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The Ministry of Science and Technology (MoST) is working on amendments of policies and regulations towards cutting administrative procedures and further facilitating sci-tech businesses, with one of the focuses being superior mechanisms and pilot policies for new business models. Industry insiders said that these are the concerns among businesses and investors in the local sci-tech market that lead to limitations in their perception of risk-taking in investment for technology application, improvement, and innovation.
Hoang Viet Tien, head of Strategic Advisor at Insider – a startup providing marketing technology solutions for big companies in Vietnam, told VIR, “Some tax incentives for investment in technological innovation are still difficult to implement due to a lack of synchronisation in legal regulations. Moreover, policies have not created many incentives for the use of products and services.”
“There is also a lack of support measures from the state to companies offering access to the market for products made by research and development or technological innovation,” he added.
The new amendment, together with the country’s strategy to accelerate digital transformation, is expected to give motivation for domestic and foreign businesses in the field.
Experts, however, said that unenforceability of some incentive policies for investment in technological innovations due to lack of consistency with other rules means businesses still have concerns over the effectiveness of such regulations. For example, the prevailing policy on public procurement is yet to encourage the use of technology products and services made by domestic firms. Also, there are still some shortcomings in the mindset of state management agencies about taking risks in making investments in technology application and innovations.
Economies that have succeeded in the transition from low to high income are based on science, technology, and innovation, with South Korea, Israel, Singapore, Poland, and Taiwan being typical examples.
The story of Israel’s economic miracle is a lesson Vietnam should learn from. According to Tien, in the case of Israel’s science and technology development, the country focuses mainly on its talent development strategy and the establishment of an ecosystem to support startups. A special feature of Israel’s development strategy is that the government is willing to support and invest capital and private venture capital funds. They bear the risk if there is a loss, or let projects and startup businesses use capital actively and flexibly according to the needs of each project or startup. This has pushed the number of projects and startups in the field of science and technology in Israel to increase dramatically in both quality and quantity.
According to statistics, for every 1,844 Israelis, there is one startup company and there are successful startups such as Houzz, Mobileye, Waze, and Wix.
Similarly, Singapore is a country with many attractive policies for setting up businesses. Besides low tax rates and easy business conditions, an important factor that attracts entrepreneurs from all over the world to Singapore is the diversity of financial sources for startups, creating an effective startup ecosystem and a highly competitive environment.
To promote innovation and entrepreneurship, the government introduced a framework of support programmes for diversified and inclusive startups and innovation. Typical are tax incentives – in 2016, Singapore’s total tax rate equalled 18.4 per cent of profits, well below the high-income international average of 41.2 per cent, according to the World Bank.
To evaluate Vietnam’s position in digital transformation, a report by the World Bank uses a framework covering connectivity, ownership, innovation, and protection while comparing the nation to others on the same digital transformation level or those that have more advanced. While Vietnam has performed well against its peers and in several areas, it exhibits important weaknesses in others.
Despite growing interest, domestic and foreign investment in this area remains modest. Ministry of Planning and Investment data showed that foreign investment in such activities reached over $570 million in the first eight months of 2021, of which about $65 million was newly registered, over $200 million was added capital, and over $300 million was worth of stake acquisitions. Vietnam’s technology market is increasingly attractive to technology giants like Ericsson, ABB, and HCL Technologies, among others.