Strategy eyes pursuit of ideal digital advances

January 25, 2021 | 10:37
As Vietnam is formulating its Socioeconomic Development Strategy for 2021-2030, continued renewal of the economy’s growth model will be fostered, with one of the key focuses to be laid on improving the quality of growth through digital solutions and improved technology transfer in line with Industry 4.0.
strategy eyes pursuit of ideal digital advances
Strategy eyes pursuit of ideal digital advances (photo: Duc Thanh)

For the first time in the history of the National Party Congress, the words “technology” and “innovation” will take a more prominent role in the draft Political Report that is compiled for discussion by the Central Party Committee. The draft will be debated at the 13th National Party Congress, which will take place in Hanoi from January 25 until February 2.

Amid the ongoing health crisis, attraction and application of high technology and innovation in all sectors of the economy are more necessary than ever for Vietnam, which is striving to become a modern, industrialised developing nation by 2025 and a developing nation with modern industry by 2035. The draft Political Report sets the target of an average annual growth rate of 6.5-7 per cent in the 2021-2025 period. It is expected that the ratio of total factor productivity (TFP) in economic growth by 2025 will be 45 per cent. Increases in TFP usually come from technological innovation or improvements.

Fostering a digital economy

Under Vietnam’s Socioeconomic Development Strategy for 2021-2020 as pointed out by the draft Political Report, Vietnam will “continue strengthening the renewal of economic growth model, strongly shifting the economy to a new growth model based on a rise in productivity, advanced science and technology, innovation, high-quality human resources, and effective usage of all resources in order to raise the quality, effectiveness, and competitiveness of the economy.”

The country will also “prioritise attraction of foreign-invested projects with high technology, an eco-friendly approach, and skilled labourers.” Such ventures are required to have a connection and technology transfer with domestic enterprises and facilitate those enterprises to develop and effectively engage in global value chains.

In addition to further improving the domestic investment and business climate, the country will also improve human resources quality, attract and foster talented people, and boost the innovation and application of scientific and technological achievements, especially those from Industry 4.0. All of these will “lay new momentum for national rapid and sustainable development.”

Notably, Vietnam is aiming to strongly develop the service sector based on the application of state-of-the-art scientific and technological achievements, especially services with high added value.

“Strong development is to be focused on a number of key services such as tourism, commerce, telecommunications, IT, transport, logistics, technical services, and legal consultancy,” stated the draft Political Report. “Modernisation and expansion will be applied to many services such as finance and banking, insurance, healthcare, education and training, science and technology, culture, and sports.”

Last October, Party General Secretary, President Nguyen Phu Trong on behalf of the Politburo signed Resolution No.52-NQ/TW on some guidelines and policies to actively partake in Industry 4.0.

“Active participation in Industry 4.0 is an inevitable requirement of special significance for Vietnam to achieve breakthroughs in socioeconomic development,” the resolution noted.

Under the resolution, Vietnam has set a goal to increase the GDP share of the digital economy to 20 per cent by 2025, and 30 per cent 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 (accessible by all communes) and labour productivity by 7 per cent annually from now to 2025.

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 especially e-commerce.

Promoting Industry 4.0

Rachel Barger, COO of SAP Asia-Pacific and Japan, cited a survey by PwC stating that Vietnam might become one of the 20 largest economies globally and one of 10 largest economies in Asia by 2050, with one of the biggest foundations being strong digital development. “But Vietnam transforming its digital landscape for further development needs to be conducted at government and business levels,” stated Barger.

Resolution 52 ordered the government to lead the construction and implementation of the national strategy on Industry 4.0, and other schemes on national digital transformation and participation in Industry 4.0. The strategy will help Vietnam improve its competitiveness, attract more high-quality foreign direct investment (FDI), and ensure sustainable growth, according to the Ministry of Planning and Investment (MPI), the drafting agency.

Under the strategy, the sectors that will be improved with high technologies include public administration, electricity-water, healthcare, education, processing and manufacturing (especially footwear, textiles and garments, and foodstuffs), agriculture, logistics, commerce, ICT, and finance and banking.

In order to develop these sectors, the government will beef up revising laws and regulations, especially those regarding venture capital and angel investment, with the most favourable conditions to be created for investors to conduct mergers and acquisitions, capital contributions, and apply high technologies.

“There will be special incentives for investment projects that create products and services using Industry 4.0 tech, especially joint ventures with domestic enterprises,” stated the draft strategy.

According to the Central Institute for Economic Management (CIEM), which examined the impact of the draft strategy, Industry 4.0 transformation will likely raise Vietnam’s GDP by $28.5 to $62.1 billion, equivalent to a rise of 7-16 per cent, from now to 2030.

Boosting tech transfer

Experts stated that one of the key solutions for Vietnam to successfully conduct digital transformation and improve labour productivity is to boost technological transfer from foreign firms to domestic ones. This has also been one of the major targets of Vietnam in its strategy to attract FDI over the past three decades.

However, the goal has not yet been reached, though over the past years leading global technology companies have selected Vietnam to develop major manufacturing facilities that supply equipment and products to the world.

“Though Vietnam has attracted tens of thousands of foreign-invested projects over the past 30 years, foreign-invested enterprises’ (FIEs) technological transfer to domestic enterprises has taken place only at a negligible level,” said Deputy Minister of Science and Technology Tran Van Tung.

“The transfer has failed to meet our expectations,” Tung stressed. “The technological spillover effects remain very limited. Only domestic firms transfer tech to one another.”

According to CIEM surveys, since Vietnam opened its doors to FDI, the prime goal of attracting high technology has not yet been achieved.

Specially, under a report on firm-level technology and competitiveness in Vietnam made from five major surveys involving over 38,700 local and foreign enterprises, technology advancements usually came from other domestic businesses. Over 80 per cent of technology transfers took place between Vietnamese enterprises, if both firms from the same and different sectors are taken into consideration.

According to the MPI, one of the key factors for the construction of a digital economy and successful implementation of Industry 4.0 is that the government will issue special incentives for FIEs to establish research and development centres in Vietnam. Currently, many foreign businesses have been operating such centres here, such as Singapore’s Grab, South Korea’s Samsung, Sweden’s ABB, and Germany’s Bosch. US telecoms giant Qualcomm is also considering founding such a centre in Vietnam.

Analysts laud Vietnam’s growth prospects

The 13th National Party Congress has been covered by international media, with some publications, analysts, and other international onlookers highlighting Vietnam’s economic success at a time when the world economy is being ravaged by the coronavirus pandemic.

Reuters reported last week that the country will look to cement strong leadership to leverage Vietnam’s economic success in recent times. Key to that, it said, will be the challenge of balancing relations with China and the United States.

Buoyed by the redirection of global trade in its favour, Vietnam is steadily growing into one of the world’s most important tech manufacturing hubs, as well as a centre for garment-making, in an economy on track to recover faster than most after the pandemic.

“US-China strategic competition will continue to destabilise the regional geo-strategic and economic environment over the next five years,” said Le Hong Hiep of the Yusof Ishak Institute in Singapore. “This is a major challenge for Vietnam, given that its economy is very open and dependent on international trade and foreign investment.”

Nikkei Asia Review said Vietnam’s production sector has proven its fast and steady recovery. The country’s open market and signing of numerous free trade agreements “are promising great opportunities for growth”.

“Vietnam has started to emerge as the latest Asian nation with a strengthening position in the region, and a future high potential for economic growth,” wrote Murat Ungor from the Department of Economics at the University of Otago in New Zealand earlier last week.

“If Vietnam can maintain a 7 per cent increase in economic growth over the next decade, the country will follow the same trajectory as previous ‘Asian Tigers’,” Ungor added.

Meanwhile Grigory Trofimchuk, chairman of the Expert Council of the Eurasian Foundation for Support of Scientific Research, said that in recent decades, Vietnam has shown itself to be a reliable country with impressive growth in all fields, including political and socioeconomic development. “Its success is due to the strategic guidelines set by the Party, which considers changes both home and abroad in order to promptly make the necessary adjustments to all programmes and long-term plans,” he said.

The Financial Express in India quoted the Economist Intelligence Unit as saying Vietnam has emerged as a low-cost manufacturing base in Asian supply chains, beating India and even China in some indicators, including foreign direct investment policy as well as foreign trade and exchange control.

Malaysian-based The Star posted an article highlighting that member companies of the Vietnam Food Association have already inked several export contracts in 2021, especially with European partners and those from Regional Comprehensive Economic Partnership member countries.

The Jakarta Post from Indonesia, meanwhile, praised the rise of e-commerce in Vietnam amid the pandemic in 2020. Although cash maintained its importance in the country, its number of mobile payments reached nearly 700 million by the end of August last year, up 980 per cent against the same period of 2019, official data shows. By Quang Hai

By Khoi Nguyen

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