Over the past few years, the words “technology” and “innovation” have been making big headlines in the media and the development plans and strategies of the government, ministries, central agencies, localities, as well as businesses.
In the context of COVID-19 appearing one year ago and sweeping across the globe and sabotaging big achievements of many nations, groups, and corporations, there has been a great need for application of high technology and innovation in all the sectors of the Vietnamese economy.
Vietnam is now striving to become a modernity-oriented industrialised nation by 2025, a developing nation with modern industry by 2035, and a developed economy by 2015, when the country will be celebrating the centennial of its independence.
According to the Political Report passed at the recent 13th National Party Congress, the Party has set a goal that Vietnam will reach an average growth rate of 6.5-7% a year during 2021-2025 period. To this end, high-tech application in many sectors of the economy and promoting innovation are one of the substantial measures.
It is expected that the ratio of total factor productivity (TFP) in economic growth by 2025 will be 45%, while the labour productivity will annually increase over 6.5%. TFP is a measure of the efficiency of all inputs in a production process. Rises in TFP usually come from technological innovation or improvements.
Fostering a digital economy
The Political Report specified that under Vietnam’s 2021-2030 socio-economic development strategy, the country is to “continue promoting the renewal of economic growth model, vehemently shifting the economy to a new growth model based on a climb in labour productivity, advanced science and technology, innovation, high-quality human resources, and effective usage of all resources so as to increase the economy’s quality, effectiveness, and competitiveness.”
In addition to further ameliorating the local business and investment environment, Vietnam will also better the quality, woo and fostering talents of human resources, and beef up innovation and application of scientific and technological achievements, particularly those from the Fourth Industrial Revolution. All of these will “create a new driving force for national rapid and sustainable development.”
What is more, Vietnam will also powerfully develop the service sector with the application of modern scientific and technological achievements.
“Modernisation and expansion will be applied to many services such as finance, banking, insurance, health care, education and training, science and technology, culture, and sports,” said the report.
Last October, the Politburo enacted the hallmark Resolution No.52-NQ/TW, which focuses on a number of guidelines and policies to actively partake in the Fourth Industrial Revolution.
“Active participation in the Fourth Industrial Revolution has become an inevitably objective requirement for Vietnam to attain major breakthroughs in socio-economic development,” the resolution read.
Vietnam has set the goal to raise the GDP share of digital economy to 20% by 2025, and 30% GDP by 2030 when all citizens can access to the 5G service. The nation is expected to become one of the leading hubs for start-ups and innovation in Asia by 2045. It is also striving to raise the broadband internet coverage rate to 100% and labour productivity by 7% per year over the next five years.
In June 2020, the Politburo promulgated Conclusion No.77-KL/TW on overcoming impacts of COVID-19 for national economic recovery and development. The conclusion underlined the need for Vietnam to develop a digital government, a digital economy, and a digital society with renovations and applications of science and technology.
“Resources are being gathered to develop a number of shared technological platforms and national key database systems,” read the conclusion. “It is necessary to boost the formulation of policy frameworks and complete legal frameworks for new business models and for digital transformation.”
Also, in June, Prime Minister Nguyen Xuan Phuc approved a national programme on digital transformation until 2025, with a vision to 2030. Together with the Politburo’s hallmark Resolution No.52-NQ/TW, released in September 2019, on a number of guidelines and policies to actively participate in the Fourth Industrial Revolution, and Conclusion 77, this programme is a big addition to Vietnam showing its strong determination to become a digital economy with sustainable development, in which new products, services, solutions, and business models are accepted in tandem with the country’s gradual completion of legal frameworks.
“The government will create new policies to stand ready to accept and pilot new technological solutions controllably. There must be a culture of accepting and piloting new things,” stated PM Phuc. “Vietnam’s technological digital businesses are the key developers of infrastructure, platforms, services, and solutions of digital transformation. They will have to master core technology and then expand their presence to the global markets.”
Challenging remain
According to the Ministry of Planning and Investment (MPI), the average labour productivity of private businesses accounts for only 34% of the labour productivity of state-owned enterprises and 69% of foreign-invested enterprises. This low productivity comes from the fact that most enterprises are micro- or small-sized ones, occupying more than 97% of all enterprises.
“Capacities in science and technology among enterprises also remain limited. Enterprises in general have failed to invest in the application and development of science and technology,” said MPI Minister Nguyen Chi Dung.
At present, a mere 10% of enterprises have registered patents within three consecutive years. Meanwhile, businesses’ investment in technology and innovation accounts for just 0.3% of their annual revenue, far lower than in countries like India (5%) and the Republic of Korea (10%), according to an MPI report.
According to the report titled “Inclusive Fourth Industrial Revolution for achieving sustainable development goals in Vietnam” that was recently released by the United Nations Programme (UNDP), Vietnam needs to have proper policies and solutions for itself and for enterprises to adapt to the Fourth Industrial Revolution which will create massive opportunities for the country to drive forwards and achieve sustainable development. Also, such a revolution will also bring many risks for enterprises and employment.
“In the transition to its new development stage, Vietnam faces some key risks and challenges, including challenges of economic uncertainty, ‘re-shoring manufacturing’ back towards developed economies, ‘trade wars’ accompanying rising nationalism, the effects of climate change and the Fourth Industrial Revolution induced changes in global value chains, employment and human development,” read the report. “In addition to such challenges, Vietnam must address a number of specific issues related to balancing continued growth, maintaining a focus on inclusion, and pushing for greener growth.”
For example, the UNDP pointed out that Vietnam must better prepare for, and adapt to, the impact of The Fourth Industrial Revolution on drivers of growth and job creation. Accelerating the Fourth Industrial Revolution offers both opportunities and risks in terms of future employment creation, as Vietnam embarks on new growth pathways. It is anticipated that automation and AI will displace jobs in several sectors that have been driving Vietnam’s growth.
A report by the International Labour Organisation titled “The future of jobs at risk of automation” suggested that 70% of jobs in Vietnam were at risk of automation. Sectors with a very high proportion of jobs at risk of automation include agriculture, forestry and fisheries (83.3% at risk), manufacturing (74.4%), food and beverage (68%), garments (85%), electronics (75%), wholesale, retail and repair of motor vehicles (84.1%), service sector (approximately 32%), retail (70%), and hotel and banking (slightly above 40%).
Meanwhile, the Oxford Economics and Cisco report “Technology and the future of ASEAN jobs: The impact of AI on workers in ASEAN’s six largest economies” released in September 2018 forecasted that 7.5 million jobs - largely in agriculture, manufacturing, wholesale and retail - would be displaced by AI in the next 10 years in Vietnam. At the same time, millions of new jobs with different functions - also in manufacturing, wholesale, retail, hotels and restaurants - would be created through what the report called the ‘income effect’. Thus, the net job loss would be about 1.7 million, 90% of which will be in the agricultural sector.
