Ministry of Information and Communications convenes inter-ministerial working session to finalize draft Law on Digital Technology Industry
On August 12, the Ministry of Information and Communications (MIC) of Vietnam hosted a pivotal inter-ministerial working session aimed at gathering expert feedback to refine the draft Law on Digital Technology Industry. This legislative effort marks a significant shift in Vietnam’s strategic approach to digital transformation, moving away from a traditional model of assembly and processing toward a value-added, innovation-led economy. The session, chaired by Deputy Minister of Information and Communications Bui Hoang Phuong, brought together key representatives from the Government Office, the Ministry of Planning and Investment (MPI), the Ministry of Finance, and various internal departments tasked with drafting the legislation.
The Strategic Shift: From Assembly to Ownership
For decades, the Vietnamese digital technology sector has been dominated by labor-intensive activities, primarily contract manufacturing, component assembly, and software outsourcing. While these sectors have contributed to export growth, they have often lacked the high-value integration that defines global tech leaders.
The proposed Law on Digital Technology Industry is designed to serve as the foundational legal framework to catalyze a transition toward domestic design, intellectual property creation, and the mastery of core technologies. By creating a robust regulatory environment, the government aims to empower local enterprises to move up the global value chain. The draft law outlines a comprehensive scope, covering digital technology operations, product and service development, and the specific rights and responsibilities of both public and private entities operating within this space.
Context and Chronology of Legislative Development
The development of this Law follows a clear directive from the Prime Minister, emphasizing the need for a modern legal framework that reflects the current realities of the Fourth Industrial Revolution.
- Initial Drafting Phase: Following the Prime Minister’s directive, the MIC was designated as the lead agency, tasked with coordinating with other ministries, provincial authorities, and industry stakeholders to draft the bill.
- Collaborative Consultation: Throughout the first half of 2024, the MIC held multiple closed-door sessions to reconcile the differing perspectives of tax authorities, investment regulators, and technological experts.
- August 12 Working Session: This specific meeting was held to finalize the draft before its official submission to the Government and the National Assembly, addressing critical gaps in previous iterations of the text.
Key Policy Pillars: Incentives and Regulatory Sandboxes
During the discussions, Pham Thuy Hanh, Deputy Director of the Department of Legal Affairs under the Government Office, underscored that the draft must focus on two primary policy pillars: investment incentives and the mechanisms for experimental testing, commonly known as "regulatory sandboxes."
"To drive the digital technology sector, the most critical elements are investment incentives, streamlined investment procedures, and competitive tax policies," Hanh stated. She emphasized that the MIC should advocate for the highest possible level of incentives, given that the digital technology sector is a strategic growth engine for the current economic era.
This perspective was echoed by Van Sy, Deputy Director of the Foreign Investment Agency under the Ministry of Planning and Investment. Sy suggested that the law should formalize the concept of "digital technology zones," ensuring these zones are synchronized with the existing legal frameworks governing industrial and economic zones. This would provide investors with the legal certainty required for large-scale, long-term technological deployments.
Addressing Structural Challenges
The working session delved into several technical and fiscal challenges that have previously hindered the sector’s growth:
- Semiconductor and Hardware Development: The draft law addresses the need for specialized incentives to attract high-end semiconductor manufacturing, a sector where Vietnam is currently positioning itself as a regional hub.
- VAT and Tax Reform: Experts discussed the necessity of favorable VAT treatments for software and hardware products that are designed and manufactured locally, as opposed to imported goods.
- The "Sandbox" Mechanism: A major hurdle for digital innovation in Vietnam has been the rigid regulatory environment. The introduction of experimental testing allows companies to pilot new technologies—such as AI-driven health services or advanced automation—in a controlled environment without the threat of immediate regulatory non-compliance.
- Human Capital: As noted in recent industry reports, the goal of training 50,000 high-quality semiconductor engineers by 2030 is inextricably linked to this law. The legislation is expected to provide the fiscal backing for these human resource development programs through public-private partnerships.
Exclusions and Scope of Application
It is important to note the boundaries of the draft law. The proposed legislation does not govern the production or supply of digital technologies intended for national defense, security, or sensitive public infrastructure. These areas are governed by separate, stricter regulatory regimes. The current Law on Digital Technology Industry is strictly focused on the civilian, commercial, and industrial spheres, ensuring that the legislative scope remains focused on economic growth rather than overlapping with state security mandates.
Broader Economic Implications
The potential impact of this law is significant. By shifting from a service-based outsourcing model to a product-based innovation model, Vietnam expects to increase its GDP contribution from the tech sector substantially. Data from the MIC suggests that while the sector has grown at an average rate of 10-15% annually over the last five years, the transition to high-value manufacturing could push this growth toward the 20% mark by 2030.
Furthermore, the emphasis on "making" rather than just "assembling" aligns with global supply chain trends. As multinational corporations seek to diversify their manufacturing footprints, Vietnam’s ability to offer not only a skilled workforce but also a transparent, incentive-heavy legal environment will be a decisive factor in attracting foreign direct investment (FDI).
Expert Recommendations and Next Steps
Representatives from the Ministry of Planning and Investment have advised the MIC to engage professional consultancy firms to review the draft’s individual articles and clauses. This move is intended to ensure that the language is watertight and that it does not create conflicts with existing laws, such as the Law on Investment or the Law on Enterprise.
As the deadline for submission to the Government approaches, Deputy Minister Bui Hoang Phuong reiterated the necessity of an open, inclusive process. "The Ministry of Information and Communications remains committed to incorporating the diverse feedback from all relevant ministries. Our goal is a law that is not only functional but also visionary, setting the stage for Vietnam’s digital independence," he noted.
The draft law will now undergo a final round of revisions based on the input provided during the August 12 session. Once the draft meets the rigorous standards of the Government Office, it will be moved to the National Assembly for debate, where stakeholders anticipate further scrutiny regarding the balance between government oversight and the freedom required for technological innovation.
In summary, the legislative push for the Law on Digital Technology Industry represents a maturity in Vietnam’s economic policy. By addressing the fundamental needs of the industry—namely tax incentives, regulatory flexibility, and institutional coordination—the government is laying the groundwork for a more resilient and sophisticated digital future. The success of this law will depend on how effectively the drafted policies can translate into tangible support for the thousands of engineers and entrepreneurs who form the backbone of Vietnam’s burgeoning tech ecosystem.
