Vietnam Digital Economy PDF

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FOREIGN TRADE UNIVERSITYFACULTY OF INTERNATIONAL ECONOMICINTERNATIONAL ECONOMIC HIGH-QUALITY PROGRAM===============MACROECONOMICS’sASSASSIGNMENT:DIGITAL ECONOMYINTERNATIONAL ECONOMIC HIGH-QUALITY PROGRAMGroup number: 09Lecturer: Ph. D Hoang Xuan BinhHanoi, 05-NoSTUDENTIDFULL NAME EMAIL CLASS1 201345...

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FOREIGN TRADE UNIVERSITY FACULTY OF INTERNATIONAL ECONOMIC INTERNATIONAL ECONOMIC HIGH-QUALITY PROGRAM ===============

MACROECONOMICS’s ASSASSIGNMENT:

DIGITAL ECONOMY INTERNATIONAL ECONOMIC HIGH-QUALITY PROGRAM Group number: 09 Lecturer: Ph. D Hoang Xuan Binh

Hanoi, 05-2021

K59 INTERNATIONAL ECONOMIC HIGH-QUALITY PROGRAMGROUP 09

No

STUDENT ID

FULL NAME

EMAIL

CLASS

1

2013450047

Phạm Hồng Phúc

[email protected]

Anh 02

2

2013450057

Nguyễn Thị Hương Trà

[email protected]

Anh 03

3

2011450204

Trần Công Minh

[email protected]

Anh 04

4

2013450069

Ngô Quang Vinh

[email protected]

Anh 01

5

2012450023

Phạm Khánh Linh

[email protected]

Anh 02

6

2013450042

Trần Nhật Minh

[email protected]

Anh 02

7

2013450011

Phạm Tiến Đạt

[email protected]

Anh 03

8

2013450058

Vũ Thanh Trà

[email protected]

Anh 01

GROUP 9 GROUP MEMBERS INFORMATION: (8 MEMBERS)

⮚ The presenters : Phạm Hồng Phúc, Nguyễn Thị Hương Trà, Trần Công Minh

TABLE OF CONTENTS 2

K59 INTERNATIONAL ECONOMIC HIGH-QUALITY PROGRAMGROUP 09 PART A:

DIGITAL ECONOMY AROUND THE WORLD

4

I

WHAT IS DIGITAL ECONOMY?

4

II

THE REAL STATE OF AFFAIRS OF DIGITAL ECONOMY IN THE WORLD

4

III

EFFECTS OF DIGITAL ECONOMY AROUND THE WORLD

PART B:

DIGITAL ECONOMY IN VIETNAM

9 12

I

THE REALITY OF DIGITAL ECONOMY IN VIETNAM

12

II

CAUSES AND EFFECTS OF DIGITAL ECONOMY IN VIETNAM

16

III

VIETNAM’S CURRENT POLICIES TO DEAL WITH DIGITAL ECONOMY

PART C:

VIETNAM DIGITAL ECONOMY FUTURE SCENARIOS

20 30

I

PREDICTIONS

30

II

SUGGESTIONS

33

PART D:

REFERENCES

37

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PART A: I

DIGITAL ECONOMY AROUND THE WORLD

WHAT IS DIGITAL ECONOMY? ❖ Digital economy is one collective term for all economic transactions that occur on the internet. It is also known as the Web Economy or the Internet Economy. With the advent of technology and the process of globalization, the digital and traditional economies are merging into one. ❖ Digital economy is defined as an economy that focuses on digital technologies, i.e. it is based on digital and computing technologies. It essentially covers all business, economic, social, cultural etc. activities that are supported by the web and other digital communication technologies. ❖ Digital economy refers to activities and transactions driven by the public and private sectors as well as the citizens to produce, adopt and innovate digital technologies and services in relation to socio-economic functions for enhanced wealth creation, productivity and quality of life.

II

THE REAL STATE OF AFFAIRS OF DIGITAL ECONOMY IN THE WORLD 1. Overview

The world's digital economy is worth about $3 trillion, accounting for about 3.8% of the global economy's value. In ASEAN countries, this value is about 150 billion USD, equivalent to 6% of the gross domestic product (GDP) of the member countries. Despite the challenging economic environment, Southeast Asia's digital sectors continue to grow strongly, reaching $100 billion in 2020 and on track to surpass $300 billion by 2025 (Pham Viet Dung, 2020). The strong development of the digital economy is clearly reflected in the change in the dominant position of companies globally.

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10 largest companies in the world in 2018 and 2008 2018

2008

Ranke d

Compan y

Establishe d

Billio n USD

Ranke d

Company

1

Apple

1976

890

1

PetroChina 1999

728

2

Google

1998

768

2

Exxon

1870

492

3

Microsoft 1975

680

3

General

1892

358

4

Amazon

1994

592

4

China Mobile

1997

344

5

Facebook 2004

545

5

ICBC (China)

1984

336

6

Tencent

1998

526

6

Gazprom

1989

332

7

Berkshire 1955

496

7

Microsoft

1975

313

8

Alibaba

1999

488

8

Royal Dutch

1907

266

9

J&J

1886

380

9

Sinopec

2000

257

10

JP Morgan

1871

375

10

AT&T

1885

238

Establishe d

Billion USD

(Pham Anh Tuan, 2019)

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Vietnam's digital economy has reached 3 billion USD in 2015, increased to 9 billion USD in 2018 and reached a total value of 14 billion USD in 2020. The Southeast Asia (SEA) 2020 Digital Economy Report published by Google, Temasek and Bain & Company on November 10 said that the e-commerce industry in Vietnam grew by 46% and Vietnam is the country with highest percentage of new Internet users in Southeast Asia 2. Digital economy’s trend

(McK insey & Company) How Digital Economy control our life

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(McKinsey & Company) Size of the Digital Economy

(McKinsey & Company) 7

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3. Factors affect the digital economy ❖ Emerging digital technologies: Emerging digital technologies such as blockchain, artificial intelligence, big data analytics and the Internet of Things can make a big leap in infrastructure upgrades industrial layer, simplifying logistics and supply chains, and help businesses operate more efficiently. (Cameron A, 2019) ❖ Higher demand for cybersecurity and personal security: The number of businesses and consumers participating in the digital economy increase leads to a higher demand for cybersecurity and personal security, especially when critical areas such as financial systems and government are increasingly digitized. ❖ Modern digital infrastructure: A developed digital economy requires quality digital and energy infrastructure – especially for energy-intensive technologies like the Internet of Things or Artificial Intelligence. Telecommunications network also needs to be set up to ensure broadband Internet is available can process large amounts of digital data for transportation launch new applications. ❖ Demand for Smart Cities: A country with rapid urbanization and population aging, smart cities will contribute to the management and use of resources more efficiently, while solving the problem of waste, pollution, pollution, and traffic congestion. ❖ The rise in digital skills, services, and businesses Digital and the freelance economy: Demand for the service industry and digital products and services increase, which means investing more in higher education, digital literacy, start-up skills and develop a bright innovation ecosystem create Vietnam. The decreasing trend of jobs with safe, fixed, repetitive; increasing demand for the basis of labor and products to generate income and services move more creative industries in the labor market. (Cameron A, 2019) ❖ Changing consumer behavior: Consumer behavior is changing with the rise of the middle classes Asia, towards using products and services with high value from the digital economy. At the same time, consumers also increasingly adapting to the digital economy, which 8

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increases the influence of groups, celebrities/ influencers in the digital economy – on supplier behavior and consumers. III

EFFECTS OF DIGITAL ECONOMY AROUND THE WORLD 1. Advantages of the digital economy ❖ Saves time. Before, if you needed office supplies, you would have to make a journey into town and purchase. Now, you can make an order over the internet and it will arrive the next day. ❖ Reduced costs for business. Firms can save on renting expensive buildings by running most of their business through the internet. A digital economy enables firms to cut out an aspect of the retail chain and send personalized goods directly from factory or warehouse to people’s goods, rather than through shops. This enables lower costs and lower prices (Tejvan Pettinger, 2020). ❖ Lower barriers to entry. In some markets, aspects of the digital economy make it easier for new firms to enter. If an entrepreneur has an innovative idea that catches on, they can create a new product which challenges traditional firms. The digital economy has brought many new services which were inconceivable before, such as online home deliveries for grocery to dating apps. ❖ Big data usage. The mass production of data can help inform governments and charities about what is happening in the economy. For example, in tracking of COVID-19 spread, the use of an app on mobile phones may indicate where local hotspots emerge (Tejvan Pettinger, 2020). ❖ Benefits for developing world. The digital economy is opening up opportunities for the developing world. For example, computer programmers in India can easily underbid western counterparts, leading to new job opportunities and higher income in India (Tejvan Pettinger, 2020). ❖ Enables people to work from home. The digital economy has been a huge asset during the COVID lockdown. Without digital technologies, the decline in economic activity would have been even greater. The digital economy gives greater scope for people working from home and having greater flexibility in their hours (which may suit parents with children). Working from home can reduce contact and spread of a virus. It can also help reduce traffic congestion and pollution.

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2. Problems of digital economy ❖ Monopoly power of tech giants. Despite the potential for new start-ups, many aspects of the digital economy have become dominated by firms with monopoly power. For example, Amazon has cornered the market for online sales, meaning many firms have to go through the Amazon market place to reach consumers who go to Amazon out of habit. Similarly, Google and Facebook have all developed very strong brand loyalty and market share in their respective markets. This has made a few tech giants very profitable. With monopoly power, Google are able to charge high prices for online advertising and Amazon have the market power to undercut traditional booksellers (Tejvan Pettinger, 2020). ❖ Less community. A traditional bookshop can act as a focal point for local community. It may holds events, book signings and individuals may enjoy the experience of browsing physical books. With the digital alternative undercutting traditional firms, old fashioned bookshops are forced out of business. Although books may be cheaper, we have lost physical interaction between sellers and buyers which was an important aspect of the buying experience. ❖ Addictive nature of technology. Whilst, in theory, the internet can save time, e.g. finding bus times is much easier with internet than paper copies, this time saved may be outweighed by the time we waste checking Facebook, twitter, internet searches. Also, the sheer volume of information can cause us to drown in information and lose sight of what we actually need. More choices do not necessarily lead to better outcomes. When faced with a bewildering range of outcomes, we can take time to decide and it becomes easier to procrastinate. ❖ Privacy issues. Harvesting and using data has become big business. Facebook collects a large range of data on its users and this has been bought by political interests who can give very targeted political ads to its users. ❖ Bypassing of labour laws. The digital economy has created a trend towards using self-employed freelancers, who are not protected by the same labour laws. For example, delivery drivers for Deliveroo and Uber drivers have often been employed on zero-hour contracts. This enables firms to cut labour costs, be more flexible, but it can leave workers without sick pay or employment protections. ❖ Social media has led to more graphic content. The anonymous and distant nature of social media has exacerbated trends to personal attacks and the posting of conspiracy theories or posting of violent/sexual images. The digital economy has enabled the proliferation of content that is damaging to human well-being. 10

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❖ Disruption patterns. The economy has always faced disruption from new technology – from the period of the Luddites to the assembly line. However, the digital economy is increasing the pace of change, causing many traditional firms (high street retailers) to go out of business. The rise of AI may threaten jobs in a whole new range of service sector industries. In theory, new technology will lead to changing patterns of activity, but no increase in overall unemployment. However, the pace of digitalisation can lead to structural unemployment, with some unskilled workers increasingly losing out to skilled workers. Combined with the monopoly power of big tech firms, it is causing an increased inequality in society, which may lead to feelings of alienation and unfairness. ❖ Environmental costs. It is a mistake to think that the digital economy implies a ‘green solution.’ Data centres use electricity and cause CO2 emissions. In the US, data centres account for around two per cent of U.S. electricity use in 2014 (Mark Kaufman, 2020). A bigger potential cost is how the digital economy encourages a ‘throw-away’ culture. E.g. the planned obsolescence of mobile phones and computers, encouraging consumers to buy new models, leading to greater use of raw materials.

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PART B:

DIGITAL ECONOMY IN VIETNAM

I

THE REALITY OF DIGITAL ECONOMY IN VIETNAM The year 2020 has marked a significant development of Vietnam’s e-commerce, even when COVID 19 spread terrors all over the world and affected the economy negatively. This reversed economic growth might be harmful to other countries; but for Vietnam, it was a great opportunity to enhance the digital economy, which redounded to the highest ever level of GDP growth that we recorded – even higher than China and USA. Digital economy, which is growing at double digits (USD 14 billion as of 2020 and predicted for USD 52 billion by 2025), plays a contributory role to this economic success. In the span of 4 years between 2016 and 2020, online selling-related queries in Vietnam have increased six-fold. The country also sees seventy-three percent of YTD monthly active user growth for selected mobile banking apps and 46% YoY growth in the ecommerce sector (Ousmane Dione, 2020). With one of the fastest growing online population in the world, wide-ranging online supply and remarkably supportive ecosystem, Vietnam’s internet economy is stronger than ever and should be looked out for. From the start or 2019 up till now the year of 2021, consumers have been changing there spending habits, with the peak in 2020 when the instruction of quarantine appeared to be effective. When analyzing customer behavior, the researchers found that up to 45% of Vietnamese customers access e-commerce marketplaces by typing the website address directly into their browsers, rather than searching for it on Google or clicking on ads. This number is much higher than the global average of only 27.49% (Vietnam Insider, 2020). To have an overall vision, we shall see the changes in consumers spending habits throughout the years:

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(Boxme Blog, 2020)

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The number of users accessing to the Internet increases every year. There also changes in the paying method, from using cash into credit card or bank transfer. According to Boxme Blog in 2020, people using direct paying method (cash) only takes 17%, while the act of using credit card and bank transfer are much higher, respectively are 37% and 30%.

(Boxme Blog, 2020) This situation forced enterprises to alternate their commercial spreading, from papers to online. The changes became more extreme from the year 2020, when COVID 19 appeared and twisted our normal lives. All exchanging activities were done online, with the most limited face to face transaction. Because of that, there were some transformations in the distribution of Internet users in economic categories:

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Growth of e-commerce expenditure among internet users in Vietnam in 2020 compared to 2019, by category

(Statista Research Department, 2021) According to the following bar chart, the e-commerce expenditure rose incredibly among all aspects of economy, with the peak of 45,9% in food and personal care. However, it saw a foreseen drop in the percentage of travel, mobility and accommodation, of -40,5%, due to the negative impacts of COVID 19. Traveling is the most popular merchant segment, accounting for 44 percent of sales in 2019. Unfortunately, this segment in 2020 and 2021 is affected badly by the movement restriction to the pandemic. (Statista Research Department, 2021) The Vietnam Government has implemented numerous laws and regulations in recent years with the goal of turning Vietnam into a full-fledged digital economy during the Fourth Industrial Revolution, such as Law on Cyber Security No. 86/2015/WH13 or Decision 749/QD-TTG dated 30 June 2020 on National Digital Transformation Program to 2025. The policies focus on the establishment of e-government to enhance transparency and speed up licensing works for enterprises, the legalization of ecommerce activities such as AI development, online ride hailing or non-cash payment etc. 15

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At the same time, stricter measures in information management have been introduced, with the notable Decree 15/2020/ND-CP dated 3 February 2020 allowing police authorities to investigate and sanction individuals and entities distributing false or defaming information on social networks. For investors interested in the e-Commerce sector of Vietnam, it is crucial to know that the government recognizes e-commerce transactions (except those conducted via social networks) as having the same degree of legal effectiveness and enforceability ...