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Challenges and Opportunities in the Technology Sector

The robust development of the digital technology industry has propelled many businesses in Vietnam to implement strategies and policies for product improvement, market expansion, and increased sales. Digital technology is increasingly becoming a determining factor for the position and strength of businesses in the international market. The Vietnamese government has introduced numerous initiatives and directions regarding digital transformation to create a foundation for the development of various industries.

However, to fully capitalize on the opportunities that digital technology brings, businesses need to establish appropriate goals and solutions. While digital technology opens up numerous opportunities, it also comes with various challenges. This article focuses on analyzing the opportunities and challenges in the digital technology development of businesses in Vietnam.

Opportunities for Technological Development in the Vietnamese Market

In response to the national digital technology trend, the widespread and increasingly modern information system has extended to rural and mountainous areas. Digital technology companies have proliferated, guiding people in using digital platforms for work and life, thus saving travel time.

Vietnam’s technology workforce is systematically trained, with nearly 50,000 Information Technology graduates annually, providing a high-tech talent pool at a low cost for the labor market. The recent years have seen a high growth rate in the economy, driven by a large and diverse domestic market. The number of consumers using digital technology is increasing, becoming an essential need in modern life.

Currently, there are over 64,000 businesses operating in the digital technology sector in Vietnam. Some enterprises have adopted development strategies aligned with the 4.0 technology revolution, such as VNPT with the VNPT 4.0 strategy and Viettel with a strategy leading in technology, services, business models, and research and development. These companies have demonstrated the ability to develop products quickly, playing a significant role during the Covid-19 pandemic, reducing the spread of the disease and alleviating revenue pressure on businesses. However, to fully exploit the potential of the domestic market and maintain sustainability, innovative product development is crucial for convenience and safety for consumers.

Vietnam is increasingly integrating deeply with international organizations in various fields, opening up opportunities for many new international technological products. In 2021, the state honored 48 Make in Vietnam digital technology products.

In recent years, multinational companies have been shifting production activities from unstable countries to Vietnam. Seizing this opportunity, Vietnam has attracted foreign investment in technology enterprises. In 2021, foreign direct investment in Vietnam increased by 9.2% compared to 2020, indicating trust from foreign investors in the Vietnamese investment environment and creating many opportunities for cooperation and exchange between Vietnamese technology enterprises. Technology transfer activities help enhance competitiveness, economic management capacity, and contribute to Vietnam’s participation in global development.

On the other hand, investments in the technology sector by domestic investors are also increasing. Some well-funded enterprises are boldly investing in this vibrant sector. Vietnamese technology companies’ shares are also attracting attention from foreign technology companies. Additionally, investing in startup activities through digital technology business has attracted diverse investment sources from domestic investors through startup programs.

Furthermore, a factor driving Vietnam’s digital technology development is its young population, sensitive to innovation, with a high proportion of smartphone users. As of 2021, Vietnam’s average population is 98.51 million people, with the age group of 15-24 accounting for up to 70%. According to UNFPA, Vietnam is in the “golden population structure” period, which will end by 2040. The working-age population will double the dependent population, presenting potential for economic and social development, including the digital technology industry.

Challenges in the Technology Sector in Vietnam

The impact of the Covid-19 pandemic has affected most sectors of the economy, but the technology sector has maintained growth. The growth rate during the 2015-2020 period averaged 15.2% per year, more than twice the GDP growth rate, making it one of the fastest-growing economic sectors in the country. As a core element of the economy, the digital technology industry in Vietnam faces various risks and challenges that require comprehensive policies for resolution.

The competition among technology companies in the ASEAN region poses a significant challenge for Vietnamese technology enterprises. ASEAN countries also leverage low-cost labor and receive state support for the development of technology businesses, similar to China providing financial assistance to enterprises to reduce dependence on foreign countries. Additionally, regional countries protect their domestic markets through national protection measures.

To confront competition and explore developmental directions, Vietnamese digital technology companies need to proactively address existing issues such as improving product quality, service quality, innovation capacity, high-tech design capabilities, especially in the field of AI. Continuous research and development of new digital technologies present a challenge for Vietnamese businesses as the digital transformation has only recently been initiated in recent years. Therefore, businesses require government support to have sufficient competitiveness on an equal footing with other countries in the region. The government needs to advise on building policies and a strict legal framework to create a fair competitive environment, helping Vietnamese technology businesses quickly update global trends and reach development milestones.

Furthermore, products serving digital technology such as hardware, software, still depend on foreign suppliers. Due to a lack of autonomy in production, Vietnam faces difficulties when the market is unstable, and import-export activities are stagnant, affecting production and business operations. Businesses need to quickly find new business opportunities, balance between the domestic and international markets. The stability of the domestic market is crucial to ensure survival in situations where the international market experiences significant fluctuations.

The development of digital technology brings both opportunities and challenges to Vietnamese businesses. Government support, workforce training, and favorable conditions are key to overcoming challenges and maximizing the opportunities that digital technology brings. Most technology companies in Vietnam are small and medium-sized enterprises with limited research and investment capabilities, making them susceptible to foreign investors’ acquisitions, influencing the development of the Vietnamese technology industry.

Despite clear guidelines from the Access to Information Law (Law No. 104/2016/QH13) and the Decree on the management, connection, and sharing of digital data by state agencies (Decree No. 47/2020/NĐ-CP dated 09/4/2020), data sharing in Vietnam is currently very limited. Private enterprises find it challenging to access government data to deploy suitable products and services, especially in developing advanced technology products like AI, data analysis. Additionally, large social media platforms such as Facebook, TikTok, open up new business models for products and services crossing borders. The exploitation of data from organizations and individuals affects security, safety, and competitiveness of businesses both within and outside the country.

In some common labor sectors, jobs are gradually being replaced by automation and artificial intelligence technology. Technology companies worldwide are undergoing a large-scale employee layoff wave, replaced by AI technology applications. Vietnam is at risk of losing the advantage of cheap labor and a drain of high-quality technology personnel as foreign companies attract them, thanks to global connectivity, making traditional management measures unnecessary.

Conclusion

With these challenges, digital technology companies need to implement activities, especially training a workforce with skills suitable for innovation requirements. Businesses need to reorganize service delivery processes, streamline organizational structures, increase transparency, responsibility, and autonomy.