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R&D policies encourage action

Released at: 08:20, 02/12/2018

R&D policies encourage action

Photo: Viet Tuan

Analysts explain what's needed to bring in investment in R&D.

Mr. Alistair Nolan, Senior Policy Analyst, Directorate for Science, Technology and Innovation, OECD

Vietnam’s science, technology and innovation performance has advanced substantially and new challenges and opportunities have emerged. One trend is the advancement in digitalization, which is affecting all countries around the globe. For an emerging economy like Vietnam, Industry 4.0 offers important opportunities, of which Vietnam is well aware. A follow-up on the OECD-World Bank Review of Science, Technology and Innovation in Vietnam, published in 2014, would be highly recommended, in order to take stock of the changes and improvements in Vietnam’s focus on R&D and recommend where additional improvements could be made to the benefit of the country.

The role of technology diffusion is critical - as shown in the OECD’s work on the “Next Production Revolution” (NPR) - because key NPR technologies are produced outside of Vietnam. And, in this connection, the importance must be stressed of efficient resource allocation processes, competition, and the operation of institutions, which have a specific technology-diffusion remit. Policies on data will become increasingly important and care must be taken not to impose unnecessary restrictions on cross-border flows of industry-related data.

To become an innovation-based economy, Vietnam has to continue strengthening R&D and must also look at other factors that shape a country’s innovation capacity. One of these factors is highly-qualified human resources. Vietnam is well aware of this and has shown impressive achievements, as reflected for example in the OECD’s PISA tests of student performance. Breakthrough innovations are often associated with activities other than R&D, such as developing and implementing new business models. 

Entrepreneurship, business creation, and upscaling play an important role in introducing new business models and helping to drive structural transformation of the economy. Nevertheless, further developing R&D capacity is also important for building and strengthening the capacities to monitor, adopt, and adapt technological developments from around the globe to Vietnam’s specific needs. And, as the example of other dynamic economies in southern and eastern Asia have shown, R&D is an important factor that can help countries move up global value chains and diversify towards more technology-intensive and knowledge-based activities.

Dr. Nguyen Dinh Cung, Director of the Central Institute for Economic Management (CIEM)

The World Economic Forum used a brand-new methodology in its the Global Competitiveness Report 2018, in which all indicators were equal. Previous rankings weighted certain indicators, with 60 per cent for basic fundamentals, 30 per cent for effective improvement, and 10 per cent for creative innovation. 

To improve its place in the competitiveness index, Vietnam needs to focus on more investment in creative innovation, information technology application, and workforce training. Changes in the creative innovation ecosystem must encourage local enterprises to more invest in science and technology. The majority of investment in creative innovation should come from local enterprises, not from the State.

The results of global competitiveness rankings depend on figures collected by the World Bank from international organizations and other sources. Relevant ministries and departments need to update their figures, as those used in the 2018 report were out-of-date.

Mr. Ralf Matthaes, Managing Director, Infocus Mekong Research (Vietnam)

The key benefits for driving R&D in Vietnam are threefold. First and foremost, Vietnam is still lacking high-end hi-tech training, and appealing policies towards R&D investment would allow its eager workforce to gain much-needed expertise across many fields. Secondly, as Vietnam is still relatively less costly to operate in than other Asian countries, an attractive R&D policy would increase FDI in this very important sub-sector. Finally, by developing a true R&D culture within the country, Vietnam’s image, not as a basic “no value-added exporter”, could be provided a huge boost, further driving higher tech investment into the country and further diversifying its economy, which is necessary to avoid the potential negative impact of global market influences.
The key to drive investment would be to provide clear and transparent rules and regulations around R&D, specifically with an eye on intellectual property rights. Also, as Vietnam has accomplished a lot with investment into EPZ’s with enticing tax incentives, it should also incorporate special tax incentives for companies establishing R&D businesses. This would truly say that Vietnam is encouraging and is open to R&D investment in Vietnam.

Mr. Trent Davies, Manager, International Business Advisory, Dezan Shira & Associates Vietnam

R&D is very important for any economy to develop and as Vietnam continues to encourage R&D investment it will help it sustain economic growth and balance.

Key investors such as Panasonic, Bosch, Samsung, Yamaha, Intel and others have invested into R&D projects and centers in Vietnam. Such investment creates jobs for thousands of people while also adding more value to products made in Vietnam and making manufacturing more cost efficient. This in turn makes Vietnam more competitive and creates opportunities to move up the global value chain.

The ongoing trade war between the US and China is creating opportunities for Vietnam, as companies are looking to relocate production from China to ASEAN. While the R&D foundations built by the above companies will help Vietnam capture more investment, it will be vital that Vietnam increases spending on R&D to compete with its ASEAN peers.

By creating a favorable business environment for foreign investors, Vietnam can continue to attract R&D investment and bolster its strong growth and development. 

Foreign investors will be attracted by incentives such as tax holidays or reductions, or exemptions from land lease fees, rents, and import tariffs. For instance, Samsung’s investment in R&D was enabled by the Vietnamese Government allowing the company to operate the center without having to pay rent for the next five decades.

Vietnam will need to address existing challenges such as infrastructure and skills shortages. In 2016, Apple was looking to invest in R&D in Vietnam but eventually chose India. Part of the reason was the infrastructure in India was better developed.

The government can focus on public-private partnerships to improve transport infrastructure and increase investment into technological infrastructure such as fiber optics and 5G. In addition, there is a need for investment into scientific research and education institutions to ensure Vietnam can compete in terms of workers competencies. I would suggest they also encourage R&D activities in local companies in order to add value in Vietnam.

Lastly, the use of special economic zones for R&D could be established nearby key industrial parks with quality infrastructure and education institutions and with investment incentives to attract FDI and R&D activities.

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