Viet Nam could become the next digital powerhouse in Southeast Asia
Jakarta Globe recently published an article stating that, with recent achievements, Viet Nam is on track to become the next digital economic powerhouse in Southeast Asia.
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According to the authors, over the past few years, Viet Nam has become a "rising star" in Southeast Asia. The country has undergone a dramatic economic transformation and has become one of the fastest-growing countries in the world.
The favorable economic climate has also fostered the emergence of the digital economy and an expanding startup ecosystem. The recent wave of the COVID-19 pandemic has also solidified digital trends that accelerated Viet Nam’s path to the next digital economic powerhouse in Southeast Asia.
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| Viet Nam is on its way to become a digital powerhouse of the region. |
Strong developments
Since 1986, the beginning of Doi Moi and Viet Nam’s opening up its economy, Viet Nam has gained incredible achievements. According to the World Bank, Viet Nam now has over 745 listed companies on the stock exchange which accounted for 68.6% of its Gross Domestic Product (GDP) in 2020. This is a massive leap from merely 24 listed companies in 2004.
After 35 years, the Viet Nam economy has been thriving and attracting many foreign investors. It has been one of the five fastest-growing countries in the world over the past 30 years, beating its neighbors.
From 2009 to 2019, Viet Nam’s GDP grew by an average of 7% per annum. In 2020, Viet Nam was one of a few countries globally that recorded GDP growth of 2.9%. Viet Nam’s GDP per capita grew to 2,800 USD from a mere 422 USD in 1986.
Looking further, Viet Nam has been shifting away from agriculture and towards industry and services which currently account for approximately 75% of the country’s GDP.
Viet Nam is also an attractive destination for foreign investors, due to its low labor costs and stable exchange rate. In addition to that, inflation has always kept below 4% which is the government’s target.
Viet Nam was named one of the world’s top 20 host economies for FDI with an inflow of 16 billion USD, surpassing other peers and trailing Singapore and Indonesia. In 2021, despite severe Covid-19 implications, planned FDI investments in Viet Nam resiliently grew 22% Y-O-Y.
Overall, these factors fuelled an export boom. In the past decade, exports by domestic firms have risen by 137%, while those by foreign-owned companies have surged by 422%.
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| The documents of the 13th National Party Congress affirmed that the digital economy will account for 20% of its GDP by 2025, and will account for about 30% of GDP by 2030. (Photo: Getty) |
The future for a digital economy
In the future, the digital economy is expected to play an indispensable role in maintaining the country's growth momentum. Even still in its early stage, the digital economy of Viet Nam is demonstrating tremendous potential driven by the following reasons:
Firstly, the Government of Viet Nam is really supportive and interested in digital transformation. Over time, it has launched a number of initiatives to encourage growth in this sector.
In 2020, Prime Minister Nguyen Xuan Phuc signed Decision No.749/QD-TTg to approve the National Digital Transformation program by 2025, with a vision to 2030. This includes improving the internet infrastructure and accessibility to 5G services, digitizing the government, and applying technology to various social-economic sectors. By 2030, the government anticipates that the digital economy will account for 30% of Viet Nam’s GDP
Secondly, Viet Nam has a large tech-savvy population and rising digital trends. According to the authors, Viet Nam is among the top 10 countries with the highest number of smartphones with 63.1 million smartphones in use. Nevertheless, digital penetration in Viet Nam is trailing behind other peers in the region with 73%.
However, the country is expected to catch up with regional peers because the majority of the population in Viet Nam is young and within working age, indicating tech-savvy consumers who will also be more receptive towards switching to online services. Together they shape the digital economy’s growth and direction based on their online behaviors.
Thirdly, despite its negative effects, the COVID-19 pandemic has helped accelerate the country's digital transformation. It pushed everyone to go online to seek alternatives, leading to new habits that prioritize online services. This will be an important stepping stone in the development of the digital economy.
Seizing opportunities in the digital economy and startup ecosystem, Viet Nam is developing rapidly, gradually positioning itself to become the next startup hub of Southeast Asia.
Viet Nam is home to a lot of tech talent and innovation. A 2021 report by the World Intellectual Property Organization (WIPO) ranked Viet Nam as the most innovative country among the lower-middle-income countries, ranking higher than neighboring countries of Indonesia, Thailand, and the Philippines.
The Vietnamese government is also quite optimistic about the domestic startup ecosystem. It is forecast that Viet Nam will have at least 8 "unicorn" startups by 2030. To facilitate this growth, the Government has launched many initiatives and passed supporting laws and tax and capital incentives for startups and SMEs.
Developing the digital economy is also one of Viet Nam's key goals in the coming years. In order to achieve the goal of becoming a developed and high-income country by 2045, stated in documents of the 13th National Party Congress.
Therefore, the digital economy will be one of the key factors to boost Viet Nam's economic growth in the coming years. Backed by a solid macroeconomic foundation, a progressive government, a young population, and an impressive growth momentum, as stated by the authors, Viet Nam will become the next digital economic powerhouse in Southeast Asia.
