Market Study on Advancement of the Digitalization in the Vietnamese Society

2020

Market Study on Advancement of the Digitalization in the Vietnamese Society

Commissioned by the Embassy of Finland in Hanoi and Prepared by VINASA, the Viet Nam National Software and IT Services Association

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Market Study on Advancement of the Digitalization in the Vietnamese Society Contents Executive Summary ......................................................................................................................... 3 The Analysis of Legislative and Regulative Framework supporting Digitalization ..........................5 State of Play ................................................................................................................................ 5 Key deficiencies ........................................................................................................................ 11 Future needs ............................................................................................................................. 12 The Market Trends ........................................................................................................................ 13 Current situation in the Market................................................................................................ 14 Investments in Digitalization .................................................................................................... 16 Potential of Information and Technology Work Force in Vietnam ..........................................19 Interest of Digital Economy giants in Vietnam ......................................................................... 21 Market Analysis by Industry .......................................................................................................... 21 Government and Administration.............................................................................................. 21 Cities and their plans ................................................................................................................ 23 Media & advertising ................................................................................................................. 27 Banking and Financial Services ................................................................................................. 29 IT & Telecom ............................................................................................................................. 30 Retail ......................................................................................................................................... 32 Healthcare................................................................................................................................. 34 Automotive & transportation and logistics ..............................................................................36 Biggest and most potential players in the Market ........................................................................ 38 TOP 10 local companies in size ................................................................................................. 38 TOP local fastest growers ......................................................................................................... 38 Other international companies that are noteworthy .............................................................. 40 Analysis on Potential Market Access or Business opportunities .................................................. 41 Technology Transfer ................................................................................................................. 41 Licensing ................................................................................................................................... 42 1

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Outsourcing and sourcing ......................................................................................................... 43 Product Development............................................................................................................... 44 Conclusions and a Way Forward ................................................................................................... 45 References .....................................................................................................................................47

Figure 1. Vietnam today: Economy at a glance ............................................................................. 13 Figure 2. Investment in startups in Southeast Asia in 2019 .......................................................... 18 Figure 3. IT ranking of countries by tech skills as measured by tests: Vietnam ranks 29th ......... 20 Figure 4. Most used Social Media Platforms ................................................................................. 28 Figure 5. Top 10 most authoritative ICT companies in 2020 ........................................................ 38 Figure 6. Top local fastest growing ICT companies in 2020 .......................................................... 39 Box 1 The mission of Vietnam's cybersecurity and safety is to protect Vietnam's prosperity in cyberspace......................................................................................................................... 9 Box 2. Law on Cybersecurity: Article 26. Guarantees relating to information security in cyberspace....................................................................................................................... 10 Box 3. Vietnam Tech Investment Report (H1 2019)...................................................................... 18 Box 4. The digital market is open for all domestic and international hi-tech companies ............ 45

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Executive Summary The first part of the Report provides an analysis of the Institutional and Legal Framework to Support the Digital Transformation Process in Vietnam, and at the same time, outlines an important tool (means) for administrative reform, economic development, and future development in the era of the Fourth Industrial Revolution - that is ICT. Resolution 52 of the Politburo of the Central Committee of the Communist Party of Vietnam (April 2020) sets out the specific goals for digital transformation that the country should achieve by 2025, as well as 2030. The Government National Digital Transformation Program to 2025, with a vision to 2030 (June 2020) introduces 6 main measures and 8 priority areas. The Ministry of Information and Communications - the main agency of the Government in the process of digital transformation- continues to give recommendations on the top 10 jobs related to digital transformation that the authorities of 63 provinces in the country need to urgently deploy (October in 2020).

Among the top-5 challenges to digital transformation, the biggest challenge in Vietnam today is the lack of awareness of digital transformation of the leaders of localities, agencies and businesses. Other important challenges are limitation of high-quality human resource and high rate of ICT employees’ turnover.

The next section of the Report addresses trends in the market, including current digital transformation status, investments in digital transformation, ICT human resources ready for digital transformation, and interest in of the "giants" of Vietnam's digital economy. Digital transformation market in Vietnam is growing fast and it has a very promissing future as the government, the business community and the society at large are all enthusiasistic to take advantages of the benefits that digital transformation is bringing about, especially in the context of the need to respond to the challengs posed by Covid-19 empidemic.

Ultimately, politicians play a decisive role in digital transformation; People are at the center of digital transformation; the institutional environment and modern technologies driving digital transformation; the development of groundbreaking platforms that drive digital transformation; Network security is an integral part of successful digital transformation.

Next, the Report analyzes the Vietnamese market in depth by each industry. The first is the administrative reform program, e-government at the Government level. Next is the plan to develop smart cities (in fact the program of digital transformation) in some big cities. Then comes the digital transformation of the media and advertising, in banks and other industries such as financial services, IT and telecommunications, retail, healthcare, as well as the car industry, transportation and logistics (logistics).

The report presents a list of the "most powerful" representatives: the top 10 largest local companies, the top 10 fastest growing domestic companies, and a list of some of the best international companies operating in the Vietnamese market.

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The next part of the Report is on Market Access Potentials and Business Opportunities, based on in-depth analysis on key issues such as: technology transfer, intellectual property rights, outsourcing to overseas market and respond to domestic market, products development.

In particular, through remote interviews between VSTI and Finnish companies, the Report shows the potential of Finnish companies to contribute and participate in policy making as well as policy and advocacy work for Vietnam's digital transformation.

In its conclusion, the Report affirms, Vietnam is a country in which the majority of people with low or middle income are taking the first steps in digital transformation. Therefore, this is a promising market for ICT products and services, due to the large population. But this is also a country with a young population structure, quite good human resources, capable of meeting the manufacture and production of ICT products and services.

Many big companies in the world such as Intel, Microsoft, IBM, Samsung, Nokia have invested in Vietnam. In the current political-economic context of the world, many big firms plan to move part of their investment capital from China to Southeast Asian countries, including Vietnam.

The cooperation in ICT between Vietnam and Finland needs to be strengthened and is promised to be raised to a new height.

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The Analysis of Legislative and Regulative Framework supporting Digitalization State of Play Legislative and regulatory framework supporting digitalization should be viewed in the broader context of the general institutional reform that is currently under way in Vietnam. Information and communication technology (ICT) is viewed as a very important means for institutional reform, and economic growth and prosperities (Cameron A et al. 2019).

In the XI Congress of the ruling Communist Party of Viet Nam in 2011 it had been recognized that institutional reform toward full market economy with socialist orientation, with the focus of creating a fair competitive environment and administrative reform, is one of the 3 so-called the “strategic breakthrough drivers” to speed up economic development in Viet Nam. The other 2 breakthrough drivers are human resource development and improvement of infrastructures (Ban Chấp hành Trung ương Đảng CS Việt Nam 2011). Since then there has been significant improvement in legislative and regulatory framework for socio-economic development in the direction of state management based on the rules of laws. The legal framework for development consists of 21 laws and hundreds of under-law regulatory policy documents 1.

In 2017 the ruling Communist Party issued a number of important Resolutions guiding further institutional reform to make it more supportive for socio-economic development in the context of more open market economy, intensive globalization and digitalization 2.

Recognizing the significance of science and technology, especially ICT and digital transformation, in May 2017 the Prime Minister issued Directive No. 16/CT-TTg on Building capacity to approach the 4th Industrial Revolution; in August 2018 the National Committee for e-Government was established in which the Prime Minister serves as the Chairperson. In 2019 the Political Bureau of the ruling Communist Party, the highest leadership unit of the Party, had issued Resolution No. 1

A number of new laws or revised laws have been made recently, including the Intellectual Property Law (2005, amended in 2009 by Law No. 36/2009 / QH12, and amended in 2019 by Law No. 42/2019 / QH14), Law on Enterprises (2014, amended by Law No. 59/2020 / QH14 effective from 01/01/2021), Law on Investment (No. 61/2020 / QH14), Law on Public Investment (No. 39/2019 / QH14), Law on Real Estate Business (No. 66/2014 / QH13), Land Law (No. 45/2013 / QH13), Bankruptcy Law (No. 51/2014 / QH13), Law on Commercial Arbitration (No. 54/2010 / QH12), Civil Code (No. 91 / 2015 / QH13), Civil Procedure Code (No. 92/2015 / QH13), Penal Code (No. 100/2015 / QH13) and Criminal Procedure Code (No. 101/2015 / QH13); concerning information technology there are Law on Information Technology No. 67/2006 / QH11, Law on Access to Information No. 104/2016 / QH13, and Law on Cyber Security No. 86/2015 / QH13.

2 These include Resolution No. 10-NQ / TW dated June 3, 2017 The 5th Conference of the 12th Party Central Committee on private economic development to make it an important driving force of the socialist-oriented market economy; Resolution No. 11-NQ / TW dated June 3, 2017 The 5th Conference of the 12th Party Central Committee on improving the institutional environment for a socialist-oriented market economy; and Resolution No. 12-NQ / TW dated June 3, 2017 The Fifth Conference of the Central Committee of the Party, term XII on continuing to restructure, innovate and improve the efficiency of state-owned enterprises.

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52-NQ/TW dated 27 September 2019 on a number of undertakings and policies to actively participate in the Fourth Industrial Revolution. Resolution No. 52-NQ/TW highlights the targets for 2025 as followed: 

Maintaining Global Innovation Index (GII) among the 3 top countries in ASEAN (in 2019 Vietnam GII ranked 42 among 131 economies; in ASEAN Vietnam GII was behind only Singapore (ranked 8) and Malaysia (ranked 33), and before Thailand (ranked 44), Philippines (50), Myanmar (129), Lao (113), Indonesia (85), Cambodia (110))(Cornell University, INSEAD and WIPO 2020).

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Building digital infrastructures at advanced level among ASEAN; broadband internet coverage of 100% communes; digital economy accounts for about 20% GDP, and productivity increases by 7% annually.

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Basically completing digital transformation in all agencies/organizations of the party, the government, the Fatherland Front, and all socio-political organizations; e-government ranking by UN among the top 4 countries in ASEAN; and at least 3 smart cities in 3 key economic regions in the North, Central and South Viet Nam.

The targets for 2030: 

GII index among the top 40 countries in the world; mobile 5G network covering the whole country; everybody having access to low-cost broadband internet.

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Digital economy accounting for more than 30% GDP; productivity increase about 7.5% annually; successfully establishing digital government; developing a chain of smart cities in key economic regions in the North, Central and South Viet Nam and gradually connecting to the network of smart cities in the region and in the world.

Following this Resolution, the Government issued the Resolution No. 50/NQ-CP dated 17 April 2020 Promulgating the Government's Action Program to implement the Politburo's Resolution No. 52-NQ / TW dated September 27, 2019 on a number of guidelines and policies to actively participate in the Fourth Industrial Revolution.

Further, the Prime Minister issued Decision No. 749/QD-TTg dated 3 rd June 2020 approving National Digital Transformation Program to 2025, with a vision to 2030, which emphasizes key measures helping to establish the foundation for the digital transformation of the economy and the society, including: 1. Raising awareness, especially among leaders at all administrative levels, on the urgency and importance of digital transformation for socio-economic development; 2. Creating favorable institutional conditions for development and adoption/application of digital technology and innovations in all spheres of socio-economic life;

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3. Developing digital infrastructures and digitalization of other infrastructures such as transport, energy, electricity, water, urban infrastructures.

4. Developing platforms for digital transformation, especially platforms for national electronic identification and authentication system, electronic payment system, mobile money, cloud, and digital platforms that can be widely used in a number of fields such as e-commerce, agriculture, tourism, health, education, transportation, construction, resources and the environment, and online learning, digital content, accounting services, corporate finance, urban, digital banking; 5. Ensuring network safety and security (cybersecurity); and 6. Promoting international cooperation in R&D and in digital innovations.

The National Digital Transformation Program to 2025, with a vision to 2030 listed 8 priority areas for digital transformation, namely: 1. Health care; 2. Education; 3. Finance and Banking; 4. Agriculture; 5. Transportation and Logistics; 6. Energy; 7. Natural resources and environment; 8. Industry production.

The National E-Government Committee performs the functions and tasks of researching and proposing to the Government and the Prime Minister on undertakings, strategies, mechanisms and policies to create a legal environment to promote the process of digital transformation towards digital government, digital economy and digital society; to urge and generally coordinate the implementation of the National Digital Transformation Program. The Steering Committee for developing E-Government/E-Government of ministries, ministerial-level agencies, Governmental agencies and People's Committees of provinces and cities under central authority shall urge and coordinate digital transformation activities within their respective ministries, branches or localities.

The Ministry of Information and Communications (MIC) plays a special role as a coordinating agency to support digital transformation in other line ministries/agencies and provinces. On 12 October 2020 MIC had issued Decision 1726/QD-BTTTT approving Digital Index for assessment of digital transformation of ministries, ministerial agencies, Government agencies, governments of provinces/cities under the central management, and national digital transformation. Recently 7

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the Minister of MIC had 10 recommendations for provincial governments to carry out digital transformation in their provinces, and offered the support of MIC in doing so (Nguyễn Mạnh Hùng 2020). The 10 recommendations include: 1. Develop provincial digital transformation strategy as soon as possible; 2. Develop provincial digital infrastructures; 3. Speed up the process of bringing all public services online at level 4 by the end of 2021 (the highest level of online public services); 4. Deploy digital government; 5. Ensure network safety and security: spend at least 10% of the provincial ICT budget for network security; 6. Budget for ICT: use at least 1% of provincial annual budget for ICT (currently on average provinces only spend about 0.3% of provincial budget for ICT).

7. Human resource: have policies to attract ICT talents; 8. Cooperate closely with MIC; 9. Consider digital transformation as the most important technological breakthrough for socio-economic development; 10. Develop regional digital transformation centers to support regional provinces (closelylinked provinces) By the end of August 2020, the Ministry of Construction and provincial governments of Ho Chi Minh City, Dien Bien, Thua Thien Hue, and Lang Son had issued the action plan for digital transformation of the agency/provinces (M.T. 2020). On 20 October 2020 Ben Tre announced the master project (“Đề án”) of digital transformation3. Other ministries and governments of other provinces are expected to do the same in 2020.

As seen above, cybersecurity is viewed by the government as one of the important integral part of the foundation for the digital transformation. On 12th June 2018 the National Assembly had adopted the Law No. 24/2018/QH14 on Cybersecurity. The purpose of the Law is to regulate “activities of protecting national security and ensuring social order and safety in cyberspace; and the responsibilities of agencies, organizations and individuals involved” (Article 1). On 23 rd November 2020 the Prime Minister issued Decision No. 1907/QD-TTg Approving the Master Project (“Đề án”) entitled “Propaganda, raising awareness and knowledge of cybersecurity period 2021-2025” with the aim to increase cybersecurity capacity of individuals, organizations, and

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See: https://www.bentre.gov.vn/Pages/TinTucSuKien.aspx?ID=26859&InitialTabId=Ribbon.Read.

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government units, contributing to the implementation of the cybersecurity Law and national cybersecurity.

Since Vietnam cybersecurity is considered as a part of the national security, it must be ensured

by Vietnamese cybersecurity specialists. Vietnamese cybersecurity companies must grow to be able to defend Vietnam in cyberspace. In the workshop entitled Cyber Security Ecosystem Make in Vietnam: Key Success Factor for National Digital Transformation organized by Vietnam Information Security Association (VNISA) on the Vietnam Cybersecurity Day 2 nd December 2020 in Hanoi, the Minister of the Ministry of Information and Communications had declared that Vietnam has mastership of 90% of the ecosystem of network safety and security products serving the Party and State agencies; in early 2021 Vietnam will be able to have mastership of 100% of that ecosystem.

Box 1 The mission of Vietnam's cybersecurity and safety is to protect Vietnam's prosperity in cyberspace If Vietnam is prosperous on cyberspace, it is imperative that Vietnam protect itself in cyberspace. The mission of Vietnam's cybersecurity and safety is to protect Vietnam's prosperity in cyberspace. This responsibility is on your shoulders, the business of safe, network security. And also the responsibility of the Association (VNISA). If we want to do this well, we have to master the ecosystem of safe products, network security. We must build a strong safe industry, strong cyber security.

In the orientation speech of Nguyen Manh Hung, the Minister of the Ministry of Information and Communications, in the workshop entitled Cyber Security Ecosystem Make in Vietnam: Key Success Factor for National Digital Transformation organized by Vietnam Information Security Association (VNISA) on the Vietnam Cybersecurity Day 2nd December 2020 in Hanoi.

While the Law on Cybersecurity is meant to prevent online activities that are deemed to be illegal or harmful for the national security, or harmful for cultural norms and social orders, the Law also raises some concerns among international technological companies as its regulations may restrict scope of the company activities on cyberspace in Vietnam4. There are regulations concerning cybersecurity involving international companies operating in Vietnam which are mainly to ensure that their operations are safe for people and within the framework of Vietnam legal system.

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See: https://www.roedl.com/insights/vietnam-law-cybersecurity-csl-cyberspace or https://www.washingtonpost.com/world/asia_pacific/under-vietnams-new-cybersecurity-law-us-tech-giants-facestricter-censorship/2019/03/16/8259cfae-3c24-11e9-a06c-3ec8ed509d15_story.html.

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Box 2. Law on Cybersecurity: Article 26. Guarantees relating to information security in cyberspace 1. Websites, portals [and] specialized pages on social networks of agencies, organizations and individuals must not provide, upload or transmit any information with the contents prescribed in clauses 1 to 5 of article 16 of this Law and other information containing contents infringing national security.

2. Any domestic or foreign enterprise which provides services on telecom networks and on the Internet and other value added services in cyberspace in Vietnam [cyberspace service provider] has the following responsibilities: (a) To authenticate information when a user registers a digital account; to maintain confidentiality of information and accounts of users; to provide user information to the Cybersecurity Task Force under the Ministry of Public Security when so requested in writing in order to serve investigation of and dealing with breaches of the law on cybersecurity; (b) To prevent the sharing of information and to delete information with the contents prescribed in clauses 1 to 5 inclusive of article 16 of this Law on services or information systems directly managed by any agency or organization no later than twenty four (24) hours after the time of a request from the CTF under the Ministry of Public Security or from a competent agency under the Ministry of Information and Communications, and to save/maintain system logs in order to serve investigation of and dealing with breaches of the law on cybersecurity within a [specified] period [to be] stipulated by the Government; (c) Not to provide or to cease provision of services on telecom networks and on the Internet and other value added services to organizations and individuals who upload in cyberspace information with the contents prescribed in clauses 1 to 5 of article 16 of this Law, when requested by the CTF under the Ministry of Public Security or by a competent agency under the Ministry of Information and Communications.

3. Domestic and foreign service providers on telecom networks and on the Internet and other value added services in cyberspace in Vietnam [cyberspace service providers] carrying out activities of collecting, exploiting [using], analysing and processing data [being] personal information, data about service users' relationships and data generated by service users in Vietnam must store such data in Vietnam for a [specified] period [to be] stipulated by the Government. Foreign enterprises referred to in this clause must have branches or representative offices in Vietnam.

4. The Government shall provide detailed regulations on clause 3 of this article.

After almost two years of implementation of this Law, the government authorities apply the Law mainly to prevent contents deemed to be anti-state, anti-government, false information, and culturally harmful contents such as pornography or violence. While self-autonomy of domestic agencies, organizations and individuals regarding cybersecurity is emphasized, the Law 10

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nevertheless gives priority for international cooperation in cybersecurity areas. Point 3 in Article 31 of the Law on Cybersecurity stated that “Prioritized development of cybersecurity training establishments which satisfy international standards; and encouraged association of, and facilitated co-operation on cybersecurity between the State sector and the private sector both domestic and foreign.” In reality, by the end of 2020 the share of the total revenue from cyber security products and services of domestic cyber security companies account for only 45% of that of international companies operating in Vietnam (Nguyen Thanh Phuc 2020).

Key deficiencies A recent report Vietnam’s future digital economy – Towards 2030 and 2045 (Cameron A et al.

2019) highlight 5 key deficiencies for digital transformation in Viet Nam: 1. Leadership and political will: while there is much enthusiasm for digital transformation at the top level of leadership of the ruling Communist Party and the Government, the leadership and political will and commitment at lower levels (line ministries/agencies, provinces, businesses and organizations) are questionable, perhaps in part due to the lack of awareness and understanding of digital transformation and how to make it happened.

2. Limitations of Vietnam’s legal regulations: there are gaps between “how regulations are written versus how they are enforced” (p. 25).

3. Limitations of human resources, including consumers’ digital skills and adoption, IT workers for digital production, and an elite group for digital leading; 4. Limitations of the ecosystem for innovation and start-up businesses; and 5. Digital infrastructure limitation: “the digital infrastructure of Vietnam is still at a basic level in terms of data, transmission speeds and similar. Huge investments are needed to create future boosts in digitalisation” (p. 25).

Limitations of human resources is one of the most serious challenges for digital transformation in Vietnam. According to the Minister of Educaiton and Training, in the whole country there are 153 out of 235 universities providing ICT training; the number of ICT graduated students each year is about 50 thousand. However, only about 30% of these graduated students can do their ICT jobs without additional training; the other 70% of the graduated students need some additional training in order to be able to work as ICT specialists effectively5.

Another issue of human resource in ICT is the high rate of employee turnover. According to the Vietnam IT Market Report 2020 using the data of IT industry in 2019, about ¾ developers are willing to switch their working environment whenever suitable; 68.2% of IT employees are

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See: https://mic.gov.vn/Pages/TinTuc/138807/Phat-trien-nguon-nhan-luc-ICT-trinh-do-cao-trong-thoi-dai4.0.html.

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reported to be seeking higher salary, 46.9% are seeking better working environment, and 34.2% are seeking more challenging job and responsibility (TopDev 2020a).

In our consultation with specialists from a number of businesses and government agencies, the most common opinion about the challenge of digital transformation is awareness of its urgency and vital necessity for the successful operation of the business/organization, especially the awareness of the leaders at all levels of government, and the business/organization leaders.

Closely related to the awareness of the significance of digital transformation is the understanding and courage to overcome habits of doing things in the old ways (Cao Viết Sinh and Trương Đình Tuyển 2019).

In a recent survey of more than 2,700 enterprises in industry sector sampled from 68,000 industrial production enterprises on the readiness to participate in the 4 th Industrial Revolution, using assessment method of Verband Deutscher Maschinen-und Anlagenbau – VDMA, based on 6 pillars of (1) strategy and organization for its implementation, (2) smart factories, (3) smart operations and production processes, (4) smart products, (5) data-driven services, and (6) Employees’ skills, on the 6 levels of readiness scale of (1) outsider, (2) beginner, (3) intermediate, (4) experienced, (5) expert, and (6) top performer, most of the enterprises surveyed (85%) are categorized as “outsider”, only 13% are “beginners” and only 2% are “intermediate” (Bộ Công Thương and UNDP 2019, Lichtblau et al. 2015). Digital transformation in industry sector is just beginning.

Future needs The above mentioned weaknesses are also widely recognized by the government and overcoming these weaknesses are considered as the top priority in implementing the National Digital Transformation Program to 2025, with a vision to 2030. The guiding principles of the National Digital Transformation Program to 2025, with a vision to 2030 stressed that political will plays the decisive role in digital transformation; people are at the center of the digital transformation; supportive institutional environment and technologies are drivers of digital transformation; development of digital platforms is a breakthrough measure to speed up digital transformation; network security is an integral part and a key for successful digital transformation (Thủ tướng Chính phủ 2020).

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The Market Trends Figure 1. Vietnam today: Economy at a glance

Vietnam is a fast growing economy. During the last 20 years annual growth of GDP was constantly at 6-7%; in 2018 the growth of GDP was 7.1% (Cameron A et al. 2019), and in 2019 it was 7%, one of the fastest growth rates in the region (The World Bank in Viet Nam 2020). During the period 2016-2019 the general productivity increased annually by 6.2%, and in 2019 it was estimated to be US$ 4,791/laborer (Bộ Kế hoạch và Đầu tư 2020b).

Currently Viet Nam is a lower middle-income country (since 2010) and is one of the most open economies in the world. By the end of 2019 Viet Nam had signed 13 Free Trade Agreements (FTAs), including the new generation FTAs with EU (European-Vietnam Free Trade Agreement-EVFTA) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and Viet Nam is negotiating 3 other new generation FTAs. These FTAs cover nearly 60 most powerful economies in the world, accounting for about 90% of global GDP. In 2019 import-andexport value had reached US$ 517.3 billion, an increase by 11 times compared to the figure of 20036. In 2019 the total foreign investment in Vietnam had reached US$ 38 billiard, an increase of 7.2% compared to the level of foreign investment in 2018 (Bộ Kế hoạch và Đầu tư 2020b).

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Report of Results of Monitoring Vietnam Implementation of FTAs by the National Assembly on 12 October 2020.

See: http://quochoi.vn/tintuc/pages/tin-hoat-dong-cua-quoc-hoi.aspx?itemid=49064.

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Current situation in the Market Vietnam is a very fast growing market for ICT. According to the data of the Ministry of Information and Communication7, by the end of September 2020 there are 127,947,990 mobile subscribers with active usage, including 59,265,641 mobile subscribers with voice and message usage only, and 68,682,349 mobile subscribers with data transactions. In addition, there are 16,296,929 fix broadband subscribers. Corresponding figures for September 2015 are 119,009,946 active mobile subscribers, including 85,761,369 subscribers with only voice and message usage, and 33,248,577 subscribers with data transactions, and 7,145,232 fix broadband subscribers. The number of mobile subscribers using mobile broadband internet data and the number of fix broadband subscribers have increased more than 2 times over the last 5 years, indicating a very fast increase in the use of internet during the last 5 years.

Now the 4G network has covered the whole country, and 5G network has been successfully tested by Vinaphone in Hanoi and Ho Chi Minh City, by Viettel in Hanoi, and by MobiFone in Ho Chi Minh City. On November 30th, 2020, Viettel had announced a pilot commercial service of 5G network in Hanoi which consists of 100 5G stations covering 3 central districts of Hoan Kiem, Ba Dinh, and Hai Ba Trung. Among the 100 5G stations, 15 stations were made completely by Viettel and 85 stations are products of Swedish Ericsson8. Testing the Viettel 5G network shows that the download speed is about 1Gbps, about 30 times the speed of the existing 4G network. VNPT (Vinaphone) and MobiFone are also reported to launch 5G pilot commercial services in December 2020. Despite the promissing future of the market for 5G network, at present time a big challenge for the service providers is that the current market demands for 5G services and the number of 5G end-user equipments are still limited and it woult take some time for the service to be profitable.

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See the statistics of MIC: http://vnta.gov.vn/thongke/Trang/dulieuthongke.aspx#.

See: https://vietnamnet.vn/vn/thong-tin-truyen-thong/nguoi-dan-ha-noi-bat-dau-duoc-su-dung-mang-di-dong5g-693749.html.

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Photo: (Vietnamnet) Opening pilot commercial 5G network in Hanoi by Viettel on November 30 th, 2020.

Given the fact that Viet Nam is a lower middle-income country (since 2010), with GNI per capita ranking (PPP method) of 127 out of 192 economies, Viet Nam ranks relatively high for many of the ICT-related indexes: 

In 2019 Vietnam ranks 67 out of 141 countries/territories by global competitiveness index (GCI), in which Vietnam ranks 41 in the ICT adoption pillar of this GCI (World Economic Forum 2019).

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In 2020 Vietnam ranks 42 out of 131 countries/territories by Global Innovation Index (GII), and ranks first among lower-middle income countries; in ASEAN Vietnam is behind only Singapore and Malaysia (Cornell University, INSEAD and WIPO 2020).

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In 2020 Vietnam ranks 49 among 170 countries by the Integrated Index for Postal Development (2IPD); in ASEAN Vietnam is behind only Singapore, Thailand, and Malaysia (Universal Postal Uion (UPU) 2020).

In 2019 it is estimated that the total revenue from ICT industry was about US$ 112 billion, an increase of 18% compared to the revenue of 2018, accounting for 14% of the national GDP, and contributing to the state budget of VND 53 thousands billion. In the first six months of 2020, despite the negative impacts of Covid-19, the total revenue of ICT industry (of both domestic and FDI enterprises) was about US$ 50 billion, an increase of 2.2% compared to the revenue of the same period for 2019 (FDI accounted for US$ 47 billion). ICT industry was considered as the fastest growing industry with the annual growth rate is expected to be at about 10-15% for 2020 (Vietnam Report 2020).

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A recent survey of ICT enterprises by the Vietnam Report Group (VNR)(Vietnam Report 2020) shows a very optimistic view of many ICT enterprises about the future of ICT industry in Vietnam.

5 opportunities for ICT development in Vietnam are identified. First, despite the challenges posed by the global Covid-19 epidemic, the success of Vietnam in controlling the epidemic and the economy successful adapting to the “new normal” is viewed by 63% of ICT enterprises as a good opportunity for ICT industry to develop, especially with supportive digital transformation policies of the government. Second, In the context of US-China trade conflict and increasing trade protectionism, there is a wave of high-tech foreign companies moving from China home or to other countries and Vietnam is considered as the most favorable destination due to its market size, growth potential, labor cost/labor force, personnel quality, political and social stability. This is an excellent opportunity for development for Vietnamese ICT industry (57.9% of the surveyed ICT enterprises keep this opinion). According to an enterprise’s survey in 2019 by Japan External Trade Organization (JETRO), Vietnam is a favorable destination for Japanese companies to move or extend their productions, and among 145 Japanese firms moving production bases out of China, 39 firms have been moving to Vietnam (23 firms to Thailand, 11 firms back to Japan, 6 firms to the Philippines, and 6 to Indonesia) (Japan External Trade Organization (JETRO) 2020).

Third, Covid-19 epidemic is believed to speed up IT development and applications in all sectors and industries in Vietnam, especially in health care (BlueZone software was developed and widely used to trace sources of Covid-19 infection, tele-medicine, smart hospital, etc.), education (online education), fintech online payment (Mobile Money platform by the State Bank, payment not using cash), online commerce, etc. 52.6% of the surveyed ICT enterprises keep this opinion.

Fourth, 47.4% of the surveyed ICT enterprises believe that the approval of the European Union Vietnam Free Trade Agreement (EVFTA) has created a favorable conditions for Vietnam development in general and for ICT industry in particular. Finally, 42.1% of the surveyed ICT enterprises see the successful experiment of 5G technology in Vietnam as an opportunity to open up a new page of ICT development in Vietnam (Vietnam Report 2020).

Investments in Digitalization In 2018 there were 248 foreign investment projects in ICT from 42 countries/territories with the total investment value of US$ 591.77 million (Bộ Thông tin và truyền thông 2019).

The government has been increasingly investing in e-government recently. During the period 2016-2020 the government total investment in e-government and IT is about VND 10,400 billion (nearly US$ 450 million), in which the investment in IT in central level agencies/ministries accounts for about 43% and the investment in provinces accounts for 57%. In general the annual spending for e-government accounts for about 0.3% of total government spending budget. The Ministry of Information and Communications recommended that ministries/agencies and provincial governments should spend at least 1% of their annual total spending budget for digital transformation of government for the period 2021-2025 (Bộ Thông tin và truyền thông 2020).

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The government facilitates investment in start-up small and medium enterprises. In 2016 The "Initiative for the startup ecosystem in Vietnam until 2025 - ISEV" (also known as National Program 844), was approved by the Prime Minister on May 18, 2016 and assigned to the Ministry of Science and Technology (MOST) of Vietnam to coordinate the implementation with other ministries, branches, localities, and socio-political organizations. In 2018 there were more than 40 startup incubators, more than 40 startup investment funds, supporting about 3000 creative startups which attracted investment of about US$ 890 million (3 times more than the investment in 2017 and 6 times more than investment in 2016) (ISEV and Bộ Khoa học và Công nghệ 2019).

Further, in 2018 the government issued Decree 38/2018/ND-CP stipulating investment in startup small and medium enterprises, which includes regulations for start-up funds and investment by local government using local government budget (Bộ Kế hoạch và Đầu tư 2020a).

In June 2019, the Ministry of Planning and Investment organized a Vietnam Startup Fund Forum, bringing together more than 100 domestic and international startup funds. The funds attending the Forum all expressed their interest in the startup investment market in Vietnam. In particular, at the Forum, 18 investment funds for creative startups announced the total investment for Vietnamese creative startups over the next 3 years is 10,000 billion VND. A report by Cento Ventures entitled "Southeast Asia Tech Investment in 2019" had showed that in 2019 investment in the Vietnam-based startups increased most among Southeast Asian countries, making up 18% (or US$741M) of the country-specific capital deployment in 2019, a huge jump over 2018 where it only accounted for 4% (or $287M), and for the first time investment into Vietnam startups exceeded Singapore which account for only 17% (Cento Ventures 2019).

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Figure 2. Investment in startups in Southeast Asia in 2019

Box 3. Vietnam Tech Investment Report (H1 2019) In only 2 years, Vietnam jumped from the second least active startup ecosystem among the 6 largest ASEAN countries into no.3, trailing behind only Indonesia and Singapore. The amount of invested capital and the number of technology deals done have grown six-fold from H1 2017 to H1 2019.

Vietnam startups raised a total of $246M in H1 2019, of which, 3 largest investments (Tiki, VNPay, VNG) captured 63% of the funding. In terms of sector, the building blocks of the digital economy such as retail and payment captured almost 60% of the period’s investment. Multivertical companies are emerging and capture 12% share of capital, while sectors that have been growing in other part of the regions such as fintech (non-payment), real estate, and logistics are only beginning to pick up in Vietnam, collectively taking 10% share of capital in total.

In 2017-2018, the majority of deals were from Singapore and Japan-based investors. This year, Korean VCs took the throne as one of the most active investors in H1 2019, having participated in almost 30% of the deals. Interestingly, many of those Korean investors invested in Vietnamese startups for the first time. The local investors were equally active, with 18

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participation in ~36% of the deals. The number of deals grew from 13 deals in H1 2018 to 21 deals in the same period of 2019.

(Cento Ventures and ESP Capital 2019) Potential of Information and Technology Work Force in Vietnam To understand the potential ICT workforce in Vietnam it is necessary to understand both the potential of human resource in general which reflects the digital potential as users, and the potential of ICT industry workforce as producers of digital products and services.

In 2018 Vietnam rank 118 out of 189 countries in Human Development Index, belonging to the group of Medium HDI (UNDP 2019).

In 2018 the World Bank introduced the Human Capital Index (HCI) measuring the human capital that a child born today can expect to attain by her 18th birthday, given the risks of poor health and poor education prevailing in her country. The Human Capital Index ranges from 0 to 1, so that an HCI value of, for instance, 0.5 implies that a child born today will only be half as productive as a future worker as she would be if she enjoyed complete education and full health. In other words, HCI measuring the hypothetical future productivity of a country workforce compared to the benchmark of full human capital potential (World Bank Group 2020).

Vietnam has the Human Capital Index (HCI) in 2020 of 0.69, ranked 38 among 174 countries with available data, very close to the average level of HCI for High income countries (0.707), higher than the average level of HCI for Upper middle income countries (0.56), much higher than the average level of HCI for Lower middle income countries (0.48) in which Vietnam is a member; and in ASEAN Vietnam is behind only Singapore (HCI=0.87) which is on the top of the ranking list (World Bank Group 2020). This suggests that Viet Nam has a good potential of human resource for future development.

In the ICT sector in Vietnam the total workforce has increased rapidly from 721,584 employees in 2015 to 973,692 employees in 2018 and it is expected to be more than a million workers by the end of 2020 (Bộ Thông tin và truyền thông 2019). There is a large number of engineers in AI, data science with the most prestigious IoT certificates in the world, not to mention the number of Vietnamese ICT specialists working abroad. According to HackerRank ranking in 2016, Vietnam was ranked 23 among the top 50 countries which have the best developers in the world, and ranked 3rd among the top 5 countries with the best AI specialists9. In 2019 a ranking by Pentalog also put Vietnam on 29th position of the 44 top countries in the world in IT ranking10.

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See: https://blog.hackerrank.com/which-country-would-win-in-the-programming-olympics/ See: https://www.pentalog.com/blog/it-ranking-world-top-developers

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Figure 3. IT ranking of countries by tech skills as measured by tests: Vietnam ranks 29th

Number of Blockchain and Fintech engineers is growing rapidly (VINASA 2018). Average productivity in ICT sector is about 30,000 USD / person / year, six times higher than the Vietnamese average (Cao Viết Sinh and Trương Đình Tuyển 2019). Vietnam has a large workforce, the quality of its workforce is increasingly improved by international standards, and the highly competitive salary level are strong points attracting the attention of international investors in the field of information technology.

Despite the promising potential of ICT human resource, at present time there are skills’ limitations at all 3 levels: the limitation of IT skills of users in the society, the skills’ limitation of IT workers both in quantity and in quality, and the limitation of IT elite those who can lead the digital transformation as master architects. Most of digital products of Vietnamese IT recently are practical applications for different industries/agencies, not products of entirely new innovations (Cao Viết Sinh and Trương Đình Tuyển 2019).

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Interest of Digital Economy giants in Vietnam Many large technology corporations in the world have invested billions of dollars to build factories producing electronic components in Vietnam: Samsung Group has built 6 factories and 1 R&D center with a total investment of over 17.3 billion USD with over 170,000 employees, including two of Samsung's largest mobile phone factories globally in Bac Ninh and Thai Nguyen.

LG Electrolux invested in a phone manufacturing and assembly plant with a total value of up to $ 1.5 billion in Hai Phong. The world's largest factory of Intel producing chipsets for laptops and mobile devices in the Hi-Tech Park in Ho Chi Minh City (SHTP) so far has reached an investment value of about $ 1.04 billion, providing 80% of Intel's CPU output globally.

While most of big foreign companies invest in DX services like cloud computing, ML as a service, Data as service, digital marketing and advertising (Cisco, Google, IBM, Microsoft, Nvidia) only two companies, GE and Siemens, invest in DX in manufacturing, energy. Their customers are utilities and manufacturing sectors.

Digital marketing and advertising are the most focused area of Google and Facebook developer groups now, this service generates impressive revenue for both service providers and SME. Along with this service big data analysis and visualization also find place in utilities and retails, computer vision and NLP begin generate subscription revenue for Google, Microsoft and IBM.

Market Analysis by Industry Government and Administration Application of ICT in government sectors has received great attention from the government recently. Nearly all government offices in the central government, ministries, ministerial agencies, and in provinces that are under direct management of the central government are equipped with internet-ready computer for every employee, connected to LAN, intranet, extranet, or WAN (Bộ Thông tin và truyền thông 2019).

In 2015 Prime Minister issued Decision 714/QD-TTg dated 22 May 2015 on the list of 6 priority national databases to be developed and connected to all relevant stakeholders (ministries/agencies, provincial governments, etc.) to serve as the foundation for the egovernment, including citizen database, land database, enterprise database, general population statistical database, financial database, and insurance database. By May 2020, 2 of the 6 databases, namely enterprise database and insurance database are basically completed and operating; other national databases are taking shapes and gradually come into use for state management. The National Digital Transformation Program to 2025, with a vision to 2030 (2020) puts the target that by 2025 “100% of national databases that create an e-Government 21

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development platform including national databases on Population, Land, Business Registration, Finance, Insurance are completed and connected, share nationwide; step by step open data of state agencies to provide timely, one-time, full-life public services to the people and socioeconomic development”. Line ministries and provincial governments also develop their special databases, such as digital academic resource database of Ministry of Education and Training (MOET), environmental geography database of Ministry of Natural Resources and Environment (MONRE), databases for the city government departments in Da Nang, Ho Chi Minh City, and so on (Bộ Thông tin và truyền thông 2020).

The government is actively promote e-government. There are 4 levels of online public services (see the Circular No. 26/2009/TT-BTTTT): 1. Online public service at level 1: is a service that ensures full provision of information on processes and procedures; file; duration; fees and charges for service performance.

2. Level 2 online public service: is a level 1 online public service that allows users to download text forms and make declarations to complete their profiles as required.

Completed dossiers shall be sent directly or by post to service-providing agencies or organizations.

3. Online public service level 3: is online public service level 2 and allows users to fill out and submit online documents to agencies or organizations providing services.

Transactions in the process of processing records and providing services are done on the network environment. Payment of fees (if any) and receiving results are done directly at the service-providing agency or organization.

4. Online public service level 4: is online public service level 3 and allows users to pay fees (if any) done online. The return of results can be made online, sent in person or by mail to the user.

As of the middle of 2020, only 15.9% of all the public services are provided online at level 4. It is expected that by the end of 2020 at least 30% of all the government public services will be served online at level 411. By May 2020, 5 ministries and 5 provinces had achieved the target of putting 30% of their public services online at level 4 (Bộ Thông tin và truyền thông 2020).

In 2020 Vietnam ranks 86 among 193 countries/territories by the e-government development index (EGDI), climbing two places from 2018; in ASEAN Vietnam is behind only Singapore (ranks 11), Thailand (ranks 57), Philippines (ranks 77), and Malaysia (ranks 47) (United Nations Department of Economic and Social Affairs 2020). The government puts forward the target that by 2025 Vietnam will be among the top 70 countries/economies in e-government ranking (EGDI), and by 2030 Vietnam will be among the top 50 countries/economies in e-government ranking (Thủ tướng Chính phủ 2020).

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See: https://moh.gov.vn/hoat-dong-cua-lanh-dao-bo/-/asset_publisher/TW6LTp1ZtwaN/content/thu-tuongtrong-nam-2020-cung-cap-it-nhat-30-dich-vu-cong-truc-tuyen-muc-o-4.

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In the goverment’s ambitious program of digital transformation, international cooperation is viewed as an important element. The National Digital Transformation Program to 2025, with a vision to 2030 (2020) stressed that “International cooperation is an important solution to digital transformation, especially to promote digital transformation in society, thereby creating a traction in the digital transformation process in state agencies. Vietnamese organizations and enterprises cooperate with large technology enterprises in the world to research, develop, transfer and pioneer the application of new technologies and new models into Vietnam.”.

Cities and their plans Building smart cities has received great attention from the highest level of leadership in Vietnam.

Vietnam has joined the ASEAN Smart Cities Network. In 2018 Prime Minister issued Decision No. 950/QD-TTg dated 01 August 2018 approving the Sustainable smart city development plan for 2018-2025 and direction until 2030 which aims to “establish the network of smart cities in the North, the Central Vietnam, the South and Mekong Delta, in which Hanoi City, Ho Chi Minh City, Da Nang City and Can Tho City shall be nuclear cities, and establish linkages between smart cities.” This same idea is repeated in the most recent draft (published on 20 th October 2020 on the Communist Party website12) for the upcoming XIII Communist Party Congress Report On Implementation Of The 10-Years 2011-2020 Socio-Economic Strategy And Development Of The Socio-Economic Strategy For 10 Years 2021-2030 in which it is stressed to “renovate and improve the quality of urban planning; urban development with a long-term vision; forming a number of smart urban chains in key economic regions in the North, the South and the Central; step by step connect with smart urban networks in the region and the world; to build urban centers towards green, civilized, with identity and pioneering urban areas, leading innovation activities, becoming a driving force of development.”

Most recently, in the ASEAN Smart Cities Summit & Expo 2020 organized in Hanoi on October 22nd, Prime Minister Nguyen Xuan Phuc stressed that “Smart urban development must be closely linked with strong information infrastructure, building e-government, moving towards digital government in the industrial revolution 4.0 and urban development in Vietnam13.” Vietnamese government will focus on building 6 smart cities in the 6 economic regions of the country by 2025 to draw lessons for building a system of smart cities nationwide.

On 13 September 2019 the Ministry of Information and Communication jointly with the Ministry of Science and Technology issued Document No. 3098/BTTTT-KHCN announcing Smart City Key Performance Indicator System for Vietnam for period until 2025 (version 1.0) which emphasizes the application of ICT in urban activities.

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See: https://dangcongsan.vn/xay-dung-dang/cong-bo-du-thao-cac-van-kien-dai-hoi-xiii-cua-dang-de-lay-y-kiennhan-dan-566046.html.

13 See: https://www.tienphong.vn/kinh-te/viet-nam-se-co-6-do-thi-thong-minh-1739226.tpo.

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The government’s orientation to build smart cities as one of the development priorities during digital transformation process has received great attention of international community. In October 2019, Japanese finance firm Sumitomo and conglomerate BRG Group had formed a joint venture for the initiative in the Dong Anh district, Hanoi city, with an investment of more than $4.2 billion to build a 272 hectare smart city14. In August 2020, Head of the U.S. Trade and Development Agency (USTDA) announced a grant over US$1.45 million in technical assistance, including over US$1.16 million non-refundable aid, to help HCMC build a smart city operation center15. In a recent visit to Vietnam in early October 2020, UK Minister’s Trade Envoy Edward Vaizey said that The UK will provide non-refundable aid from the Commonwealth Foundation to Vietnam’s Ministry of Construction (MoC) to construct smart building projects and smart cities in Vietnam16. The Asian Development Bank (ADB) also expressed the willingness to support Vietnam in building smart cities17. Vietnamese and Indian firms are also having dialogue for cooperation in development of smart cities and also smart villages in all parts of Vietnam 18.

In Hanoi, since 2017 the city government has adopted a number of pilot project using digital technology, such as i-parking application in central Hanoi; tourism webpage (MyHanoi.vn and Hanoi360.vn); Hanoi police uses Facebook to communicate with people about social life and security issues; online registration of temporary residence for tourists; online system for tracing the sources of safe agricultural products (Hn.check.net.vn) which covers information from about 2000 food processing/producing businesses/cooperatives, with about 4000 codes of product origins; district authorities in 5 districts of Dong Da, Hai Ba Trung, Thuong Tin, Phu Xuyen, and Dong Anh use Zalo to interact with local people; the Department of Natural Resources and Environment established 11 environmental digital monitoring stations in Hanoi, and digital environmental monitoring systems set up by other stakeholders, such as FairNet by the Technology School (Hanoi National University), PAMair by D&L company, and AirVisual by IQair; and transportation VOV software helping users to identify good routes and transportation means for their travel in Hanoi.

In Hanoi 3 smart urban areas are under construction, including BRG Dong Anh (272ha in the North of Hanoi) developed by BRG and Sumitomo Corporation (Japan) with the investment of US$4138 Billiard which is expected to be completed by 2028; Vinhomes Ocean Park (420ha in Gia Lam District) consisting of a combination of 66 residential apartment buildings; and Vinhomes Smart City (280ha in the West of Hanoi) invested by the VinGroup. In these smart cities, the latest digital technologies are used to ensure smart management, smart security, smart community, and smart home.

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See: https://www.smartcitiesworld.net/news/news/work-begins-on-hanois-42-billion-smart-city-4666.

See: https://e.vnexpress.net/news/news/us-allocates-1-45-mln-toward-hcmc-s-smart-city-development4152559.html.

16 See: https://bbgv.org/business-center/knowledge/news-knowledge/uk-to-support-vietnam-in-building-smartcities/.

17 See: https://baoxaydung.com.vn/adb-supports-vietnam-to-build-smart-city-280248.html.

18 See: https://en.vietnamplus.vn/vietnamese-indian-firms-to-build-smart-cities-in-vietnam/188335.vnp.

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Hanoi authority is working on a Master Project (Đề án) for Building Smart Hanoi City by 2025 and Direction to 2030. The latest draft puts forward the targets: 

By 2025, perfecting mechanisms and policies related to building and managing the smart city, fully updating smart elements in all construction planning of the city. Complete the construction of the information infrastructure foundation, making smart the major urban technical and socio-economic infrastructures, ensuring a safe, reliable and uninterrupted connection to key elements in the city. Train and recruit the necessary human resources and have the right organizations to build and operate the smart city.

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By 2030, Hanoi will advance to the ASEAN leading group of smart cities, widely used smart applications, modern, efficient and safe information infrastructure, complete and smooth operation. . The technical infrastructure, socio-economic infrastructure of urban areas are made smart at a high level, meeting the needs of the city's residents best. Having abundant and high-quality human resources enough to meet the needs of smart urban development in the new age.

In Ho Chi Minh City (HCMC), the People Committee had issued Decision No. 6179/QD-UBND dated 23 November 2017 Approving the Master Project “Building Ho Chi Minh City to become a smart city period 2017-2020, with vision to 2025” (HCMC Smart City Project). The general objectives of the HCMC Smart City Project include (1) high economic growth rate toward knowledge economy, digital economy; (2) effective urban management based on sound projections; (3) enhancement of quality of living and working environments; (4) strengthening people participation in the urban management. Advanced technologies, especially ICT are considered as the key tools for achieving the development targets of the smart city project in the areas such as smart transportation, smart health care, safe food, environmental protection, flood prevention, human resource development, public security, e-govenment, and urban planning.

After implementing the Smart City Project for 1 year, Ho Chi Minh City authorities had adjusted the plan, with new goals for the next 5-year period. That is, building a “creative city” serving as a nucleus inside Ho Chi Minh City and that nucleus is the starting point for the deployment of industrial revolution 4.0 in Ho Chi Minh City. As an important step in building smart city, on 12th October 2020 the People Committee of Ho Chi Minh City had passed a resolution for reorganization of adiministrative units of the city and the formation of Thu Duc city by combining District 2, District 9, and Thu Duc district. These 3 districts form what is called “the Eastern City” of Ho Chi Minh City, the most developed part of Ho Chi Minh City, with 12 colleages and universities in Thu Duc district, the second-largest high-tech zone in the country in District 9, and new urban and financial centers in District 2. In addition, the Eastern City of HCMC is also well placed to connect with other development centers in Dong Nai and Ba Ria-Vung Tau provinces.

The new Thu Duc city has the land area of 211.56 km2k, with 1,013,795 population, and in 2019 it contributed 1/3 of the gross regional domestic product (GRDP) of HCMC which is about 7% of the national GDP. The new Thu Duc city is expected to become an innovative city with 8 25

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innovative centers, namely (1) a financial center, (2) sport and health care center, (3) hi-tech production and application center, (4) education center, (5) the largest start-up center in Vietnam, (6) ecological technology center, (7) transportation and container port center, and (8) smart urban area of Truong Tho port19. The National Assembly Standing Committee had decided the formation of Thu Duc City on its 51st meeting on 9th December 202020.

In another development, the People Committee of Ho Chi Minh City had issued Decision No. 2393/QĐ-UBND dated 3 July 2020 Approving Digital Transformation Program of Ho Chi Minh City with the vision that by 2030, Ho Chi Minh City becomes smart city with the fundamental and comprehensive renovation of activities of the digital government apparatus, of the digital enterprises and the prosperity and civilization of a digital society; by 2025 HCMC will be among top 5 provinces/cities in e-governance; digital economy accounts for 25% of GRDP, and annual increase of productivity by at least 7%; HCMC will be among top 3 provinces/cities in ICT Development Index (IDI), among top 3 in Global Competitive Index (GCI), among top 2 in Global Innovation Index, top 3 in Global Cybersecurity Index (GCI); broadband internet covers more than 95% of households and 100% communes; mobile 4G/5G and smartphones are popular, and more than 60% of people and enterprises use e-payment.

In Da Nang, the city authorities had piloted smart applications since 2014 in the framework of the Master Project to Build a Smarter City as stipulated in Decision 1797/QD-UBND dated 25 March 2014. In 2018 Da Nang People Committee issued Decision 6439/QD-UBND dated 29 December 2018 Approving the Master Project for Building Smart City of Da Nang for Period 20182025, Direction to 2030. Da Nang smart city program focuses on 6 pillars, including smart management, smart economy, smart environment, smart living, smart citizens, and smart transport. Da Nang city authorities identify 53 priority projects to be implemented in the periods 2018-2020, 2021-2025, and 2026-2030. In Da Nang there are more than 500 ICT specialists working in the government offices, about 25000 IT persons working in ICT enterprises, including about 9,500 persons working in the area of digital content and software; in addition, there are ICT specialists working in 25 universities/colleges in Da Nang. Da Nang is also home to more than 3000 ICT enterprises, including about 900 enterprises having ICT as the main activities and having average annual growth of 17% per year in the period 2013-2017 (Uỷ ban Nhân dân Thành phố Đà Nẵng 2018). Da Nang has achieved significant progress in digital transformation in a number of areas, such as transport (using smart camera for traffic and parking monitoring, developing GIS database for transport management), smart water management, smart environment management, smart electric grid network and lighting, development of online gateway for monitoring food safeties, application of ICT in education, application of e-health care in all communes, digital management of hospitals and development of database for e-health records and patient’s IDs (currently the database includes health information of 1,225,831 persons).

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See the Master Project for Building Thu Duc City: https://www.hataland.com/thanh-pho-thu-duc.

See: https://vnexpress.net/thanh-lap-thanh-pho-thu-duc-4203798.html.

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In 2019 Da Nang received ASOCIO Smart City Award 2019.

Challenges The policy of the Government of Vietnam stated in the Smart City Sustainable City Development Project is "cities need to be smart right from the planning step". However, at present, in Vietnam in general and Hanoi in particular, there is no unified specialized database system for urban planning and urban development management, but rather scattered in data system of ministries, branches and local agencies. This is a big gap, causing serious consequences in land use planning.

The general perception of urban government leaders is that “in building smart cities, there are two important things: investing in building a smart, advanced (technical) infrastructure, and building a series utility applications on smartphones so that citizens can easily interact with governmental levels” (interview with a leader of the National Institute of Urban and Rural Planning).

People's participation is limited. The city authorities are not able to mobilize many social resources (people, businesses - investors, associations, socio-political organizations) to participate in implementing the project, in proposing solutions and ideas to build smart cities, as well as directly using and exploiting smart utilities and services (Evaluation of the Ho Chi Minh City National Assembly Delegation in the survey on the implementation of the project "Building Ho Chi Minh City into a smart city in the 2017-2020 period, with a vision to 2025").

Insufficient investment, lack of skills and maintenance capacity are another limitations. For example, the Center for managing and operating smart traffic (lntelligent Transport System - ITS) is like the 'brain' of traffic monitoring on Ho Chi Minh City - Trung Luong expressway. The center connects with 38 cameras, including the roads at the ends of Ho Chi Minh City and Tien Giang, 44 electronic boards to inform the traffic situation, guide the driver how to circulate on the highway. However, from 2018, the Center is paralyzed because after more than 3 years of operation, electronic products have been used for a long time in rainy and sunny conditions, the power source is not stable, there have been many damaged devices, there is no replacement device. Besides, there is software error (software made by Korean contractors). The penalty for violation on this highway is mainly based on the traffic police and 4 speed measuring devices, and 7 cameras managed by the traffic police. However, the above monitoring devices are not enough to monitor traffic order and safety on the whole route longer than 40km.

Media & advertising There are diverse media formats in Vietnam. According to the statistics of the Ministry of Information and Communication (Bộ Thông tin và truyền thông 2019), in 2018 there were 868 newspapers agencies operating in Vietnam, including 24 e-newspapers agencies with 189 webpages, employing total 41,600 workers and generate total revenue of VND 4,900 billiard (about US$211.5 million).

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There were 71 TV stations and 1 national radio station, providing 87 channels of radio, 191 channels of domestic TV, including 83 pay TV channels, and 70 pay channels of foreign TV having permission to operate in Vietnam. The number of user accounts for cab-TV were 10,458,294, including 5,606,538 accounts of analog cab-TV, 3,207,797 accounts of digital cab-TV, and 1,334,793 accounts of IPTV; the number of user accounts for digital satellite TV, mobile TV, and internet TV increased significantly during 2016-2018 (from 1,367,790 accounts for digital satellite TV in 2016 to 1,794,393 in 2018; from 387,687 user accounts for mobile TV in 2016 to 814,697 accounts in 2018; and from 722,046 user accounts for internet TV in 2017 to 1,277,004 accounts in 2018). The total revenue from pay TV increased slightly from VND 7,499.1 billiard in 2016 (about US$323.7 million) to VND 7,775 billiard in 2018 (about US$335.6 million) (Bộ Thông tin và truyền thông 2019).

There were 493 social media having licenses to operate in Vietnam (Bộ Thông tin và truyền thông 2019). By January 2020 there were about 65 million social media active users, implying a penetration of 67% population (about 96.9 million) and an about 10% increase compared to the number of social media active users in 2019 (We are social and Hootsuite 2020). Facebook is the most popular (with 90% of internet users aged 16-64; 61 million people can be reached with advertisement on Facebook), followed by Youtube (89%), Zalo (74%), FB Messenger (74%), Instagram (46%), Tiktok (39%), Twitter (31%), Skype (26%), Viber (25%), Pinterest (23%), Line (20%), Linkedin (19%), Wechat (19%), Whatsapp (19%), Twitch (16%), and Snapchat (16%) (We are social and Hootsuite 2020).

Digital advertising market in Vietnam is growing rapidly. In 2019 the total digital ad spend was US$306 million, an increase by 9.2% compared to the value in 2018. The largest share of digital ads in 2019 was digital search ads (US$118 million), followed by digital banner ads (US$54 million), digital classified ads (US$53 million), social media ads (US$50 million), and digital video ads (US$31 million); spend on Social Media ads had the fastest growth rate with the annual increase of 17%, compared to 12% increase of spend on digital banner ads, 9.2% of digital search ads increase, 7.7% of digital video ads increase, and only 1.3% of digital classified ads increase (We are social and Hootsuite 2020).

Figure 4. Most used Social Media Platforms

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Banking and Financial Services Banking and financial services sector is among the fastest growing sectors in Vietnam that make the country “a rising star in the global fintech industry� (Cameron A et al. 2019). The number of fintech companies has increased quickly from 40 in 2016 to 140 at present time. Covid-19 epidemic somehow has facilitated digital online payment that draws 36.2 million users with total transaction value of US$8,904 million in 2020 (TopDev 2020b). This is one of the sectors that are pioneering in using digital technology for innovations, especially big data and AI, Robotic Process Automation (RPA), chatbot, blockchain, and mobile payment.

Digital online payment and financial transaction without using cash are fully supported by the government. The Prime Minister had issued Directive No. 22/CT-TTg dated 26 May 2020 calling for actively promoting measures for payments without using cash in Vietnam. According to the 29

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statistics of the State Bank, during the first 6 months of 2020 the number of payment transactions without using cash has increased by 180%; many banks reported the proportion of transactions in the bank branches is less than 10%21.

The National Digital Transformation Program to 2025, with a vision to 2030 stresses the digital transformation in financial and banking sector as followed: Build e-finance and establish a modern and sustainable digital finance foundation.

Deploying comprehensive application of digital technology in tax, customs, treasury and stock markets. Digital transformation in commercial banks to provide digital banking services towards diversified development of distribution channels, innovation, process automation, and promotion of cooperation with financial technology companies (fintech) and payment intermediaries in building a banking and financial service ecosystem to promote the universalization of national finance, bring financial - banking services closer to those in remote areas which are inaccessible or not serviced by banks based on technological innovation such as mobile payment, peer-to-peer lending. Support access to loans with credit scoring solutions with a reliable customer data warehouse and scoring model.

Biggest challenge for Banking and financial services digital transformation is the lack of human resource with proper skills to meet the increasing demands of digital banking and financial services. Another challenge is how to ensure information security in the context of digital banking. Fintech firms involved with cryptocurrencies are not welcomed by the government because of the policy to ban its use in Vietnam (Cameron A et al. 2019).

IT & Telecom Vietnam's information and communication technology (ICT) industry in recent years has had a strong development, becoming an important infrastructure sector for socio-economic development, creating a new development paradigm to improve national competitive capacity.

According to a report by the Ministry of Information and Communications, the ICT industry revenue in 2019 was estimated at more than US$112 billion, up 9.8% compared to 2018, paying the state budget nearly VND 54 trillion (about US$2.3 billion), contributing 14% to GDP, and creating jobs for more than one million workers22. Large domestic enterprises such as Viettel Group, VNPT Group, FPT, CMC, Vingroup and many other corporations increasingly focus on R&D and making innovative ICT products. Many startups are digital, some of which are successful.

Specifically, Topica Fouder Institute has created more than 60 startups, raised more than US$ 20 million from funds and has a total valuation of more than $ 100 million; WeFit - built according to the principle of a shared economy for gyms with revenue of US$700,000 in 2017 after only 1 21

See: https://forbesvietnam.com.vn/tin-cap-nhat/thach-thuc-chuyen-doi-so-ngan-hang-o-viet-nam-13510.html.

See: https://sotttt.soctrang.gov.vn/sotttt/1229/27531/53582/307955/tin-tuc-noi-bat/cong-nghiep-cntt-dien-tuvien-thong-da-tro-thanh-nganh-kinh-te-quan-trong-cua-dat-nuoc.aspx.

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year of operation; Truck-hailing startup Logivan succeeded in raising an additional US$ 5.5 million in investment in early 2019.

As of June 2020, the number of IT, electronics and telecommunications enterprises (both domestic enterprises and foreign investors - FDI) is about 45,500 enterprises. Total revenue of IT, electronics and telecommunications industry (both domestic and FDI) in the first 6 months is estimated at nearly 50 billion USD, up by 2.2% compared to the same period last year. Revenue from FDI sector reached 47 billion USD, accounting for 95% of total revenue. Total export revenue of IT, electronics and telecommunications of Vietnam up to June 2020 was estimated at US$45.7 billion, up by 4% YoY. Export revenue from FDI sector reached 44.5 billion USD, accounting for 97% of total export revenue of Vietnam23.

Vietnam's ICT infrastructure is being increasingly invested by the government to ensure the demand for ICT application in administrative reform, building a digital government and digital economy. 58/63 provinces in Vietnam have data centers; 62/63 provinces have online video conferencing facilities. Private companies are encouraged to invest in ICT infrastructure.

As mentioned above, many large technology corporations in the world have invested billions of dollars to build factories to manufacture electronic components in Vietnam. The hardware industry in 2018 has made a special contribution to the total revenue of the entire Vietnam IT industry with over 88 billion USD, accounting for nearly 89% of the total industry revenue with about 3,500 enterprises. In 2019 ICT industry hardware products such as telephones, computers and electronics continuously maintained their positions in the top 10 list of Vietnam's main export products, bringing the industry a trade surplus of about US$ 28 billion. Vietnam becomes a 2nd largest producer of telephones, and 10th largest producer of computer in the world.

However, the turnover of foreign-invested enterprises accounts for 98% of the total export revenue. Meanwhile, there are not many products in the electronics and telecommunications sectors that are created and designed in Vietnam.

Vietnam Software Industry has a strong development step in both revenue and number of businesses. Total revenue of the software and digital content industry of Vietnam in 2018 reached over US$4.3 billion, IT service revenue reached over US$6 billion, software exports reached over US$3.5 billion. Vietnam is currently Japan's second largest partner in software development and service outsourcing from 2014 to present and is the most popular partner of Japan since 2009. Ho Chi Minh City and Hanoi rank in the top 20 most attractive cities in the world for software outsourcing and services.

Currently, there are 25 Vietnamese software enterprises achieving CMMi certification, of which 5 enterprises achieved CMMi level 5 (FPT Software, Luxoft, Global Cybersoft, Harvey Nash Vietnam, Toshiba Vietnam), making Vietnam become Southeast Asia's leading country in the

23

See: https://ictnews.vietnamnet.vn/cuoc-song-so/cntt/95-tong-doanh-thu-doanh-thu-cong-nghiep-cntt-dien-tuvien-thong-cua-viet-nam-la-tu-fdi-258030.html.

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number of CMMi certified software companies, surpassing Singapore, Philippines and Malaysia (VINASA 2019).

One of the very important directions of ICT development in Viet Nam is network information safety and security (NISS). NISS has received a great and increasing attention of the government, businesses and ICT users. In 2020 the NISS monitoring system of Viettel alone had recorded 156 organizations being attached, 306 government websites being attached, 4 big phishing campaigns targeting all major banks, affecting 26,055 bank users, and 3,044,685 DDoS attaches (Nguyen Son Hai 2020).

According to the data released on the Vietnam Day of Cyber Security 2 nd December 2020 by the Authority of Information Security (AIS), Ministry of Information and Communications, the total revenue from cyber security products and services of domestic cyber security companies had increased sharply from VND 400.6 billion in 2016 to VND 1490 billion at the end of 2019 and it is estimated to be about VND 1900 billion (about US$ 82 million) at the end of 2020. The share of the total revenue from cyber security products and services of domestic cyber security companies compared to that of international companies operating in Vietnam has also increased from 18% in 2015 to 39% in 2019 and it is expected to reach 45% at the end of 2020 (Nguyen Thanh Phuc 2020).

In the digital content industry, in 2019, the revenue was modest, about US$850 million, of which the export revenue accounts for nearly 93% because Vietnamese enterprises have not yet exploited the domestic market which was dominated by major cross-border platforms such as Facebook and Google. Vietnam is also the 7th largest country in the world in terms of the number of Facebook accounts, with over 60 million users (57% total population). With these numbers, the digital content industry market is expected to continue to grow strongly in the coming time, bringing a great source of revenue for Vietnam's IT industry.

Retail Vietnam, with its young population and high urban population rate, is an attractive market for the retail industry. According to the General Statistics Office, in 2019, the country's retail sales of goods reached nearly US$162 billion, equivalent to VND 3,751 billion, accounting for 75.9% of the total and up 12.7% compared to 2018. Retail stores are under great pressure to compete with the trend of online trade, and many retail stores use omni-channel sales as a new way of comprehensive and sustainable development to keep up with the digital transformation economy.

There has been a boom in e-commerce and e-Logistics lately. According to the Department of ECommerce and Digital Economy (Ministry of Industry and Trade), e-commerce growth is 35% / year; Vietnam's retail e-commerce sales in the 2016-2020 period are estimated to increase 20% / year and Vietnam's total retail e-commerce sales are expected to reach US$ 10 billion by 2020 (Bộ Công Thương 2019). E-commerce growth is in part due to the sudden increase in smartphone 32

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users, creating opportunities for online shopping trends on mobile to explode. Eight out of every 10 Vietnamese will use a mobile phone (Google APAC) and 46% will own a personal computer.

This is the driving force for the trend of online buying and selling in the retail industry to develop.

The popular online sales channels for consumers are social networks (Facebook, Zalo Shop, Instagram), e-commerce platforms (Shopee, Lazada, Sendo), electronic websites.

According to Shopee's statistics, consumers often buy fashion clothes, cosmetics, food, technology items online. For high-value items such as home appliances, electronics, and fresh foods they would go directly to the store due to quality concerns and desire to buy products with good guarantee return, warranty. This makes omni channel the best operating and sales solution for a retail store. Customers can browse online or go to the store.

2020 will be a booming year for convenience for both buyers and sellers. Barcode scan payment forms are popular at Vinmart supermarket chains or using e-wallets for payment. Lotte Mart also offers in-store shopping and door-to-door delivery. Technological achievements are strongly applied in 2020 to bring convenience to everyone such as sales management software, POS machine, barcode scanner. Retail stores such as fashion accessories, cosmetics, mom & baby can speed up online sales and delivery goods with MISA eShop sales software. Currently, the software has connected with reputable carriers such as ViettelPost, Fast Delivery, Economical Delivery, AhaMove. Shops just need to confirm the order, choose the unit with the cheapest shipping cost, push the order and track the delivery process on the same system (MISA eShop 2020).

Localization and personalization are two prominent trends that are absorbed and applied by domestic retailers in the Vietnamese market. Many foreign retailers, when entering the Vietnamese market, want to build extensive networks, but fail and quit the game. The reason is not due to the financial shortage, but the lack of application of the trend of localization and personalization in the development process24.

"Black swan" Covid-19 is still constantly spreading globally, entering every corner, making the economy tilt, bringing dire consequences for the economy. However, in contrast to the gloomy picture of shopping malls under the influence of the epidemic, online shopping businesses saw a positive growth. According to a survey by Nielsen in February 2020, online retailers such as Tiki, SpeedLotte‌ recorded an increase of at least 2-4 times a day's average orders. Co.opmart's online shopping service increased 4-5 times in the same period. The Grab transportation unit quickly launched the Grabmart service, going to the supermarket to help consumers. These are very quick moves that adapt to the market from the retail side. The online retail market, although growing rapidly over the past few years (growing 39% on average over 5 years), is higher than that of the traditional retail market (up 10% on average over 5 years), still only accounts for less

24

See: http://vneconomy.vn/hai-xu-huong-tat-yeu-cua-nganh-ban-le-viet-nam-trong-tuong-lai-

20191113020341293.htm.

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than 4% of total retail sales in Vietnam. The retail market, therefore, offers good potential for online retail solutions25.

Healthcare Health sector is one of the sectors that apply ICT the most. The government and the leaders of the Ministry of Health give strong priority to the digital transformation of health sector. The Ministry of Health has issued many legal documents and guiding documents on the development of information technology (IT) application in the health sector such as Circular No. 46/2018 / TTBYT dated December 28. 2018 of the Minister of Health regulates electronic medical records; Circular No. 54/2017 / TT-BYT dated December 29, 2017 of the Minister of Health promulgating the set of criteria for information technology application in medical examination and treatment establishments; Circular 49/2017 / T-BYT dated December 28, 2017 of the Minister of Health regulating remote medical activities; Circular No. 53/2014 / TT-BYT dated December 29, 2014 of the Minister of Health regulating conditions for medical activities in the network environment and other professional documents in the field of information security, digital signature.

Recently Ministry of Health issued Decision No. 4888/QD-BYT dated October 18, 2019 approving the Master Project (Đề án) on Application and Development of Smart Medical Information Technology for the period of 2019-2025: 

Objective 1: Develop and step by step form a smart health care and disease prevention system, contributing to good implementation of the Vietnam Health Program.



Objective 2: Accelerate the application of information technology in medical examination and treatment facilities, contributing to administrative reform and reducing hospital overcrowding; use digital medical records instead of paper medical records, e-payment of hospital fees, and form smart hospitals.



Objective 3: Strengthen the application of information technology in health management, deploy electronic office systems, public service gateways and electronic one-stop information systems of administrative procedures, and promote level 3, level 4 online public services, to build smart medical governance.

The National Digital Transformation Program to 2025, with a vision to 2030 stresses the digital transformation in health sector as followed: Develop a support platform for remote medical examination and treatment to assist people in remote medical examination and treatment, reduce the load of medical facilities, limit public contact, and reduce the risk of cross-infection; 100% of medical establishments have remote medical examination and treatment units; accelerate digital transformation of the health sector.

Build and step by step form a system of healthcare and disease prevention based on digital 25

See: https://resources.base.vn/management/nganh-ban-le-chuyen-doi-so-655.

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technologies; Comprehensive application of digital technology in medical examination and treatment facilities, contributing to administrative reform, reducing hospital overcrowding, improving the quality of medical examination and treatment, using electronic medical records, leading to no use of paper medical records, e-payment of hospital fees, establishment of smart hospitals; building a smart health management platform based on digital technology, integrating information and data, forming a national health database.

By 2020 all of the public services provided by the Ministry of Health have been carried out online at level 4 (the highest level of online public services). Nearly 100% of all hospitals at all levels have applied hospital management software in their operation. Many central, provincial and district hospitals have step by step deployed test management software systems, medical image storage and transmission management software, proceeding to implement electronic medical records and hospital information systems. Some hospitals have applied artificial intelligence and robotics in diagnosis, treatment and surgery. Immunization Information Management System and Infectious Disease Information Management System has been deployed nationwide; 99.5% of health care facilities in the country have e-medical records connecting to Vietnam Social Insurance network, telemedicine has been a practice for central-level hospitals and some advanced hospitals of Hanoi and Ho Chi Minh City to connect to their satellite hospitals at lower levels.

The health sector currently has four outstanding robot systems that are used in modern medicine, including Da vinci laparoscopic surgery robot, Renaissance spine surgery robot, Makoplasty knee and hip surgery robot, and Rosa neurosurgery robot. AI technology has been used in cancer treatments and image analyzation in a number of hospitals, such as K hospital, Lung hospital, Vimec hospital in Hanoi, Phu Tho General Hospital 2018, Quang Ninh General Hospital 2018 (Báť™ Y táşż 2019).

AI is also used for prevention of Covid-19. Zalo, Viettel and FPT also put AI applications into chatbot that automatically statistics the disease situation in Vietnam in the form of real-time maps. The number of people hospitalized in isolation, the number of people being treated and recovered is also constantly updated. Artificial intelligence chatbots such as those of Zalo, Viettel, and FPT help people approach epidemic developments and be proactive in prevention. In addition, AI is also used in other applications such as Bluzone, NCOVI to help the health sector detect infected cases early and send them to authorities. At the same time, it helps the health sector to monitor epidemics and have a timely response plan26.

26

See: https://baodautu.vn/ung-dung-tri-tue-nhan-tao-vao-y-te-than-y-moi-d127968.html.

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Automotive & transportation and logistics Currently, Vietnam has about 40 automobile manufacturing and assembling enterprises, with a total capacity of about 680,000 vehicles / year, the localization rate of motorbikes reaches 8595%.

Application of ICT in transport has received great attention of the government. On 7 th June 2019 the Prime Minister signed Decision No. 703/QD-TTg approving the Master Project “Developing a competitive transport market in the direction of developing multimodal transport, connecting between different modes of transport, focusing on the application of information technology to reduce costs of transport, facilitating the circulation and distribution of goods and services by the business.” One of the key point of this Decision is to promote strong application of science and technology, especially information technology and new technology trends in transport and logistics such as automation, artificial intelligence, internet of things, to take steps developing breakthroughs in both the state management and the operation of the transport market, improving the capacity of the transport industry to access the industrial revolution 4.0.

The National Digital Transformation Program to 2025, with a vision to 2030 stresses the digital transformation in transportation and logistics sector as followed: 

To develop a smart transportation system, focusing on urban transportation systems, highways and national roads. Transforming logistics infrastructure (such as seaports, inland water ports, cargo, railway, logistics).



Develop platforms connecting shippers, carriers and customers to develop a one-stop system that allows shippers to find the optimal means of transporting goods and warehouses accurately as well as supporting the packaging and posting support, perfecting the processing of related administrative documents.



Transforming the management of transport infrastructure, transport business vehicles, driver management, allowing digital transport infrastructure management, vehicle registration and management through digital records , and grant and administer digital vehicle driver licenses.

Many ICT projects are integrated into transport (land, air, water) infrastructure and management projects as well as in development of logistics centers (Bộ Công Thương 2019). In Vietnam, currently there are some studies applying high-tech applications such as Blockchain to logistics activities. For example, the application of e-DO (Electronic Delivery Paper) for odd shipments (LCL) is being carried out and is used in the e-B / L project of the International Freight Forwarders Association FIATA. Saigon Newport is testing e-Port, e-DO with a few shipping lines.

Some information technology (IT) applications in production and business activities include: 

Transport management, GPS navigation system providing routing for remote managers as well as providing up-to-date shipment information for customers; Create Transport 36

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Exchanges - Exchanges help connect trucks with shippers, connect supply (idle trucks) and demand (shippers have goods to send), help utilize resources, save costs fees; Routing system - Software for road planning, vehicle tracking 

Warehouse management, automation has been set up in many warehouses and yards, automating the workflow by warehouse management system (WMS). While this system has proven to help warehouses operate efficiently, full automation is a matter of intentionally designed and automated warehouses.



Work organization: Working "mobile" in the Logistics industry. Typically, it is to create channels to access service information closer to customers such as website, fan-page, twitter, satellite websites with preeminent features that are easy to use by smartphone, thereby creating features easy connection between customers and businesses. At the same time, create a support team to advise and provide services to customers quickly and promptly; Create a questionnaire system to get customer opinion by IT application; create groups to support import and export knowledge, logistics on social networks, thereby creating opportunities to reach customers as well as new business opportunities. The fact is gradually proving that applying IT, especially using Big Data and AI to analyze data and coordinate human resources in production and business activities is the optimal solution.

In addition to tangible logistics centers, currently, with the advancement of technology and the development of e-commerce, from the end of 2018, Vietnam has begun to form a new model, that is: Drop-shipping . This is a business model that allows for an on-call shop operations without needing to store inventory, own products and ship products to customers. This model is suitable for newcomers with a small amount of capital, do not need to own products (Bộ Công Thương 2019).

According to the Vietnam Logistics Business Association (VLA), the growth rate of the logistics industry in Vietnam in recent years has reached about 14% - 16%, with a scale of about US$40 42 billion/year. Participating in the logistics market there are about 3,000 domestic enterprises and about 25 leading logistics groups in the world doing business in many forms. Currently, many cross-border logistics service providers are operating in Vietnam with big names such as DHL, FedEx, Maersk Logistics, APL Logistics, CJ Logistics, KMTC Logistics (Bộ Công Thương 2019). In 2018 the World Bank ranked Vietnam 45 among 167 economies by Logistics Performance Index (LPI), a huge improvement from 64th position in 2016, and Vietnam is considered as one of the top performers among lower-middle-income countries (Arvis et al. 2018).

Although there is significant potential, the competitiveness of this industry is still quite modest compared to other countries in the region, especially in technology adoption. New technologies that have been applied in the global logistics industry are still not commonly used in Vietnam.

For example, robotics systems in warehouses have only been applied by two companies in Vietnam, namely German Schenker and Vinamilk in Binh Duong. Major domestic shipping companies are still manually handling goods without using automatic distribution centres.

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Looking ahead, technologies such as virtual reality or delivery by drones have not yet been announced in any technology deployment plans (Bộ Công Thương 2019).

Biggest and most potential players in the Market TOP 10 local companies in size On 17 July 2020 Vietnam Report announced top 10 most authoritative ICT companies in 2020, including (1) Viettel Group, (2) FPT, (3) VNPT, (4) Mobifone, (5) VNPT-Vinaphone, (6) CMC, (7) VNG, (8) VNTT, (9) HTC, and (10) Saigon TEL (Figure 5). The assessment is based on financial assessment (Yellow bar on Figure 5), communication assessment (Green bar), and survey assessment (Blue bar).

Figure 5. Top 10 most authoritative ICT companies in 2020

Nguồn: Vietnam Report, Top 10 Doanh nghiệp Công nghệ uy tín năm 2020, tháng 7/2020

TOP local fastest growers Vietnam Report also announced top 500 fastest growing companies in Viet Nam. Figure 6 shows top 5 fastest growing companies in Telecommunication, Top 1 fastest growing company in Ads and Market Studies, and top 5 fastest growing companies in Other IT (the 2 nd row refers to their position in the top 500 fastest growing companies in general).

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Figure 6. Top local fastest growing ICT companies in 2020 Top 500 fastest growing enterprises in Vietnam: Telecommunication FAST500 No. Enterprises ranking Công Ty Cp Giải Pháp Thanh Toán Việt Nam 1 35 VNPAY (Vietnam Payment Solution Joint Stock Company)

Brand

Công Ty Cổ Phần HTC Viễn Thông Quốc Tế (HTC Telecom International)

2

37

3

61

4

83

5

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1

Top 500 fastest growing enterprises in Vietnam: Ads and Market Studies Công Ty Cp Công Nghệ Thông Tin Truyền Thông Thiên Hy Long Việt Nam (Chicilon 104 Media Information Technology Vietnam Joint Stock Company) Top 500 fastest growing enterprises in Vietnam: Other IT

Tập Đoàn Bưu Chính Viễn Thông Việt Nam (Vietnam Post and Telecommunications Group VNPT) Tổng Công Ty Dịch Vụ Viễn Thông (VNPT Vinaphone) Công Ty Cp Viễn Thông FPT (FPT Telecom)

8

Tập Đoàn Digital Novaon (NOVAON Digital Corporation)

2

100

Công Ty Cp Công Nghệ Bằng Hữu (AMIGO-- IT Services and Solutions for Personalized Financial Services in Vietnam)

3

154

Công Ty Cp MISA (MISA Join Stock Company)

1

4

185

5

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Công Ty Cp Công Nghệ Và Truyền Thông Việt Nam (Vietnam Technology & Telecommunication Joint Stock Company VNTT) Công Ty Cp Công Nghệ Elite (Elite Technology JSC.)

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Other international companies that are noteworthy Giant international ICT companies have been mentioned in some places in previous sections.

Here are some of them: Intel: Apart from its largest chip assembly and testing plant worth more than US$1 billion in Ho Chi Minh City, US multinational technology corporation Intel plans to continue expanding its production in Vietnam. IPV has contributed an average value of more than US$ 3.6 billion per year to HCMC over the past 10 years. With another investment in Ho Chi Minh City in the coming time, the export revenue will increase further.

Microsoft owns a mobile phone production plant worth over 300 million USD in northern Bac Ninh province. Microsoft has a small software operation (140 employees evenly split between Hanoi and Ho Chi Minh City) that provides support to local clients. The team includes a 10-person group of engineers that help developers use the MS enterprise platform.

Apple is reported to request Foxconn, a Taiwanese mulltinational electronics contract manufacturer, to move iPad and MacBook assembly to Vietnam from China to diversify its production to minimise the impacts of a Sino-US trade war27. Foxconn is building assembly lines for Apple’s iPad and MacBook laptop at its plant in the northeastern province of Bac Giang in Vietnam which will start the production in the first half of 2021. Foxconn Vietnam is currently employing about 50,000 workers and its revenue from export in 2019 valued at about US$ 3 billion and is expected to reach US$ 6 billion at the end of 202028. Foxconn is reported to invest US$270 million to support the Vietnam expansion of production for Apple (Reuters online 26 November 2020).

IBM returned to Vietnam in 1994 with offices in Hanoi and Ho Chi Minh City. It focuses on the public sector as well as banking and telecommunications and has set up a number of industryspecific centers in the country, including: a Banking Center of Excellence, a Cloud Computing Center, and a Global Delivery Center in Hanoi and Ho Chi Minh City.

Samsung Vietnam officially announced the start of construction of the largest new research and development (R&D) center in Southeast Asia in the Tay Ho Tay urban area, Hanoi. This center has an investment of about 220 million USD with a total construction area of 11,603 m2 and floor area of 79,511 m2. The building is designed with 16 floors, 3 basements and is expected to be completed by the end of 2022. It is expected that when put into operation, the Center will increase the human resource from 2,200 people to 3,000 people 29.

Other ICT giants such as HP, Panasonic, Qualcomm, Fujitsu, SAP have large-scale production facilities or operate actively in Vietnam. Hindustan Computers Limited (HCL), one of the 3 largest IT companies in India (Top 5 outsourcing companies in the world) has developed its center in Ho 27

See: https://www.reuters.com/article/uk-foxconn-vietnam-apple-exclusive/exclusive-foxconn-to-shift-someapple-production-to-vietnam-to-minimise-china-risk-idUKKBN2860XN. 28 See: https://tinnhanhchungkhoan.vn/foxconn-tang-dau-tu-apple-co-vao-lam-to-post244704.html.

29 See: http://ictvietnam.vn/samsung-xay-dung-trung-tam-rd-moi-lon-nhat-dong-nam-a-tai-viet-nam-8857.htm.

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Chi Minh City, requiring an additional 10,000 engineers in the next 5 years. Axon Enterprise, one of the leading executive technology development companies in the US, has also focused its technology development base in Ho Chi Minh City Vietnam.

Analysis on Potential Market Access or Business opportunities Technology Transfer The National Assembly of Vietnam passed a revised law on Technology Transfer on June 19 2017, covering regulations on technology transfer activities within Vietnam, from abroad into Vietnam and from Vietnam to foreign countries. It also specifies the rights and obligations of organizations and individuals engaged in technology transfer activities; technology appraisal of investment projects and technology transfer contracts. The law comes into effect on July 1, 2017.

The Prime Minister issued Decision No. 1851/QD-TTg dated 27 December 2018 approving the Master Project (Đề án) “Promoting technology transfer, technology mastery and development from abroad to Vietnam in priority sectors and fields until 2025, with a vision to 2030.” The project aims to guide policies to support technology transfer, ownership and development from abroad into Vietnam, especially source technologies, high technologies and fundamental technologies in order to rapidly innovate technologically, shorten the gap in technological qualification and capacity compared with advanced countries in the region and in the world, contributing to restructuring economic sectors to serve the industrialization and modernization of the country.

Priority orientation for technology transfer, technology mastery and development from abroad to Vietnam includes: high technologies, source technology for IT infrastructure development, development of 5G network, software development, especially software embedded in hardware, electronics and telecommunications equipment; technology to manufacture electronic components, microelectronic circuits for the development of devices such as peripherals, computers, home electronics, audio-visual equipment, solar cells, and chips microprocessor, controller (PLC programmable controller, CNC controller).

According to the Ministry of Science and Technology (Science and Technology), the technology transfer contracts have been approved, the number of industrial contracts currently accounts for 63%, processing of agricultural products and food accounts for 26% and medicine and cosmetics accounts for 11%. Through FDI activities, many new technologies have been implemented and many new products have been produced in FDI enterprises; many officials and workers have been trained and re-trained to update their knowledge to suit new requirements. FDI activity also has the impact of promoting domestic technology development in the context of market mechanism competition.

Thanks to adjustments in economic mechanisms and policies, technology transfer can be made through import of equipment and machines; trade relations have been expanded, creating 41

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opportunities for businesses to access new achievements of science and technology, thereby innovating production technology, increasing competitiveness of products, workers' skills and productivity are raised30.

Licensing In most cases, to enter into a license agreement, the foreign licensor does not need to establish a business entity in Vietnam or a joint venture with a Vietnamese party. Establishing a subsidiary or branch office in Vietnam is optional. There are no restrictions against a foreign licensor entering into a licensee agreement without establishing a subsidiary or branch office in Vietnam.

Foreign licensors who wish to establish a business entity in Vietnam have to satisfy certain conditions or restrictions imposed on foreign investors. Typical examples of these conditions and restrictions include, among other things: 

limitations on foreign ownership in certain sectors;



business sector restrictions;



requirements for forms of investment;



geographic restrictions;



conditions on the qualifications of Vietnamese partners; and



other conditions or requirements relating to specific business sectors.

As for regulatory review requirements, to establish a company in Vietnam, foreign licensors must obtain at least: 

an investment registration certificate (IRC). The IRC will set out content relating to the investment project, such as investors, project location, objectives and scale of the project, investment capital, investment incentives and restrictions; and



an enterprise registration certificate (ERC). The ERC will provide the corporate details, such as the company name, registered office address, charter capital, owner’s details and legal representatives of the company.

The provincial Department of Planning and Investment or the board of management of the relevant industrial zone or park with jurisdiction over the location of the investment project has the power to approve the IRCs and ERCs. However, larger-scale projects and certain types of projects require a ‘decision on investment planning’ approval from higher-level government bodies prior to submission of the IRC and ERC to the local investment authorities. In addition, 30

See: https://dovetec.vn/thuc-trang-va-giai-phap-chuyen-giao-cong-nghe-o-viet-nam/.

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approval of the foreign investment from a number of other government bodies may be required, depending on the nature and scale of the foreign investment.

Vietnamese law does not explicitly differentiate between types of license arrangements. Some license arrangements are expressly regulated by specific laws, while others are not and, therefore, will be treated as civil arrangements under civil laws. The two general license arrangements are as follows: 

license arrangements that are regulated by specific laws: these include copyright license arrangements (which include software licenses, performance or TV show licenses, music licenses); industrial property rights licenses (such as patent licenses, trademark or service mark licenses, industrial design licenses); plant variety licenses; technology transfer licenses; and franchise agreements; and



license arrangements that are regulated by civil laws: this covers other types of licenses, for example, celebrity and character licenses, or license agreements for non-registered industrial property subject matters.

Vietnamese law does not differentiate between national and international licensing relationships. The law requires that a licensee agreement must be established in the form of a written contract31.

Outsourcing and sourcing Gartner’s “Leading Global Locations for Offshore Services,” A.T. Kearney’s “Global Services Location Index” and Tholon’s “Top Outsourcing Destinations” indicate that Vietnam is emerging as “India+1” location for ICT and ICT-enabled services.

Vietnam is the second-largest partner of Japan when it comes to software development, services and new technologies; only behind China. Since 2014, Vietnam has been becoming the 2nd biggest partner to Japan in software and service outsourcing. More than 10 software companies in Vietnam have established their subsidiaries in Japan. A survey conducted by the Information Technology Promotion Agency Japan on more than 1,100 Japanese IT companies using outsourcing services shows that there are 31.5% of them likely to select outsourcing services from Vietnam, comparing to the numbers of 20.6% for India, 16.7% for China, 9.7% for Thailand, and 7.4% for Philippines.

A statistics indicates that Vietnam currently has 20,000 employees serving the Japanese market in ITO (Information Technology Outsourcing) and BPO (Business Process Outsourcing). Annually, there are about 55,000 IT graduates from universities and colleges in Vietnam. With more than 45 years of cooperation, Vietnam is ready to make up for Japan's increasingly lack of IT human resource because of the pressure of aging population. In 2018 Japan has invested in 54 IT 31

For more details, see: https://www.lexology.com/library/detail.aspx?g=a43f4e3c-a335-402d-85f27676f98479da.

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projects, accounting for 19.6% of total investment projects in Vietnam and the investment wave from Japanese businesses will probably continue to increase in the future32. Vietnam also provide outsourcing services to many of the US companies. In 2019 employees working in IT outsourcing campanies accounted for 43.8% of manpower in IT industry in Vietnam (TopDev 2020a).

Foreign-owned ICT services firms producing for export are typically multinational affiliates using Vietnam as a base to provide software outsourcing and ICT-enabled (BPO etc.) services to clients around the world. For these firms, cost of labor is a key driver of investment and expansion. SPi is a Philippines-based content solutions BPO company with approximately 20,000 employees in countries around the world. Their Vietnam branch employs 800 people to provide global clients with non-voice BPO services for the publishing, health care, and entertainment industries. Specific services include PDF conversion of previously published materials, creation of eBooks, and the generation and enhancement of digital content (e.g., to make content searchable). Digi-Texx (Germany) and UK-based Harvey Nash are anotther examples of foreign-owned companies using Vietnam to provide ICT outsourcing services (Sturgeon and Zylberberg 2017).

Product Development Vietnam ICT companies have been trying to upgrading from software outsourcing to ownproduct development in recent years, but it is difficult due to the lack of Vietnamese management, sales and marketing professionals capable of sowing confidence in potential customers and investors. For example, KMS Technologies used to do software outsourcing. The company generally provides software architecture, design, development and testing services for clients. The work is highly collaborative, with daily virtual meetings and 2-3 month-long trips by software engineers to the US to meet with clients at their facilities. KMS has developed only a few of its own products in the last two and a half years. Its 15-person R&D group has been separated from KMS to avoid conflicts of interest with outsourcing clients. One of their spinoffs is QASymphony.com, a company that licenses a software testing tool. QA now has a US-based executive team and has raised $2.5 million in investment capital. KMS also spun off SuperBrightyStudio, a gaming studio developing games for the domestic and regional markets.

Their game studio has put out one game called WiTurn, which has become popular in Vietnam and China (Sturgeon and Zylberberg 2017).

Vietnam has made it a priority to increase R&D spending in the country to facilitate the shift toward own-product development of ICT sector. The government has sought both to attract multinational R&D centers and to encourage companies already in the country to invest a small portion (1%) of their revenues in R&D (Sturgeon and Zylberberg 2017).

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See more details: https://www.farorecruitment.com.vn/vietnam-is-a-favorite-supply-of-it-outsourcing-servicesto-japan-t_1/2578.

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Conclusions and a Way Forward The analysis presented above shows a general picture of a great progress in term of digital transformation in all socio-economic fields with various levels of digitalization and the progress made by Vietnamese ICT companies in order to improve Vietnam position in the global ICT value chains.

Box 4. The digital market is open for all domestic and international hi-tech companies Vietnamese people have a saying that if you are at the right time (“thiên thời”), in the right place (“địa lợi”), and you work with right people (“nhân hòa”), you will prevail! Vietnam now is the right place and at the right time to do digital transformation. The very promissing digital market is open for all domestic and international hi-tech companies. The market is surely competitive. Vietnamese companies are very experienced in outsourcing services and quite strong in software development, and they do not easily give up to the international giants. My advice for international players who want to have a share in the Vietnamese digitalization market is to find a right Vietnamese digital hi-tech partner and work together with them as a team—you will succeed.

Truong Gia Binh, Chairman of FPT Corporation, Vice President of The Asian-Oceanian Computing Industry Organization (ASOCIO), Chairman of Vietnam Software Association (VINASA), Head of the Committee for Private Economic Development of the Government Office.

The promising ICT landscape of Vietnam today is the result of endless efforts for many years of Reform of many stakeholders, from the government as the key actor to create favorable institutional environment for ICT development and applications to the participation of domestic and international stakeholders, and lay people as both users and the source of creative ideas.

Despite the encouraging results of digitalization in Vietnam as mentioned above, the process of digital transformation in Vietnam is only at the beginning stage. In general, the awareness of the importance of digital transformation in the context of global industrial revolution 4.0 among many segments of population and at many administrative levels is limited, let alone the knowledge of how to do it (Cao Viết Sinh and Trương Đình Tuyển 2019).

Given the lower-middle-income country status, Vietnam is doing rather well in the beginning stage of the digital transformation process as evident from a number of internationally comparable digital development indexes and the reality in many aspects of social and economic life of the country as mentioned above. With a large population size, young population structure, relatively good human resource, Vietnam is a good market for ICT products and services.

The government of Vietnam sees the 4th industrial revolution, particularly the global digital transformation process, as the exceptional opportunity for Vietnam to catch up with other more developed nations and to become prosperous country in the world. The government has worked 45

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hard to improve institutional setting, making it favorable for digital transformation development and for attracting foreign companies to come and work with Vietnam for mutual benefits.

New technologies and ICT are adopted by all industries and enterprises at various level of digitalization understood in the sense of ICT application. ICT is applied more in fintech industry, smart logistics and transport, e-commerce, smart tourism, high-tech agriculture, smart cities, smart health care, e-education, e-governance and some of the production industries. Many production enterprises, however, still are not ready for digital transformation.

ICT market is also an attractive market that draws investments of many foreign companies from all over the world, including big names such as Intel, Microsoft, IBM, Samsung, Nokia, and the like. In the context of global market restructuring as a consequence of increasing protectionism and trade war between US and China, there is a shift of investment from China to other countries, especially Southeast Asian countries. Vietnam is considered as one of the good destination for foreign investment.

New technology and ICT products are also highly visible in day-to-day life of ordinary people, from using mobile phone, internet TV, social media, online payment to using car, washing machine, and so on, that are changing their way of life and habits.

All the above mentioned aspects point to a very promising future of ICT development in Vietnam that has enough room for international cooperation, particularly for ICT cooperation between Vietnam and Finland, both at government level as well as at business level.

There are, nevertheless, limitations in Vietnam ICT landscape that need attention. The most important limitation is the limitation in terms of quantity of high-quality ICT human resource and limitation of foreign language skills of Vietnamese labor force. High turnover of employees in ICT sector is another challenge for ICT companies operating in Vietnam.

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