Industry 4.0 Accepting loss to approach

(ĐTTCO) - The most important thing for Vietnam now is to find a driving force for the economy. The Prime Minister quickly understood the potential of the private sector in spurring economic growth.

Motivating the growth of private enterprises is one of the most important priorities for the government. The strong growth in Industry 4.0 innovation has been creating a number of opportunities for economic growth but also many issues for the government to resolve.
Impressive messages
Speaking at the international “Smart Industry World” exhibition and conference in December 2017, the Prime Minister posed three questions to the attendees: Where is Vietnam on the global map? What are the other countries doing? And what Vietnam should do to successfully develop smart industry and the digital economy?
A year later, in September 2018, speaking at the WEF ASEAN 2018, the Prime Minister spoke about the opportunities for and potential of private enterprises amid Industry 4.0 innovation. He described the private sector as the backbone of Southeast Asian countries and the key to creating new business models and innovations. The Prime Minister thought that by promoting entrepreneurship, ASEAN member countries can overcome the barriers and challenges to Industry 4.0 innovation.
At the beginning of this year speaking at the Davos conference in Switzerland, the Prime Minister suggested that international corporations should “Come and create Industry 4.0 products for Vietnam.” He reiterated that “Vietnam will create favourable conditions and go together with international partners to … promote digital transformation and Industry 4.0.”  
 The Prime Minister said: “Let us see Vietnam as a safe place for investment amid the global volatility; investors are welcome and Vietnam is always opening its doors to global partners.”
Minister of Information and Communication Nguyen Manh Hung, replying to a question from Grab Taxi founder Anthony Ping Yeow Tan about the Vietnamese government’s views on the economic model based on the new sharing platform, said: “Grab is a new business model that strongly impacts traditional business models. However, 4.0 innovation in Vietnam is more oriented towards policies rather than the technology [itself]. Hence, the government’s policies will tend to support new business models.” 
The Prime Minister delivered a stronger message when he said the motto of ‘if you cannot manage you should prohibit’ is old school. The government is ready to support all new ideas and breakthroughs by all enterprises and startups, he assured. The government encourages the startup spirit, creation and innovation, which bring more convenience and benefits to the people.

Challenges to government management
But behind the above strong messages from the government are many tough issues it has to resolve.
First is the issue of balancing the benefits of new business platforms and traditional business models. For instance, the conflict between traditional taxi agencies and ride sharing businesses like Uber, Grab, Go-Viet and others. 
The government has been proactive in collecting opinions from experts and the public on this issue and is on its way to creating a legal framework for these two business models. 
Industry 4.0  Accepting loss to approach ảnh 1  

In countries and territories like Japan, Taiwan, Britain and some states in the US and Canada, Uber and Grab are prohibited. The European Court of Justice ruled that Uber is a transportation business.
Second is the issue of cryptocurrencies such as Bitcoin. Globally there is a controversy still raging over the nature of Bitcoin. Should people accept it as a payment method? The world is still finding the answer. Some nations allow virtual money while others prohibit it. 
 Industry 4.0 innovation is happening in every country around the world. All other countries are in the same boat as Vietnam, trying to manage and build a legal framework for these activities.
In Vietnam, the government decided in 2017 to create a legal framework for virtual money and assets. This is essential preparation when faced with the rapid growth of virtual technology. But in contrast, the State Bank of Vietnam reiterated its 2014 stand of not accepting Bitcoin as a currency. According of monetary policy makers and operators, Vietnam has not prepared the necessary conditions for using this as a currency yet. Hence, Vietnam should not trade off its macroeconomic stability for the very high risk and dangers posed by 4.0 technologies like this. 
In the real market, cryptocurrency trading, dealing and mining are not rare. They are continuing and waiting for a legal framework since the government has left the issue unresolved. The government does not prohibit cryptocurrencies but neither has it legalised them.
The third challenge of the digital economy is tax management. In 2018 the HCM City Tax Office announced that the city would collect taxes from businesses operating on the Internet, such as on Facebook. There was a case where the tax authorities collected taxes and fines of VND9 billion from an individual after they failed to declare revenues from doing online business. This example reveals how much tax is not properly collected yet from Internet and e-commerce business. The Tax Office is also considering how to collect tax from individuals and companies doing business on platforms like Google and Youtube but with no success yet.
The last and most dangerous issue is the formation of digital ecosystems which pose a high risk to the country and the security of the currency. 
A digital ecosystem is created when a corporation supplies many products and services at the same time, such as food, travel, entertainment, transportation, hospitality services. Payment is done through their own payment gates like electronic wallets. How can the government then determine the monthly, quarterly or yearly business value to calculate tax? 
Settlements though virtual tools conceal the actual trading amount and bypass authorities.

Loss is cost of learning 
So now we understand why Minister Hung said Industry 4.0 innovation in Vietnam has more to do with policies than technology. The key here is how the government responds to this issue to encourage the growth of the digital economy.
The government could allow the growth of the digital economy to learn its operating rules and then adjust policies gradually to meet the practical requirements. 
If Vietnam agrees to green-light the digital economy, the government should accept some loss of tax as the cost of accessing new technology and adapting to the rapid growth of the global economy rather than as a loss to its coffers.
This mindset is in line with the Classification Theory since utilising Industry 4.0 innovation to develop the private sector and spur economic growth is the first priority of the government now. 
This priority was clearly shown in the Prime Minister’s message at Davos: “Vietnam will lead in developing a legal framework, accept and allow the trial of new technologies, adopt the public-private-partnership model to create a breakthrough and environment-friendly products and services based on Industry 4.0 and start-ups with strong ambition that dare to fail.” 

Deputy Professor Doctor Nguyen Khac Quoc Bao

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