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Digitalisation in Vietnam

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published on July 25, 2018

 

Interview with Stefan Ewers

 

​If the topic of digitalisation in Germany is written on the agenda, it can be expected that you will not just get a plain definition for the term. The repeatedly mentioned keywords are “disruptive technologies”, “innovative business models” or “autonomization”, which in turn is often summarized under the term “Industry 4.0”. But today we want to talk about Vietnam.

 

Please give us a brief insight into what is meant by the term digitalisation in Vietnam.

In Vietnam, we need to differentiate between different business models. Drawing level with their international partners, we see consulting and service firms in Vietnam commit themselves to the digital transformation. Especially for those being part of an international group, digitalisation is a big issue and thus devoted similar attention as in Western countries. Things look different for the manufacturing industry, though. The Vietnamese industry still has a strong focus on agriculture and labor force intensive production processes. High-technology is being supported, but still underrepresented. Digitalisation in the agricultural industry is still poorly developed. As to other industrial sectors, e.g. the textile industry, digitalisation is currently being pushed towards international standards.
 
The Vietnamese government aims at keeping up with the international development in the field of industrial digitalisation. 
 

Digitalisation is a cross-industry and cross-company topic. How do you assess the current situation in Vietnam - Has society already internalized the topic, do companies understand the change or is it more likely to try and endure the topic? Which sectors are already on the road to success, which are lagging behind, maybe even traditionally?

The society internalized the principle of digitalisation. The digital exchange of information has definitely reached the young population in Vietnam´s cities and has become an indispensable part of everyday life. High-technology  takes a natural pioneer position when it comes to digitalisation. As to the agriculture, there have been noticeable developments in recent years, defining areas of application for digitalized processes. These are still far from being part of everyday business in this sector, though. The textile industry is working on an international level.
 
Altogether, the digitalisation of industry is not as widely ramified as in many other countries. This is mainly due to the low wage level in Vietnam, resulting in many industries focusing on work force intensive processes.
 

Can you give us an example from Vietnam on how German (or other foreign) entrepreneurs deal with digitalisation locally? How can companies be supported by external consultants and experts in the transformation, where do you see more on-site consulting needs?

Usually German business companies choose other countries or regions of the world to develop new ideas which are subsequently implemented in Vietnam. Vietnam is rarely ever the first site to approach new projects at.

Talking about a specific example, though, a German manufacturing company recently implemented a new 3D printing technology for their products at their Vietnam site. This is one of the rare examples for Vietnam being chosen to spearhead a business group.  But in this case, too, Vietnam is not being assigned an exclusive status – the company applies the same technology in Germany as well.
  

Where do you see the best chances for German and European companies to position themselves in the market with disruptive business models in Vietnam? 

Traditional industrial sectors in Vietnam need to be modernized in order to maintain a global competitiveness. Particularly the agricultural sector needs updating in order to keep up with international standards. Though Vietnam is currently still taking benefit from the low average wages, this is most likely to get equalized in the years to come, generating a need for efficiency enhancement to counteract the loss of relevance.
 

What challenges and opportunities do you see for companies that already work locally to master this rather difficult mammoth task?

The population recognizes the benefit of digitalisation and is willing to put it into practice. One of the major challenges on the way to realization is Vietnam´s poor infrastructure. Internet connectivity – which is vital for a successful digital transformation – still lags behind regional standards.
 

What points must be given special attention in the transformation in the Philippines (for example: cybersecurity, data protection, change management, cloud computing, ERP systems, (tax) compliance systems, digital payroll, value change, blockchain technologies, etc.)? Do you see local cultural, social or economic advantages that speak in favor of an easier transformation?

Vietnam´s profile of requirements is rather liberal. Data protection is only focused on with regard to government data and information. There is a major need for the implementation of security-related procedures, as digital communication must be considered to be insecure, lacking protection against accidental information transfer to third parties/data theft. The overall high acceptance exhibited by the population may definitely be considered to have a positive impact on the realization of these procedures.
 

The digital change needs to be lived up to and promoted by the company leadership in order to prevent the transformation from being jeopardized. Does the local government provide support and funding opportunities for the first steps towards digital transformation? Are there investment programs to attract ambitious digital pioneers? Have incubators been installed in order promote innovative business models and to accelerate e.g. the establishment of start-ups?

High-technology and IT are currently granted tax and regional promotion. We may expect this promotion to be continued. There is no additional government support though. Incubators or similar multipliers do either not exist or are only organized individually on a rather private level.

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