Investing in research and development (R&D) is a safe and sustainable solution for businesses to improve competitiveness and integrate deeply into domestic and international markets. Therefore, many businesses have invested in this field and initially obtained positive results.

Thanks to R&D, Vinaseed has successfully exported rice to the EU market. Photo: ST

Upstream investment

The Vietnam National Seed Corporation (Vinaseed) with the strategy of "standing on the shoulders of giants" to be able to go faster and further, has expanded its cooperation with public research institutes, boosted international cooperation in transferring scientific and technological advances, and increased cooperation with Vietnamese leading breeders.

As a result, this company has produced the best rice in the world. From mid-2020, Vinaseed has successfully exported VJ Pearl Rice and RVT fragrant rice to the Netherlands and Czech Republic for US$1,040 per ton. Additionally, Ban Mai white rice and Phuc Tho brown rice have been successfully exported to Australia by Vinaseed.

A representative of Vinaseed's leaders stated that the EU was strict in food safety, in which, for plant origin products, the exporting country must comply with EU regulations along the entire production process.

Therefore, in addition to improving the quality of human resources, the entire closed value chain of the business must be prepared in a methodical and scaled manner. From planting, using copyrighted seedlings, to harvesting and processing using modern technology, machinery and equipment, ensuring the best products that meet EU standards.

In fact, many companies have seriously invested in R&D years ago. Nguyen Xuan Phu, Chairman of Sunhouse Group, said that three years ago, the company made a landmark decision to invest huge capital, up to millions of dollars, in expanding their new factory system, and investing in R&D activities to perfect the production chain, increase the localization rate, raise the quality standards of the product line to serve the domestic market and develop the standard of export products meeting international standards.

In addition, there are several companies investing strongly in R&D such as Thaco, VinGroup and some firms in the agriculture, textile and electronics sectors.

According to experts, R&D investment is considered an upstream investment. To increase competitiveness, enterprises must be self-employed in technology, from development, research to production and distribution. This also helps firms increase their product value and profit compared to importing and buying copyright from other units. Thanks to R&D, Vietnamese enterprises will be able to escape outsourcing and create a sustainable brand as well as a position in the international market.

However, to achieve the above results, Vietnamese firms need to find ways to have capital and human resources to follow R&D. At present, most Vietnamese enterprises are small and medium sized, while investment in R&D requires large capital. Not only that, the capital recovery period is long, and its effectiveness depends on many factors. Therefore, Vietnamese enterprises that want to invest in R&D are all large-scale units and capital must be extracted from their profits. Rang Dong company, for example, has to deduct up to 20% of their profit after tax, and Vicostone company also deducted 2% of their profit for R&D.

More opportunities from FDI inflows

However, not all businesses are aware of the importance of R&D to sacrifice their profits. According to a recent study by the Trade and Competition Division of the World Bank (WB) Group, Vietnamese firms spend 1.6% of their annual revenue on R&D activities, lower than many regional countries such as Laos (14.5%), Philippines (3.6%), Malaysia (2.6%), and Cambodia (1.9%). Moreover, 26% of medium and large enterprises declared spending on R&D, while only 9% of small firms invested in R&D.

The good news is that in the revised Investment Law, R&D activities are identified as factors with investment incentives. Hence, enterprises expect that in the future, they will receive an investment wave of R&D from FDI inflows, thereby spreading to domestic enterprises for mutual development. Recently, LG Group plans to set up an R&D center in Da Nang city on solutions for car components and information technology. Thus, LG has "followed" Samsung to focus on investing in R&D in Vietnam.

Earlier this year, Samsung decided to invest US$220 million to build its own R&D Center in Hanoi, which is expected to be completed by the end of 2022, attracting 3,000 engineers to work. This center will not only focus on product research and development, but also in areas that are the world's trends such as artificial intelligence (AI), Internet of Things (IoT), big data and 5G networks. This is also the biggest R&D center among R&D centers of foreign enterprises invested in Vietnam. This center is considered an R&D strategic "base" globally by Samsung. Along with Samsung, a number of large technology corporations such as Bosch and Qualcomm have also established R&D centers in Vietnam.