The Role of STI and Digital Transformation in Economic Growth
The importance of science, technology, and innovation, coupled with digital transformation, has been highlighted both theoretically and practically as crucial to establishing new growth engines for Vietnam’s economy. This shift has been evident since 2016–2017, when disruptive technologies like Uber and Grab entered Vietnam, followed by a surge in e-commerce activity. The Vietnamese government’s open yet cautious approach to these developments set a positive precedent for embracing Industry 4.0.
Historically, Vietnam’s economic growth relied heavily on resource exploitation, labour-intensive industries, and demand stimulation. The integration of STI and DT presents an opportunity to fundamentally reshape this model. General Secretary Tô Lâm succinctly encapsulated this transformation, emphasising the need for a revolution in production relations, one driven by digitalisation and scientific advancement to align with the rapid evolution of production forces.
Enterprises, particularly private businesses, are positioned as the critical drivers of this transformation. By leveraging STI and DT, companies can enhance overall efficiency, reduce costs, expand markets, and unlock growth opportunities. These advancements not only benefit businesses but also create ripple effects across the economy.
Addressing Barriers to Growth
Despite its potential, Vietnam’s adoption of STI and DT has been moderate at best. Many initiatives remain confined to paper, and the country’s starting point lags significantly behind global standards. Chief among these challenges is the lack of a supportive legal framework to protect and encourage pioneering businesses. Several critical areas need immediate attention to overcome these obstacles.
First, a legal framework that aligns with current realities is essential. This framework should protect and support those willing to lead in adopting innovative business models and technologies. Often, the failure of startups or businesses engaging in STI and DT can be attributed to institutional shortcomings rather than market forces. These enterprises are sometimes excluded not because their products or services lack appeal but because systemic resistance prevents their integration into the market.
In simpler terms, the system behaves like a weak immune system that rejects anything new instead of adapting to it. This discourages innovation leaders, creating a precedent that deters others from taking risks. Without addressing this issue, Vietnam risks stagnation in its innovation journey.
Second, adequate resources must be mobilised to support STI and DT initiatives. While there is a growing emphasis on fostering innovation and entrepreneurship, financing remains a significant bottleneck. With approximately 70% of the economy’s credit flowing through banks, much of it directed towards real estate, little is left for innovative ventures.
Vietnam boasts a dynamic, creative youth population brimming with ideas for transformative business ventures. However, many of these ideas fail to materialise due to a lack of funding. Not everyone can access venture capital or win startup competitions to secure investment. While banks naturally prioritise profitable and low-risk investments, the government and the State Bank of Vietnam must devise strategies to allocate a specific portion of bank capital to STI and DT. These ventures are akin to “long-term crops” that may not yield immediate profits but are essential for sustainable growth.
Finally, Vietnam must prepare for potential risks associated with developing STI and DT. Lessons from past experiences, such as stock market bubbles or the four-trillion-dong bond crisis, underline the importance of foresight. Similarly, as Vietnam develops its STI and DT capabilities, it must anticipate digital crises, including cybersecurity threats, data manipulation, and large-scale digital conflicts at the national level.
Laying the Foundation for Transformation
Creating a conducive environment for STI and DT requires more than policy adjustments; it demands a cultural shift in how innovation is perceived and supported. Vietnam has already demonstrated its capacity to adapt and thrive, as evidenced by its response to previous industrial revolutions and economic reforms. The challenge now lies in accelerating this progress.
Building institutional resilience is crucial. Legal systems must not only tolerate but actively encourage and safeguard innovation. This means establishing mechanisms to ensure businesses experimenting with novel technologies or business models are not unfairly penalised. For example, tax incentives, subsidies, or innovation-friendly regulations could incentivise companies to invest in STI and DT.
Resource allocation must also be restructured to prioritise long-term growth over short-term gains. Developing venture capital funds specifically for STI and DT or encouraging public-private partnerships in innovation are viable strategies. At the same time, fostering a culture of risk-taking among young entrepreneurs and providing them with access to affordable credit could unlock untapped potential.
Equally important is the need to address digital risks proactively. Investing in cybersecurity infrastructure, training skilled professionals, and collaborating with international partners can mitigate the threats associated with rapid digitalisation. Additionally, public awareness campaigns can educate businesses and individuals about the importance of data security and ethical digital practices.
As Vietnam stands at a pivotal juncture in its economic evolution, the integration of science, technology, and digital transformation offers a transformative path forward. While challenges abound, the opportunities far outweigh the risks if approached with determination and vision.
To ignite these new growth drivers, Vietnam must prioritise the development of a robust institutional framework, mobilise sufficient resources, and prepare for potential risks. With these measures in place, the country can harness the full potential of STI and DT, paving the way for a sustainable and innovative future.
The journey may be challenging, but with the right policies, a committed government, and an entrepreneurial spirit, Vietnam has the tools to redefine its growth trajectory and establish itself as a leader in the global innovation landscape.
