Electronic and Information Technology in Vietnam

A well-orchestrated mix of policies needed

We have encountered a strong functional demand for an enterprising government in the field of microelectronics and information technology during our visits to IT firms -- both privately owned and contr olled by the state or a city administration -- as well as some public institutio ns (listed in Appendix 1). This demand was never formulated as requiremen ts for the government's IT and electronics manufacturing policies. Instea d it was discussed as functional prerequisites for the effective use of in formation and communications technologies. Principally this would make no d ifference to the argument.

We can distinguish several reasons why a well-orchestrate d mix of different government policies really matters in today's Vietnam . Here, we will list five such reasons for limited, professionally organized state inter- ventions in the economy. More arguments for better coordinat ion of the government's policies could easily be added.

FE The changing technology: The development of microelectronics is m oving very fast, faster than in most other fields of today's technologies. New products and processes are launched on the international market and combinations old and new products influence what already exists on the market. In many areas, not all, ava ilability for Vietnamese users of modern information technology is increasing rapidl y. All these technological changes and their enhanced availability alters the precondit ions for the modernization of the Vietnamese economy and may change radically the competitive- ness of its industries in the both local and international market places.

The government has to monitor these technological changes con tinuously and observe and assess technological changes that may cause problems f or Vietnamese firms and for the country's economy.

FE The industrial supply base of electronics components: Vietnam of today is not a supplier of modern IT components. Nearly all components used by Vie tnam's infor- mation industries and by its retail and service companies have to be tra nsferred from abroad. The market may be open, but there are still many visible and invisible restrictions due to price, time of delivery, amount of components and pr oducts avail- able, after-sales-services, trade mark and licenses, etc. The restrictio ns may cause problems for production and the on-going capacity building among Vie tnamese firms and institutions.

The government has to assess the changing industrial supply ba se of micro- electronics technology in order to help create better conditions for the emerging Vietnamese IT industries.

FE Economic and technological indivisibilities: While Vietnamese fi rms and foreign investors are moving into production of electronics equipment of severa l kinds, the minimum size -- from a technological point-of-view -- of a productio n plant may be very big and extremely costly. Today, such risky investments are no rmally super- vised by a ministry or other government institution.

Although the economy is now being further decentralized, the government must continue to follow the preparations for very large investments in information technology and provide advise to Vietnamese and foreign firms on how to solve problems of technical and economic indivisibilities. This will require a further build- up of expertise inside government that observes and oversees these investments in order to avoid expensive mistakes, which may cause problems for all the IT industries in the country.

� The public sector as a sophisticated IT market: Together, the state and the provincial institutions in Vietnam represent a very important market for IT products. By combining procurement policy on the one hand with industry and trade policies on the other, it could be possible to influence the market forces towards more IT capacity building inside the country.

The government could play an important role in linking its own needs as an advanced user of information technology with capability building among Vietnamese firms and institutions. We are not proposing a general policy of "buying Vietnamese products and services only", which could lead to many sub-optimal and even negative solutions for the state institutions. But -- in a limited number of areas where modern information technology is currently applied -- we are proposing a preferential, two-string policy of public procurement monitored by some central agencies or by the sector ministries which could lead to both optimal technical solutions for the public sector users and better capacity building, training, etc. in Vietnamese firms and institutions. In this way the government could influence positively the rate and direction of the country's IT development.

Experience from other countries, who have combined procurement and industry policy in the field of information technology, are often negative, partly because IT has been advancing very fast. Consequently, a two-string policy of this kind has to be developed very carefully and be assessed continuously.

� Cross-sectoral policy coordination or orchestration: All countries with policies for IT include educational elements in their policies. Manpower development is considered a key element in virtually every IT policy. In some countries, actually in most of the highly-industrialized countries, other policies such as policies for regional develop- ment, for communications, transport and other infrastructure, for modernization of the public administration, etc. programs for IT development and diffusion are also included in the IT policy.

The government of Vietnam cannot expect industrial firms and non- governmental institutions and agencies to take on national responsibilities for cross- sectoral coordination of the country's investments in IT. Regardless of the current fiscal restraints for the government, some guidelines and other coordination, fueled by carefully directed government funds, have to be formulated and implemented to attain the national objectives for education, infrastructure, trade and international competitiveness, etc.

One illustration, which is already taking place: The Ministry of Science, Technology and Environment is actively promoting an "open systems" approach to IT applications in the state sector. The Ministry tries to influence decisions on procurement and software development that would allow easy exchange of data and computer software between agencies, ministries and other institutions so that infor- mation could be shared and costs cut. The quality of available information could also be improved by this "open systems" view on IT applications.

Without free trade in IT products and services but with a strong central government in command of economic development, the five points above -- plus some others -- would have been formulated differently. Now, when there is no US trade embargo and when the state sector plays a weaker role in the economy, the government's policies for IT and electronics production must be more sensitive to the other major economic players, such as the firms, the banks, the foreign investors, etc.

Still, if a Vietnamese IT industry should expand and flourish in the near future, there will be need also for an active government. On appropriate occasions, the Vietnamese government could be more than just a general facilitator for the firms. Like in some of the other East Asian countries, by combining different policies for trade, industry, taxation, education, etc., the government could stimulate IT development as well as other fields of high- technology.

As an exercise in policy analysis, we propose that the 1993 national program for information technology (cf. Chapters 1 and 5) is situated in the broader policy context outlined above. By performing such a cross-sectoral experiment on how to combine and orchestrate separate policies, it would become easier to explore why government really matters to information technology in Vietnam. The policy exercise might also show new ways of implementing policies for microelectronics and other IT in Vietnam.

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Last update: May 8th, 1995