Digital Economy exposes local enterprises still lagged behind

Nguyen Duc Khuong, Professor of Finance at France-based IPAG Business School and also a member of Economic Advisory Group to the Prime Minister, said that currently 90 per cent of payment activities and about 80 per cent of buying and selling activities are conducted via the internet. The digital economy is moving deeply into people’s life.

The global economy has been changed significantly in the context of the “Industrial Revolution 4.0”. Digital economic enterprises have made important changes in the value chain of industries as well as the global supply chain, becoming a driving force of the global economy.

At the conference themed on “Digital Economy – the World does not wait for us” prior to the Vietnam Digital Economy Forum (VDEF) 2018, Khuong said that within last few years, the global economic growth was about 2.5 per cent. Meanwhile, the global digital economy is growing five times faster. This has been a key factor in driving economic productivity and reducing firm costs.

In Vietnam, the development of such digital models as Uber and Grab in transportation, and, Viber, and Facebook in communications has created useful services for people as well as effectively utilized the idle resources in society.

Yeah1 Network, a Vietnamese Multi-Channel Network (MCN), is a prime example of how a digital firm can grow domestically and then reach out to the world. Despite establishing no overseas branch, Yeah1 Network is currently the number one MCN in Asia and the seventh largest MCN in the world by monthly views.

Than Trong Phuc, Managing Director of DFJ VinaCapital Group Limited, said that Vietnamese are entering the digital age. In the next four years, the number of people using the internet in Vietnam increases by 10 per cent, the figure for social media, smartphones, and internet on smartphones will be 25 per cent, five per cent and 21 per cent respectively. 

Than Trong Phuc, Managing Director of DFJ VinaCapital Group Limited.

However, Phuc said that despite the strong growth of the indicators, Vietnam’s digital economy is in danger of lagging behind.

The nation ranked 115th globally in terms of information and communication technology development indices (ICT) last year, while its ranking for 2015 was 114th. In the previous years, Vietnam was always ranked top 100 nations having the highest ICT indices.

Also, according to a survey of 50 digital economies in the world in 2015 conducted by Havard and Tufts universities in the U.S., Vietnam and Colombia have the similar speeds of digital economy development. However, the same survey conducted this year shows that Colombia is accelerating its digital economy and leaving Vietnam behind.

Experts say it is important to balance the short-term and long-term benefits when making policies and mechanisms in order to help Vietnamese enterprises compete with other economies in the world.

Phuc also stated that Vietnam’s small and medium-sized enterprises (SMEs) are threatened and need urgent help to integrate into the global digital economy.

“Vietnamese enterprises must apply technology to join the global digital economy or else they will be lagged behind or even go bankrupt,” said Than Trong Phuc.

Currently, Vietnamese SMEs contribute to only 50 per cent of the national personnel. SMEs account for 98 per cent of the total number of enterprises in Vietnam but contribute only 40 per cent of national Gross Domestic Product (GDP) due to their hesitation in applying technology to develop.

In addition, the development of superior organizational and technological models poses a huge problem related to human resources. Researchers at Oxford University and McKinsey, a global management consulting firm, forecast that half of the jobs in developed countries will be replaced by process automation in the next 15 years. This figure is higher in such developing countries like Vietnam.

Aymeril Hoang

According to Aymeril Hoang, Head of Innovation for the Societe Generale Group, which has 150,000 staff globally, education must be the prerequisite in order to solve this problem.

Currently, the demand for programmers and software engineers is increasing significantly in Vietnam, especially in start-ups, foreign outsourcing companies, and domestic enterprises such as FPT and Viettel. However, the software engineer supply from universities in Vietnam is not enough in terms of quantity and quality.

Phuc said that this is the right time for the government of Vietnam to act decisively. Domestic enterprises need support to dominate the domestic market and then gradually reach out to the world.