Vietnam’s Digital Economy Strategy and ASEAN Cooperation

On March 31, 2022, Vietnam’s Prime Minister unveiled Decision No. 411, which outlines the nation’s digital economy and society development strategy for 2025, aiming for an extended vision by 2030. The Ministry of Information and Communications has been tasked with driving this strategy forward.

This strategic plan pursues two main objectives: enhancing the digital government, economy, and society while nurturing Vietnamese tech firms to compete on a global scale. The overarching goal is to achieve a robust and prosperous Vietnam, in which citizens experience comfort and prosperity.

The digital economy serves as one of the three foundational pillars of the broader digital transformation plan outlined during the Party’s XIII Congress. As reported by the Ministry, Vietnam’s digital economy was responsible for 12% of the national GDP in 2020, increasing to 16.5% by 2023, with an impressive annual growth rate surpassing 20%.

In celebration of National Digital Transformation Day on October 10, VietNamNet arranged an online roundtable discussion focused on “Vietnam’s Opportunities for Digital Economic Cooperation within ASEAN.”

ASEAN is actively advancing digital transformation, with countries making significant strides in establishing e-government structures and digital markets. The vision is to maximize the advantages of digital technologies within ASEAN, bolstering its competitiveness. Key questions arise: How can Vietnam tap into these regional opportunities to enhance its digital economy strategy?

We are pleased to present the following speakers:

• Ambassador Pham Quang Vinh, former Deputy Minister of Foreign Affairs focused on Southeast Asia and former head of SOM ASEAN from Vietnam.
• Mr. Goh Keng Phang, Economic Counselor at the Singapore Embassy in Vietnam.
• Mr. Jason Bay, Country Director (for the Vietnam market) of Sea Limited Group.

Nearly ten years ago, ASEAN achieved a landmark moment with the Kuala Lumpur Declaration, establishing the ASEAN Community 2015 and outlining goals for 2025. This community is founded on three key pillars, including the ASEAN Economic Community.

What are your views on the evolution and changes within the ASEAN Economic Community, particularly through the lens of the COVID-19 pandemic, and how has digital transformation influenced its trajectory?

The inception of the ASEAN Community in 2015 marked the culmination of a roughly 20-year integration process. Under the three-pillar framework—Political-Security, Economic, and Socio-Cultural Communities—the Economic Community poses the crucial challenge of creating a unified market. Presently, ASEAN encompasses around 700 million individuals and boasts a collective economy nearing $3.8 trillion, making it the fifth-largest digital economy globally.

While Vietnam led ASEAN in 2020 amid the COVID crisis, the pandemic necessitated a pivot towards virtual interactions due to imposed restrictions. These challenges disrupted supply chains but also encouraged a rapid adoption of digital solutions. Consequently, consumer engagement with online shopping has surged over the past three years.

Building on the momentum from 2021, ASEAN leaders released a statement in Brunei aimed at economic recovery through digital initiatives. In 2023, negotiations commenced for the Digital Economy Framework Agreement (DEFA), which will serve as a collaborative platform for advancing ASEAN’s digital economy, with hopes of its completion by the following year.

The journey of ASEAN integration is ongoing. Collective efforts to foster an integrated economic environment have progressed significantly, particularly in e-commerce and digital economic exchanges—wavelengths amplified by the pandemic.

Vietnam and Singapore celebrate significant milestones: 50 years of diplomatic ties and a decade of the Vietnam-Singapore Strategic Partnership. Reflecting on this partnership, the Vietnam-Singapore Industrial Park (VSIP) exemplifies the economic collaboration between the two nations.

As we navigate this era of digital transformation, could the concept of digital economic cooperation evolve into a modern-day VSIP, further strengthening relations?

The VSIP model has demonstrated exceptional success since its launch in 1998 in Binh Duong, now expanded to 18 industrial parks across 13 Vietnamese provinces, contributing to local economic growth. This year, new parks are being developed in Lang Son and Ha Tinh.

Unlike traditional forms of cooperation bound by geography, the digital economy transcends physical boundaries and encompasses a wide array of sectors. This flexibility presents ample opportunities for diverse digital collaborations. VSIP continues to support traditional manufacturing, especially electronics, providing a substantial base in Vietnam.

To enhance manufacturing capabilities, the Singapore Agency for Science, Technology and Research has initiated a Memorandum of Understanding (MOU) with the Vietnam National Innovation Center aimed at advancing manufacturing techniques in Vietnam.

Innovative urban planning and smart city initiatives are also a focus, with advancements occurring at VSIP. For example, VSIP Binh Duong integrates intelligent technologies across its operations, managing energy, water, waste, traffic, and security effectively.

In the realm of e-commerce, Singaporean companies have significantly invested in Vietnam, contributing positively to the economy and citizens’ lives. SEA Group stands out for its role in creating employment and enhancing consumer experiences through platforms such as Shopee. Recently, Shopee has partnered with local SMEs to optimize their e-commerce capabilities, increasing their reach to consumers both locally and globally.

This highlights just a few examples of the potential for continued collaboration.

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in the digital economy.

Back in 2015, SEA Group entered Vietnam with its online shopping platform, Shopee, at a time when the local population was not accustomed to digital shopping, e-wallets, or financial applications. Today, however, young Vietnamese, particularly Gen Z, are heavily engaged in online shopping.

As reported by Google’s e-Conomy Southeast Asia 2022, Vietnam’s digital economy is estimated to hit 49 billion USD by 2025, with e-commerce expected to contribute 32 billion USD. This rapid e-commerce growth highlights its role as a fundamental component of Vietnam’s digital economy.

Given its extensive experience in the Vietnamese market, how does SEA/Shopee view the potential for e-commerce to enhance the country’s digital economy?

We are in an exciting era. A decade ago, e-commerce was on the outskirts, and we began to invest in Shopee when the market was still developing.

Given Vietnam’s youthful population, economic dynamism, and cultural vibrancy, I clearly see its potential. Ambassador Pham Quang Vinh observed that the COVID pandemic acted as a critical juncture for digital economic growth, unveiling e-commerce’s vast potential.

In 2020, leveraging digital technology became crucial for resilience against COVID, ensuring that daily life and the economy continued functioning without significant disruptions, which could have led to worse outcomes. The increased reliance on digital solutions improved overall conditions.

Now, in a post-pandemic world, it’s evident that e-commerce and digital transformation extend beyond resilience; they elevate quality of life, boost productivity, and foster economic development. Within the ASEAN region, we focus on market growth and accessibility.

The Vietnamese government aims for the digital economy to contribute 30% to the GDP by 2030, which is ambitious but reflects the considerable potential seen in ASEAN, particularly in Vietnam. Observations show this goal is achievable.

We are dedicated to assisting the Vietnamese government in realizing this aim within both the national and wider ASEAN frameworks.

Traditionally, Singapore is viewed as a “gateway” within ASEAN, known for its open economy and logistical capabilities. Vietnam sees potential in Singapore as an export partner, underpinned by various agreements enhancing their economic ties. How can Vietnam leverage Singapore as a digital economy gateway, and what aspects can they collaborate on within the ASEAN digital landscape?

: I believe Vietnam, like Singapore, is a significant digital hub in ASEAN. The country is emerging rapidly as a digital focal point in the area. You noted that Vietnam’s digital economy contributed 12% to GDP in 2020, climbing to 16.5% in 2023, showcasing an annual growth rate of 20%.

This constitutes remarkable advancement. Simultaneously, Singapore’s role is to cultivate a robust ecosystem fostering digital economic development in the region. We invite partners eager to co-develop in this domain.

For instance, we have around 220 venture capital funds, which are vital for technology companies, particularly deep tech startups, requiring ample time and investment for technology advancements, research, and eventual commercialization.

Singapore boasts a skilled and diverse workforce, welcoming talent and entrepreneurs globally, including from Vietnam, to enrich our ecosystem.

In terms of opportunities, Singapore provides a platform for businesses, innovators, and investors to collaborate and generate new ideas. An example would be the annual Singapore Tech Innovation Week, where entrepreneurs and innovators from all over come together to create groundbreaking solutions.

Both Vietnam and Singapore possess numerous strengths and can achieve significant synergies by connecting these two pivotal digital centers in ASEAN.

In practice, we’ve discussed connectivity as essential for regional integration. Singapore was previously a catalyst for ASEAN economic unity. Now, with the shift towards digital transformation, it’s vital to explore how to unify all 10 ASEAN nations within the digital realm.

Countries like Singapore, Vietnam, Malaysia, and Thailand are at various digital development stages.

Thus, beyond mere connection, we must consider: How can we genuinely connect? Sharing experiences, learning from one another, and providing mutual support are crucial. Initiatives for ASEAN integration have historically seen developed countries assist their less developed counterparts, a practice that should be continued given our past experiences’ importance.

Secondly, we must extend our connections not just internally but also globally. Singapore is integral to this. I believe that Singapore will facilitate Vietnam’s connection to the global stage, making it part of a broader framework.

The ASEAN Integration Initiative (IAI) has been crucial for many years and has gained increased significance amid geopolitical challenges, potential regional trade blocs, and shifting global alliances.

There is a common understanding in ASEAN of “ASEAN centrality.” If we aspire to be a unified region of 700 million people with a multi-trillion dollar economy, our integration with the world should be strategically orchestrated.

To achieve this goal, internal connectivity is essential; otherwise, we would enter the global market as ten disparate economies with differing standards. It’s important to acknowledge that while Singapore is small, Vietnam is significantly larger—a question arises: What relevance does a small nation like Singapore hold globally? This underscores the need for ASEAN unity; without it, we cannot be central in broader global considerations.

Currently, traveling from Hanoi to Singapore takes about 3.5 hours, and a container ship from Haiphong to Singapore takes a minimum of four days. Although these physical journeys remain unaffected, enhancing digital economic connectivity can streamline and amplify the physical routes.

Shopee serves as a digital bridge across Southeast Asia. Imagining the cross-market connectivity journey through Shopee highlights how Vietnam can advance its e-commerce prospects within ASEAN, and ultimately, strengthen its digital economy through broader connections with the region.

Absolutely. My background is in electrical engineering, so I understand the importance of physical distance, but in technology, logical distance holds equal or greater significance. Therefore, what does “logical distance” mean in e-commerce?

In terms of e-commerce, you’re not limited by physical barriers…

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Embracing Digital Connectivity for ASEAN Growth

As Keng Phang highlighted, our connections are no longer limited by geography. Leveraging digital technologies allows different regions to unite, particularly as we enhance AI algorithms to optimize production and supply chain management.

My concerns about physical distance have diminished. The critical aspect lies in addressing the logical distance that persists due to legal, linguistic, cultural, and financial barriers, as well as licensing challenges.

To facilitate this, we require government leadership, but the private sector is eager to play its role in overcoming these obstacles.

Recognizing our capabilities, Shopee has developed the Shopee International Platform (SIP) to ease the digital export and import processes within ASEAN. Without SIP, SMEs encounter significant challenges that hinder their operations.

For instance, a small Vietnamese business looking to enter markets like Singapore or Malaysia must first establish a representative office and recruit local language speakers, manage trade financing, shipping costs, and navigate market research—an overwhelming feat for smaller enterprises.

However, SIP can assist by employing AI chatbots for customer support and translation, making communication with foreign customers simpler for Vietnamese sellers.

Additionally, Shopee manages trade logistics, shipping, customs clearance, and currency exchange. From the seller’s side, products are sent to a Shopee warehouse in Vietnam, while buyers receive their items shipped from a local warehouse in Singapore or Malaysia.

This support diminishes both financial and non-financial challenges typically faced by smaller companies seeking to export within the region. Larger organizations might handle these aspects independently, however, for smaller entities, I often present SIP by questioning the need for costly market research prior to earning revenue. Instead, platforms like SIP allow businesses to generate income from exports before conducting assessments of market potential.

Over the past few years, over 350,000 SMEs and 1,000 Vietnamese brands have leveraged the Shopee International Platform to expand into ASEAN.

This year, we’re also collaborating with ASEAN Day, a significant campaign launched by Vietnam during the pandemic in 2020. Every August 8th, we encourage sellers to offer discounts to stimulate trade across ASEAN.

Before my role as Economic Counselor in Vietnam, I actively participated in various ASEAN Economic Community (AEC) committees, focusing on bridging physical and digital gaps among member nations.

We’ve discussed the importance of the Digital Economy Framework Agreement (DEFA), which serves as a vital tool for enhancing the trade of goods, as products still require transportation between countries.

Efforts are underway to accelerate customs clearance processes, ensuring that goods reach consumers quickly while supporting local businesses. Additionally, cross-border companies like SEA Group significantly contribute to expanding business operations throughout the region.

Ambassador Pham Quang Vinh elaborated on ASEAN’s legacy of Free Trade Agreements (FTAs) and its initiatives for economic connectivity. He emphasized that building the digital economy requires a strong foundation of connectivity, both infrastructural and digital. What strategic and institutional opportunities are available for ASEAN considering the diverse levels of development among its countries?

First, our existing economic integration efforts provide a robust foundation for advancing the digital economy. Our interconnected regional economies bolster continuous collaboration.

Next, we must assess our business practices in the digital realm. It’s essential to create a seamless connection between digital and physical spaces to ensure they complement one another effectively. The groundwork laid by ASEAN in traditional economic integration supports the continuous evolution of the digital economy.

The third point recognizes the array of FTAs that include provisions for digital economy advancement, including agreements with dialogue partners like India and negotiations within various economic frameworks.

These initiatives must work together, navigating past experiences to foster a thriving digital environment within ASEAN. Strengthening the regional framework will enable us to collaborate globally.

It’s also crucial to acknowledge the disparities in development levels across Southeast Asian countries. As we strive for economic integration, there are varying degrees of digital and legal framework advancements.

By establishing a cooperative roadmap, we can follow a phased approach to achieve our objectives. This process allows for flexibility, enabling quicker implementers to lead while others require more time.

Ultimately, consensus on our shared goals is paramount. Through mutual support, we embody the spirit of the ASEAN community. In the fast-growing landscape of Southeast Asia, we must harness our collective strength to attract major countries and leading technology firms for mutual benefits.

By working together, we can leverage the diverse levels of economic and digital development across our region to advance collectively.

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