Challenges arisen in digital economy time

Digital economy refers to an economy that is based on networks, digital and intelligent platforms. It has a prominent meaning to all nations as it can boost GDP a great deal.
Challenges arisen in digital economy time

The transformation from traditional economy to digital one is the most important factor for the development of each country because of its ability to increase productivity for many industries while providing enterprises with an opportunity to innovate their base in order to have a new method to approach the market.

Potentials are identified, yet not explored

By introducing Resolution No.36A/NQ-CP on e-government, Instruction No.16/CT-TTG on the Fourth Industrial Revolution, Decision No.1819/QD-TTG on approving the national program for information technology application in state agencies' activities during 2016-2020 and other related instructions on reducing unnecessary conditions in business, improving administrative formalities, focusing on reducing costs for enterprises in 2017, the government wants to confirm its strategic vision on recognizing opportunities and values of the digital economy to create the foundation for the Fourth Industrial Revolution to happen in Vietnam.

This is also considered the strong determination of national leaders in transforming wishes of businesses into reality.

However, up till now, Vietnam has yet composed a specific strategy on nationwide digitalization, and thus implementing policies lack consistency with the major guideline.

In particular, according to Resolution No.36A/NQ-CP, private information technology (IT) companies have still seen discrimination between private and state-owned companies in the resolution.

Also, they encounter difficulty in the administrative procedures and methods of identifying prices for their products in accordance with Decree No.102/2009/ND-CP on investment management in information technology applications using state budget funds.

They then meet investment obstacles due to regulations on public telecommunication fee in Circular 57/2016/TT-BTC.

Information technology companies, in fact, need a guarantee as well as fairness when approaching IT projects financed by the national budget to attract human resources into developing the digital economy.

At the moment, there is no specific policy to encourage IT companies to invest into the procedures of digital economy. Also, although IT startups are greatly facilitated, they cannot fully develop because of unfinished legal frame.

Specifically, commercializing startup products taking advantages of IT applications is meeting hindrances, losing business opportunities of many enterprises. It is worth noticing that because legal instructions on investing or withdrawing capital from startup businesses are not clear and transparent, the situation of brain drain into neighbouring countries has worsened.

Another challenge in developing digital economy is the lack of consistency in awareness and insufficient human resources to build a smart city. In fact, the deficiency in officers who can satisfy basic standards, along with no general planning, leads to misunderstanding between the concepts of e- government and smart city. Also, the implementation in different aspects lacks cooperation, resulting in confusion.

Local authorities find it difficult because of overhead cost increases due to inability of recruiting proper human resources. State officials themselves are not technologically qualified enough to choose or apply procedures of a smart city, leading to inconsistency.

It is also noticeable that the policy itself is not inspiring enough to take advantage of the powerful force from startup businesses to tackle the above issue.

It is, therefore, essential that the government first provide clear mechanisms to encourage the startups to take part in the public trading process or approach information on government’s development programs.

Many companies want the government to assign the Ministry of Information and Communications to be a good clue and cooperate with other related state bodies as well as private sector to draft and issue a list of standards on smart city so that local authorities are able to study and implement.

Half-baked plans

The financial solutions for the development of smart city should be carefully produced, with clear short-term as well as long-term visions, before infrastructure construction projects are chosen so that there will not be any interruption.

One of the plausible recommendations from the private sector is that instead of continuing the 2-party partnership between local authorities and technology companies (via the form of buying or renting service products, which are not easy to implement at all), a 3-party partnership among local authorities, technology companies, and financial companies should be formed.

Accordingly, the third group would be the one in charge of creating a clear financial solution and then monitoring the second group to apply it when this group processes the order from local authorities.

Many problems exist in current legal documents that could create difficulties for enterprises to expand and develop their business. For instance, the tax policy on digital services of both domestic and international companies is still inadequate.

While foreign service providers like Google, Facebook, and Grab only have to pay a tax of 5% , their domestic counterparts have to pay not only value-added tax, user tax, but also business income tax of 20%, which could lead to many Vietnamese companies open their foreign branches to optimize tax paying.

The process of listing and then paying copyright income tax for digital content is not appropriate either. Due to the impracticality of income tax laws as well as instruction documents, local tax offices find it frustrating, and thus collecting tax at the highest possible.

Creators of digital content themselves are not clear about this procedure, which makes it more complicated. The reality shows that new digital content having flexible forms appears in a great amount each day from millions of individuals participating in the network environment (in many cases, they are simply video clips or digital pictures), and so conventional procedures of registering for copyright are absolutely not suitable to encourage these people to create more content.

The process of creating a digital economy or smart city in Vietnam requires more innovative ideas, yet grave challenges still exist and erase possible benefits that this new form possesses.

The new year is coming, and digital companies, innovative companies in particular as well as business communities in general all hope that the government continues its strong determination in tackling current serious problems for the sustainable economy development.

The government needs to issue a fair tax policy between domestic and international companies to form healthy competitiveness. 

In addition, the monopoly in the telecommunication and television field still exist due to regulations and policies of the government.

There must be resolutions to decrease the monopoly and to create a healthier business environment for other enterprises.