Digitalisation in Vietnam

last updated on 24 August 2022 | reading time approx. 4 minutes

Interview with Lutz Koch and Michael Wekezer

Digitisation is a cross-sector and cross-society issue. How do you assess the current situation in Vietnam? Which sectors already hit the road to success, and which are rather lagging behind?

The digitisation process in Vietnam has progressed rapidly in almost all areas (i.e., public services, administrative procedures, business processes, and everyday trading activities) in recent years. This development has been supported on the one hand by the implementation of the Vietnamese government's action plan on digitisation in Vietnam from 2019 to 2025, and on the other hand by the impact of the Covid-19 pandemic. In 2019, as part of this action plan, the government launched the National Public Service Portal (NPSP), an electronic platform that connects the government with businesses and citizens. Since July 1, 2022, twenty-five essential public services, including the re-issuance of citizen ID cards (identity cards), registration for permanent or temporary residence, initial or re-issuance of passports, etc., have been digitised, demonstrating the government's strong will to continue driving digital transformation, especially in the administrative sector. A survey conducted by the Vietnam Chamber of Commerce and Industry on digital transformation in Vietnamese enterprises found that companies in all industries in Vietnam have recognized the importance of digitalisation and are already using technology to improve internal management, purchasing, logistics, production, marketing and financial transactions.

Where do you see potential for German or European companies in Vietnam?

The still quite new free trade agreement between Vietnam and the EU (EVFTA), which came into force in August 2021, creates new opportunities both in trade and investments between the EU member states and Vietnam. For German and European companies, this not only creates new potentials to be seized, but also facilitates access to the Vietnamese market.

In addition, recent changes in the regulatory framework for foreign investment (e.g. simplification of administrative procedures, application of digital public services and administrative procedures) create an advantageous starting position and efficient environment for foreign investors. Vietnam is specifically recruiting high-quality foreign direct investment. In recent years, these direct investments have focused in particular on the manufacturing and production sectors.

Digitisation always raises questions about issues such as cybersecurity, data protection and the creation of new rules and standards for the digital economy. What are your experiences in Vietnam? Are there already laws or regulations that specifically regulate these issues, providing safety for companies?

In Vietnam, the Civil Code, in combination with the Law on Cyber Information Security, the Law on Cybersecurity, and other regulations, governs the handling of data privacy and cybersecurity.

 
While individuals and organizations generally have the right to protect their private information in accordance with the law, the competent authorities, as well as organizations or individuals processing such private data, are responsible for ensuring the cybersecurity of such information.

In addition, the Ministry of Public Security has established a separate department to deal with cybersecurity and other high-tech crimes. This shows that the Vietnamese government attaches great importance to the protection of private information of individuals and organizations. The department is also responsible for monitoring and complying with regulations and for developing optimization measures in the field of cyber security.

In general, the regulations in place have gradually improved the security and protection of individuals' and organizations' personal information. For example, unauthorized trading or sharing of personal data is no longer as common as it used to be in the past.

However, as theft of personal data still occurs, the Ministry of Public Security is planning a stricter law on personal data protection in a timely manner. Since the first drafts contain similar concepts to those familiar from EU data protection laws, the legislation could have far-reaching implications for companies operating in Vietnam.

To what extent did the Covid-19 pandemic have an impact on the developments since its beginning?

The Covid-19 pandemic has had a major impact on many areas of life in Vietnamese society as a whole, and on the development of digitalisation in particular.

As the Covid-19 pandemic increasingly spread to Vietnam, and contact restriction and social distancing measures were introduced, companies had little choice but to integrate digital technologies into their daily operations. For example, in internal administration, digital banking, or online marketing. Within a very short period of time, the percentage of companies using digital technologies therefore skyrocketed.

The tendency to work from home and to make purchases of all kinds online also increased dramatically. In addition, people's habits in general payment transactions changed – payments were no longer preferably made with cash, but mainly via smartphone or other smart devices (e.g. money transfer via Momo, Shopee Pay) as well as with traditional bank cards.

In addition, Vietnam is one of the economies recovering fastest from the Covid-19 pandemic, and significant economic growth is forecast for the foreseeable future.

Can you provide a practical example of good digitisation in everyday business?

A practical example of digitisation in Vietnam is the transformation process within the tax authorities in the past few years. Examples include the Centralized Tax Management System, the Electronic Tax Declaration System, the Electronic Tax Refund System, and the Electronic Invoice Database and Management System.
The nationwide implementation of the Centralized Tax Management System was already completed by the General Tax Directorate in 2015.

By 2021, the electronic tax return system has been successfully implemented in all 63 provinces and cities and in all tax departments Out of a total of 841,018 enterprises, 838,787 have filed the electronic tax return so far. Thus, the participation rate is equivalent to 99.7 percent.

As for electronic tax payment, the National Tax Administration has cooperated with 55 commercial banks and all 63 regional tax departments to introduce the system and to encourage enterprises to use the service. As of August 2021, 832,802 enterprises out of a total of 841,018 had registered with the tax authority to use the service, a 99 percent registration rate.

Furthermore, the Tax Department has successfully implemented an electronic tax refund service. Since July 2022 all businesses operating in Vietnam are obliged to use an e-invoice when selling goods or providing services to customers, including any export activities. All official invoices will be synchronized in a single database of the tax authority and updated daily. The tax authority also grants each company the right to access the company profile in the database, allowing the company to manage all its own incoming and outgoing invoices online. The digital transformation has not only reduced time and costs for companies operating in Vietnam, but also provided greater transparency.