Business and Technology 4.0

2:22:29 PM | 7/12/2022

Economic trend

Boosted by the Fourth Industrial Revolution or Industry 4.0 and the integration into the world economy, Vietnam's achievements of 40-year reform have placed it at an outstanding position. The country has established bilateral economic relations with more than 230 countries and territories, and multilateral relations, including 16 FTAs, with 60 economies. However, we also need to stay alert to three economic megatrends in the new context:

First, the trend of concurrent cooperation and struggle in the world economy remains unchanged. Specifically, although the Chinese and U.S. economies are in fierce competition, the two sides still maintain their cooperation. At the same time, they are also the two largest markets of Vietnam, requiring domestic enterprises to skillfully find the appropriate cooperation areas so as not to be trapped in the competitive position of these two giant economies.

Second, geopolitical factors in the international economy are changing, especially in the Indo-Pacific when the new Indo-Pacific Economic Framework (IPEF) Initiative is adopted (figure 1).


This factor has a strong impact on freight transport and supply chain shifting. In particular, as the Russia-Ukraine conflict is reportedly resulting in higher fuel costs for transportation, which indirectly facilitates the realization of Kra Canal project in Thailand and brings great opportunities for Vietnamese businesses, specially those in southern provinces.        

Third, Industry 4.0 is a continuous automation process of traditional industrial and manufacturing activities, powered by cutting-edge artificial intelligence (AI) technology. Wide-ranging machine-to-machine (M2M) communication and the Internet of Things (IoT) are integrated, enhancing automation, improving communication and self-monitoring, and producing intelligent machines that can analyze and diagnose problems without any human intervention. Certainly, the industrial revolution is always the beginning and aims to meet three factors of strengthening manufacturing capacity: Speed, scale and optimization. It can also be seen that the difference of the Fourth Industrial Revolution is impacting all three business fields: Industrial manufacturing, trade, and finance and banking

However, statistics show that we are also seeing a big gap in artificial intelligence. Per capita investment in AI solution companies in Vietnam is below US$1 as in Thailand, Malaysia, Indonesia, Vietnam and the Philippines. Meanwhile, it is US$68 in Singapore. In 2019, the figure was US$21 in China and US$155 in the United States. That poses challenges for Vietnamese businesses that need to invest more to take advantage of digital platforms for merchandise production and distribution, thus boosting the country's economic growth.

Business and technology 4.0

In a world that is both cooperative and competitive, enhancing core competencies to make high-quality goods and services is a prerequisite (international economic integration programs require high domestic production capacity of goods to enjoy preferential tariffs, subject to regulations on processing content and the origin of inputs of exports). However, regional geopolitical transformations and digital development have led to new initiatives that shape more cooperation and competition in non-tariff technical barriers, especially to product quality and standards (both technical and social). The IPEF Initiative, for example, is designed as a tool to strengthen cooperation between the United States and its Asian partners. Unlike CPTPP and RCEP - the two largest trading blocs in Asia, the new economic cooperation program does not state tariff reductions. Instead, the U.S. seeks cooperation in strategic areas like shifting and developing supply chains to establish regulatory standards for a digital economy that works perfectly for product value chains, from inputs to consumers. In other words, IPEF is a newly designed mechanism to seek sustainable benefits from various trading partnerships, based on technical standards and principles of products and services.

As the world evolves, building new supply chain management models and digital applications in all economic fields, especially in the agricultural sector in Vietnam, plays a very important role. Figure 2 shows a simple traditional agricultural product supply chain model from farmers to intermediaries, agents, wholesalers, retailers and finally consumers.

Nevertheless, digitally-driven new models can merge intermediaries, agents, and wholesalers by establishing coordinated marketing centers where digital technology can be applied for selection and classification, based on market, packaging and wholesale standards are given increasingly strict and complicated market requirements (Figure 3).

Applicable technologies may be: sensors to interact with farmers in managing soil, water, light, humidity and temperature; IoT and GPS connectivity and positioning; big data for climate forecasting; logistic robots and software for market and consumer demand forecasting. Certainly, these smart coordination centers will be digitally applied to manage increasingly sophisticated supply chains as well as product value to ensure market-based supply and demand rules in the Industry 4.0 era.

Some policy recommendations and programs in the digital transformation trend

According to a new study by the U.S. consulting firm Kearney and Singapore's EDBI, digital technology in general and artificial intelligence (AI) in particular can lift the ASEAN economy, including Vietnam, to a higher level. If ASEAN members catch up with the pace of AI adoption, they could add nearly US$1 trillion (over US$100 billion for Vietnam) to the region's gross domestic product by 2030.

To do so, it is necessary to develop and implement four specific policies:

First, National General Data Policy: Technologically, standards are No. 1 priority. So, it is necessary to develop a common regional data policy for Vietnam in line with digital transformation standards and principles of industrialized countries.

Second, Digital Skills Training: Any technology solution must take into account its impacts on workers and place humans on top. There is a need to build a shared commitment to digital skills training for the workforce.

Third, Application in Industrial manufacturers: Robots, IoT, AI and Big Data; in Commerce: E-commerce; and in Finance and banking: Fintech.

Fourth, Cybersecurity: Strengthening cooperation and capacity building in cybersecurity.

The effective implementation of the above solutions will certainly help the successful delivery of the country's strategic goals for sustainable development to 2030, with a vision to 2045.

Dr. Thai Cong (Vietnam Business Forum)