Embark on a journey through Vietnam’s vibrant innovation landscape, where every milestone signifies the nation’s unwavering commitment to progress. In February 2023, Vietnam’s remarkable rise in global innovation was highlighted by its 46th position out of 132 nations in the Global Innovation Index (GII) 2023 (WIPO, 2023), a leap of two spots from the previous year. This recognition places Vietnam among the top seven middle-income countries that have made significant strides in innovation over the past decade.
How is Vietnam navigating towards innovation-driven growth amidst these accomplishments? What are the challenges and opportunities that await businesses in this ever-evolving terrain?
In this article, we explore the complete narrative, delving deeper into Vietnam’s journey as it forges ahead towards innovation-driven prosperity.
Vietnam jumps to 46th in Global Innovation Index
Vietnam is recognized as one of the seven middle-income countries that have made significant progress in innovation over the past decade by 2023.
With a consistent improvement in Vietnam’s Global Innovation Index (GII) ranking from 2017 to date, currently at 46 out of 132 countries, it’s evident that Vietnam has made significant strides. The GII has shown a steady rise, climbing from the 59th position in 2016 to 42nd in both 2019 and 2020, 44th in 2021, 48th in 2022, and settling at 46th in 2023.
Within the ASEAN region, Vietnam ranks behind Singapore (5th), Malaysia (36th), and Thailand (43rd), placing it among the middle-income economies within the top 65 countries in the GII. This group has shown the fastest advancement in GII rankings over the last ten years.
In 2023, the GII index saw changes in component indicators, data sources, and calculation methods. Notably, a new startup index, “Value of unicorn businesses” was introduced, with Vietnam ranking 33rd in this category.
How Vietnam Is Making Efforts To Stand on the World Stage
Vietnam’s commitment to innovation and progress is evident in its strategic initiatives and forward-looking policies.
Introducing the Provincial Innovation Index (PII) Nationwide
Since 2017, Vietnam has adopted the Global Innovation Index (GII) by the World Intellectual Property Organization (WIPO), alongside many countries worldwide, to identify strengths and weaknesses in socio-economic development through science, technology, and innovation.
In response, the Ministry of Science and Technology has developed the Provincial Innovation Index (PII) in alignment with local contexts, drawing on domestic experiences like PCI, PAR, PAPI, and international practices.
This index serves as a vital tool for investors in assessing local investment environments and aids international organizations and donors in evaluating activities within Vietnam’s provinces. With 52 indicators across 7 pillars mirroring GII’s structure, the PII provides comprehensive insights into each province’s innovation landscape, highlighting strengths and weaknesses for informed decision-making. (VnEconomy, 2024)
Government Plan for 2030
Vietnam’s government, through Decision No. 569/QD-TTg (11/5/2022), targets a significant boost in science, technology, and innovation by 2030. The key objectives include:
- Raising Total Factor Productivity (TFP) contribution to economic growth by over 50%.
- Increasing high-tech industrial product value to at least 45%.
- Maintaining the Human Development Index (HDI) above 0.7.
- By 2030, R&D investment should hit 1.5% – 2% of GDP, with societal contributions rising to 65% – 70%.
These endeavors are geared towards propelling Vietnam into the top 40 nations globally in the Global Innovation Index (GII) and nurturing innovation across agriculture, industry, services, and regional development (Thu Vien Phap Luat, 2022).
What Challenges Await
Vietnam’s promising position in the GII 2023 rankings is met with significant hurdles, particularly amidst global political and economic uncertainties, alongside shifts in investment and trade strategies worldwide.
In 2022, venture capital investment in Vietnam witnessed a stark 56% decline due to global economic fluctuations, notably impacting the technology sector (vietnam.vn, 2023). Despite remarkable growth in internet usage and strides in innovation indexes, Vietnam still grapples with the absence of policies promoting innovation and sustainable entrepreneurship, alongside limited large-scale divestment deals and capital from major corporations.
Several significant trends shape Vietnam’s future, including the robust development of the Fourth Industrial Revolution, digital technology, and artificial intelligence. While offering opportunities to bolster competitiveness and sustainability in various sectors, they also present challenges such as infrastructure limitations and an aging population. Moreover, political, social, and institutional issues add to the complexity.
To meet the government’s outlined objectives, Vietnam’s economy must sustain an average annual growth rate of 7% over the next two decades or more. Committed to greener and more comprehensive growth, Vietnam pledges to reduce emissions by 30% and halt deforestation by 2030, aiming for net-zero emissions by 2050.
Opportunities For Vietnam
Amidst the pursuit of advancing GII rankings, Vietnam’s startup ecosystem has soared to the third position among the top six economies in Southeast Asia. This milestone reflects substantial investments in innovative startups and a growing presence of engaged investors and funds.
Despite economic challenges, Vietnam’s technology ventures have maintained their third-highest position in the region, with first-half figures hitting $413 million.
The government has introduced favorable conditions through Decree 11/2024/NĐ-CP, effective February 2nd, 2024. This decree exempts both corporate and individual shareholders from capital gains tax on share transfers. Additionally, startups can enjoy a five-year period of 0% Corporate Income Tax (CIT) from the start of their taxable income (Thu Vien Phap Luat, 2024).
Enterprises are encouraged to leverage government support and adapt to market trends. Addressing talent shortages through training investments and fostering partnerships within the startup community are imperative. Expanding into foreign markets offers sustainable growth avenues.
Despite economic uncertainties, businesses must prioritize controlled growth strategies to diversify revenue streams. Market shifts present opportunities for innovative startups to explore new business models and tap into untapped segments. Sectors like financial technology, education technology, and AI-driven solutions for traditional industries attract investor interest in 2024 (Vietnam Business Forum, 2024).
For startups, understanding target market preferences and tailoring marketing strategies accordingly is essential. Vietnam must implement strategies to harness its vast potential, enhance technology transfer, and cultivate high-quality Vietnamese brands for global markets. This collective effort demands action from all levels of government and sectors, including local authorities, scientists, the private sector, and business associations, to intensify efforts in innovation and technology application.
In conclusion
Vietnam’s journey towards innovation-driven growth is marked by significant achievements and promising opportunities amidst its rise in the Global Innovation Index (GII) rankings. However, this success comes with its set of challenges, including the need to navigate through political and economic uncertainties globally and enhance policies promoting innovation and sustainable entrepreneurship.
Nevertheless, Vietnam is proactively tackling these hurdles through initiatives such as the Provincial Innovation Index (PII) and the government’s strategic plan for 2030, designed to foster science, technology, and innovation across diverse sectors. Moreover, the burgeoning startup ecosystem presents abundant growth opportunities, with substantial investments in innovative ventures and a keen focus on international expansion.
As Vietnam strides forward on its journey to becoming a nexus of innovation and creativity, collaborative efforts across sectors and concerted actions from all stakeholders will be pivotal in unlocking its full potential and propelling sustainable development in the global landscape of innovation and technology.
References
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