Changes in consumer behavior and market trends in recent years have forced us to rethink the role of technology.
In a column originally published in the August 1-7 edition of the Vietnam Investment Review, Eunjung Han, a consultant at Rouse Legal Vietnam and Vice Chairman of the Digital Sector Committee of the European Chamber of Commerce in Vietnam, discusses how the implementation of the EU- The Vietnam Free Trade Agreement (EVFTA) and relevant government policies have an impact on the growth of the local technology market.
As Vietnam enters the post-pandemic era, the experiences and learnings from the pandemic serve as a reminder of the importance of digital transformation and its crucial technological component.
Despite the economic and social impact of COVID-19, Vietnam remains an attractive destination for European investors. According to the 2021 White Paper of the European Chamber of Commerce (EuroCham), Vietnam’s stable macroeconomic climate, with single-digit inflation, continues to boost investor confidence in the country’s investment and business environment.
On top of that, the EVFTA is paving the way for the continuation of foreign direct investment (FDI) from the EU and is seen as a means for shared recovery and economic rebound.
As the first comprehensive free trade agreement between the EU and a developing country in Asia, the EVFTA has had a positive impact on trade and investment exchange. While COVID-19 may have affected key export regions in southern Vietnam, the EVFTA has helped Vietnam become the EU’s largest goods trading partner in ASEAN and rank as one of the Top 10 providers in the EU market.
Today, the local tech market forecast is positive with exciting opportunities and changes ahead with the government prioritizing tech-related FDI. This is consistent with Vietnam’s digital economy and high-tech aspirations introduced by the EVFTA, indicating its potential as a platform to explore technology collaborations and strengthen partnerships between Vietnam and the EU.
That said, realizing this potential will come down to the effective utilization of the EVFTA in a business environment with improved infrastructure, administrative procedures that are easier to navigate and with fewer uncertainties, and more means of facilitating cooperation. As for Vietnamese companies, steps must be taken to improve operations and efficiency to meet the highest EU standards.
Vietnam’s commitments under the EVFTA in the technology space cover a wide range of areas including, but not limited to, public services, trade, e-commerce, intellectual property, data, and climate change. Consequently, the Vietnamese government has made efforts to reform relevant policy and regulatory frameworks, as well as to launch new initiatives.
In 2020, Decision No.749/QD-TTg approved the National Digital Transformation Program until 2025, with an orientation to 2030. The program has the dual purpose of developing a digital government, economy and society, as well as establishing companies Vietnamese digital. with global capacity.
The launch of the program, which coincided with the entry into force of the EVFTA, is allowing Vietnam and the EU to identify opportunities for collaboration and mutual development. As part of the agenda of the program, the Electronic Transactions Law is currently in the process of updating and amending provisions, including but not limited to digital signature, digital identity, and electronic contracts, to support Vietnam’s fast-growing digital economy and provide adequate regulations.
In August 2021, the Ministry of Industry and Trade (MoIT) issued Decision No.1972/QD-BCT on the establishment of the Vietnam National Advisory Group in accordance with the provisions of Article 13.15 of the Trade and Sustainable Development Chapter of the EVFTA . The group, composed of Vietnamese associations and non-governmental/non-profit organizations legally established and operating in Vietnam that represent legitimate interests related to trade and sustainable development, is tasked with collecting opinions, advising and making recommendations on the implementation , ensuring compliance with the commitments under the EVFTA. Investment regulations are also being reformed to allow Vietnamese and EU companies, especially technology-based investors, to benefit from the EVFTA and enjoy more incentives. For example, in October 2021, the Government issued Decision No. 29/2021/QD-TTg on special investment incentives for investment projects, defined according to high-tech criteria, covering income tax exemptions for companies, as well as reductions in rent from the surface of the land and water. . It is these types of incentives that can attract more FDI, improve the business climate and ultimately lead to higher quality investments.
In order to deal with the tariff changes and complete the tax reduction roadmap under the EVFTA, the Ministry of Finance is currently compiling a list of Vietnamese imports and exports in line with the ASEAN Harmonized Tariff Nomenclature to update the technology, trade and classify goods that meet market demand. . Vietnam applies this and reviews are conducted every five years to ensure consistency with the Harmonized System amendments.
A powerful and transparent intellectual property (IP) legal regime is needed to promote creation, research and development activities in the science and technology space. The recently passed amended Intellectual Property Law reflects efforts to comply with the EVFTA. As just one example, the amended law includes provisions on the liability of Internet service providers in the context of copyright infringement to ensure sufficient protection of IP rights in the digital network. Providing stronger protection of IP rights is one of the many efforts Vietnam can make to attract more value-added investment from the EU.
Data protection and relevant issues such as cross-border data flow play an important role in shaping a digital economy and various legal instruments are in preparation. The draft Personal Data Protection Decree is being developed so that Vietnam can be more aligned with international standards and will be the country’s first set of consolidated regulations regarding the protection of personal data. Also pending issuance is a draft decree amending Decree No. 72/2013/ND-CP with regard to the management, provision and use of internet services and online information, and a draft decree governing the implementation of the Cybersecurity Law.
In addition, authorities at different levels have been actively involved in EVFTA awareness raising activities and technology-based capacity building for agencies/businesses. For example, the MoIT offers an online training program on the EVFTA commitments. In addition, the EU is supporting the Vietnamese government in the implementation of the EVFTA, in particular with the Vietnam Trade-Related Assistance Program to assist ministries in helping the private sector to familiarize themselves with the agreement.
According to the business climate index for the second quarter of 2022, published by EuroCham and conducted by YouGov Vietnam, European business leaders have a positive outlook on Vietnam’s green growth prospects. Specifically, 79 percent of surveyed participants said their assessment of Vietnam’s green development potential improved compared to the first quarter, and 90 percent said stronger development of the green sector would attract more FDI.
As seen in policies such as the 2012 Vietnam National Green Growth Strategy and the 2030 Vietnam Renewable Energy Development Strategy with a Vision for 2050, continuous efforts are being made in terms of awareness and capacity building. The EVFTA synergizes the government’s efforts by allowing Vietnam access to modern technologies from the EU, which will accelerate developments in green growth and renewable energy, as well as helping locally manufactured products meet Vietnam’s technical and environmental standards. the European Union. In turn, this will contribute to the launch of new industries and products, which could promote technology transfer in the future.
Ho Chi Minh City has recently pointed to the role of the EVFTA in the mutual benefit of the EU and Vietnam, as it sees projects in urban transport, agriculture and climate change mitigation implemented with EU support. The city is now seeking investment in nearly 200 projects in ten key areas including, but not limited to, infrastructure development, agriculture, industry and commerce, and services.
Trade relations between Vietnam and the EU in recent years have seen a significant boost as the EVFTA demonstrates its potential to promote mutual development and cooperation, especially in the technological landscape. That said, the EVFTA is not without its challenges. Taking into account that the EU’s main export is high-tech products, the elimination of tariffs will give way to a greater supply of high-quality EU products in the country. The limited resources of smaller companies and lack of hi-tech capability compared to EU manufacturers is an indication of the need to work on improving their ability to better compete in terms of quality, functionality and reliability. Investment in human capital, vocational training and IT education will lead to higher productivity and therefore should also be included as part of capacity building to ultimately improve operation and efficiency to meet higher standards. EU high.
As the second fastest growing market in Southeast Asia with a thriving digital economy, Vietnam promises to become a regional digital powerhouse. For Vietnam to go from promise to reality, it must continue its pragmatic and open approach. This includes efforts to improve infrastructure, provide more means to facilitate cooperation, provide more incentives and cut red tape to create a more transparent business environment that is favorable to both local businesses and EU investors.