Vietnamese Ministry of Information and Communications Convenes Stakeholder Meeting to Finalize Draft Law on Information Technology Industry

Hanoi, Vietnam – On August 12, 2024, the Ministry of Information and Communications (MIC) convened a critical working session with various ministries, sectors, and industry stakeholders to gather input and refine the draft Law on the Information Technology (IT) Industry. This comprehensive legislative proposal is slated for submission to the Prime Minister and subsequently to the National Assembly, aiming to establish a robust legal framework for Vietnam’s rapidly evolving IT sector.

The high-level meeting was presided over by Mr. Bui Hoang Phuong, Deputy Minister of MIC. Participants included representatives from the Office of the Government, the Ministry of Planning and Investment (MPI), the Ministry of Finance, and the MIC itself, underscoring the inter-ministerial importance of this legislative initiative. The session was hosted at the MIC’s central office, signaling the ministry’s commitment to a thorough and collaborative drafting process.

Prior to this gathering, the Office of the Government had acknowledged the MIC’s proactive role in developing the draft Law. The MIC, in collaboration with other ministries, central agencies, and relevant organizations, had been diligently working on the foundational elements of this significant legislation. This consultative approach reflects a strategic effort to ensure the law is comprehensive, practical, and addresses the multifaceted challenges and opportunities within the IT industry.

The primary objective of the draft Law on the IT Industry is to rectify existing inconsistencies and gaps in the current legal framework governing information technology. Specifically, it aims to address issues within the broader Information Technology Law, providing a more focused and effective regulatory structure for the IT sector. The proposed legislation seeks to foster the development of proactive policies that drive innovation, incentivize growth, and mitigate potential risks associated with IT industry activities.

Strategic Objectives and Scope of the Draft Law

The draft law is envisioned as a catalyst for creating an enabling legal environment that will spur the development of the IT industry. By transforming IT into a key economic sector, the legislation aims to ensure its substantial contribution to national economic growth. Key objectives include:

• Shifting Industry Focus: Guiding Vietnamese IT enterprises from basic assembly and integration towards higher-value activities such as research, design, and the production of core IT products and solutions.
• Market Development: Establishing a dynamic market for the IT industry that promotes the development and production of IT products, from conceptual design to manufacturing within Vietnam.
• Legal Framework Clarity: Defining the scope of the IT industry, encompassing IT activities, IT products, and IT services. This includes ensuring the development of IT industry, as well as clarifying the rights and responsibilities of all stakeholders involved in IT industry activities.

The proposed legislation explicitly outlines its coverage, including all activities related to the production and provision of IT products and services. It also emphasizes the assurance of IT industry development and defines the rights and responsibilities of organizations and individuals participating in or related to the IT industry. Notably, the law will not regulate activities related to the production and supply of IT products and services for national defense, security, and public health, recognizing the specialized nature of these domains. The scope of application is broad, intended to encompass all organizations, individuals, and entities involved in or related to the IT industry.

Background and Context: The Evolution of Vietnam’s IT Sector

Vietnam’s IT sector has experienced remarkable growth over the past two decades, evolving from a nascent industry to a significant contributor to the national economy. Fueled by a young, tech-savvy population, a supportive government policy environment, and increasing foreign direct investment, the sector has seen substantial expansion in areas such as software development, digital services, and hardware assembly.

Historically, government efforts to foster IT development have been channeled through various decrees and resolutions, culminating in the overarching Law on Information Technology. However, as the digital landscape continues to evolve at an unprecedented pace, existing regulations have faced challenges in keeping pace with rapid technological advancements and emerging business models. The current regulatory framework, while foundational, is perceived by many as needing modernization to effectively address the complexities of a globalized digital economy.

The draft Law on the IT Industry emerges as a response to these evolving needs. It aims to build upon the existing legal architecture by introducing more specific provisions tailored to the unique characteristics of the IT industry, which is inherently innovation-driven and subject to global technological shifts. This legislative push signifies a strategic imperative for Vietnam to solidify its position as a digital hub in Southeast Asia and to leverage the IT sector as a key engine for future economic prosperity.

The Drafting Process: A Collaborative and Consultative Approach

The working session on August 12th represents a crucial milestone in the extensive drafting process of the IT Industry Law. Deputy Minister Bui Hoang Phuong emphasized the ministry’s desire for direct dialogue and discussion with representatives from various ministries and industry associations. This approach is designed to ensure that the draft law benefits from diverse perspectives and practical insights from those who will be directly impacted by its provisions.

The Ministry of Information and Communications has undertaken a systematic approach to the law’s development, involving extensive research, data collection, and preliminary consultations with industry experts and leading technology firms. This proactive engagement is critical for identifying potential regulatory hurdles and opportunities, and for ensuring that the final law is both forward-looking and practical.

The participation of representatives from the Office of the Government, the Ministry of Planning and Investment, and the Ministry of Finance highlights the inter-agency coordination required for such a significant piece of legislation. These ministries play vital roles in shaping national economic policy, investment strategies, and fiscal frameworks, all of which are intrinsically linked to the development of the IT industry. Their input is essential for ensuring that the law aligns with broader national development goals and economic policies.

Key Policy Directions and Discussions

During the meeting, several critical policy areas were highlighted for discussion and refinement. A significant focus was placed on the imperative of creating an enabling environment for IT investment. Ms. Pham Thu Hang, Deputy Director of the Legal Department at the Office of the Government, articulated that the draft law needs to concentrate on two major policy directions: investment promotion and the establishment of a sound legal framework.

"To develop the IT industry, the most important aspect is investment promotion, including capital investment, technological investment, and supportive policies," stated Ms. Hang. She further elaborated that the government aims to provide the highest level of support for the IT industry, recognizing it as a crucial sector for development, particularly in the current phase. This emphasis on investment underscores the government’s commitment to making the IT sector a cornerstone of Vietnam’s future economic growth.

Mr. Duong Van Vu, Deputy Director of the Department for Foreign Investment Cooperation (under MPI), also shared valuable insights from the perspective of attracting foreign capital. He proposed the necessity of establishing "IT industrial parks" within the framework of the draft law. This suggestion aims to align the IT Industry Law with the existing Law on Industrial Zones and Economic Zones, which is managed by MPI. The concept of specialized IT parks is intended to provide a concentrated ecosystem for IT companies, fostering collaboration, innovation, and streamlined administrative processes.

MPI also recommended that the draft law should include provisions for incentivizing technology transfer. This would involve creating mechanisms for companies specializing in technology to assess and compare their intellectual property with existing legal regulations, ensuring fair valuation and protection of intellectual assets.

Addressing Specific Concerns and Recommendations

The discussions also delved into specific policy considerations, including the application of Value Added Tax (VAT) and the framework for tax incentives for research and development activities. Representatives from various ministries and related sectors raised pertinent questions and offered recommendations on a range of issues, such as:

• Investment Incentives for the Digital Economy: The need for clear and attractive policies to encourage investment in the burgeoning digital economy, including specific incentives for sectors like the "digital economy" and "smart devices."
• VAT Policies: Clarifying VAT policies applicable to IT products and services to ensure competitiveness and prevent unintended tax burdens on businesses.
• R&D Tax Incentives: Establishing robust tax policies to encourage research and development activities, fostering innovation and the creation of intellectual property within the IT sector.
• Intellectual Property Protection: Strengthening legal frameworks for the protection of intellectual property rights, which is crucial for encouraging innovation and investment in a knowledge-based industry.
• Data Center Policies: Developing clear regulations and policies for the establishment and operation of data centers, which are critical infrastructure for the digital economy.
• Digital Content and Services: Addressing the unique regulatory needs of digital content creation and the provision of digital services.

The meeting served as a platform for experts to present their views on numerous issues that require careful consideration within the draft Law on the IT Industry. These included, but were not limited to, investment incentives for the "digital economy" and the provision of "smart devices," VAT regulations, and tax incentives for research and development and for the production of "smart products."

Broader Implications and Future Outlook

The finalization of the Law on the IT Industry is expected to have far-reaching implications for Vietnam’s economic trajectory. By providing a clear, comprehensive, and supportive legal framework, the law aims to:

• Attract Further Investment: Create a more predictable and attractive environment for both domestic and foreign investment in the IT sector.
• Boost Innovation: Encourage greater investment in research and development, leading to the creation of new technologies and intellectual property.
• Enhance Competitiveness: Position Vietnamese IT companies to compete more effectively in the global market by shifting their focus towards higher-value activities.
• Drive Digital Transformation: Accelerate the digital transformation of the economy and society by fostering the development of advanced IT products and services.
• Job Creation: Spur job creation in high-skilled IT roles, contributing to the professional development of the Vietnamese workforce.

The collaborative approach taken by the Ministry of Information and Communications in drafting this law signals a strong commitment to developing a robust and future-ready IT sector. The insights gathered from this stakeholder meeting will be instrumental in shaping the final version of the law, ensuring it effectively addresses the evolving needs of Vietnam’s dynamic digital landscape. As the draft progresses towards submission to higher authorities, it represents a significant step towards solidifying Vietnam’s ambition to become a leading digital economy in the region.

The successful implementation of this law is anticipated to unlock new avenues for growth, foster a thriving ecosystem of innovation, and ultimately contribute to the nation’s overall economic prosperity and technological advancement. The continued dialogue and cooperation between government agencies and industry stakeholders will be paramount in navigating the complexities of the digital age and ensuring that Vietnam remains at the forefront of technological innovation.