Vietnam emphasizes human resource development and research and development funding

In the bustling heart of HCM City, Vietnam's leading R&D hub, the weight of funding still heavily rests on the shoulders of the private sector. Amidst the tech-savvy streets, lined with global tech giants like Intel, Samsung, and Bosch, an intricate web of challenges plagues the nation's R&D sector.

Vietnam's Ambitions in the Global Tech Race

Vietnam has made strides in the global innovation race, claiming the 44th spot among 133 economies in the 2024 Global Innovation Index, published by the World Intellectual Property Organisation (WIPO). Yet, the journey towards technological advancement and increased competitiveness demands a consistent investment in research and development (R&D) and a robust, skilled workforce.

Vietnam's leap in the high-tech industry output index is a testament to the country's potential. However, the nation's low R&D expenditure of 0.4% of GDP in 2023 pales in comparison to the global average of 2.3% and even regional peers like China (2.5%), Singapore (1.9%), and Malaysia (1%).

This undervaluing of R&D echoes the shortage of high-quality technical professionals and limited capital access for innovation-led enterprises - a stumbling block that threatens to hinder Vietnam's progress in the tech arena.

The Hunt for Skilled Talent and Sustainable Capital

The dependency on a skilled workforce, especially in areas like AI, cloud computing, blockchain, and cybersecurity, is of utmost importance for the development of a robust digital economy. Yet, Vietnam continues to grapple with the challenge of attracting and retaining talent due to fierce competition both domestically and from global markets.

Even large corporations like Viettel, feeling the heat of the competition, have had to raise salaries by approximately 20% above the industry average to stay competitive. However, this may not be enough to sustain long-term growth in the tech sector where innovation is the lifeblood.

Capital remains a significant hindrance for R&D activities, with traditional lenders viewing these ventures as high-risk due to their intangible and uncertain nature. The inability to value intangible assets like patents and proprietary technologies continues to impede financing efforts, making it difficult for tech start-ups like Thuận Thành Technology Solutions Co, Ltd in Bắc Ninh to secure funds for infrastructure expansion.

A Credit Package for a Digital Leap: Is It Enough?

In an effort to support the digital infrastructure and technology enterprises, Vietnam has prepared a VNĐ500 trillion (US$ 192 million) credit package. However, the effectiveness of this disbursement hangs in the balance unless lending conditions are tailored to the realities of innovative businesses.

Navigating the Path to Progress

Even in HCM City, Việt Nam's leading R&D hub, the burden of funding still falls largely on the private sector. -VNA/VNS Photo

The Politburo's Resolution No 57-NQ/TW sets a lofty goal for Vietnam, aiming to reach an R&D investment of 2% of GDP by 2030, with over 60% of the budget coming from the private sector. Targeted investments in strategic technologies such as AI, semiconductors, and renewable energy are a crucial part of this strategy.

Achieving this vision requires systemic reform, including the amendment of the 2013 Law on Science and Technology, more flexible budgeting mechanisms, and streamlined fund allocation processes. While some companies have embraced the Science and Technology Development Fund mechanism, overall engagement remains low due to unclear guidelines and cumbersome procedures.

A Trio of Troubles: Overemphasis on Basic Research, Limited Industry Integration, and Insufficient Budget Allocation

Tackling the core bottlenecks in Vietnam's R&D sector calls for a close examination of three persistent issues: overemphasis on basic research, limited industry integration, and insufficient budget allocation for developmental research.

The R&D sector has a heavy focus on basic research, which hinders its practical impact and commercial value. The disconnect between research institutions and industry contributes to this challenge, as research findings rarely translate into tangible products or services that bolster the economy. Lastly, compared to advanced economies, Vietnam allocates a smaller portion of its R&D budget to developmental research, which is integral for fostering innovation and industry application[3].

Institutional Bottlenecks and Global Economic Pressures: Obstacles on the Journey to Innovation

Administrative procedures and governance frameworks are seen as barriers to innovation, squeezing the life out of technological advancement[5]. Over-centralization and bureaucratic red tape slow down progress, limiting the agility needed for rapid technological progress.

External factors such as proposed tariffs on Vietnamese exports and global trade disruptions threaten to reduce investment in R&D by diverting resources necessary for economic stabilization and export market diversification[4].

Government Actions for a Future-Oriented Research Ecosystem

Recognizing these challenges, the Vietnamese government has taken decisive action to transform the R&D landscape:

Setting Major National Tasks: Strategic, development-oriented challenges for top scientists encourage research that directly addresses national needs and fosters integration with industry.
Promoting Industry-Science Collaboration: Making enterprises the core of the science and technology ecosystem encourages scientists to work more closely with business R&D divisions, bridging the gap between research and industry.
Streamlining Governance and Reducing Bureaucracy: Improving efficiency by decreasing administrative procedures and moving towards decentralization will foster innovation and technological deployment.
Investing in Strategic Technologies: Focusing on areas such as AI and semiconductors positions Vietnam as a competitive player in future technological fields.
Mitigating External Economic Risks: Negotiating to reduce the impact of international tariffs and diversifying trade ties create a stable environment for continued R&D investment.

| Challenge | Government Action/Response ||-----------------------------------|------------------------------------------------------------|| Overemphasis on basic research | Set major, development-oriented tasks for scientists || Limited industry integration | Promote industry-science collaboration || Insufficient developmental R&D | Increase focus and budget on developmental research || Institutional bottlenecks | Streamline governance, reduce administrative procedures || Global economic pressures | Negotiate tariffs, diversify trade partners |

Large corporations like Viettel are feeling the pressure from investment to R&D activities. - VNA/VNS Photo

Vietnam’s R&D sector is poised at a critical juncture, with the government actively tackling structural and external challenges to foster a more innovative, future-oriented research ecosystem[3][5].

The Vietnamese government has set a target to reach an R&D investment of 2% of GDP by 2030, with a majority of the budget coming from the private sector.
To achieve this goal, the government intends to amend the 2013 Law on Science and Technology, implement more flexible budgeting mechanisms, and streamline fund allocation processes.
Vietnam's low R&D expenditure, at 0.4% of GDP in 2023, is awaiting a consistent investment in research and development for increased competitiveness.
In order to compete in the global tech industry, initiatives such as AI, semiconductors, and renewable energy must receive targeted investments.
Attracting and retaining a skilled workforce, particularly in areas like AI, cloud computing, blockchain, and cybersecurity, is vital for developing a robust digital economy.
The inability to value intangible assets like patents and proprietary technologies continues to impede financing efforts for tech start-ups.
To support digital infrastructure and technology enterprises, Vietnam has allocated VNĐ500 trillion (US$ 192 million) as a credit package, but lending conditions need to cater to the needs of innovative businesses.
The overemphasis on basic research in the R&D sector hampers its practical impact and commercial value, while limited industry integration contributes to this challenge.
Institutional bottlenecks and bureaucratic red tape slow down progress, limiting agility required for rapid technological advancement.
Global trade disruptions and proposed tariffs on Vietnamese exports pose economic risks that may reduce investment in R&D by diverting resources necessary for economic stabilization and export market diversification.

Vietnam emphasizes human resource development and research and development funding