Individual Essay: Analysis of the Vietnamese Government’s Initiative to Promote and
Develop Innovation and Entrepreneurship.
Lưu Thu Huyền - 22118648
Lecturer: BUSM3028
Western Sydney University - Vietnam Campus
Ho Chi Minh City, 2024
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Table of Content
List abbreviation.......................................................................................................................................................
Abstract.....................................................................................................................................................................
I. Introduction...........................................................................................................................................................
II. Key elements of the Vietnamese government's initiatives in innovation and
entrepreneurship......................................................................................................................................................
III. Critical appraisal of the initiatives...................................................................................................................
A. Evaluation of the effectiveness of the initiatives.............................................................................................
B. Identification of any limitations or challenges Vietnam faced........................................................................
IV. Government's roles in the economy and influence of public policies on innovation...................................
A. Discussion of the role of government in promoting innovation and entrepreneurship...................................
B. The impact of public policies on innovation and entrepreneurship in Vietnam..............................................
V. Recommendations for improvement..................................................................................................................
A. Identification of areas for improvement in the current initiatives...................................................................
B. Potential new policies or strategies for the government to promote innovation and
entrepreneurship...................................................................................................................................................
VI. Conclusion...........................................................................................................................................................
References..................................................................................................................................................................
Appendix A: Amount of budget that government spending on R&D.................................................................
Figure 1: Gross Expenditure on Research and Development in Viet Nam and Selected
Economies (%).....................................................................................................................................................
Appendix B: Venture capital investment in Vietnam...........................................................................................
Appendix C: Shortage of skilled workers, particularly in STEM in Vietnam market......................................
Figure 2: Employment Types by Education for Ages 15-64, 2015......................................................................
Appendix D: Definition of SMEs.............................................................................................................................
Appendix E: Application of Regulatory Sandbox in Singapore...........................................................................
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List abbreviation
1. SMEs: Small and medium-sized enterprises
2. MOE: Ministry of Education and Training
3. R&D: Research and Development
4. S&T: Science and Technology
5. STEM: science, technology, engineering, and mathematics
6. NIC: Vietnam Innovation Network
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Abstract
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I. Introduction
In today's rapidly evolving global economy, innovation and entrepreneurship play a
crucial role in driving economic growth and development. Recognizing this, the
Vietnamese government has implemented a series of initiatives and public policies aimed
at promoting and developing innovation and entrepreneurship within the country. This
report critically appraises these government initiatives and explores their key elements,
while also examining their implications for the role of government in the economy and
the influence of public policies on innovation. Furthermore, it will provide suggestions
for potential improvements to the government's initiatives in innovation and
entrepreneurship development.
II. Key elements of the Vietnamese government's initiatives in
innovation and entrepreneurship
Vietnam is implementing a series of comprehensive actions to promote technological
development and innovation in many different fields. These include reforming the
science, technology, and innovation regime while improving state governance through
legal framework amendments, management reforms, and digital transformation.
Firstly, the government focuses on building a national innovation system by establishing
ecosystems, innovation centers, and open platforms and promoting linkages between
networks and research centers (VNA, 2022). Accordingly, a significant portion of the
budget has been allocated to government research and development (R&D) institutes,
making the state the largest donor in the country (See Appendix A).
Secondly, Vietnam is developing human resources through increased education, training,
and business cooperation. Honor and communication activities are increasingly
expanding to raise awareness through awards, education, media channels, contests,
campaigns, and displays (VNA, 2022). Moreover, NIC was established to foster a vibrant
innovation ecosystem, provide resources and support to entrepreneurs, and help turn
research and ideas into successful businesses.
In addition, science, technology, and innovation infrastructure is being improved by
developing high-tech parks, laboratories, quality infrastructure, and information systems
(VNA, 2022). The authorities encourage businesses to access technology by providing
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tax incentives. Accordingly, proactive international integration and cooperation efforts
are being implemented through cooperation, participating in global alliances, and creating
favorable conditions for business participation (VNA, 2022). A typical example is the
"Start-up Nation" program launched in 2016 to support the development of 5,000 start-up
businesses by 2025 (Innolab, 2023). In this program, Vietnam's most successful and
famous entrepreneurs are invited, sharing their start-up experiences, and commenting on
new business models and trends worldwide. The aim is to replicate the entrepreneurial
spirit and analyze the causes of failure, and inspire the young generation and promote the
national entrepreneurial spirit through this.
III. Critical appraisal of the initiatives
A. Evaluation of the effectiveness of the initiatives
Vietnam's policy initiatives promoting innovation and entrepreneurship have
shown promising results and effectiveness. The government's commitment to
establish a national innovation system and allocate a significant portion of the
state budget to R&D institutes demonstrates the government's dedication to
driving innovation and technological advancements. This commitment and the
focus on fostering public-private partnerships have created favorable conditions
for innovation to flourish in the country.
Additionally, the efforts to enhance human resources development are vital for
nurturing an environment conducive to innovation and entrepreneurship.
Measures such as awards, education programs, media channels, and collaboration
networks help raise awareness and honor innovative achievements. The
establishment of the NIC serves as a platform for knowledge sharing, resource
allocation, and enabling the commercialization of intellectual property. These
initiatives are crucial for providing entrepreneurs with the necessary resources and
support and translating research outputs into successful businesses.
B. Identification of any limitations or challenges Vietnam faced
While the Vietnamese government's initiatives in innovation and entrepreneurship
are promising, the country has faced several limitations and challenges.
According to Innolab (2024), the primary challenge is the absence of policies that
promote innovation and sustainable entrepreneurship, as well as limited large-
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scale divestment deals and capital from investors. Due to swings in the global
economy, venture capital investment in Vietnam saw a sharp 56% fall in 2022,
with the technology sector mainly affected (Vietnam, 2023). This means that
Vietnam needs more legislation supporting innovation and sustainable
entrepreneurship, as well as a dearth of large-scale divestment agreements and
money from significant firms, despite the country's impressive growth in internet
usage and innovation indices.
Vietnam's future is shaped by several noteworthy developments, such as the rapid
advancement of digital technology, artificial intelligence, and the Fourth
Industrial Revolution (See Appendix B). They provide chances to improve
sustainability and competitiveness across various industries, but they also bring
drawbacks like aging populations and inadequate infrastructure. In addition, the
complexity is increased by political, social, and institutional factors. Furthermore,
Vietnam is also facing a shortage of skilled workers, particularly in STEM (See
Appendix C).
Addressing these limitations and challenges requires a multi-dimensional
approach involving government policies, private sector initiatives, and
collaborations with academia and civil society. Continuously identifying and
addressing these challenges will help create a more conducive environment for
innovation and entrepreneurship in Vietnam.
IV. Government's roles in the economy and influence of public policies
on innovation
A. Discussion of the role of government in promoting innovation and
entrepreneurship
The Vietnamese government focuses on science, technology, and innovation as
key drivers of socio-economic development. Since the early 2010s, science,
technology, and innovation have gained increasing importance, with the
government being the most prominent research funder. Significant investments
have been made in government R&D institutes, highlighting the commitment to
promoting innovation (Audretsch & Fiedler, 2021).
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Moreover, the Vietnamese government has taken inspiration from the successful
policies of countries like China to build technical capacity and promote
innovation (Nesta, 2020). They have implemented S&T policies to stimulate
research and development efforts, emphasizing technology transfer and
commercialization of research outcomes (Nesta, 2020).
The government has also prioritized the development of innovation hubs and
startup ecosystems in key cities such as Ho Chi Minh City and Hanoi. They have
established innovation centers, incubators, and co-working spaces to provide
support services to startups and facilitate collaboration between academia,
industry, and entrepreneurs (USAID, 2024). These efforts reflect a multi-faceted
approach by the Vietnamese government to promote innovation and
entrepreneurship, proving that the authorities play a crucial role in encouraging
and nurturing innovation-driven enterprises.
B. The impact of public policies on innovation and entrepreneurship in
Vietnam
Public policies can significantly impact the growth of innovation and
entrepreneurship in Vietnam. Firstly, the Vietnamese government has taken steps
to provide support to entrepreneurs in the form of venture capital investment, as
well as research and development subsidies. Entrepreneurs and innovators are
better equipped to experiment with new ideas, develop prototypes, and take
innovations to market when they receive funding and resources.
Secondly, policies that encourage collaboration between industry and academia,
promote science and technology education, and provide training for entrepreneurs
can increase individual skills and knowledge. It leads to the upgraded capacity
and skills that can help entrepreneurs and innovators succeed in creating new
products and services in the market.
Finally, government policies that support innovation ecosystems that promote
interactions between local and international start-ups, experts, and investors can
further develop the country's innovation and entrepreneurship ecosystem. By
engaging with counterparts in other countries and encouraging technology
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transfer, innovation in Vietnam can further benefit from input and inspiration
from the global community.
V. Recommendations for improvement
A. Identification of areas for improvement in the current initiatives
There are several areas where the Vietnamese government's current initiatives to
promote innovation and entrepreneurship could be enhanced. Firstly, ensuring
equitable access to capital for startups and innovators is critical. There are many
different funding sources to support SMEs (See Appendix D) in Vietnam
(Vietnam Law, 2018).
● Credits supported and guaranteed by the State,
● State budget capital, capital sources exempted or reduced from taxes, fees,
charges, land rent, land use fees and other payables.
● State budget according to the provisions of law.
In addition, legal capital sources from domestic and foreign organizations and
individuals can also contribute to transparency and compliance with legal
procedures in managing financial support for small and medium-sized enterprises
in Vietnam.
Additionally, there needs to be a focus on strengthening STEM education and
talent development. In 2020, the Ministry of Education recommended that high
schools include STEM Education programs in their training (MOE, 2020). After
three years of application, high schools have noticed positive results in education
using this method and are trying to maintain the program in the future. By
nurturing a skilled workforce, governments can support the growth of innovative
startups that rely on technical expertise.
B. Potential new policies or strategies for the government to promote
innovation and entrepreneurship
A regulatory sandbox framework could be implemented to promote innovation
without hobbling it with burdensome regulations. This framework allows startups
to temporarily test innovative products or services under controlled conditions,
allowing them to identify regulatory challenges and work with governments to
develop new solutions. This approach balances the need to protect consumers
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with encouraging breakthrough ideas and technologies. The Vietnamese
government can refer to Singapore's implementation (See Appendix E).
Incentives and tax benefits tailored to startups and innovative businesses can be
another effective strategy. The government encourages entrepreneurship and
venture investment by reducing tax rates, tax exemptions, or deductions for
qualified startups, investors, or research and development activities. It helps
reduce financial barriers and encourages risk-taking in the startup ecosystem.
By considering and implementing these proposed policies and strategies, the
Government of Vietnam can create a favorable environment that promotes
innovation and entrepreneurship. It will contribute to economic growth, job
creation, and developing a vibrant startup ecosystem in Vietnam.
VI. Conclusion
● Summary of the main points discussed in the essay
● Final thoughts on the importance of innovation and entrepreneurship in Vietnam
and the role of the government in promoting them.
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innolab. (2023, May 19). VIETNAM’S INNOVATION AND TECH INVESTMENT
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Appendix A: Amount of budget that government spending on R&D
In 2013, Vietnam spent 0.37% of its budget on R&D and ranked 9th among the countries
that spent the most on this field. Accordingly, by 2030, efforts will be made to attract and
effectively use investment resources, allocate at least 2% of the state budget for science,
remove barriers to science—corporate capital, and promote public-private partnerships
(VNA, 2022). The intended outcome is stimulating innovation, enhancing technological
capabilities, and driving economic growth by commercializing research outputs (Quynh
& Truong, 2023). Thanks to that, research institutes, universities, and scientific
organizations are being developed into large research objects with autonomy, streamlined
structures, and meeting international standards.
Figure 1: Gross Expenditure on Research and Development in Viet
Nam and Selected Economies (%)
(Vo et al., n.d.)
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(innolab, 2024)
Vietnam's government, as outlined in Decision No. 569/QD-TTg (11/5/2022), has set
ambitious goals for science, technology, and innovation with a vision for 2030 (innolab,
2024). The key objectives include a significant increase in the contribution of Total
Factor Productivity (TFP) to economic growth by more than 50%. The aim is also to raise
the value of high-tech industrial products to a minimum of 45% and maintain a Human
Development Index (HDI) above 0.7. To achieve these targets, the government plans to
increase research and development (R&D) investment to 1.5% - 2% of GDP, with
societal contributions reaching 65% - 70%.
These efforts are aimed at propelling Vietnam to be among the top 40 nations globally in
the Global Innovation Index (GII) and fostering innovation in key sectors such as
agriculture, industry, services, and regional development. By focusing on science,
technology, and innovation, Vietnam aims to enhance productivity, promote high-tech
industries, and achieve sustainable economic growth while improving overall human
development. (thuvienphapluat.vn, 2024).
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Appendix B: Venture capital investment in Vietnam
(innolab, 2024)
Vietnam's economy must maintain an average annual growth rate of 7% for the next two
decades or more to reach the government's stated goals (innolab, 2024). Vietnam,
dedicated to more sustainable and all-encompassing growth, promises to cut emissions by
30% and stop deforestation by 2030 to reach net-zero emissions by 2050 (innolab, 2024).
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Appendix C: Shortage of skilled workers, particularly in STEM in
Vietnam market
Compared to the domestic wage sector's 21 percent and the foreign direct investment
wage's 9 percent, public sector employees' post-secondary education attainment was 86
percent in 2014, with 52 percent being university graduates (Cunningham & Pimhidzai,
2018). Meanwhile, employers are bemoaning the lack of trained workers, especially in
management and professional professions requiring a university degree (See Figure 2). It
can limit the country's ability to drive innovation and technological advancement
forward.
Figure 2: Employment Types by Education for Ages 15-64, 2015
(Cunningham & Pimhidzai , 2018)
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Appendix D: Definition of SMEs
According to Vietnam Law (2018), small- and medium-sized enterprises (SMEs)
encompass micro-, small-, and medium-sized enterprises, which are characterized by
their size and financial criteria. These enterprises have an average number of employees
covered by social insurance that does not exceed 200 annually. Additionally, they must
meet at least one of the following two criteria:
1. Total capital amount: SMEs have a total capital amount that does not
exceed VND 100 billion.
Or
2. Total revenue: SMEs have a total revenue in the preceding year that does
not exceed VND 300 billion.
Identification of micro-, small-, and medium-sized enterprises is further categorized
based on the sector in which they operate, namely:
1. Agriculture, Forestry, and Fisheries
2. Industry and Construction
3. Trade and Service
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Appendix E: Application of Regulatory Sandbox in Singapore
Since 2016, Singapore has formally implemented the regulatory sandbox pilot
mechanism as an initiative to facilitate a conducive environment for innovative startups
in the banking and finance sector (Tran, 2021). The primary objective is to enable these
startups to implement new business models within the realm of innovation. Notably, the
existing legal framework in Singapore lacks explicit regulations governing this matter. To
address this, the Monetary Authority of Singapore (MAS) has released Guidelines on an
Experimental Legal Framework for the Financial Industry, which operates within the
sandbox mechanism.
1) In Singapore, the regulatory sandbox establishes a set of conditions and standards
that must be met by startups operating in the Finance and Banking sector in order
to participate in the testing mechanism (Tran, 2021). A key criterion for eligibility
is the requirement for the services offered to be "new" or "creative." Therefore,
existing financial services provided in Singapore are generally ineligible to
participate in the sandbox, unless the business can demonstrate the distinctiveness
and innovative nature of the technology or supporting services in comparison to
other existing financial services readily available in the market.
2) It is important to note that the pilot legal framework of the sandbox in Singapore
has a limited scope of application (Tran, 2021). It is specifically designed for a
select group of innovative startups that satisfy the predetermined criteria
established by the sandbox. Within this framework, eligible businesses will have
the opportunity to choose between two distinct testing models tailored for startups
operating in the Finance and Banking sector.
(i) testing sandbox is designed for intricate and high-risk business
concepts, necessitating a rigorous and comprehensive registration
procedure followed by approval from the relevant authorities.
(ii) sandbox express is a separate model tailored for straightforward and
low-risk business ideas or ventures that have already been introduced in
the market, operating under established principles. Eligible businesses can
commence testing within the predefined environment of Sandbox Express
within 21 days of successfully registering with the authorities. Sandbox
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Express is particularly suitable for specific scenarios, including insurance
brokerage operations, the establishment and operation of organized
markets, and money transfer transactions.
3) The regulatory sandbox legal framework consistently establishes a
predetermined timeframe within which startups can engage in this experimental
legal model (Tran, 2021). During this period, fintech startups are able to
implement their business models under the oversight of competent authorities.
However, once the specified deadline has passed, startups are required to operate
within the regulatory framework as governed by Singapore's current legal system.
This regulatory transition aims to safeguard Singapore's financial system.
Furthermore, it is worth noting that in certain exceptional circumstances,
Singapore authorities may exercise their discretion to extend the sandbox
application period in order to accommodate the legitimate testing requirements of
startups.
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