Vietnam businesses struggle with innovation despite gov’t encouragement: experts

Companies in Vietnam are having to confront many hurdles on their innovation path despite the government’s aggressive actions to stimulate this activity, experts and policymakers say.

Do Thi Phuong Lan, editor-in-chief of the Economy & Forecast Review under the Ministry of Planning and Investment (MPI), said Wednesday that there have been setbacks in building incubators and providing training and consultancy for startups. The linkage between academies, universities and startup businesses continued to be weak.

Lan was speaking at a Hanoi forum on innovation in the context of digital transformation and sustainable development.

She also spoke about implementation of the government’s strategy, adopted in May 2022, to advance science, technology and innovation until 2030.

She said the government has issued a wide range of policies and mechanisms to encourage businesses to research and innovate, helping them raise labor productivity and competitiveness of their products and services.

A system of national science-technology funds has been forged to finance innovation at research institutes, universities and enterprises, she added.

Phan Thanh Ha, director of the MPI-managed SME Development Fund, noted that the fund, established in 2013, was supporting startup SMEs and SMEs that join industrial clusters and the value chain. The fund provided loans at interest rates 20% lower than those offered by four state-owned commercial banks, Ha said.

Vietnam climbed two notches on Global Innovation Index (GII) from 2022 to reach 46th among 134 economies in 2023. Its startup ecosystem climbed to third spot from fifth among the six largest economies in Southeast Asia.

Trinh Thi Huong, deputy head of the MPI’s Business Development Department, said the country’s framework for supporting businesses in DT was virtually complete. In addition, firms’ digital transformation process has benefited from government-led tools and databases, not to mention expert advice, she said.

Huong said that thanks to government efforts, over 13,800 companies have received direct training in digital transformation and nearly 400 firms have been provided with “deep expertise” for their digital transformation processes.

Do Tien Thinh, deputy director of the MPI-run National Innovation Center (NIC), noted that Vietnam’s legal system detailed incentives for innovation projects as well as innovation centers, rather than focusing on sectors and investment territories as was done before.

“Regulating incentives for innovation centers set up by businesses has been a big step in policy making,” Thinh said, adding that government agencies were working on opening up more incentives for financing and sandbox mechanisms.

Weaknesses in innovation

Lan said that in addition to its efforts to build up a framework for innovation, the Vietnamese government should further refine its related policies.

In reality, despite the proliferation of innovation-stimulating policies, there have been setbacks in building incubators and providing training and consultancy for startups. Linkages between academies, universities and startup businesses continued to remain week.

In addition, businesses and investors have faced difficulties in rolling out research & development projects and marketing their science-technology products, she said.

The GII rankings in 2017-2023 show that the biggest weaknesses in Vietnam’s innovation process have been in infrastructure; human capital and research; and business sophistication, she added.

According to the 2023 Vietnam Open Innovation Ecosystem report, sci-tech and innovation investment in Vietnam has not improved much. Investment in R&D per GDP has remained low and has even decreased, with the ratio standing at 0.4% in 2023, lower than the ASEAN average; even as the corresponding figure has jumped in Singapore, Thailand and Malaysia.

The report also said that 75% of the surveyed companies were not fully aware of the role of innovation, undermining motivation, the report showed.

Future orientation

Thinh from the NIC suggested that innovation activities focus on four sectors: agriculture; services; industry, construction, and transport; and regions.

He also proposed combining international and domestic trends regarding technology (emerging technologies), economy (digital, sharing economy) and society (personal information security, aging population) with Vietnam’s strengths to determine innovation orientations.

He proposed solutions to accelerate innovation in Vietnam, including prompt removal of business difficulties; piloting special mechanisms and policies in critical and emerging sectors like fintech, carbon credit exchanges; better utilization of new channels like venture funds and crowdfunding; mobilizing major financial resources from ODA; and forming state budget-funded long-term projects to support innovation centers, startups and human talent.

Huong from the Business Development Department suggested pursuit of the global trend of going digital and green. Three major pillars of this process were raising productivity and economic effectiveness sustainably; increasing climate change resilience and adaptation; and minimizing greenhouse gas emissions, Huong noted.