A digital economy growth is an inevitable trend worldwide and Vietnam is no exception to that tendency. A target has been set up that Vietnam’s digital economy will account for about 20% of GDP by 2025.
And by 2030, the digital economy will boost Vietnam’s GDP by 7 – 16%, equivalent to about 28 – 62 billion USD. The Party and State have issued numbers of guidelines, policies and solutions to promote the country’s digital economy, in which people are one of the key factors.
What is digital economy? How is the current trend of the digital economy incurring?
Digital economy is an economy that operates mainly on digital technology, especially electronic-based transactions conducted through the internet. The “Vietnam Private Economic Forum 2019″ defined the digital economy as all economic activities based on the digital platform, and the development of the digital economy is the use of digital technology and data so as to create new opportunities and new business cooperation models.
Digital economy may increase labor productivity and economic growth. Besides, the digital economy also remain the sustainable growth since it utilizes more knowledge than resources. The cost for businesses and people to participate in the digital economy is lower, so it may create opportunities for a bigger volume of participation. Along with the application of digital technology, the seamless internet network will reduce the distance between urban-rural areas and between regional countries.
As the world arrives at the recovery phase after the Covid-19 pandemic, it can be seen that digital transformation will play an increasingly important role in the global economy. Countries have been competing on a global scale for digital supremacy, the Vietnamese Government has clearly expressed its desire to join the race by considering digital transformation as one of the most important targets for the Socio-Economic Development Strategy for the period of 2021-2030. When countries begin to reap the “sweet fruits” from digital transformation, the Government of Vietnam has clearly shown its determination to participate in this race.
In June 2020, the Prime Minister signed and promulgated the Decision on the “National Digital Transformation Program to 2025, with orientation to 2030” with the goal that Vietnam is in the group of 50 leading countries in E-Government, related to the development of the digital economy, improving the competitiveness of the economy, the goal by 2025 is that the digital economy accounts for 20% of GDP; the proportion of the digital economy in each industry or field shall reach at least 10%; by 2030, the digital economy will account for 30% of GDP; the proportion of the digital economy in each industry or field reaches at least 20% (2). It can be said that these are challenging targets, requiring breakthrough efforts in many aspects, not only building a workforce with high digital capabilities but also being the driving force to promote the outstanding development of the country.
According to Google’s report, currently, Vietnam’s digital economy reaches a total value of 14 billion USD, 4.5 times higher than 05 years ago, and is expected to reach 43 billion USD in 2025. To support development In the digital economy, Vietnam has set a target of 50% of the population having an electronic payment account by 2025 (3).
Vietnam’s ranking in global competitiveness has increased significantly in recent years (increasing by 10 places from 2018-2019 to 67/141 economies (4). To achieve this result, the Government has expressed its endless efforts on reforming the business environment, promoting innovation to adapt and leapfrog in the context of Industry 4.0 and deeper integration.
Economic studies and empirical evidence generally point out four main advantages of the digital economy:
Common challenges in developing the digital economy (5):
1. Monopolistic power: The digital economy is vulnerable to the risk of market concentration due to large fixed costs and network effects that occur in case more objects participate in a network leading to the more appreciated by users. This effect can also make market entry more difficult if the minimum size for the competition is relatively large relative to the overall size of the market. This can lead to high barriers to entry, abuse of regulatory power, and increased costs of data and digital services.
2. Privacy issues: Protecting industrial and economic data is necessary to ensure fair competition for businesses while protecting personal data is essential to preventing cybercriminals from override data and unauthorized use of the customer’s identity.
3. The breadth of technology: The enhanced efficiency of digital technology may not be able to make up for the time spent using social networks and searching the Internet. Moreover, the volume of information alone makes users overwhelmed and leads to a loss of decision-making ability.
4. Environmental costs: Data centers use a lot of electricity and most businesses cannot offset the corresponding CO2 emissions. Furthermore, the intentional obsolescence of consumer electronics encourages the use of more raw materials and the release of more harmful waste.
5. Productivity issues: For a long time, it has been difficult to show a clear relationship between digital technology development and economic growth across countries and over time. This productivity issue has received a lot of attention but has not been satisfactorily resolved.
6. Inequality: Access and utilization vary by income, location and skills. If digital platforms provide additional advantages for those who already have an advantage, they further increase existing inequalities, such as better learning outcomes for students with better skills, higher education, and ability for internet access.
7. Changes in labor market structure: Businesses will replace labor with digital entities (robots), and industries that use digital capital will grow faster than other industries.
In order to realize the main advantages of the digital economy in practice as well as limit the difficulties in implementing solutions and tasks of developing this economy for the country, it is necessary to have consensus and determination of the entire Party and Vietnamese citizens, in which the young generation will play an important role, especially in the task of developing a digital economy based on science, technology and innovation.
People are the key factor in developing the digital economy in Vietnam
According to the Party and State’s point of view, economic development is by the people and for the people. Therefore, in fact, to develop the digital economy, the promotion of the human factor is both a goal and a driving force for socio-economic development. Vietnam has nearly 100 million people and is in the stage of a “golden population” structure that is well trained, studied, and worked hard, and Vietnamese people love and quickly adapt to accessing and applying new technology- this is a great advantage to promoting the development of the country’s digital economy.
Vietnam is also being evaluated as one of the countries with a good digital economy development rate in Southeast Asia with good telecommunications infrastructure, wide coverage, and high user density. According to data reported in 2020, Vietnam has about 68 million internet users, accounting for about 70% of the population. The explosion and popularity of the internet and digital technologies have brought many opportunities for people especially young people to participate and connect in the digital economy market, where the barriers to foreign trade are seriously reduced, with many opportunities to access and share information and knowledge with communities of interest and build business cooperation relationship.
Although there are many advantages including a massive volume of a young workforce, the Vietnamese workforce still lacks many necessary skills to master the digital economy, so improving digital skills for the workforce is an action that needs to be taken soon so as to take advantage of the strengths of digital technology. Some options that can be considered to serve to improve digital skills for the workforce can be considered such as:
- Strengthening IT education and training at all levels, especially through the system of technical and vocational schools.
- Attracting talents from Vietnamese expatriates working in digital fields around the world.
- Encourage the improvement and development of soft skills for employees.
- Encourage initiatives that build the core skills people need so that they can leverage, expand and adapt these skills to meet the needs of technological advancement.
- In addition to improving digital skills for employees, fostering innovation capacity or promoting access to information, information quality and information security will also contribute to maintaining and improving the high competitiveness for the country’s digital economy.
Despite such former success, the following development path of Vietnam may consist of many difficulties and challenges. Therefore, Vietnam needs to continue to make stronger, more substantial, and comprehensive reform efforts to improve the economy, especially the digital economy of the country. To meet our proposed targets, it is required not only efforts from the Government but also the cooperation of stakeholders, especially the business community and the people.
Reference sources
(1) Statista. 2021 Growth of gross merchandise value of digital economy in Southeast Asia from 2019 to 2020 with a forecast to 2025
(2) Communist Party of Vietnam. 2021 The role of the young generation in implementing the policy of developing the digital economy on the basis of science and technology, innovation
(3) Ministry of Industry and Trade. 2021 Vietnam promotes digital economy development
(4) Government newspaper. 2019 Vietnam’s 4.0 global competitiveness through each indicator
(5) Worldbank. 2021 Digitizing Vietnam: The Road to the Future
