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Vietnam’s digital transformation is considered by the Vietnamese Government as an essential aspect in maintaining growth and prosperity.  

With an estimated Gross Merchandise Volume (GMV) rise of 28% in 2022, Vietnam is said to be one of the fastest growing digital economies in Southeast Asia. By 2030, it is predicted that Vietnam’s digital sector would contribute 30% to the country’s GDP  

1/The need for digital transformation to enable Vietnam to achieve its development goals  

  • The impact of Covid-19  

The abrupt nature of the COVID lockdowns was one of the most important contributing factors to the quick expansion of Vietnam’s digitalization. At first, digital transition came as a reaction to the social distancing regulations, and as a result, e-commerce flourished in the country. This partly enabled Vietnam to be considered as Asia’s best-performing economy in 2020 

In response to the COVID-19 outbreak, Vietnam’s use of digital platforms, e-commerce websites, social networks, and specialized applications has expanded significantly, going from 48% of enterprises having digital presence in June 2020 to 73% in January 2021. The rate of businesses spending in digital solutions, such as setting up hardware and software for corporate operations, jumped from 5% to 21% during the same time period. 

Moreover, the Vietnamese government has also increased its attempts to automate processes and offer citizens public services using digital means. As of June 2022, 45.78% of administrative services were conducted online, a 1.6-fold increase from the same time period in 2021. As for plans for the near future, Vietnam’s Prime Minister, Pham Minh Chinh, said that by the end of 2023, the proportion of individuals using online public services must increase from the current 18% to 50%. 

On the other hand, despite encouragement for the emerging trend of using digital technology in wake of the epidemic, the Vietnamese adoption of key industry 4.0 technologies is still in its very early stages. For now, digital platforms are mostly used to simplify straightforward commercial processes including sales, accounting, and payment methods.  

These digital tools have limited use and application, and can only be used in supply chain management, manufacturing operations, and production planning by major companies with adequate financial and human resources. A survey conducted by The World Bank in 2021 shows that only 6.9% of businesses employ cloud computing for work-related operations. Additionally, only 1.5% of businesses employ Big Data or AI for marketing, and only 6.1% of businesses use robots for fabrication, compared to 5.9% of businesses that use modern manufacturing techniques. 

Share Of Firms Adopting Industry 4.0 Technologies

Overall, Vietnam was one of the few nations that handled COVID-19 reasonably effectively partly thanks to the fact that the country’s digital push has been accelerated. Regardless, Vietnam still has a long way to go in order to establish the right conditions for domestic organizations to adapt to the newest global digital technology if it wants to become a digital powerhouse in the future.  

  • EVFTA as a driver of Vietnam’s digital transformation 

Through the EU-Vietnam Free Trade Agreement (EVFTA), the European Union has a major influence on the development of the digital economy. Indeed, the agreement establishes cross-sectoral initiatives covering increased investment, updating to EU regulations, adoption of non-legislative measures to improve quality of life, etc. 

The EVFTA will help to boost Vietnam’s digital economy and development by encouraging the development of electronic commerce between EU and Vietnam by enhancing Vietnam’s regulatory environment for digital transformation. This will be accomplished through consistent and productive discussion of the regulatory concerns brought up by e-commerce and digitalization. The regulations, laws, and frameworks governing e-commerce in Vietnam will be gradually improved, advancing and enabling the country’s digital transformation. 

Moreover, under the opportunities created by the EVFTA, Vietnamese businesses will even undergo digital transformation in order to meet the standards of the European market. With that being said, Vietnamese manufacturers must invest in better technology to more effectively control their product quality. As a result, their client satisfaction will also be improved and their operating procedures will be optimized accordingly; all to be able to compete with EU E-commerce. For instance, as proof of origin for goods made in Vietnam and exported to the EU remain one of the biggest obstacles of the EVFTA, Vietnamese exporters are pushed to use information technology, such as blockchain, for the tracking of their exported agriculture products’ origin. 

  • Digital transformation is a major asset of Vietnam’s National Pland to achieve the countries’goals 

By the middle of this century, Vietnam wants to accomplish two major goals. One is to achieve net-zero carbon emissions by 2050 as pledged by Prime Minister Pham Minh Chinh at the COP26. And the other is to become a high-income country by 2045 in accordance with a resolution of the 13th National Party Congress. Digital transformation would be the key to unlocking these goals. That’s why it is highlighted as a top priority by many national programs. 

The National Digital Transformation Programme by 2025, with a focus on 2030, was recently approved in Vietnam. This project will aid in accelerating digital transformation through alterations in perception, business strategies, and incentives for the digitalization of firms, administration, and industrial operations. The program will be directed towards cooperatives, businesses, and households that wish to reform their operations to be more productive, efficient, and competitive through digital means.  

Additionally, the Ministry of Planning and Investment (MPI) has proactively released a program to assist companies with their digital transformation for the years 2021–2025, designating the Enterprise Development Department as the focal point and cooperating with the relevant ministries, sectors, localities, associations, and partners to implement. 

Moreover, the 13th National Party Congress sets national digital transformation as of utmost importance, with digital society, economics, and governance as its three fundamental foundations. Vietnam has given the digital transformation a great amount of attention by introducing numerous initiatives and solutions to generate innovations for Vietnam to become a successful nation. As a symbol, the National Digital Transformation Day is observed on October 10 with the goal of accelerating digital transformation tasks, increasing public awareness towards their importance and mobilizing the entire political system and populace to ensure the success of the work. 

2/The main sectors targeted by this digital transformation  

The National Plan prioritises 8 different sectors for this digital transformation, including finance and banking, healthcare, education, agriculture, transport, logistics, energy, natural resources, and environment and manufacturing.  We are now going to focus on the 4 most promising ones. 

  • Manufacturing  

Vietnam’s manufacturing industry is a critical attribute of the economy, contributing to 25.1% of the nation’s GDP in 2021. 

It is a significant sector that is primed and prepared for digital transformation, as 85% of the manufacturing enterprises have access to digital technologies. The production-related technologies are mostly appreciated since most of the businesses are involved in the assembling and outsourcing phases. These technologies include monitoring and control, robotics and automation technology. 

Most of investment in digital technology done by Vietnamese businesses are on purposed to save costs, boost productivity, and improve management. In the upcoming years, nearly a 1/4 of manufacturing companies aim to invest in Industry 4.0 technology. 

  • Finance and Banking  

The new culture of digital banking and fintech is spreading across Vietnam, especially among the younger generations and more technologically adept population. Vietnamese citizens often register accounts and conduct online banking transactions using mobile applications, making the country’s banking and insurance industries great opportunities for digital transformation. Currently, digital platforms are used for 95% of payment services and deposits, enabling Vietnam to rank as the 4th country among Southeast Asia with cashless payment adoption rates in 2011. The State Bank of Vietnam sets out digital transformation as a goal for 2025 and expect to have 50% digitized banking and 70% client transactions made via digital channels. In order to digitalize, modernise, and provide better digital services, 95% of Vietnamese banks have formed a plan for digital transformation and have continued to actively integrate new technologies, such as cloud computing and big data. 

Vietnam’s fintech market is expanding, and at an impressive pace for such a young sector. Digital payments mediated 93% of the venture capital invested in Vietnam in 2021. The country’s strong internet penetration, high proportion of smartphone users, and quickly expanding e-commerce are credited with the development of FinTech.  

Cashless Payments Adoption Rate In Sa In 2021, By Country

Additionally, the government implements a certain number of acts to encourage the cashless society with a pilot program for mobile money services (MMS) in 2021. This pilot program will last for two years from the time the first company is given permission to test the MMS, and authorities will utilise the results of the experiment to create specific regulations. 

  • E-commerce  

One of the fastest-growing areas of the digital economy in Vietnam is e-commerce. The nation’s e-commerce market is expanding by 35% annually, which is 2.5 times faster than Japan, according to the Vietnam E-commerce and Information Technology Agency (VECITA). The growth of e-commerce in Vietnam is predicted to generate revenues of 16.4 billion USD, a record for this industry. 

In 2022, foreign direct investments will still be flooding Vietnam’s e-commerce market. On regional e-commerce platforms, businesses from China, Japan, South Korea, and the United States have started increasing their online presence. Lazada, Shopee, Tiki, Sendo, and The Gioi Di Dong are five of Southeast Asia’s most popular e-commerce platforms, and Vietnam is one of their strongest markets. 

Currently, the number of people participating in online shopping in Vietnam has grown steadily, reaching 57.6 million people in 2022. This industry is expected to continually grow, expecting to gain 70.0 million users in 2025.  

Users In The E Commerce Market In Millions (vietnam)
  • Logistics

Along with the e-commerce boom, the logistics industry has been growing quickly. Vietnam ranked as the 11th country among 50 countries worldwide in leading logistics and transportation in 2022.  In recent times, Vietnam’s logistics sector has entered an unprecedented boom, with 14–17% growth rate and over US$ 40–42 billions of sales annually. The Vietnamese government aims to achieve a 20% yearly growth of the logistics sector in 2025. There has been a rise in infrastructure, technology, and investment attraction from foreign investors to support the expansion of logistics. 

To deal with competition and new markets, businesses operating in the field are transitioning from traditional logistics companies to e-commerce logistics companies. Data from the Vietnam Logistics Business Association shows that in recent years, the proportion of businesses using technology in their operations increased from 15–20% to 40–50% 

Governments and businesses are becoming more concerned about the role of digital transformation in logistics. Nguyen Hong Dien, Minister of Industry and Trade, claims that Vietnam’s logistics service sector will continue to grow quickly and responsibly in order to keep up with global trends. A strategy for the digital transformation of the local logistics sector in the years 2022–2025 and its direction to 2030 has been released by the Ho Chi Minh City People’s Committee. The creation of a digital logistics map, a centralised data warehouse, and digital platforms linking multimodal transport services will all be finished by 2025 in the city. 

Final thoughts

With a sharp growth in the creation of new businesses, the digital economy has made significant contributions to the economy. The key to development has been a digital society that places its citizens at its core.

The development of domestic digital technology items has been continuously aided by the government during the past several years. This is due to its awareness of the home market, consumer demands, local culture, and creativity, as such Vietnam offers a lot of potential to find innovative digital transformation solutions for sectors, locales, and organisations.

Despite significant progress, there is still work to be done to close the gap in the development of digital skills in Vietnam. This is to guarantee that everyone has an equal chance at achieving the successes of the country’s digital economy. Vietnam is moreover well prepared for its digital transformation.