Economic Sector

Last updated: Thursday, February 21, 2019


Industry 4.0: Harnessing Disruption for Vietnam’s Development

Posted: Thursday, August 02, 2018

The World Bank (WB) is supporting an initiative that allows farmers to use smart phones, paired with an automated sensor in the field, to monitor the level of water flowing to their rice paddies. When the water level gets low, the farmer can use a smart phone to trigger the pumping station. The farmer can monitor, from a distance, multiple plots and sensor stations at once. This has implications for agricultural productivity, water conservation, greenhouse gas (GHG) reduction and rural development in Vietnam.

This was shared by Mr Ousmane Dione, World Bank Country Director for Vietnam, at the Industry 4.0 Summit held recently in Hanoi.

In the past two decades, Vietnam has successfully inserted itself into select global value chains while achieving a remarkable reduction in poverty. In the years ahead, disruptive technologies will present both challenges and opportunities for remaining on this successful trajectory.

In terms of digital adoption, Vietnam shows strengths and challenges. The World Bank’s Development Report 2016 on Digital Dividends ranks Vietnam’s Digital Adoption Index at 0.46 out of 1-point scale. While higher than the average of global lower middle-income countries, it is lower than the regional average.

Internet penetration is 54 per cent, and 40 per cent of Vietnam’s population are social media users. While those numbers are impressive, according to a recent survey of Alphabeta, Vietnam fares lowest in the region in other digital measurements.

To forge ahead, or even leapfrog, Vietnam must upgrade the way its government functions, he said. “Three types of government relationships are critical: government to government (G2G), government to business (G2B), and government to citizens (G2C). Technologies can help in many ways, if we can embrace them strategically to reverse potential disruptions to these relationships,” said Ousmane Dione.

But technologies alone cannot solve the puzzle. Simply buying software or hardware won’t improve the way government functions. Government will not be a partner to Industry 4.0 if it is stuck in Bureaucracy 1.0.
Therefore, according to Ousmane Dione, a three-factor formula, or a tripod, is necessary for Industry 4.0 to really help Vietnam achieve its development aspirations: technologies, institutions, and people.

Technologically, Vietnam needs to grasp integrated digital solutions. The government should adopt a holistic approach to how technology can support reforms for impact and transform its development outcomes.

Open data is another critical element. Robust open data among government institutions and between the government and the business and the public, will allow data to be used in ways that yield dividends for tomorrow.
Leveraging financial technology, or Fintech, can also be instrumental in improving G2B and G2C relationships in Vietnam, where a large share of the adult population still has no bank account.

Institutionally, the Government needs to put in place institutions and streamline its business processes to enable innovation. The full function of smart phones, tablets and other devices can only be realised with the right foundational institutions and processes. These include a digital interoperability framework, digital asset management processes, and privacy protection.

Institutions or processes neither create nor anticipate disruptive technologies, but they can be instrumental in facilitating innovations and mitigating disruptions.

As for people, Vietnam must invest now in skills and health for the workforce of the future. In human capital terms, Vietnam is well positioned. It has achieved good basic education outcomes, reflected through its strong results in international assessments such as PISA and Young Lives, and it has a dynamic young generation that can embrace and adapt to changes. Also, Vietnam ranks seventh in terms of improvements to its Universal Health Coverage score. But the nation is aging. The share of Vietnam’s population in working age peaked last year, and is now on the decline. By 2050, it is expected that 1 out of every 5 Vietnamese will be over 65 years old.

A critical challenge in Vietnam is that only 8 per cent of the labour force has a university education, and this is insufficient to make the leap into Industry 4.0. Workers need to be equipped with the right skills mix to ride this wave.

Investing in research and development will be critical for Vietnam to join the frontiers of Industry 4.0. “Made in Vietnam” should be replaced with “Researched and Developed in Vietnam.” This means that Vietnam not only creates cheap labour, but also invests in the industry of the future.

For Industry 4.0 to serve Vietnam, the government must first ensure an enabling environment to accommodate innovation and improve productivity. This includes macro stability and resilience, and the effective and efficient use of fundamental technologies since Industry 3.0.

Anh Mai

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