Opportunities
According to a report released by Google and the Singaporean fund Temasek, the digital economy in ASEAN has seen explosive growth in recent years, expanding by 27% in 2017 to US$50 billion, and accounting for 2% of the region’s economic output. Growth was primarily driven by online travel, e-commerce, online media, and ride-hailing services.
The digitisation trend has been seen in almost every industry in Vietnam, giving way to non-traditional business models, from business registration and electronic invoicing, to online retail, property, and banking.
Ever more start-up companies are being established in Vietnam and many have achieved impressive business results in the areas of e-commerce, QR code payment, electronic wallet, and e-banking solutions.
A report by the Vietnam E-Commerce Association shows that 2017 was a booming year for e-commerce in Vietnam with revenues topping US$2 billion, more than double the figure for 2016. The revenues are expected to hit US$5 billion by 2020.
In a digital economy, technology will help add more value to products, cut production costs, and reduce the number of required workers. As such, the Vietnamese enterprises which could tap into opportunities brought about by the digital economy could enhance their business performance, expand their market shares, and even march into new market segments. Moreover, the digital economy could drive small and medium-sized businesses to play a larger role in economic growth.
But not all enterprises can make the switch to digital technology, which depends on their business strategies and capacity, said Deputy Minister of Science and Technology Bui The Duy.
Digital transformation does not mean buying software and hardware but concerns how to change the business model and adapt to technological transformation. Therefore, each company should have their own way of transformation that best suits their particular conditions.
Challenges
With a population of 90 million people, 58 million internet users, and 125 million mobile subscribers, as well as many enterprises in the areas of information technology, software, and digital content, Vietnam is seen as having huge potential to develop its digital economy.
However, the proportion of e-commerce to total retail sales is just 3.6%, a small figure compared to the Asia-Pacific average of 14.5%. The Vietnam Chamber of Commerce and Industry has stated that the digital economy also presents significant challenges to Vietnamese enterprises.
The first challenge is the strong presence of foreign enterprises in many industries of the Vietnamese economy. The influence of foreign technology firms such as Facebook, Google, and Microsoft on Vietnamese society is enormous. If Vietnamese enterprises fail to catch up and integrate with this trend, they could face setbacks right on the home soil.
In addition, Vietnamese enterprises’ ability to adapt to the digital economy, especially among small and medium-sized enterprises, is fairly limited. They are struggling to expand their business in the digital economy due to a variety of difficulties stemming from the lack of knowledge in data security, online infrastructure, cyber-attack risks, and so on.
The high costs of IT equipment and logistics solutions compared with regional countries are also preventing many enterprises from expanding into the digital economy. Another challenge is domestic consumers’ lack of confidence in online shopping.
With the opportunities and challenges presented by the digital economy, Vietnamese enterprises need to make further investments in new technologies, learn from new business models, and stop using outdated elements in their business operations.
At the same time, they need to conduct thorough research to understand their customers’ needs in order to improve the quality of their products and services. Once they are proactive in approaching the digital economy, companies with strong capabilities and advantages could become engines that drive the digitisation of the national economy.
