Many Vietnamese businesses are investing heavily in technologies and innovation to stay competitive

Vietnamese firms at early stages of digitalization

According to Mr. Bui Duong Hung from Trade Union University, while efforts are underway to promote digital transformation, many companies, especially small-scale enterprises, find themselves constrained by limited financial resources, inadequate data management, cybersecurity vulnerabilities, and deficiencies in data collection and storage. These challenges are exacerbated by the broader economic landscape characterized by global volatility, a significant informal economic sector, weak national product and service brands, and infrastructure gaps. Additionally, the effectiveness of State-owned enterprises (SOEs) remains a concern, and government agencies often lack the requisite coordination, innovation, and digital oversight. The labor force, too, faces skill gaps, resulting in a low ranking on the global talent competitiveness index.

In response to these challenges, Vietnamese businesses have begun to invest in digital technologies, innovation, and digital integration, yielding notable achievements. According to statistics, as of October 31, 2022, over 50% of Vietnamese companies established websites, with 35% regularly updating their online information. Furthermore, 44% leveraged social networks for product and service sales, and 25% embraced e-commerce platforms. Nearly 90% of businesses receive orders electronically through various channels, such as email, e-commerce websites, and social networks, while 9% have mobile versions of their websites and proprietary mobile applications featuring shopping functionalities (Ministry of Industry and Trade, 2022). Notably, digital marketing has gained traction, with over 200,000 retail and omnichannel stores in Vietnam utilizing software like Kiotviet and Sapo for sales management, and over 100,000 companies actively employing digital marketing as a central marketing strategy. The cost allocation for these digital marketing initiatives represents over 20% of the total advertising budget of Vietnamese businesses. This concerted effort has translated into tangible outcomes, with the digital economy contributing 11.91% of the GDP in 2021 and 14.26% in 2022, as reported by the Ministry of Information and Communications.

According to a survey on the digital readiness of companies conducted by Mr. Pham Van Tuan, Hanoi Open University and other authors in 2023, the average score stands at 2.7 on a 5-point scale, indicating that Vietnamese businesses are currently at a Level 2 stage in terms of digital application in their operations, signifying the early stages of digitalization. Notably, private companies exhibit a higher level of digital readiness compared to SOEs, with scores of 2.75 and 2.43, respectively. When segmented by the size of the labor force, companies with 51-100 employees demonstrate the highest level of digital readiness, albeit with relatively minor discrepancies across categories.

Further examination of digital readiness across industries reveals the following ranking, from highest to lowest readiness: commercial companies (2.81 points), service companies (2.76 points), industrial companies (2.75 points), other companies (2.55 points), and agricultural companies (2.40 points). Digital readiness is positively correlated with the size of a company's capital and the ratio of digital revenue to total revenue.

The survey conducted by the Australian Commonwealth Scientific and Industrial Research Organization (CSIRO) and the Vietnamese Ministry of Science and Technology (MOST) in 2023 showed that Vietnamese companies have made significant progress in their level of digital readiness compared to the previous survey conducted in 2019. This change is attributed to the positive awareness of the digital economy among enterprises. The trend of giant global firms using digital technology in their business stages has made Vietnamese companies increasingly appreciate the role and importance of developing the digital economy. In fact, 61.5% of businesses assigned the digital economy as important role, while 30.8% thought the digital economy has a very important role. As a result, over 80% of businesses have increased investment to apply Digital Technology 4.0 to the business cycle.

Enhancing Vietnamese businesses’ readiness for the digital economy

The Prime Minister approved the National Strategy for Development of Digital Economy and Digital Society to 2025, with a vision to 2030, aiming to increase the digital economy’s share of the GDP to 20% by 2025. According to Minister of Information and Communications Nguyen Manh Hung, three pillars are essential for developing the digital economy in Vietnam: Digital governance, data mining, and digital productive forces. Specifically, ICT accounts for 20% and digitally driven sectors make up 80%, generated by digital transformation in those sectors.

To enhance the readiness of businesses and further develop the digital economy, Vietnam needs to formulate strategies and policies on digital economic development, according to Mr. Bui Duong Hung. The Government needs to promptly issue instructive documents for implementing the National Strategy and develop sector-specific and locality-specific policies. Based on this National Strategy, businesses need to establish their own goals, strategies, and action programs to expedite the digital transformation process.

After 13 years of enforcement, the Law on Telecommunications and its guiding documents have created a basic legal framework to foster competition and enable businesses to enter the market. However, the legal framework for the digital economy has many shortcomings that need to be addressed and improved. Therefore, after a comprehensive review and consultation, the National Assembly needs to quickly amend, complete, and enact the draft Law on Telecommunications (with 10 chapters and 73 articles). Other legal documents on digital economy also need to be revised to ensure consistency with the Law on Telecommunications.

Moreover, it is necessary to increase investment in developing technology infrastructure and minimizing security and network safety risks. From now to 2025, to 2030 and beyond, the Government, the Ministry of Information and Communications, and large Vietnamese telecom firms need to continue to invest heavily in large-scale IT, communication, and energy infrastructure development. They need to prioritize developing 5G services and building pilot smart urban systems in big cities such as Hanoi, Ho Chi Minh City, and Da Nang.

Furthermore, according to Bui Duong Hung, it is necessary to develop human resources to meet digital economic requirements. The Ministry of Education and Training and the Ministry of Labor, Invalids, and Social Affairs need to further reform training programs and update science, technology, and digitalcontent. Businesses need to have plans to train, foster, and raise digital awareness and capacity.

Consumers play an important role in driving the development of the digital economy. Therefore, the Government and Vietnamese businesses need to cooperate to change consumer habits and gradually build a good culture in the digital economy.