Digital Transformation in Vietnam: Policies, Results and Recommendations.

• Author: Chuc, Nguyen Dinh

1. Introduction

   Digital transformation can be denned as the integration of technology into an organization's operations with the primary goal of increasing efficiency, improving the customer experience, and thus creating value. Digital transformation necessitates significant changes to manufacturing and business systems, as well as requirements for compatibility with other economic systems. The fundamental drivers of digital transformation are human resources, institutions, and technology.

   Economic value is connected to digital business transformation. Businesses can leverage digital transformation to boost operational capacity and customer experience, as well as develop new business models, digital products, and digital platforms. Enterprise digital transformation is a broad reform initiative built around the integration of digital technology that enables businesses to operate more efficiently, compliantly, and adapt to the new era. Such a transformation entails a complete restructuring of products and services, organizational structure, processes, and company culture.

   To invest in digital transformation, sufficient material on data digitization, operational model change, and synchronization of operations on the digital platform are required. The degree of transformation and technological advancement varies by industry and sector. Due to the availability of infrastructure, digital platforms, and human factors, the information technology and telecommunications sector is experiencing a rapid transition. Additionally, coordination of equipment infrastructure, technology, and people is required for successful digital transformation.

   Due to the complexity of digital transformation, business leaders must possess not only administrative skills but also digital transformation potential, which include an understanding of technology and the capabilities that those technologies may provide (IoT digital platforms, big data, blockchain, AI, robotics, sensors, etc.). The main reasons behind failures in digital transformation include: (i) limited organizational motivating capacity; (ii) a lack of appropriate corporate culture; (iii) misunderstanding of digital capacity; and (iv) mistakes in digital transformation initiatives. Small and medium-sized businesses lack adequate financial budgets and personnel, and their organizational structures are difficult to change (Albukhitan 2020; Pelletier and Cloutier 2019; Gray and Rumpe 2017; Stich et al. 2020). As a result, successful digital transformation requires research and evaluation in a variety of areas, including responsiveness, technology absorption, investment strategy, and transformational dynamics.

   The purpose of this research is to elucidate Vietnam's strategies and policies for fostering digital transformation in both the public and private sectors. The study assesses the feasibility of digital transformation steps and resource requirements between 2021 and 2025, as well as the responsiveness of regions to the government's digital transformation requirements and policies. Additionally, it examines policy tools that have been developed and are currently being implemented, as well as the early results of digital transformation.

   The rest of this paper is divided into five sections. The second section provides an overview of Vietnam's digital transformation. This section also examines the government's digital transformation programmes and policies that are designed to accelerate the process. The third section describes the legal framework that is necessary for the digital economy. The fourth section presents the government policies to support the digital transformation of enterprises. The fifth section of this study assesses what has and has not worked in Vietnam's implementation of digital transformation. The final section concludes with some policy recommendations.

2. Current State of Digital Transformation in Vietnam

   2.1 Studies on Digital Transformation in Vietnam

   The digital economy and digital transformation are critical drivers of socio-economic growth. They increase the productivity and competitiveness of economies such as Vietnam. Numerous studies have been conducted to get a better understanding of the digital economy and digital transformation. Attempts have been made to assess the current state of digital transformation and the factors influencing the development of the digital economy and digital transformation in Vietnam.

   The Australian Commonwealth Scientific and Industrial Research Organization (CSIRO 2018) has examined the level of awareness and preparation for digital transformation in Vietnam, with a particular emphasis on agriculture and industry. While the majority of organizations surveyed in the study recognize the value of digital technology and digital transformation in production and business, they view that each industry has its own unique digital transformation requirements and approaches. The study also found that businesses continue to struggle to implement new technologies due to technical and financial constraints. The level of readiness for digital technology transformation remains low. While Vietnam has numerous opportunities to accelerate digital transformation and develop the digital economy in the coming years across various industries and sectors, doing so will require government support to improve the quality of human resources, raise awareness of the benefits of the digital economy, and provide businesses with preferential financial resources (CSIRO 2018).

   Positive assessments have been made of the impact of the EU-Vietnam Free Trade Agreement (EVFTA) and the COVID-19 pandemic response on Vietnam's digital transformation. Domestic businesses are expected to accelerate their digital transformation in order to comply with European standards and laws by joining the EVFTA. The trade agreement will push businesses to continuously improve their efficiency in terms of delivery, seamless electronic transactions, electronic contracts, and digital after-sales activities. The EVFTA also contributes to the public sector's digital transformation by strengthening the legal framework for the digital economy and digital transformation, particularly in the area of intellectual property protection (Le and Tran 2020).

   The necessity of business digital transformation is also emphasized in the context of COVID-19. The majority of enterprises, particularly large enterprises, are well aware of digital technology. The pandemic has contributed to the promotion of digital transformation in SMEs. Based on industry analysis, manufacturing firms tend to employ more digital technology in their operations than service firms. Digital technology is primarily used for internal management, purchasing, logistics, manufacturing, marketing, sales, and payments. The pandemic has prompted enterprises to increase the use of digital technology for remote personnel management, online conferences, online learning, and internal approval. However, enterprises face numerous challenges during the digital transformation process, most notably in terms of conversion costs, internal infrastructure resources (digital infrastructure, human resource quality), personal/business data leakage, and ineffective regulations and rules (VCCI 2020).

   For small- and medium-sized enterprises (SMEs) in Vietnam, the benefits of digital transformation include: enhancing production and business activities; relieving employees and managers of routine tasks, and allowing them to focus on decision-making; addressing the COVID-19 epidemic; increasing added value; and assisting businesses in adhering to global business standards. Here, the primary obstacles are: management and employee opposition; full transformation expectations of relevant organizations and parties; a lack of awareness of digital technologies among the parties involved; and a lack of customer interest in the potential long-term benefits of the digital transformation process (Bui Le Minh 2021). According to a survey of 180 SMEs and SOE managers, about 75 per cent of SOEs and 39 per cent of SMEs have adopted digital technologies to optimize working processes. About 44 per cent of SOEs and 45 per cent of SMEs used digital technologies to improve product quality. Finally, about 21 per cent of SOEs and 54 per cent of SMEs did so to improve customer experience. These findings suggest that there should be a sectoral focus on enterprise digital transformation (by type and economic sector) and the provision of specific transformation steps for businesses (Watkins et al. 2021).

   In another study by CIEM (2020), it is found that the institutional system is asynchronous, slow to complete, and does not effectively facilitate the development of the digital economy in Vietnam. This is based on an analysis of the existing laws governing electronic transactions, cyber information security, cyber security, data protection, and data mining and use.

   2.2 Government Programmes and Strategies for Digital Transformation

   Following the government's lead and direction on digital transformation, ministries and local governments have pushed for reforms and policies that support digital transformation in both the public and private sectors. For instance, the Ministry of Planning and Investment developed a toolkit to assess SMEs' readiness for digital transformation and provide guidance on technology solutions consistent with the enterprise's digital transformation roadmap, with a focus on the processing and manufacturing industries. The digital transformation process is divided into three phases that correspond to distinct technological requirements, including: digital transformation of business models, perfecting and digital transformation of management models (manufacturing processes and technological processes); business connection and administration; and innovation to create new products and services (MPI and USAID 2021).

   The promotion of digital...