Speeches & Transcripts July 13, 2018

Industry 4.0 – Harnessing Disruption for Vietnam’s Development

Greetings 

-         HE Prime Minister Nguyen Xuan Phuc

-         HE Chairman of the Central Party Economic Commission Nguyen Van Binh

-         HE Vice Chairman of the National Assembly Phung Quoc Hien

-         Protocols observed, ladies and gentlemen,

 

Thank you for inviting me to the Industry 4.0 Summit. Your presence here shows both strong commitment and a clear vision for Vietnam to embrace this important megatrend, as you advance the country’s social and economic development.

Let me start by discussing a piece of technology that has become omnipresent. It’s nearly impossible to tear our attention away from it. As you sit in the audience, you may even be looking at it right now. You have probably guessed by now, I am referring to our smart phones.

Back in 1983, you could only make calls with the Motorola DynaTAC 8000x, which had a height of 33cm and weight of 0.8kg. In contrast, the iPhone6 weighs about 16% of its distant cousin from 35 years ago but is exponentially more useful.

For example, the World Bank is supporting an initiative that allows farmers to use smart phones, paired with an automated sensor in the field, to monitor the level of water to their rice paddies. When the water level gets low, the farmer can use a smart phone to trigger the pumping station. The farmer can monitor, from a distance, multiple plots and sensor stations at once. This has implications for agricultural productivity, water conservation, Green House Gas reduction and rural development in Vietnam.

Technological convergence has changed the way we live, work, produce and consume. Sometimes this change is gradual, but it can also be disruptive. If we can truly predict one thing in this era of rapid and exponential technological change, it will be continued disruption across different dimensions.

In the labor market, the ILO forecasts that 56 percent of all employment in Cambodia, Indonesia, the Philippines, Thailand and Vietnam is at high risk of being replaced with technology over the next decade or two.

In the past two decades, Vietnam has successfully inserted itself into select global value chains while achieving a remarkable reduction in poverty. In the years ahead, disruptive technologies will present both challenges and opportunities for remaining on this successful trajectory.

On July 5, at the National Conference on Sustainable Development 2018, Prime Minister Nguyen Xuan Phuc asked the audience whether Vietnam was ready for Industry 4.0. Let me quickly discuss how Vietnam fares based on international rankings.

In terms of digital adoption, Vietnam shows strengths and challenges. The World Bank’s Development Report 2016 on Digital Dividends ranks Vietnam’s Digital Adoption Index at 0.46 out of 1-point scale. While higher than the average of global lower middle-income countries, it is lower than the regional average.

 

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Internet penetration is 54 percent, and 40 percent of Vietnam’s population are social media users. And while those numbers are impressive, according to a recent survey of Alphabeta, Vietnam fares lowest in the region in other digital measurements.

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To forge ahead, or even leapfrog, Vietnam must upgrade the way its government functions. Three types of government relationships are critical: government to government (G2G), government to business (G2B), and government to citizens (G2C). Technologies can help in many ways, if we can embrace them strategically to reverse potential disruptions to these relationships.

But technologies alone cannot solve the puzzle. Simply buying software or hardware won’t improve the way government functions. Government will not be a partner to Industry 4.0 if it is stuck in Bureaucracy 1.0.

The next big question is HOW?

I believe a three-factor formula, or a tripod, is necessary for Industry 4.0 to really help Vietnam achieve its development aspirations: technologies, institutions, and people.

First - technologies – Vietnam needs to grasp integrated digital solutions.

The government should adopt a holistic approach to how technology can support reforms for impact and transform its development outcomes.

  • An interoperability infrastructure as a foundation would strengthen G2G, G2B, and G2C relationships, optimize government investments, and link central level agencies, national and sub-national governments.
    • Let’s take a look at Estonia as an example. The country did it at the start of its digital journey known as e-Estonia, and as a result has gained 2 percent in its GDP. The system enables an Estonian to establish a company in just 18 minutes. With over 99% of states services online, Estonia boasts of saving 800 hours of working time every year through e-Estonia. Another enviable side effect is that twice as many students pursue IT careers in Estonia than the average in other OECD countries.
  • Open data is another critical element. Robust open data among government institutions and between the government and the public, will allow data to be used in ways that yield dividends for tomorrow.
    • Smart City initiatives show how greater data openness can enhance the accountability of the government in generating and maintaining service delivery. In Hanoi, real-time data on public transportation and traffic would go a long way to relieve commuting headaches. Geospatial data in the Mekong Delta could serve as early warnings of floods or heat waves. And the public health sector can now use programs like the PathoMap, which allows first responders to monitor and then quickly contain and remove biological threats.
    • Open data also makes economic sense. Open data in the EU created a market for data worth 55.3 billion Euros in 2016, with an expected increase of 37 percent between 2016 and 2020.

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Source: European Data Portal

  • Leveraging financial technology, or Fintech, can also be instrumental in improving G2B and G2C relationships in Vietnam, where a large share of the adult population still have no bank account.


Through fintech, marginalized communities and ethnic minority groups have enhanced opportunities to access services and financial products remotely, at lower costs, and without delays. Both Indonesia and Malaysia have fared well to strengthen financial inclusion, including providing more digital payment options for disadvantaged consumers. E-payment should be a reality to ensure financial inclusion of ethnic minorities in Vietnam, and also to leverage the remittances from the large Vietnamese diaspora sending money back home.  

·       Also, blockchain can be used to boost efficiency and safeguard data privacy. For example, tax collection in most countries require personal data to go through several intermediaries. There are inherent risks in this process, which may discourage people from paying taxes. In such cases, the government could use blockchain to record transactional data linked to unique IDs based on biometrics, eliminating the need for intermediaries and repeated validation processes.

o   Another great example comes from food safety. Walmart recently started to use blockchain to track its produce. While it used to take 6.5 days to track bad produce to its source, with the use of blockchain the company now has it down to 2.2 seconds.

Second - institutions – the Government needs to put in place institutions and streamline its business processes to enable innovation.

The full function of smart phones, tablets and other devices can only be realized with the right foundational institutions and processes. These include a digital interoperability framework, digital asset management processes, and privacy protection.

Not long ago, subscribers of Vinaphone, Mobifone and Viettel could only connect to one other at high prohibitive costs. And that is exactly the way data communication between government agencies works now!

A case in point is the fragmentation of database management systems, with databases across and even within government agencies not communicating with each other. This is a challenge acknowledged by the Government of Vietnam, which has recently proposed to build and link six national databases. The main roadblock is the lack of a robust national ID system, and we embrace the government’s recent efforts to accelerate the national ID reform implementation.

On this front, both India and Thailand are moving rapidly on unique IDs based on biometrics, which are an integral element of e-governance in this new era. How can one grant access to digital public services, if you can’t identify with certainty a person or company? At its height, India registered 1 million persons a day thanks to new technologies. At that rate, Vietnam could complete its full digital registration in three months.

Digital identities and data also raise important issues of safeguarding public and private interests. Institutions that can protect data privacy and enable e-transactions and data analytics for public goods will be key for Vietnam to get the most dividends.

Institutions or processes neither create nor anticipate disruptive technologies, but they can be instrumental in facilitating innovations and mitigating disruptions.

And third - people – the country must invest now in skills and health for the workforce of the future.

 

In 1999, the U.S. Department of Labor famously predicted that 65 percent of primary school children would end up in jobs that hadn’t yet been invented. And last year, this number jumped to 85 percent, according to Dell Technologies. We are looking at an unknown job landscape in the future.

In human capital terms, Vietnam is well positioned. It has achieved good basic education outcomes, reflected through its strong results in international assessments such as PISA and Young Lives, and it has a dynamic young generation that can embrace and adapt to changes. Also, Vietnam ranks seventh in terms of improvements to its Universal Health Coverage score.

But the nation is aging. The share of Vietnam’s population in working age peaked last year, and is now on the decline. By 2050, it is expected that 1 out of every 5 Vietnamese will be over 65 years old.

A critical challenge in Vietnam is that only 8 percent of the labor force has a university education, and this is insufficient to make the leap into Industry 4.0. Workers need to be equipped with the right skills mix to ride this wave.

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Source: World Economic Forum Human Capital Index Report on Southeast Asia, 2016

In order to stay ahead and embrace shifts in innovation, promoting digital literacy is important. This includes the existing public-sector workforce so it can respond to emerging digital demands.

In many cases, this will require a change in mindset and a departure from comfort zones. Partnering with the private sector and citizens to leverage their participation, creativity and innovation in public services will be useful for the public-sector workforce to keep up with the digital pace.

For example, China has been able to move forward with transformative digital health service that can improve access to, and the quality of, health care. This is empowered by plentiful domestic venture capital resources of $5-10 billion) promising IPO valuations, and the power of the public sector to integrate innovations quickly into service delivery models. These digital health service initiatives include the Robot – a telemedicine system that aims to boost the appropriateness of care at village clinic level in Anhui, or the WeDoctor platform that provides online access to health professionals, and also bookings for face-to-face appointments.

Investing in research and development will be critical for Vietnam to join the frontiers of Industry 4.0. “Made in Vietnam” should be replaced with “Researched and Developed in Vietnam.”

Let’s return to our smartphones. I hope my remarks have been interesting enough to keep you off of your smartphone. But perhaps you are a public official, and you were using your smartphone to look up social assistance coverage of poor and near-poor people in the Northern Mountains region? With an integrated national database linked by a unique ID system, you could do this whether you are at your office desk or at the Industry 4.0 Summit. Perhaps you are a business person who needed to bid for government auctions or file taxes on your phone? Or perhaps you were sending instructions to a relative in a remote area who needs to pay her electricity bill by phone? I believe this is the future of Vietnam.

But whatever you do, let us not undermine the basis. For Industry 4.0 to serve Vietnam, the government must first ensure an enabling environment to accommodate innovation and improve productivity. This includes macro stability and resilience, and the effective and efficient use of fundamental technologies since Industry 3.0.

Let me end my presentation by giving you a T.I.P for realizing this can-do future.

·     Leveraging Technologies to capitalize on innovations

·     Putting in place fundamental Institutions

·     Investing in the People of today and the future

Just do it and thank you!

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