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Vietnam Must Redefine Scope and Scale of Digital Economy

The Chief Economist of the state-owned Bank for Investment and Development of Vietnam (BIDV) stated that the current method of calculating the scale of the digital economy “only reaches the core”, while digital transformation is spreading rapidly into many industries and fields. At a recent seminar, the Chief Economist, Can Van Luc, explained that the criteria and measurement of the digital economy in Vietnam is only basic.

The Ministry of Information and Communications (MIC) has made a preliminary calculation of the digital economy by measuring it in terms of the core economy (ICT), without accounting for digitisation in other segments. Luc claimed that the scale of Vietnam’s digital economy is much larger. The proof can be found in the banking industry; revenue from digital payments accounts for 20% of this segment, and the digital payments sector must be counted as part of the digital economy.

Almost every agency and organisation has its own way of quantifying the scale of Vietnam’s digital economy. For example, as per MIC’s ICT White Paper 2021, by the end of 2020, the total revenue of Vietnam’s IT (electronics and telecommunications) industry was US$124.7 billion. This revenue consisted of the hardware and electronics industry (US$111 billion), software industry (US$5.4 billion), digital content industry (US$888 million), and IT services (US$7.3 billion).

Meanwhile, at a recent talk on the digital economy, a representative from the Department of E-commerce and Digital Economy (under the Ministry of Industry and Trade) cited indicators on e-commerce development related to the growth of the digital economy. He claimed that since 2016, the growth rate of e-commerce in Vietnam is 25-30%/year. B2C revenue of Vietnamese e-commerce rose from US$5 billion in 2016 to US$11.8 billion in 2020. The representative said that by 2025, the scale of B2C revenue in Vietnam’s e-commerce will be US$35 billion, accounting for about 10% of the country’s retail sales. From international estimates, reports from tech giants almost only mention Vietnam’s Internet economy. Forecasts from private players show that by 2025, the entire Internet economy in Vietnam will be worth US$57 billion. The compound annual growth rate (CAGR) will be 29%.

Considering this, Luc stated that there are many different interpretations when it comes to Vietnam’s digital economy. He explained that the first thing to do to accurately measure the country’s digital economy is to clearly define its scope and scale. According to him, in a relatively narrow sense, the digital economy is the ICT sector and industries and business models associated with digital technology (digital services, online platforms, a part of the sharing economy).

On the other hand, the broader meaning of the digital economy includes all industries and sectors of the economy that were formed and operate on a digital platform (including traditional economic sectors). A wider understanding of the digital economy also encompasses industries and fields that use any digital technology such as e-commerce, digital tourism, digital health, digital agriculture, digital education, and e-government.

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