More than a decade ago, it was easy to catch sight of people waiting in queue to withdraw cash from an ATM. Back then, salary payment through banks was still a quite new practice. Most workers found it troublesome to get their pay with a card, since there was more to do before cash went into their wallets. Today, office workers transfer their salaries to an e-wallet, or directly use Internet banking for shopping. Payment of power and water bills, purchase of prepaid scratchcards, or debt servicing, all can be done simply with a single click.
And that is just a small part of the new ecosystem created by the digital technology.
A natural development stage
For long, we have been talking about the digital economy as if it were a separate entity, or a subdivision of the economy in general. However, in reality, the digital economy is a natural development stage, accompanying technological advancements. The birth of the steam engine, and later the diesel engine, completely transformed the small, self-sufficient production model into a large-scale commodity economy. As a result, the whole world has become a huge market and factory. Following the invention of electricity in the United States, the economic and social life of mankind changed quickly. Just imagine what it would be like in Hanoi or HCMC if there was a power outage for three days.
The Digital Revolution, which may be simply understood as the process of converting the methods of building, storing, processing, and transferring data based on binary numbers (0 and 1), has brought about similar effects. The greatest achievement of this revolution, the Internet, blurs the line between real and virtual spaces, not only in personal life but also in the economy.
In terms of market capitalization, the world’s seven largest companies (with capitalization of over US$300 billion) are all Internet businesses—prominently three e-commerce companies (Amazon, Tencent, Alibaba), two technology groups (Microsoft and Alphabet), a smartphone maker (Apple), and a social networking service provider (Facebook). Among them, Amazon and Apple have once exceeded the market cap of US$1,000 billion. The value of Amazon is four times Vietnam’s gross domestic product in a year in comparison.
Those huge numbers may not mean much to the majority of people. Everyone tends to make a big deal out of figures to prove what they think is important. However, for office workers, city dwellers, and youngsters born in the late 1990s or early 2000s, the charm of digital technology lies not in numbers, but in how it naturally changes them.
It comes so naturally that people no longer realize how they are dependent on it. A white-collar worker may buy lunches via an app and have them delivered by Grab Food or Go Food, make payments using an e-wallet, and write reviews on their Facebook pages to obtain discount codes as a reward. This person may also take advantage of technology to book a ride home, learn to cook via YouTube, get engaged in e-commerce with Shopee, watch movies on Netflix, chat with friends through messaging apps, and listen to music on Spotify before going to bed.
Currently, more than half of Vietnam’s population has access to the Internet, and 84% own a smartphone. Every week, Vietnamese spend 24.7 hours online, only behind Singapore in Southeast Asia, according to the market research firm Nielsen.
Perhaps, there is no evidence for the rise of the digital economy more convincing than a look into how we loosen our purse strings: The number of online transactions via domestic cards in 2017 grew 50% from 2016, whereas their value surged 75%, according to the National Payment Corporation of Vietnam (NAPAS). In just two years, from 2016 to 2018, the scale of Vietnam’s e-commerce market doubled, worth US$8 billion in 2018, as per the latest report by Google and Temasek about the Internet economy in Southeast Asia. The gross merchandise volume (GMV) in Vietnam makes up 4% of GDP, the highest in Southeast Asia. This is driven by e-commerce, whose value reached US$3 billion in GMV last year.
However, similar to the FDI-based industrial growth, e-commerce is not a playground for Vietnamese enterprises. The “Big Three” Lazada, Tiki and Shopee are owned or largely owned by Chinese e-commerce firms—Alibaba, JD.com and Tencent respectively. “Purer” Vietnamese players like Adayroi.com or Sendo are struggling to win a piece of the lucrative pie.
However, one interesting characteristic of the Internet ecosystem is that there is always room for newcomers. Considering its convenience, low costs, quick adaptability and just reward for creativity, cyberspace has gradually become an incubator for Vietnam’s greatest talents. Nguyen Ha Dong is arguably the first Vietnamese representative of such generation, with his game Flappy Bird emerging as a phenomenon in 2013. Ever since, creativity has not only been limited to electronic games, but also expanded to every corner of the digital economy.
The shift to the gig economy
The economic impacts inevitably entail many other consequences.
The shift to the gig economy is apparent, as the Internet has given birth to many new businesses. This is not only reflected by the fleets of Grab or Go Viet drivers, but also in programmers who create applications for sale to the “app stores” of operating systems, or office workers setting up their commercial pages on Facebook and Instagram. No specific statistics are now available, but by means of observation, we are moving towards a more dynamic labor market with many opportunities, which is however also more uncertain and replete with risks.
Moreover, social communities now have different characteristics. Readers easily trust the KOLs (key opinion leaders) online, while the mainstream media are coping with many problems when adapting to the new environment. As urban residents get connected with one another through social networks to communicate and share information, news agencies are losing their importance.
Apart from the positive features, cyberspace involves new risks that need to be adjusted. Aside from socio-political issues such as fake news, it is obvious that the current legal system fails to catch up with the changes in new economic relations.
The long-running lawsuit between Vinasun and Grab, and the “pilot” of ride-hailing service are some good examples. This is, of course, a common challenge for all countries, but excessive caution with a conservative approach will have a negative impact on the growth potential of the digital economy. The Cybersecurity Law will come into force early this year, as one of the attempts to better control cyberspace. However, experts are afraid that the provisions of this law and its guiding documents may in one way or another hamper the online business environment.