(The article was published in Print Review No. 61 (July 2021)).

The digital economy covers all sectors and economies (industry, agriculture, services; manufacturing, distribution, circulation of commodities, transportation, logistics, banking and finance,...) to which digital technology is applied. The digital economy is increasingly covered in all socio-economic aspects. The process of developing Vietnam's digital economy in the coming years will face many limitations, difficulties and challenges such as: Telecommunications infrastructure have not met the requirements; The legal environment for digital economic development in our country is weak, not tight, sync, transparent and constructive; Human resources, especially information technology human resources - the most important factor in competition and digital economy development - are still small in quantity, not guaranteed in quality; The assurance of cybersecurity, security and information security in our country is facing many risks;... The article will assess the effectiveness of the digital economy, identify the strengths, weaknesses, opportunities and challenges of digital economic development in Vietnam, in order to help propose appropriate policies to develop the digital economy fastly and sustainably.

Keywords: Digital economy; E-Commerce; The economics of digitization; Digital economy development

1. Introduction

The digital economy is increasingly covered in all socio-economic aspects. Digital economy development is using digital technology and data to create new business models. In the digital economy, enterprises will innovate production and manufacturing processes from traditional models to an ecosystem-based operating model, linking from manufacture to trade, aimed at enterprise growth and improving labour productivity. The manifestations of digital technology appear anytime, anywhere in social life, such as e-commerce sites, online advertising or applications on dining, transportation, delivery... In recent years, the digital economy in Vietnam has grown by more than 40% per year, leading in Southeast Asia. This is the published information in “Report on Southeast Asia's digital economy in 2019”. Vietnam's digital economy continues to “boom”, reaching a value of USD 12 billion in 2019 and up to $43 billion in 2025. It is expected that the digital economy in Vietnam in 2025 will account for 20% of GDP, accounting for over 30% of GDP by 2030. E-commerce grows, investor’s belief increases... is the reason why Vietnam has become a dynamic and spectacular digital economy market in the region. In the process of developing the digital economy, Vietnam also faces many limitations, difficulties and challenges such as: (1) Telecommunications infrastructure has not met the requirements; (2) The physical and legal environment for digital economic development in our country is weak, not tight, sync, transparent and constructive; (3) Human resources, especially information technology human resources - the most important factor in competition and digital economy development - are still small in quantity, not guaranteed in quality; (4) The assurance of cybersecurity, security and information security in our country is facing many risks; (5) The state management of tax collection of commercial activities and the provision of cross-border services; (6) Dispute resolution system for business, commercial and civil activities in the digital environment; (7) A huge and potentially many risks have been warned when e-commerce corporations develop and operate a closed business ecosystem including many products, services, from transportation, travel, food, entertainment, books, electronic supermarkets to medical check-up ...

Thus, assessing the effectiveness of the digital economy, identifying strengths, weaknesses, limitations, difficulties, opportunities and challenges will help propose appropriate policies for fast, strong and effective digital economy development. This will contribute to promoting sustainable economic growth, meeting the requirements for industrialization, national modernization, the rapid development of smart socio-economy.

2. Characteristics and role of digital economy development

2.1. The concept of the digital economy

The digital economy, also known as the internet economy, the new economy, or the web economy, is “an economy that operates primarily on digital technology”, especially electronic transactions conducted through the internet, according to Oxford digital economy collaboration group. The digital economy covers all sectors and economies (industry, agriculture, services; manufacturing, distribution, goods circulation, transportation, logistics, banking and finance,...) to which digital technology is applied. The manifestations of digital technology appear anywhere in life such as e-commerce sites, online advertising or food and transportation applications,... also integrate digital technology to meet the needs of customers conveniently. However, on a macro level, the digital economy has also made significant contributions in integrating Vietnamese enterprises into the global technology chain.

2.2. The role of the digital economy

Digital economies with outstanding economic performance and new economic models are creating fundamental transformations in all sectors and fields, from agriculture, industry to services; from manufacturing, distribution and circulation of goods to supporting factors, such as transportation, logistic, finance, banking... In the digital economy, enterprises will gradually transition from traditional manufacturing and business to a model that links production, trade and use stages. This will increase productivity as well as labour efficiency; at the same time create scale and growth rate for economies. Economies change on two sides: (1) Mode of production: resources, infrastructure, mode of operation of production and business...; (2) Economic structure. In addition to the appearance of new development resources such as digital resources, digital wealth, financial power is gradually shifting to information power. Businesses of all backgrounds and sizes are increasing their dependence on a secure, stable and reliable internet platform that helps them carry out day-to-day operations. Thanks to the digital economy, economic performance has achieved high results, industries have made breakthroughs in business models, from e-commerce, online advertising on social networking sites (Facebook, Instagram), entertainment (Netflix, Pinterest), to transportation (Uber, Grab, GoViet) to distribution, wholesale and retail (Lazada, Shoppee)... Vietnam must also be in line with the world's digital reels.

2.3. Features of the digital economy

The digital economy is evident in phenomena such as blockchain technology, digital platforms, social media, e-commerce enterprises (e-commerce, traditional industries such as manufacturing or agriculture that use digital supporting technology...); enterprises involved in software development, application, digital and communication content development, related services and training, together with enterprises engaged in the production and development of information and communication technology equipment. The characteristic of the digital economy is the combination of 3 main processes intertwined with each other, including material processing, energy treatment, processing of information. In particular, information processing plays the most crucial role, and is also the easiest field to digitalize. The connection between the subject and the economic cycle bases on the achievements of information technology and the Internet, helping to connect resources, eliminate many intermediaries and increase the opportunity to access the global value chain.

According to Cameron A, and associates (2019), the components involved in the digital economy include: businesses (entrepreneurs and investors), Individuals (consumers, owners, workers,...), Objects of innovation implementation (universities, innovation centres, startups,...), Policy planners and influences (governments, associations, trade unions, individuals), details are shown in Figure 1.

Figure 1: Participants in the digital economy

Source: CSIRO and Ministry of Science and Technology (2020)

3. Current situation of digital economy development in Vietnam

3.1. Contribution of the digital economy and economic growth

Vietnam is one of the fastest digital economic development countries in the region. The trend of digitalization, transformation and application of digital technology in Vietnam is happening quickly and widely in many fields, from trade to transportation, banking, health, education, tourism, entertainment... and have made important contributions to the country's economic growth. There are currently about 30,000 hardware, software, digital content and telecommunications and information technology services with total revenue in 2017 reaching $91.6 billion, 12 times more than in 2010 ($7.6 billion). Software industry with about 10 thousand enterprises, with a high growth rate (15% - 20% / year), revenue in 2017 reached 3.7 billion USD. Vietnam has more than 50 Fintech companies providing deposit and cryptocurrency payment services. In the digital content business, the online advertising industry reached $390 million in 2016, online game revenue reached about $500 million. Transportation businesses also launched many applications to compete with Grab, Uber, such as FastGo, Be, VATO ...

One of the areas of development of the digital economy is the field of e-commerce development. E-commerce was born quite a long time ago, if counted from the time when "big companies" such as Amazon or Ebay were born, it is now 25 years. E-commerce has really exploded and threatened the existence of traditional sales channels in the last 5 years. Two important foundations of any form of commerce are payment and delivery methods, in the past those are "traditional". In 2015, the Vietnam E-commerce Association (VECOM) identified this as the last year of the popularity period, from 2016, Vietnam e-commerce moved to a new stage with the highlight of fast and stable development. In 2019, according to VECOM's survey, the growth rate of e-commerce reached over 32%. The average growth rate (CAGR) for the whole four-year period of 2016 - 2019 was about 30%. The scale of e-commerce retailing consumer goods and services in 2019 reached about 11.5 billion USD. VECOM predicts that the growth rate of 2020 will continue to remain above 30%, then the size of Vietnam e-commerce will exceed 15 billion USD. The average growth rate forecast for the whole period 2015 - 2025 is 29%. At that time, Vietnam's e-commerce scale will reach the threshold of USD 43 billion and come in third place in ASEAN.

With tremendous growth in revenue and market size, e-commerce is now one of the most important components of the digital economy in Vietnam. E-commerce has grown rapidly in both form and market size, becoming one of the ten most promising developed markets in the world for e-commerce growth.

3.2. Opportunities to develop the digital economy in Vietnam

Vietnam has always been considered to have a stable political and social environment and a solidly strengthened macroeconomic foundation, with a young and agile population in technology grasp, among the top countries with a growth rate in the number of Internet users, smartphones and use of social networks. Digital transformation, while there is no need for a national strategy and government action, is essentially the private sector, and the people are one step ahead.

Vietnam is also considered a dynamic economy with about 700 thousand private enterprises. Vietnam's population of nearly 100 million people is in the period of "golden population" structure, well-trained, well-ed in maths and hard work. Vietnamese personality adapts quickly to change, prefers to use technology. Vietnam is also considered one of the countries with a decent digital economic development rate in the ASEAN region with quite good telecommunications - IT infrastructure, wide-coverage, high user density. Currently, about 72% of the population is using smartphones, 68% of Vietnamese watch videos and listen to music every day on mobile devices, 70% of mobile subscribers are using 3G or 4G,... The information technology telecommunications industry has created 3G and 4G telecommunications infrastructure covering 95% of the country, currently starting to deploy 5G, which is an important foundation of the digital economy in Vietnam.

The Government has been self-innovation and transforming to become a Government of the 4.0 era, capable of national development management in the digital age. At the same time, all levels, sectors, and society need to make changes from awareness to action to promote the advantages brought about by the application of information technology and digital technology and meet the challenges of the digital economy era. In the spirit of Resolution No. 52-NQ/TW of September 27 2019, on several guidelines and policies to actively participate in the Fourth Industrial Revolution (IR 4.0), Vietnam has set many goals for the period 2025-2045. Specifically, by 2025, (i) maintaining the ranking of the Global Innovation Index (GII) of the top 3 ASEAN countries; (ii) build digital infrastructure with the advanced level of ASEAN region, broadband Internet covers 100% of communes; (iii) the digital economy accounts for about 20% of GDP, the average labour productivity increases over 7% per year; (iv) basically complete digital transformation in party agencies, the state, the National Front, socio-political organizations; (v) belong to the top four ASEAN countries in the e-government ranking as assessed by the United Nations; (vi) there are at least three smart cities in the three key economic regions of the North, South and Central. By 2030: (i) maintaining its ranking of the Global Innovation Index (GII) in the top 40 countries in the world; (ii) 5G mobile networks nationwide; people have low-cost broadband Internet access; (iii) the digital economy accounts for over 30% of GDP, the average labour productivity increases by about 7.5% per year; (iv) complete the construction of the Digital Government; (v) forming a number of smart urban chains in key economic regions in the North, South and Central, gradually connecting with the smart city network in the region and the world. By 2045, Vietnam will become one of the leading manufacturers and service centres in Asia; have high labor productivity, are capable of mastering and applying modern technology in all fields of socio-economic, environment, defence and security.

In order for Vietnam to actively develop its digital economy and participate in the 4.0 IR, it needs to change its thinking, unity of awareness, strengthen the leadership role of the Vietnam Communist Party, the management of the State, socio-political organizations. Perfecting the institutions to facilitate active participation in irregularities 4.0 and the process of national digital transformation; promote the development of essential infrastructure; develop and enhance national innovation capacity; developing human resources in priority industries and technologies, enhancing international integration; promoting digital transformation in party agencies, the State, the National Front, socio-political organizations... At the same time, ensuring jobs, stabilizing incomes, supporting weeds and reining in society for the vulnerable and vulnerable classes, as well as enhancing the protection of the living environment in the process of economic development of the country.

The above contents are the basis for Vietnam's confidence in successfully transitioning from a traditional economy to a digital economy. Vietnam has the advantage of human resources and government support, which will create a national wave and motivation for digital economy development as a direction in which Vietnam can promote further development of the digital economy.

3.3. Limitations and difficulties in Vietnam's digital economy development

In the process of developing the digital economy, Vietnam also faced many limitations and difficulties, the followings are the main difficulties for this development process:

Firstly, the telecommunications infrastructure has not met the requirements. In the digital economy, data is resource. From data, digital models create customized services that optimize and effectively leverage idle social resources. Currently, the data system in Vietnam is still distributed, not shared and connected. Therefore, Vietnam faces a significant challenge from building a shared database of the country.

Secondly, the physical and legal environment for digital economic development in our country is weak, not tight, synchronized, transparent and constructive. The rapid transformation of business models in the digital economy has led to some laws not keeping up. Due to the rapid development of science and technology, digital economy and new business methods and innovative ideas, state management agencies proved quite an awkward in managing digital economic activities. As with the traditional business environment, if we do not have an excellent legal environment to resolve disputes, digital businesses will move to a more secure place (Tran Thi Hang and Nguyen Thi Minh Hien, 2019).

Thirdly, human resources have not met the requirements. Human resources, especially information technology human resources - the most important factor in competition and digital economy development - are still small in quantity, not guaranteed quality. In the next 15 years, about 50% of jobs in developed countries will be replaced by automation processes; this rate is higher in developing countries such as Viet Nam, as the added value of the workforce is low compared to the world average. Therefore, the need to train and retrain human resources to meet the requirements of the digital economy becomes urgent (Bui Thanh Tuan, 2020).

Fourthly, ensuring cybersecurity, security and information security in our country is facing many risks. The digital economy is based on information technology; the Internet contains significant risks of security, information security, finance, and privacy of data of the digital economy participants. Vietnam is one of the countries most vulnerable to cyberattacks. 

Fifthly, focus on management, especially tax collection management with cross-border trade and service provision. The Internet is borderless; territory and geography become relative when businesses can also work and do business. Hindering the circulation of information and data is cutting the arterial line of the digital economy. However, how to collect taxes and ensure benefits for workers when Grab, Netflix and Airbnb are not in Vietnam but do business in Vietnam?

Finally, the significant and potentially many risks that have been warned are when e-commerce corporations develop and operate a closed business ecosystem that includes a variety of products, services, end-to-end utilities, from transportation, travel, food, entertainment, books, electronic supermarkets to medical examination and treatment...; in particular, all those transactions are made through e-wallets created by these companies, many problems of state management, even currency security will be raised.

4. Some solutions for digital economy development in Vietnam

Firstly, build e-Government towards digital Government and digital economy. According to Mai Tien Dung (2018),  e-Government implementation is an inevitable trend, improving transparency in the Government's operations, repel corruption, contributing to economic development, improving competitiveness, labour productivity, and is a path to prosperity for the nation. To have a substantial breakthrough, Vietnam needs to study, learn from the world's experience and develop specific, directly implementation steps with the highest efficiency.

Secondly, improve the quality of education - training human resources for the digital economy. The shortage of IT human resources is considered one of the major challenges for developing Vietnam's digital economy. Therefore, along with changing the training program to keep up with new technology trends, accelerating the socialization of information technology education by creating conditions for students to approach this field early, it is necessary to change education towards increasing self-study, self-updating and lifelong learning. Another highlight here is that the COVID-19 pandemic has created opportunities to drive digital transformation in education.

Thirdly, formulate and announce the industry planning on information technology development and application. The State continues to promulgate regulations and standards for information exchange among agencies, to create a link and synchronization in the process of investment and development of infrastructure based on the application of information technology. Promoting the e-Government Program, including transport and tourism, will promote the application of information technology in all areas. Promote digitization in industries and fields, including building national data infrastructure; drastically reforming administrative procedures related to digitization, electronification, and information transparency. In addition, it is necessary to build electronic payment infrastructure with solutions to limit the use of cash; support the development of e-commerce, e-contracts, digital signatures.

Fourthly, ensuring cybersecurity and high-tech crime prevention. The focus is on protecting economic security, information security, cybersecurity, monitoring and preventing various types of cybercrime and high-tech crimes. The authorities should focus on ensuring information security and cybersecurity at the national level and each agency, unit at all levels and each enterprise, especially the financial - monetary system and digitalized government agencies. Along with building and developing modern telecommunications infrastructure, becoming the foundation of the digital economy, it is necessary to focus on ensuring cybersecurity to create conditions for people and businesses to quickly and equally access digital content development opportunities. In addition, ensuring cybersecurity will help Vietnam have the trust of foreign partners, a safe environment for business investment, and an opportunity for us to develop products for cybersecurity.

Fifthly, launching the revolution of all digital startups, universal digital technology in Vietnam. The fastest way to accelerate the digital economy is to use digital technology to change the way we are producing, working. Using digital technology to solve Vietnam's problem, these technology enterprises will go global. Technology is born to solve problems, where there is a problem, there is technology, solution. The problem is everywhere, maybe right in our daily work, and each of us can start technology to solve our problems. Propaganda to raise social awareness about the digital economy. Press agencies and media need to guide public opinion, help businesses, people, and the whole society have a proper awareness of the digital economy, thereby having the best preparation for adapting to this development trend.

REFERENCES

1. The Ministry of Politics (2019), Resolution on a number of guidelines and policies to actively participate in the 4th industrial revolution. 52-NQ/TW, 27 September 2019.
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