Changes in consumer behavior and market trends over the past few years have forced us to rethink the role of technology
In a column published in the August 1-7 edition of the Vietnam Investment Review, Eunjung Han , consultant at Rouse Legal Vietnam and vice-chairman of the Digital Sector Committee of the European Union Chamber of Commerce in Vietnam, discusses how the implementation of the EU-Vietnam Free Trade Agreement (EVFTA) and related government policies will How will it affect the growth of the local technology market.
As Vietnam enters the post-epidemic era, the experience gained during the epidemic has been reminding people of the importance of digital transformation and the key technologies involved.
Although the epidemic has had a huge impact on the economy and society, Vietnam remains an attractive market for European investors. The European Chamber of Commerce (EuroCham) “2021 White Paper” pointed out that based on Vietnam’s stable macroeconomic environment and single-digit inflation, investors will continue to be optimistic about the country’s investment environment and increase confidence in conducting trade in the country.
More importantly, EVFTA is paving the way for continued direct investors (FDI) from the EU and is seen as a means of mutual recovery and economic rebound.
As the first comprehensive free trade agreement between the European Union and Asian developing countries, EVFTA has had a positive impact on trade and investment exchanges. Despite the possible impact of the COVID-19 pandemic on Vietnam’s key export region in the south, the EVFTA has helped Vietnam re-emerge as the EU’s largest merchandise trading partner in ASEAN and among the top 10 suppliers to the EU market.
Currently, the outlook for the local technology market is very positive. Government support for technology-related overseas investment brings exciting opportunities and changes. This coincides with Vietnam’s digital economy and the high-tech prospects brought about by EVFTA, showing its potential to be a platform for exploring technological cooperation and strengthening the partnership between Vietnam and the EU.
Having said that, the realization of this potential ultimately depends on the effective use of the EVFTA in a business environment with improved infrastructure, simpler administrative procedures, less uncertainty, and more collaborative facilitation tools. For Vietnamese companies, they must take measures to improve their operating models and increase work efficiency to meet higher EU standards.
Implementation measures
Vietnam covers a wide range of technology areas under EVFTA, including but not limited to public services, trade, e-commerce, intellectual property, data and climate change. Correspondingly, the Vietnamese government has also actively reformed relevant regulatory frameworks and policies, and launched new initiatives.
In 2020, Vietnam’s Decision No. 749/QD-TTg approved the National Digital Transformation Plan by 2025 and towards 2030. The program serves the development of digital government, economy and society, and aims to build a globally competitive Vietnamese digital enterprise, with a dual purpose.
The launch of the program coincides with the entry into force of the EVFTA, enabling Vietnam and the EU to find opportunities for cooperation and common development. As part of the program’s agenda, the Electronic Transactions Law is currently being updated and amended with provisions including but not limited to digital signatures, digital identities and electronic contracts to support Vietnam’s rapidly growing digital economy and provide an appropriate regulatory regime.
In August 2021, the Vietnamese Ministry of Industry and Trade (MOIT) issued Decision No. 1972/QD-BCT on the establishment of a Vietnamese domestic advisory group in accordance with Article 13.15 of the EVFTA Trade and Sustainable Development Chapter. The Advisory Group is composed of Vietnamese associations and NGOs/NGOs legally established and operating in Vietnam and representing legitimate interests related to trade and sustainable development. Recommendations to ensure compliance with EVFTA commitments.
Investment regulations are also being reformed to enable EU and Vietnamese businesses, especially technology-based investors, to benefit from the EVFTA and enjoy further incentives. For example, in October 2021, the government issued Decision No. 29/2021/QD-TTg on Special Investment Incentives for Investment Projects, defining the definition of high-tech standards and covering measures such as corporate income tax exemptions and land and water rent relief . These incentives can further attract FDI, improve the business environment and ultimately lead to higher quality investment.
In order to respond to tariff changes and complete the tax reduction plan under EVFTA, the Ministry of Finance is currently compiling Vietnam’s import and export lists based on the ASEAN Harmonized Tariff Terminology, updating technology, trade and commodity classifications to meet market demand. Vietnam will apply this list and review it every five years to ensure its alignment with the Harmonized System amendments.
A strong and transparent intellectual property legal regime is essential to facilitate creative, research and development activities in the field of science and technology. The recently approved amendments to the Intellectual Property Law reflect Vietnam’s efforts to comply with EVFTA commitments. For example, the revised law includes provisions on the liability of Internet service providers in case of copyright infringement to ensure adequate protection of intellectual property rights on digital networks. Strengthening the protection of intellectual property rights is one of the ways for Vietnam to attract value-added investment from the EU.
Related issues, such as data protection and cross-border data flows, play an important role in shaping the digital economy, and several legal instruments are being drafted. Vietnam is developing a draft “Personal Data Protection Decree” to better align with international standards. The bill will also become the country’s first set of comprehensive regulations on personal data protection. Draft amendments to Decree No. 72/2013/ND-CP on the management, provision and use of Internet services and online information and a draft decree guiding the implementation of the Cybersecurity Law are also pending publication.
In addition, agencies at all levels have been actively conducting awareness campaigns on EVFTA and helping institutions/enterprises develop technology-based competitiveness. For example, the Ministry of Transport offers an online training program on EVFTA commitments. In addition, the EU is also supporting the Vietnamese government in implementing EVFTA, especially the Vietnam Trade-Related Assistance Program, to assist agencies at all levels to help private companies familiarize themselves with this agreement.
investment trends
According to the business climate index for the second quarter of 2022 released by the European Chamber of Commerce and YouGov Vietnam, European business leaders are optimistic about Vietnam’s green growth prospects. Specifically, 79 percent of respondents said that their assessment of Vietnam’s green development potential had improved compared to the first quarter, and 90 percent said that strengthening the development of green industries would attract more foreign investment. direct investment.
It can be seen from policies such as the 2012 Vietnam National Green Growth Strategy and the 2030 Vietnam Renewable Energy Development Strategy that Vietnam has made continuous efforts to improve awareness and competitiveness of green development. The government’s efforts coupled with Vietnam’s access to modern technologies from the EU through the EVFTA will accelerate green growth and the development of renewable energy, and help locally manufactured products meet EU technical and environmental standards. In the long run, this will also help launch new industries and products, and facilitate future technology transfer.
Affected by the EVFTA’s mutual benefits to the EU and Vietnam, some urban transport, agriculture and climate change mitigation projects in Ho Chi Minh City are being progressively advanced with the support of the EU. Currently, the city is seeking investment for nearly 200 projects in ten focus areas, including infrastructure development, agriculture, industry, trade and services.
In recent years, trade relations between Vietnam and the EU have improved significantly as EVFTA has demonstrated the potential to promote common development and cooperation, especially in the field of technology. But EVFTA also poses challenges. Given that the EU’s main export business is high-tech products, the removal of tariffs will allow more high-quality EU products to flow into Vietnam.
Compared with EU manufacturers, some smaller companies in Vietnam have limited resources and lack high-tech capabilities. These companies need to work hard to improve their competitiveness in order to better compete with EU manufacturers in terms of quality, functionality and reliability. Investments in human capital, vocational training and IT education will lead to higher productivity and must therefore be part of competitiveness building to ultimately improve business operations and efficiency and meet higher EU standards.
As the second fastest-growing market in Southeast Asia, Vietnam’s digital economy is developing rapidly and is expected to become a digital powerhouse in the region. For this to turn from promise to reality, Vietnam must remain pragmatic and open. This includes efforts to strengthen infrastructure, foster more partnerships, provide more incentives, remove red tape and create a more transparent business environment that benefits both local companies and EU investors.
