Zooming ahead in sustainable economic growth – digitally

Tanja Leimgruber - Programme lead, Digital Transformation for Green Growth, Global Green Growth Institute in Vietnam

In recent years, Vietnam’s major cities have been frequently listed among the most polluted cities. At the same time, there remain challenges of environmental pollution, over-exploitation of natural resources, lack of adequate waste management, and increasingly extreme weather events that need to be addressed with urgency nationwide.

The global mega trend of digital transformation – which will impact all areas of the economy and our personal lives – provides a unique opportunity for Vietnam to address these challenges and support the country’s sustainable economic growth.

The key questions for governments and each citizen are how different stakeholders could be impacted by digital transformation; and what enabling conditions or essential policies and regulations are available to ensure that the benefits of digital transformation outweigh the potential negative effects for all stakeholders.

Key stakeholders that will inevitably be impacted by digital transformation are small- and medium-sized enterprises (SMEs), consumers, the government, and the environment.

SMEs are the backbone of the Vietnamese economy and will benefit from digital transformation through reduced input costs and improved resource management. Smallholder farmers, for example, will benefit from precision input delivery and satellite monitoring, which lead to productivity gains, water efficiency and reduction in the use of pesticides and chemical fertilisers.

Meanwhile, manufacturing SMEs will enjoy the benefit of smart factory concepts with automated processes, intelligent sensors, and advanced technologies including 3D printing and AI. This will increase labour productivity while reducing input cost and enhancing energy efficiency.

Apart from traditional business models, digital models will benefit from reduced overhead and inventory costs due to redundance of physical stores and direct online sales channels. Digital technologies are considered a key component to foster innovation and create easier access to markets, which contributes to shaping a more inclusive and decentralised economy.

While traditional SMEs primarily need technical support in upgrading their digital skills, overcoming digital illiteracy and identifying the right technologies for their businesses, the growing number of young tartup entrepreneurs in Vietnam are facing a different challenge. Limited access to finance for startups and disruptive business models create a bottleneck for innovations. The government should therefore incentivise innovative funding mechanisms for digital startups and strengthen cooperation with traditional banks, venture capital funds, and other potential financiers.

For consumers, digital transformation creates a range of opportunities. Consumers benefit from increased convenience and access to products. Enhanced transparency for products and new concepts, such as supply chain tracking, can lead to more conscious consumer choices which heighten the demand for sustainable, less GHG-intensive, and locally produced items.

This change in consumer preference will push suppliers to focus on sustainability in their supply chain, production, and packaging. Further, through shared and platform economy concepts such as ride-hailing apps, underutilised assets such as private cars can be monetised, resulting in a gradual reduction in the number of assets owned by individuals.

However, the increased services and convenience for consumers also bear some challenges. Anytime, anywhere access to e-commerce can lead to unsustainable consumption and create rebound effects where efficiencies gained are outweighed by excessive production and consumption. E-commerce and the predominant use of delivery can generate vast amounts of waste through returns and packaging.

E-government concepts give a boost to easy access and availability of services for citizens through implementation of electronic ID, and e-insurance and pensions, for example. E-services assist SMEs with registration and tax filing, making it easier for entrepreneurs to start a business and, at the same time, helping the government collect taxes. Meanwhile, advancement in data collection and sharing across ministries as well as between national and local governments leads to more informed decision making.

In this context, the government faces the challenge of connecting digital transformation and sustainability at the policy level. Moreover, with a surge in data collected and stored, there is a pressing need for the government to ensure data privacy and cybersecurity to avoid data getting into the wrong hands.

If digital technologies are applied appropriately, reduced GHG emissions, increased energy efficiency, more sustainable resource management, and better environment-social-governance monitoring will lead to bolstered sustainability, climate change mitigation, and long-term sustainable growth.

Given that the Vietnamese government sets the right framework to close the digital skills gap, fosters innovation in digital technologies, and supports innovative funding mechanisms for SMEs and startups, the country will not only become a frontrunner in Southeast Asia’s digital economy but also develop into one of the most attractive and sustainable investment destinations for international investors.