Vietnam’s E-government Ranking Only Tells Partial Story of Digital Transformation
- Vietnam ranked 86th in a new e-government ranking by the United Nations, but the country has ambitious plans to become a digital society by the next decade.
- Both public and private sectors seized opportunities to accelerate innovation during the pandemic, but there had already been some successes before then.
- Conditions are favorable for businesses especially in the tech sector, but legal barriers, security issues, and a global recession are challenges to be considered.
On July 10, 2020, the United Nations released its E-Government Survey 2020. With an overall score of 0.66 on the E-Government Development Index (EGDI), Vietnam moved up two places from last year and was ranked 86th among 193 member states. Though Singapore, Malaysia, Thailand, Brunei, and the Philippines scored higher, Vietnam has so far already made some substantial improvements on e-governance and hopes to be among the top four Southeast Asian nations by 2025.
Vietnam Briefing looks at Vietnam’s recent performance as measured by the index, how it fits into the country’s broader digitalization strategy, and the impacts on business and future development.
COVID-19 a catalyst for digital transformation
The EGDI measures the scope and quality of online services, the status of telecommunication infrastructure, and the existing human capacity of a country’s e-governance. The 2020 ranking is led by Denmark, South Korean, and Estonia. According to the UN, 65 percent of member states are at the high or very high EGDI level. While income level is a predictor for e-government performance, a country’s political will, strategic leadership, and commitment to advance digital services can also improve its ranking.
Governments around the world have responded to the pandemic by launching innovative digital tools to disseminate information, perform contact-tracing, provide healthcare services, and facilitate working and learning from home. Such is certainly the case in Vietnam, where government portals have been put to greater use and saw significant surges in traffic.
Both the public and private sectors are committed to boosting Vietnam’s digital healthcare capacities. In addition to the existing host of services and platforms provided by different health tech start-ups, a remote medical examination and treatment app called Bluezone was launched. Developed by telecommunications conglomerate Viettel, Bluezone can store information on individuals who have been in close contact with a COVID-19 positive user and alert them about the risk of infection.
Vietnam’s broader effort at “digitalizing” the country
Although e-government initiatives are now more critical than ever, Vietnam’s efforts predate the pandemic and are part of a larger long-term plan to become a digital country.
On September 27, 2019, the government approved Resolution No.52-NQ/TW, the first comprehensive resolution outlining policies and targets for Industry 4.0 development. Two months later, the national public service portal, an electronic platform for online public services was launched after nine months of development. The government expects that the portal will help it save more than US$182,000 per year.
In June 2020, the National Digital Transformation Program by 2025 was approved, aiming to create a digital government, digital economy, and digital society while establishing globally competitive digital businesses. The programme builds on previous efforts to turn Vietnam into a digital society over the next decade, notably establishing national databases, making government services available online, and continuing to develop and increase access to 4G and 5G networks across the country.
Though the government has set ambitious targets, Vietnam has several favorable conditions for a digital transformation. There are hopes that the country will continue to register impressive economic growth rates. Revenues from the IT sector in 2019 reached US$112.5 billion, double of 2015. IT products such as mobile phones and computers are among Vietnam’s top exports.
Finance, banking, insurance, healthcare, and many other sectors will benefit from a growing middle class. Graduates of technology and data science fields will provide the needed high-quality labor force. Furthermore, because information and technology systems in Vietnam are still relatively new compared to those in Europe or the US, a digital transformation in Vietnam has lower risks and can be done faster.
Why it matters for business
With e-government and more broadly digital transformation being top priorities, businesses can expect several positive spillovers. According to the UN and World Bank reports, a high e-government index is correlated with a high business environment index. In turn, a good business environment attracts high-quality investors, facilitate technology transfer and exchange of management practices, enhance transparency and reduce corruption.
More directly, the National Digital Transformation Program promotes the development and widespread use of e-commerce platforms in enterprises and in the community. It also aims to give greater incentives and support for start-up development and encourages large companies to make use of new technologies and commercial activities.
The program intends to shift the economy from assembly and processing of high-tech goods to manufacturing in line with a “Made in Vietnam” strategy launched in May 2019 to foster 100,000 tech firms and make Vietnam a technological powerhouse.
Hence, businesses can continue to expect investment incentives for science and technology-related firms in the coming years.
The path ahead: challenges and opportunities
Such a large project as a digital overhaul in government, business and society will inevitably encounter some challenges. The new Law on Investment allows some investors to establish a company without first obtaining an investment registration certificate (IRC), which creates favorable conditions for foreign investors to set up tech or innovative start-ups. However, the legal framework for investment will need to be clarified to support investment.
Cybersecurity is also a concern, not only for the protection of data and regulation of online content but also for investment. Under Vietnam’s Cybersecurity Law, companies have to store data within the country, hand over data, and take down sensitive posts if requested to do so by the government. These requirements can have negative implications for investor confidence, opportunities for local businesses, and overall economic growth.
While Singapore and Indonesia are the traditional start-up hubs in Southeast Asia, many are seeing Vietnam as the next leading ecosystem. The country has a few homegrown success stories, such as its first-ever unicorn start-up VNG, payment app Momo, and e-commerce platform Tiki. As demand for online shopping grew during the pandemic, Tiki was able raise $130 million in a deal by Northstar Group, a private equity fund.
However, looking forward the competition for fundraising deals may be fierce among both local and regional players. The global recession may reduce the appetite for investing, while the number of talented entrepreneurs and innovators keeps growing.
Finally, it is also important to remember that a digital transformation will not happen overnight. If successful, continued and sustained efforts at promoting tech innovation in all aspects of society will help Vietnam steadily climb world digital rankings in the upcoming years.