Background: Science, Technology & Innovation as a Pillar of Socioeconomic Development in Vietnam

 Vietnam and the Fourth Industrial Revolution

Technology is continuing to change the world at a rapid pace. Building on the spread of digital and  information  technology  that  revolutionised  the  productivity  of  economies since  the middle of the last century, as part of the Fourth Industrial Revolution (4IR) we are now seeing a new wave of emerging technologies that are blurring the lines between the physical, digital, and biological spheres, and which have the potential to significantly disrupt almost every industry in every country. This transformation –driven by the combined engines of science, technology and innovation –has the potential to raise global income levels and improve the quality of life for populations around the world through new products and services that increase the efficiency of our economies and the quality of life enjoyed by millions around the world. However, the equitable enjoyment of these benefits is by no means guaranteed, and history has shown that significant steps forward enabled by technology have often been accompanied by deepening levels of socio-economic  inequality  due  in  part  to differing levels of access and affordability. The spread of new technologies such as artificial intelligence and robotics therefore present countries around the world with a challenge in designing / transforming entire systems of production, management, and governance to harness these forces for the global good.

As Vietnam continues its remarkable journey of development from one of the poorest countries in the world 30 years ago to one  of  the  most  dynamic  countries  in the East  Asia  region,  it  will be  imperative  for a wide  range  of stakeholders—especially  governments,  private  sector,  development  agencies actors—to work together to ensure this latest wave of technological possibility becomes a force for good in progressing rather than reversing Vietnam’s socio-economic development. 

As Prime Minister Nguyễn Xuân Phúc noted in his national speech marking 2019 New Year Address that science, technology and innovation represent key pillars of growth for the country.  The Prime Minister emphasized that the use of innovation is critically important in the areas agriculture, information technology, manufacturing and e-Government as key drivers of economic growth, which at the same time should be in line with the spirit of “leave no one behind”.

The Innovation Ecosystem in Vietnam

Vietnam currently has the third-highest rate of start-ups in South-East Asia and was praised in February 2019 as “Asia’s creativity hub” and “an emerging innovation powerhouse” in an Austrade review of Vietnam’s Innovation Ecosystem. Co-working spaces, accelerators, incubators and programs for the startup community have continued to boom in Vietnam since 2016, and include Vietnam Silicon Valley (VSV), the Vietnam Innovative Startup Accelerator (VIISA), and a range of parallel incubators under government agencies, universities and institutes.

 In the last 30 years, Vietnam has become one of the world’s great development success stories, rising from the ranks of the poorest countries. On the strength of a nearly 7% average growth rate and targeted government policies, tens of millions of people have lifted themselves out of extreme poverty. Classified as a ‘lower-middle-income economy’ in the 2019 World Bank Country Classification Index, Vietnam is at a pivotal moment in its development journey and has clear aspirations articulated in its Vision 2035 roadmap to use science, technology and innovation as the engine for its next leap forward in economic growth and prosperity. Prime Minister Nguyen Xuan Phuc in particular has seized upon the potential of emerging technologies and the Fourth Industrial Revolution as a key driver to accelerate the pace of industrialization and help transition Vietnam from its manufacturing-led growth towards a more competitive and sustainable knowledge-based economy.

However, the national ecosystem of innovation players is still fragmented in Vietnam, and visibility of each other's role / contribution is low (including among donors). There is recognition that connectivity between the different actors is essential and that donors are well positioned to help perform this intermediary convening function.

 The biggest ecosystem priority appears to be better connecting larger private sector players to smaller domestic companies with a view to helping the latter grow through shared IP, upskilling initiatives and mentoring networks. Within the domestic private sector, readiness for “Industry 4.0” remains low, with a 2018 survey of 2,700 enterprises by UNDP revealing around 85% were at the lowest level of preparation according to criteria such as strategy and organization, smart operations and data-driven services. Match-making between international companies and local suppliers is therefore seen as a priority by both public and private actors, recognizing that the lengthy and deep investments in manufacturing that FDI companies such as Samsung have made in Vietnam have not resulted in sufficient integration of local companies within their supply chains, leading to similarly low levels of technology transfer between international and domestic actors. The World Bank’s “FDI Linkages” initiative in Vietnam is trying to address this by boosting linkages between domestic firms with foreign markets and investors. 

Challenges to avoid the ‘Middle-Income Trap’ in Vietnam

In the spirit of ‘leave no one behind’, Vietnam is tackling head-on the challenge of the 'middle income trap' where a country that attains a certain income through the export of manufactured goods loses its competitive edge because of rising wages and is unable to keep up with more developed, knowledge-based economies. Avoiding the middle-income trap entails identifying strategies to introduce new processes and find new markets to maintain export growth. Ramping up domestic demand is also important, but the biggest challenge for Vietnam is moving from resource-driven growth that is dependent on cheap labor and capital to growth based on high productivity and innovation that it can export to its ASEAN neighbours and beyond.

Awareness of the need for Vietnam to transition its economy is very strong at the highest levels of government, with the Prime Minister being a strong personal driver and national focal point for the innovation agenda. The dynamics of Vietnam's position with regard to other ASEAN countries around the digitalization of industry is a critical influencing factor here, especially with Vietnam chairing ASEAN in 2020. The PM wants Vietnam to be in the top 10 global countries for software and digital content outsourcing which is a powerful and ambitious vision, and Vietnam has many assets to support this journey as noted. However, sectors that are particularly ‘ripe’ for innovation are notably agriculture (with 12 million hectares of agricultural land now under cultivation) and finance (with just 30% of the population owning a bank account – one of the lowest rates in Asia).

Building a coherent, ecosystem approach to innovation

Government:  Following the Prime Minister’s lead, many ministries – including the Ministry of Planning and Investment (MPI) and the Ministry of Science and Technology (MOST) – have subsequently made innovation an explicit part of their strategies and policy frameworks, and there are now a significant number of innovation and 4IR-related initiatives at the national level. Alignment and coordination between these (and between government departments in general) remains a challenge. The National Innovation Network Program (launched in August 2018) is designed to promote coordination and collaboration, but there are still cracks, gaps and walls between ministries that are to some extent unintentionally enforced by donors perpetuating vertical partnerships with single departments. This makes the internal scaling / dissemination of innovative policies and approaches within the government system very difficult, because the pathways for ministries to work together on this are not well enough developed.

Development agencies:  Most of the innovation momentum and activity in Vietnam is taking place at the national level in terms of the macro STI-related policies, strategies and country-wide innovation initiatives that are being developed and implemented to drive socio-economic development more broadly. This is in contrast to interventions to stimulate and support early-stage innovation (e.g. challenge funds) and support to innovators have become less relevant, which are necessary in more nascent innovation ecosystems. This has led to a shift in the kind of innovation support provided by the international partners working in Vietnam (e.g. DFAT, USAID, UNDP, GIZ, GAC and the World Bank) towards government-level partnerships focused around macro-level research, policy design assistance and industry-level analysis and mediation. Multi-year innovation collaborations between international agencies and government ministries are increasingly common, with the Aus4Innovation partnership between DFAT and the Ministry of Science and Technology being a good example of this higher-level ecosystem-strengthening approach. To this end, the Vietnam meeting provided an opportunity to delve into innovation policies and systems-level support as a pathway to sustainable development impact at scale.

Other Ecosystem Actors:  A new forum for donors and other actors to contribute to national policymaking was established in December 2018 in the form of the annual Vietnam Reform and Development Forum (VRDF), through which the Government invites international specialists to the forum to share experience and advise on areas of strategic priority. The 2018 iteration of VRDF included a dedicated session on “New drivers for growth: Innovation based on Industry 4.0”.