Vietnam advances legislative framework to transform digital technology industry into a cornerstone of national economic growth

The Ministry of Information and Communications (MIC) of Vietnam convened a pivotal inter-ministerial meeting on August 12, 2024, to refine the draft Law on Digital Technology Industry. This legislative initiative represents a strategic shift in Vietnam’s economic policy, aiming to transition the nation from a hub of low-value assembly and outsourcing to a center of design, innovation, and proprietary technology production. The meeting, which brought together representatives from the Government Office, the Ministry of Planning and Investment (MPI), the Ministry of Finance, and various industry experts, serves as a critical juncture in the drafting process before the proposal is submitted to the Government and the National Assembly for formal deliberation.

The Strategic Shift: From Assembly to Innovation

For decades, Vietnam’s industrial landscape has been characterized by its role in global supply chains as an assembly base for foreign electronics manufacturers. While this model successfully integrated the country into the global economy, it left the domestic industry vulnerable to low margins and limited technology transfer. The proposed Law on Digital Technology Industry is designed to rectify these structural deficiencies by establishing a robust legal corridor that incentivizes original design, software integration, and the mastery of core technologies.

The draft law targets the "Made in Vietnam" paradigm, focusing on domestic manufacturing of digital products and high-tech software solutions. By shifting the focus toward the "Make in Vietnam" initiative, the government aims to increase the local value-add percentage of exported digital goods, thereby fostering a more resilient and self-reliant economy.

Legislative Timeline and Context

The drafting of this law is the result of months of cross-departmental collaboration, initiated following a directive from the Prime Minister. The timeline reflects the urgency with which the government views the digital transformation of the national economy:

• Early 2024: Prime Minister directs the Ministry of Information and Communications to spearhead the drafting of the Law on Digital Technology Industry in coordination with relevant ministries.
• May–July 2024: Intensive internal consultations occur between the MIC and stakeholders from the technology sector and academia.
• August 12, 2024: The inter-ministerial meeting takes place to solicit direct feedback from key government bodies, including the Ministry of Planning and Investment and the Ministry of Finance.
• Late 2024 (Projected): Finalization of the draft for submission to the National Assembly.

Key Policy Pillars and Objectives

During the August 12 meeting, Deputy Minister of Information and Communications Bui Hoang Phuong emphasized that the law must provide clear, high-level incentives to catalyze growth. The draft law covers the entire lifecycle of digital technology, including industrial activities, product development, service provision, and the rights and responsibilities of all participating stakeholders.

A significant exclusion from the law is the regulation of digital products and services strictly dedicated to national defense and security, which will continue to be governed by specialized regulations. However, for the civilian sector, the law aims to establish a "sandbox" mechanism—a controlled regulatory environment that allows companies to test innovative business models without the immediate burden of full-scale compliance, which is often a barrier to entry for emerging tech startups.

Official Responses and Expert Input

The consultation process highlighted two primary areas where government stakeholders believe the legislation must be most aggressive: investment incentives and experimental regulatory frameworks.

Pham Thuy Hanh, Deputy Director of the Department of Laws at the Government Office, stressed the necessity of a highly competitive investment environment. "To develop the digital technology sector, the most important elements are investment policies, investment procedures, and tax incentives," she noted. She urged the drafting committee to propose the highest possible level of incentives, arguing that the digital sector is the primary driver of growth for this development stage of the Vietnamese economy.

Furthermore, Doan Van Sy, Deputy Director of the Foreign Investment Agency under the Ministry of Planning and Investment, provided a critical recommendation regarding "Digital Technology Zones." He suggested that the new law must be harmonized with existing legislation governing industrial and economic zones. By aligning the digital tech sector with established industrial park policies, the government can offer more streamlined administrative processes for international firms looking to set up high-tech research and development (R&D) centers within Vietnam.

Challenges and Economic Implications

The transition to a high-tech economy is not without its hurdles. Industry experts and officials have identified several recurring issues that the law must address:

1. Semiconductor Industry Integration: With Vietnam aiming to become a global player in the semiconductor supply chain, the law must explicitly provide incentives for chip design and back-end assembly, testing, and packaging (ATP).
2. Taxation Hurdles: Current Value Added Tax (VAT) regulations are often viewed as cumbersome for digital service providers. The law aims to provide clarity and, where possible, relief to encourage the scaling of local software firms.
3. Human Capital Development: A core element of the "Make in Vietnam" strategy is the goal of training 50,000 high-quality software and semiconductor engineers. The legislative framework is expected to support partnerships between the state, universities, and private enterprises to ensure a steady pipeline of talent.
4. Intellectual Property and Asset Valuation: The law seeks to better define digital assets, making it easier for tech companies to use their intellectual property as collateral for loans, which is a major bottleneck in the current startup ecosystem.

Broader Economic Impact

The successful implementation of the Law on Digital Technology Industry is projected to have a multiplier effect across the entire Vietnamese economy. As the digital sector matures, the integration of Artificial Intelligence (AI), Internet of Things (IoT), and big data analytics into traditional industries such as agriculture, manufacturing, and logistics will accelerate.

By creating a favorable legal environment, Vietnam aims to attract more high-quality Foreign Direct Investment (FDI). Multinational corporations are increasingly looking for locations that offer not just low labor costs, but a sophisticated ecosystem of local suppliers, skilled labor, and a predictable legal environment. This law is the government’s primary tool for signaling to global investors that Vietnam is ready to move up the value chain.

Conclusion: A Future-Ready Framework

The August 12 meeting underscored the collaborative spirit required to finalize a piece of legislation as complex as the Law on Digital Technology Industry. While the drafting committee faces the difficult task of balancing aggressive incentives with fiscal responsibility, there is a clear consensus that the status quo is insufficient for the challenges of the next decade.

As the draft moves toward the National Assembly, the focus will remain on ensuring that the regulations are flexible enough to adapt to the rapid pace of technological change. For Vietnam, this law is more than just a regulatory document; it is the blueprint for a national transformation that seeks to secure the country’s position as a prominent player in the global digital economy. The coming months will be decisive as the final text is polished, reflecting the combined ambitions of policymakers, industry leaders, and the broader Vietnamese society to foster a truly innovative and technologically advanced nation.