The dynamic role of digital economy in the new era of development

TCCS - The digital economy has become an important part of the gross domestic product of countries around the world, in which Asia is considered a dynamic region with a high rate of digital economic growth, and is forecast to become the center of digital technology and global digital economic development. Located in the center of Southeast Asia, with great potential for digital economic growth, Vietnam is considered to have the highest digital economic growth rate in the region. It can be said that Vietnam has the opportunity to "catch up" and is actually "going with" the world in the Fourth Industrial Revolution.

Politburo member and Prime Minister Pham Minh Chinh visits the exhibition of products, services and digital transformation applications in banking activities_Photo: VNA

The country's development path to the mid-21st century is reflected in the 10-year Socio -Economic Development Strategy 2021-2030 at the 13th National Congress, stating that the industrialization and modernization model in the new period and new era is to continue to promote industrialization and modernization based on the foundation of science, technology, innovation and technological achievements of the Fourth Industrial Revolution. Promote the development of a number of key economic sectors and fields with potential, advantages and great room to act as a driving force for growth in the spirit of catching up, progressing together and surpassing in some areas compared to the region and the world. In his speech at the National Conference on Breakthroughs in Science, Technology, Innovation and National Digital Transformation, General Secretary To Lam affirmed that developing the digital economy creates a new driving force for growth; promoting the application of digital technology in all sectors and fields, creating new business models. Developing digital citizens, equipping people with the necessary knowledge and skills to effectively participate in the digital economy and digital society, ensuring that no one is left behind... Resolution No. 57 of the Politburo also pointed out the strategic direction and was widely agreed upon by cadres, party members, scientists, and the business community, considering this as a "contract 10" in the field of science and technology. Our country is facing a new opportunity, both an opportunity and a challenge on the path of development. In order to take advantage of Vietnam's advantages in the era of rising up, recognizing the issues raised in the process of breaking through the digital economy to become a sustainable driving force is a matter of great theoretical and practical significance.

The role of digital economy in the new era

The digital economy is increasingly becoming an important driving force, playing a key role in shaping new productive forces and growth methods, enabling many countries and regions around the world to seize opportunities and overcome challenges in the digital age. The digital economy promotes economic growth by creating new business opportunities, new products and services, thereby expanding markets and facilitating businesses to penetrate and reach global scale. The digital economy not only creates jobs in the core field of information and communication technology, but also in most sectors of the economy, notably industries such as logistics, digital marketing, customer service,education , healthcare, etc. Thanks to easier access to services and information at minimal cost, digital technology helps optimize production and business processes, thereby reducing costs and improving efficiency, promoting innovation, and narrowing the gap between geographic areas and society. The application of digital technology contributes to increasing transparency in management in both the public and private sectors, improving production relations and the efficiency of superstructure institutions. On a global scale, the development of the digital economy helps promote cooperation, economic integration and digital technology solutions can help solve “global problems” related to climate change and sustainable development.

For nearly 40 years, Vietnam's economy has been a typical example of a continuously growing economy. But like many countries, Vietnam is facing the "middle-income trap", the "double" competitive pressure on our country today is from low-income countries with cheap labor markets and from high-income countries with higher technology and productivity. In this new context, the economic strategy that has brought success to Vietnam with high growth over the past nearly 40 years will not continue to bring similar growth and development in the future. To move from a lower-middle-income country to a high-income country by 2045, Vietnam needs to overcome the growth model based on the cheap labor market, depending on foreign direct investment (FDI), to shift to a growth model based on technology and innovation, improving labor productivity throughout the economy.

Experiences of countries overcoming the middle-income trap show that middle- and low-income countries often initially go through a period of “technological catch-up” through the existing technological “best practices” of higher-income countries. However, in the long term, this “imitation” will not be sustainable in maintaining high growth rates when the country moves up the income ladder. Facing a turning point in the journey to overcome the middle-income trap and enter the Fourth Industrial Revolution, Vietnam needs to quickly identify that the digital economy will play a leading role in this journey, as a driving force paving the way for the creation of a new productive force, a new, fast and sustainable growth trajectory. The digital economy with key inputs being digital technology and data will form a “productive force in the new context”, contributing to improving efficiency and reducing transaction costs in the economy, helping to optimize production and business processes, thereby improving efficiency and productivity, promoting innovation in various fields, creating new products and services, creating opportunities for Vietnam to accelerate the country's economic development.

Current status of digital economic development in Vietnam in recent times

Recognizing the position, role and importance of the digital economy, the Party and State have always paid attention and had many timely policies and solutions to promote the transition to digital production methods. The task of developing the digital economy and digital society is given high priority in the national development strategy. Vietnam is also one of the first countries in the region to issue a program/strategy on national digital transformation and digital economic development with many specific goals to be achieved. However, in terms of the effectiveness of implementing digital economic development, it is necessary to evaluate the following issues:

The proportion of added value of the digital economy in gross domestic product (GDP) still has many challenges.

According to data released by the General Statistics Office in 2023, considering the entire economy, the proportion of added value of the digital economy in GDP from 2020 to 2023 is on average about 12.62%. Of which, the core digital economy contributes 7.42% (accounting for 60.19%), digitalization of other industries contributes 4.91% (accounting for 39.81%). The proportion of added value of the digital economy in GDP tends to decrease in 2023 due to the decrease in the manufacturing industry of electronic products, computers and optical products (accounting for more than 30% of the total added value of digital economic activities) due to the decline in global demand. Although the service industries with added value due to the application of information technology in production, business activities as well as in management and administration tend to increase, it is not much, only from 6.53% in 2020 to 6.65% in 2023.

The contribution of the digital economy to labor productivity growth is still modest.

Although labor productivity is not the most comprehensive indicator, in the long term, whether a country has the ability to improve its living standards over time will depend largely on the ability to increase output (productivity) of its workers. Overall, although our country's labor productivity has increased steadily over the years, the overall labor productivity of the entire economy is not high and the absolute gap in labor productivity with other countries in the region is still quite large. Quantitative analysis in the period 2012 - 2017, according to the views of some experts, shows that the overall impact of the digital economy on Vietnam's labor productivity is still very modest with a growth rate of 5.3%, much lower than that of other countries; however, it can be seen that this is the initial stage of development of the digital economy in Vietnam. In the context of maintaining labor productivity growth that is gradually becoming more difficult, the digital economy is expected to be a new driving force for improving labor productivity in the coming period. Thus, when the digital economy and digital transformation are on the rise, they will fundamentally change the efficiency and productivity of many economic sectors. In addition, for Vietnam to maintain high growth, overcome the low-middle income stage and move towards becoming a high-income country, the path to increasing labor productivity must be based on innovation and digital economic development. The decisive factor in this process is effective investment in both hard and soft infrastructure, contributing to increasing productivity in all sectors/fields of the economy.

The potential impact of the digital economy on labor productivity and its connection to green growth is still great.

Based on four digital economic development scenarios in the 2019 Report "Vietnam's Future Digital Economy towards 2030 and 2045" by the Commonwealth Scientific and Industrial Research Organization (CSIRO) (Australia), with the calculation method according to the "traditional production function" economic model, the estimated contribution of the digital economy to labor productivity in the period 2020 - 2030, on average each year, is from 7 - 16.5% in 100% of the overall labor productivity growth rate. Thus, it can be seen that the digital economy is an important contributor to the productivity and efficiency of the economy and a new driving force for rapidly improving labor productivity to achieve the goal of the "National Digital Transformation Program to 2025, with a vision to 2030" which is to increase annual labor productivity by at least 7% in the period to 2025 and 8% to 2030.

Integrating “digital economy” and “green economy” into “dual growth”.

Although the concept of “green economy” as a new growth mode appeared much later than the “digital economy”, the two modes are coexisting and will “go together” in the future. In addition to the economic and social impacts as a new source of growth, the environmental impacts of digital economic growth are receiving special attention. The environmental impacts of the digital economy are divided into groups, including the impact of the information technology sector, the impact of electronic applications, and the impact of e-commerce. Considering the digital economy for not only economic benefits, but also environmental and social values ​​has led to the concept of “digital economic sustainability” as a solution to environmental problems.

Youth Union members practice livestreaming to sell agricultural products at the Conference on the potential of applying digital transformation and e-commerce in economic development_Photo: VNA

Some solutions to promote digital economic development

General Secretary To Lam emphasized that digital transformation is not simply the application of digital technology to socio-economic activities, but also the process of establishing an advanced, modern production method - "digital production method", in which the characteristic of the productive forces is the harmonious combination of humans and artificial intelligence; data becomes a resource, becomes an important means of production, so production relations will also have profound changes, especially in the form of ownership and distribution of digital means of production. In turn, changes in production relations will strongly impact the superstructure, opening up a new role for the State and new methods of social governance, fundamentally changing the way the State and citizens interact, between social classes. Therefore, to exploit the potential for digital economic development, it is necessary to carry out synchronous solutions, taking into account the dialectical relationship between infrastructure and superstructure, including:

Firstly , the development of the digital economy requires the establishment and orientation of an institutional framework that is suitable for the digital business environment, facilitating innovation, especially new business models and methods so that the digital economy can soon increase its scale and increase its contribution to overall growth. The process of managing the development of the digital economy can study the approach to the perspective of resolving the relationship between the market and the State to achieve a balance between the requirement of "creating motivation to promote innovation related to the development and application of the digital economy" and the requirement of "ensuring market order". In recent times, the explosion of digital technology has led to the formation and development of diverse forms, strategies and new business solutions based on digital tools, which has obscured many aspects of the impact of digital technology and the digital economy on the economy. This is posing a major challenge in measuring the digital economy consistently to compare and build “baseline” digital economic values ​​of a year, as a basis for setting digital economic development goals in terms of scale and growth rate.

Second , digital economic development policies need to be specific, such as encouraging the development of "core" enterprises in the digital economy, prioritizing digital economic development with a focus on enterprises and digital technology products "Make in Vietnam"; tax incentives for the software sector and high-tech zones; developing a digital platform with a focus on a national digital platform, shared and unified in each industry and field.

Third, regarding the orientation of selecting and developing priority industries and spearhead industries, it is necessary to develop a number of specific industries, fields and enterprises associated with digital transformation and digital economic development, such as telecommunications, information technology and key digital enterprises, to perform well the leading role in digital technology infrastructure, creating the foundation for the digital economy and digital society associated with ensuring information safety, security and national sovereignty in cyberspace in the spirit of "catching up, progressing together and surpassing in some areas compared to the region and the world".

Fourth , increase investment, especially public investment, to synchronously upgrade infrastructure and essential and widespread digital services, covering all aspects of the economy and reaching every citizen. However, to have a strong digital economy, a huge amount of resources is needed, which cannot only come from the state budget, but must rely mainly on social capital from the private sector and the FDI sector. Therefore, it is necessary to create an open investment and business environment to attract capital for investment in digitalizing the economy, infrastructure and digital services.

Fifth , it is necessary to raise awareness, correct and comprehensive understanding of both the benefits and environmental challenges for digital economic development in the most optimal direction towards sustainable development, with the best preparation for the ability to integrate these development trends for state management agencies, industries, localities and the business sector, especially small, medium and micro enterprises. Enterprises in the process of digital transformation and green innovation need to take advantage of internal and external cost reduction, link digital transformation and green innovation in business plans, enhance social responsibility, and contribute to promoting the spillover effects of digital transformation and green technology innovation.

Sixth , entering the digital era, revolutionary innovation in the digital economy has significantly changed the mode of production and lifestyle, the approach to the role of the state economic sector in building an independent, self-reliant economy and deep and broad international integration. In this context, the role of the state and the state economic sector needs to be adjusted towards effective adaptation, building an effective institutional and legal framework to promote the effectiveness of the digital economy in building an independent, self-reliant economy and deep and broad international integration./.

Source: https://tapchicongsan.org.vn/web/guest/kinh-te/-/2018/1092902/vai-tro-dong-luc-cua-kinh-te-so-trong-ky-nguyen-phat-trien-moi.aspx