As digital and smart technology transforms the global economy, Vietnam is pushing a strategy to take advantage of these changes, growing the country’s startup sector and supporting adaptation.
Economies across the globe are witnessing a new industrial model, built on the integration of digital technologies and physical systems—from value chains and logistics to production. Near-ubiquitous mobile technology, artificial intelligence and robotics have already created new and expanding industries. New sectors are taking shape around the “internet of things”, self-driving vehicles, 3D printing and quantum computing. The boundaries between biology and technology are also changing, through nano and biotechnology, new uses of big data and artificial intelligence.
Historically, the global economy has been transformed by three successive industrial revolutions: in the first, engineering and power generation, through technology like the steam engine, led to basic mechanical automation; in the second industrial revolution, industrialization and manufacturing allowed the spread of new technologies; in the third, electronic automation—including the advent of computers and the internet—transformed communication and allowed new levels of economic integration.
In the latest revolution of the global economy, the dynamics of labor and technology in new ways as smart technological systems are built with machine learning and big data. For Vietnam, this creates major challenges as production models shift and labor no longer translates into the competitive advantage it once did.
The COVID-19 pandemic has seen countries across the world including Vietnam suffer severe economic impacts. But these challenges aside, there are still opportunities for Vietnam to shorten the gap between its economy and that of more developed countries, and to actualize a process of industrialization and modernization for the country. For Vietnam, the shifting global economy also creates new opportunities for growth, as the country looks to raise incomes and standards of living by building on its existing competitive advantages.
Vietnam adopts policies for growth in a new economic era
Recognizing the importance of using available resources in the current “Fourth Industrial Revolution,” Vietnam’s government and legislature have actively pushed new policies and programs to increase competitiveness. Resolution 52, signed by previous Communist Party General Secretary and President Nguyen Phu Trong in September 2019, outlines proactive policies to guide the country’s participation in the current economic transformation. In the resolution, the Communist Party of Vietnam pledged its commitment to a long-term strategy that would be rolled out quickly for both the political system and the society as a whole. There is also a need to increase the public’s awareness of the meaning of the Fourth Industrial Revolution, in order to make full use of new opportunities.
The country has already adopted key policies to lay the groundwork for the infrastructure, human resources and creative capacity to take advantage of the current economic transition. This fall, the Vietnamese government launched a new program to incentivize innovative startups in telecommunications, information technology and automation, as well as clean energy, through free access to infrastructure, public financing and tax incentives. The government also recently launched an initiative to make improvements in technology manufacturing, mobile app creation and creative good exports.
Last September, the World Intellectual Property Organisation (WIPO) ranked Vietnam 42nd out of 131 countries on its annual Global Innovation Index (GII), a study of economic innovation around the world. Vietnam ranked third out of Southeast Asian nations, behind Malaysia and Singapore, and ninth in the Asia-Pacific. Among 29 lower-middle income countries in the GII, Vietnam ranked first.
In 2019, the Ministry of Planning and Investment published a draft national strategy on “Industry 4.0.” Under the strategy, Vietnam plans to become a “digital society” within the next decade. The strategy establishes key links for cooperation across sectors and government ministries to tackle challenges like labor displacement, evolving industrial production and cybersecurity threats.
As for the human resource that have so far attracted many foreign businesses to Vietnam, the country has taken steps to raise awareness and capacity among workers in high-tech and digital technology fields, preparing the country for economic changes.
Vietnam to drive high-tech startups with new incentives
Vietnam is also seeking to capitalize on the country’s growing startup ecosystem. Since 2017, startup firms such as VNPay, Tiki and VNG have shown the country’s potential as a startup hub. The growing sector is driven by rising consumer spending, increasing digital revenues from e-commerce and fintech, and Vietnam’s increasing prominence as a destination for foreign investment funds.
At the Vietnam Ventures Summit in 2020, foreign and domestic investors pledged to invest US$815 million in startups—more than double the amount invested in 2019. US venture fund 500 Startups plans to back 80 startups in the country by the end of 2021.
Vietnam’s fintech sector in particular has expanded rapidly, growing from 44 firms in 2017 to 123 in 2020. Other top sectors, based on funding, include AI, information technology and food technology.
To support this growth, the Vietnamese government has created a series of initiatives to provide funding, training and startup incubation opportunities. Much of this support is locally-driven: Ho Chi Minh City’s Department of Science and Technology, for instance, has created its own VND 11.75 billion (US$520,000) fund; Hanoi’s People Committee has established a platform, Startupcity.vn, to connect investors and entrepreneurs to one another and to cultivate the startup community.
Vietnam still has a long way to go in Fourth Industrial Revolution
The COVID-19 pandemic has accelerated transitions to new technological economies, creating new motivation for businesses around the world to build smart factories with automatic production processes, while at the same time pointing to weaknesses in global supply chains. The shift to this new model of industry is inevitable and attempts to maximize economic gains will depend heavily on flexibility and effective strategies—among businesses as well as governments, including Vietnam’s.
Vietnam has been recognized by the UN and the international community for its potential to support an inclusive economic transition. Though the Fourth Industrial Revolution will displace many jobs, Vietnam can capitalize on these changes by creating new growth drivers, distributing the benefits of innovation, strengthening capacities across demographics and building inclusive social and environmental protections into the evolving economy.