016 following domestic media coverage of the World Economic Forum’s annual meeting, of which the theme was “Mastering the Fourth Industrial Revolution.”

This discussion started to gain momentum later that year when remarks from governmental figures regarding the Fourth Industrial Revolution, known as Industry 4.0, emerged on the scene. Since then, it has witnessed participation from business circles, academics, and policy-makers tackling different aspects of Industry 4.0 in Vietnam.

The country’s interest in Industry 4.0 was officially incarnated in policy in September 2019 when Party General Secretary, State President Nguyen Phu Trong, on behalf of the Politburo, signed Resolution No.52-NQ/TW on a number of guidelines and policies to regarding Industry 4.0.

“Active participation in Industry 4.0 is the inevitably objective requirement of special significance for Vietnam to achieve breakthroughs in socio-economic development,” the resolution noted.

Under the resolution, Vietnam has set a goal to raise contribution of digital economy to 20 per cent by 2025, and 30 per cent GDP by 2030 when all people can access the 5G service. The country expects to become one of the leading hubs for startups and innovation in Asia by 2045. It also aims to increase the broadband internet coverage rate to 100 per cent and labour productivity by 7 per cent annually by 2025.

Vietnam will also try to become one of the three leading ASEAN countries in terms of the global innovation index.

To achieve these goals, Resolution 52 underlines a series of solutions, such as the development of IT, electronics and telecommunications, cybersecurity, smart manufacturing, finance and banking, healthcare, education and training, digital agriculture, and innovation centres.

“It is necessary to construct and develop national innovation centres, with a focus on key technology of Industry 4.0,” the resolution stated. “Special breakthrough mechanisms and policies are to be applied to these centres.”

Currently, many nations have and will develop their own centres of the type, and Vietnam is not an exception.

For example, under their “Made in China” strategy, the Chinese look to establish 30 such facilities by 2025. Southeast Asian nations have also been following suit. Specifically, Thailand founded its True Digital Park in Bangkok in 2018, while Singapore is now developing its own Silicon Valley called Punggol Digital District, which is expected to be completed in 2023. The nation-state successfully constructed its first facility, One-North, in 2001. Elsewhere, Malaysia set up its Smart Technology Centre in 2018, while Indonesia in 2017 established its own innovation centre in Jakarta.

First innovation symbol

In October 2019, as part of efforts to implement Resolution 52, Prime Minister Nguyen Xuan Phuc signed Decision No.1269/QD-TTg on setting up the National Innovation Centre (NIC), the first of the kind in Vietnam which will operate under the management of the Ministry of Planning and Investment (MPI), in order to support the national eco-startup development, and the renewal of the national economic growth model based on scientific and technological development.

According to the MPI, located at Hoa Lac Hi-tech Park in Hanoi, the NIC will include two areas. The first area covering nine hectares of land will be home to the centre’s headquarters, costing $74 million. The second area, covering 14ha of land, will be earmarked for developing service facilities including apartments, villas, schools, a hospital, a commercial centre, and entertainment complex in service of those living and working there.

NIC general director Nguyen Hoa Cuong told VIR that the centre will support the application of high technologies, especially those from Industry 4.0, for Vietnamese enterprises and assist the country in luring startups and innovation stakeholders, developing high-quality human resources, and contributing to the implementation of the National Strategy on Industry 4.0.

The NIC will connect and co-operate with other innovation centres nationwide and globally in order to create an integrated universal system. It will be used for showcasing new technologies, giving access to foreign technology providers to Vietnamese businesses, and providing prevalent services by 4.0 technologies.

“International and domestic experiences show that incentives and encouragements are prerequisites for attracting more investment and talent for R&D activities and innovation,” said Cuong. “We can create new technology, products, services, and business models, while enhancing productivity and economic effectiveness.”

Currently, many foreign businesses have been operating their R&D centres in the country, such as Singapore’s Grab, South Korea’s Samsung, Sweden’s ABB, and Germany’s Bosch. The US telecommunications giant Qualcomm is also considering founding such a centre here.

The NIC will also aim to create the best environment for enterprises to conduct R&D and innovation. Furthermore, it will provide a regulatory sandbox with the best incentives which can be regionally attractive in order to entice both talent and high-quality investment.

Formulation of incentives

In recent times the MPI has been focused on compiling a governmental decree on preferential mechanisms, policies, and incentives for the NIC’s operation and attraction of investment and talent.

“In the context of the strong expansion of Industry 4.0, and many nations are racing to build up their own NICs in order to boost R&D activities, with the invention of new technologies, the compilation and enactment of the decree are quite necessary,” Cuong said.

The overall target of the decree is to lay firm groundwork for the application of the highest incentive mechanism within the law, which will help the NIC to attract domestic and foreign talent and experts, as well as major technological groups from advanced nations.

According to the MPI, a series of special incentives will be applied to investors with startup projects, and those with R&D activities at the NIC.

Specifically, they shall be given corporate income tax (CIT) priorities for revenue generated from activities at the centre, and exempted from import tax for goods and services which are used as inputs for R&D activities. Furthermore, they shall also be granted investment licences with shortened procedures.

For products and services or business models that have yet to be stipulated under the law, enterprises, entrepreneurs, and startups at the NIC are given a free hand to deploy their business models and sales of products, until there are specific regulations for those business models, goods, and services, except for those banned in Vietnam and those that affect national security and defence, national custom and tradition, and public health.

In order to attract investment from global technological firms into the NIC, the MPI is also expected to offer them some special incentives.

Specifically, they shall be allowed to enjoy a 10 per cent CIT rate within 30 years, and also exempted from import tax for goods and services which are used as inputs for R&D activities. They will also prioritised in conducting procedures on industrial property rights and patent registration.

Besides that, they will be granted a business registration certificate within 24 hours upon providing sufficient information to the NIC.

Commenting on the proposed incentives, Nguyen Manh Truong, CEO of Tri Nam TDI., JSC, told VIR that many IT and technological firms like Tri Nam are awaiting more incentives and policies from the government for the NIC.

“We are eager to see it now and expect that we can operate in it,” Truong said. “IT firms are currently lacking a legal framework on blockchain, sandboxes, and digital signatures, which can help them develop more effectively.”

Nguyen Quang Minh, CEO of cybersecurity specialists SecurityBooth based in Hanoi, told VIR that he has been keeping updated himself about the draft decree, with incentives for businesses like his.

“I know that businesses in the NIC can register to establish an enterprise without listing business lines and receive a business registration certificate within 24 hours after providing the necessary information for the NIC’s authorities. That will be a very good point for attracting high-tech firms,” Minh said.

Meanwhile, for groups like South Korea’s Seim I&D Vietnam Co., Ltd, Vietnam’s Industry 4.0 strategy and NIC development are quite significant to their performance in the country.

“The onset of Industry 4.0 is from technical capacities and ideas, which are created by humans. Thus we must look for opportunities from the development of human resources suitable to the Industry 4.0 age,” Kim Jung In, CEO of the business, told VIR.

“The sectors that the Vietnamese government is attaching great importance to including smart cities, e-government, and construction of infrastructure of information and communications are the sectors which are the strengths of South Korean businesses. If enterprises and research agencies of both countries develop a joint network for close co-operation, strong achievements will be reaped,” he said.