Digital Transformation Facilitates Cross-Border Trade

The Covid-19 pandemic has made businesses realize the superiority of digital economy and the urgent need for digital transformation. Digital transformation will help Vietnamese businesses, especially small and medium-sized enterprises (SMEs), find flexible business models, reduce costs and optimize resources to access global supply chains and sell goods across the border.

Opportunity for digital transformation

According to Dr. Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI), digital transformation helps us have a transparent, effective trade while leaving no one behind in cross-border trade.

“The direct interaction between producers and consumers, especially consumers making direct orders to producers and leading production under the C2B method rather than the B2C method, and consumers choosing to buy products marketed by producers will become a global trend,” he said.

In a new trade, not only do consumers choose products and services for themselves but they can also interact with producers, turning the modern global market into a place for buying and selling goods and a space for social interaction of people as well, he said.

According to the Vietnam White Paper and Vietnam E-Business Index Report, many Vietnamese businesses have launched e-commerce to boost import and export under both business-to-business (B2B) model and business-to-consumer (B2C) model. Globally, cross-border e-commerce has grown rapidly and has become a key trend of e-commerce in recent years.

As the EU - Vietnam Free Trade Agreement (EVFTA) officially came into effect on August 1, 2020, digital transformation has increased accessibility to the enormous European Union (EU) market where the information technology system is highly developed. Mr. Cao Quoc Hung, Deputy Minister of Industry and Trade, assessed that digital transformation in import and export has helped reduce workload and paper records at companies and agencies. As a result, it has helped raise the quality of public services and reduce the time of handling administrative procedures. The great benefit of digital transformation in import and export is facilitating importers and exporters to participate in international trade and reduce time, costs and effort to improve import and export performance of Vietnam.

In addition, businesses can accelerate digital transformation to enter new supply chains to replace traditional supply chains that have been disrupted or stalled by the Covid-19 pandemic while expanding and diversifying import and export markets and reducing dependence on certain markets, Deputy Minister Hung confirmed.

Supporting cross-border e-commerce

Cross-border e-commerce is quickly becoming a core and inevitable trend of the global economy and digital transformation is a necessary launchpad for businesses to join the game.

Mr. Hoang Long, Business Development Director of Alibaba Vietnam, said that the Covid-19 pandemic is evolving complicatedly but Alibaba.com is still achieving good growth, with an increase of more than 100% of new shoppers and more than 15% of new sellers, showing that the online market is still growing very strongly while the traditional market is affected.

“By 2022, e-commerce revenue will reach about US$3,300 billion. Given the current e-commerce growth, this value is expected to be reached in 2020. Cross-border e-commerce growth will outpace point of sale growth,” said Mr. Tran Xuan Thuy, Country Director of Amazon Global Selling Vietnam.

With the magnificent advancement of information technology, all businesses, especially SMEs, can directly access foreign consumers. Moreover, thanks to big data technology, they can easily analyze in detail consumer behavior in all markets, right customer care and audience-targeted marketing.

Import-export activity is also related to many other issues closely associated with IT applications and communications with product data collection and processing procedures in digital transformation. For example, the traceability of exported agricultural and seafood products accounts for a high share in Vietnam's export value. Some Vietnamese enterprises have also applied blockchain technology to traceability of agricultural products.

According to the representative of the Multilateral Trade Department under the Ministry of Industry and Trade, between physical and online trade promotion, the latter can be organized continuously with low cost on different platforms. This form eliminates three main limitations of physical promotion form: Location, attendance and costs.

For instance, the obvious advantage of exporters in applying digital transformation is creating a system of geographical indications. By leveraging digital transformation, these geographical indications can reach global consumers more quickly and effectively through online forms like online word of mouth, viral or trending.

To support enterprises, authorities have also been gradually building a legal corridor to enable e-commerce and promote a digital economy, including the Master Plan for National E-commerce Development in 2021-2025 approved by the Prime Minister in Decision 645/QD- TTg dated May 15, 2020, and the National Digital Transformation Program to 2025 and further to 2030, ratified under Decision 749/QD-TTg dated June 3, 2020. The above-mentioned policy platform shows the interest of the Government and regulators in digital economic development strategy and their focus on exporter support.

By Huong Ly, Vietnam Business Forum