Legal system for digital transformation in Vietnam

The term “Industrie 4.0” has received explicit attentionin Vietnam afterthe World Economic Forum that tookplace in January 2016, with the theme “Mastering the Fourth Industrial Revolution”. Itfirst gained attention of Vietnamese leaders atthe 4^th Plenum of the 12^th Central Committee on 5 May 2016.

After that, the Vietnam ICT Summit with the theme of “Digital Revolution: Opportunities and Challenges”, held on 24 September 2016, marks the first time Industrie 4.0was openly discussed in Vietnam. At the event, Prime Minister delivered his keynote speech on “digital revolution”, which proved to be an early iteration of Industrie 4.0.

On June 3, 2020, the Prime Minister of Vietnam issued Decision No. 749/QD-TTg approving the National Digital Transformation Program by 2025, with an orientation towards 2030. The main targets of this Decision are to developthree pillars: digital government, digital economy, and digital society. In addition to the quick expansion of Vietnam’s digitalization, especiallyafterthe COVID-19 pandemic, the focus on developing policies on digital transformation is increasingly promoted.

About digital economy

In Vietnam, digital economy refers to economic activities that primarily rely on digital information, knowledge, technology, and data as crucial production factors. It operates mainly through the Internet and information technology networks and leverages digital technology and platforms to enhance labour productivity. The digital economy includes three components: the ICT digital economy, the Internet/platform digital economy, and the industry/field digital economy.

Vietnam's economic landscape is transforming significantly by adopting innovative digital technologies. It is one of the fastest-growing digital economies in ASEAN at a rate of 38% per year⁽¹⁾. In 2022, the proportion of digital economy in GDP is estimated to reach 11,5%⁽²⁾.

As regulated in the National Digital Transformation Program, the digital economy is expected to contribute 30% to Vietnam’s economy by 2030. Consumer survey findings indicate that Vietnamese consumers swiftly adapt to the industry's transformation and embrace new products and services within the digital economy⁽³⁾.This adaptability proves advantageous in attracting investments and advancing the development of Vietnam's digital economy.

To achieve the goals ofthe digital economy as stated in the National Digital Transformation Program , on March 31, 2022, Vietnam’s Prime Minister approved Decision No. 411/QD-TTg on “The National strategy for developing the digital economy and the digital society by 2025, with an orientation to 2030”. Continuing the principles set out in Decision No. 749/QD-TTg, Decision No. 411/QD-TTg has proposed several aspects to be focused on developing, which are:

(1) Completing theinstitutions, policies andlegal environment;

(2) Developing infrastructure;

(3) Developing digital platforms;

(4) Developing digital data;

(5) Developing information security and cybersecurity;

(6) Developing digital enterprises; and

(7) Developing digital payment

Further, several specific areas are designated as key points for digital economic growth, which are (1) Agriculture and rural areas; (2) Health; (3) Education and training; (4) Labor, employment and social security; (5) Trade, industry and energy; (6) Tourism; (7) Resources and environment; and (8) Other fields and sectorssuchas finance, banking, insurance, post, transportation, logistics, construction and real estate, manufacturing, and service.

About digital government

A digital government is one in which thegovernment operates securely in the digital realm, utilising data, and digital technology to improve service quality, expedite decision-making, formulate better policies, optimise resource allocation, drive development, lead national digital transformation, and effectively address key socio-economic challenges.

According to the United Nations e-government rankings, in 2022, Vietnam ranked 86^th out of 193 countries and territories in terms of digital government⁽⁴⁾. The country’s online public services index ranked 76^th. In recent years, digital technology has been applied in state agencies to develop e-government, contributing to administrative reform. By 2022, the rate of online public services at level 4 in Vietnam reach 100%, and the rate of administrative procedures processed online was 50%⁽⁵⁾.

On June 15, 2021, the Prime Minister issued Decision No. 942/QD-TTg approving the E-government development strategy towards the digital government inthe period  of 2021-2025, with a vision towards2030. The strategy sets out a vision by2030 in whichVietnam would be ranked among the top 30 countries in the world in terms of e-government and digital government.

Decision No. 942/QD-TTg identifies five key target groups, including providing high-quality services to society, broadening public engagement, improvingstate agency operations, effectively addressing essential issues in socio-economic development, having a breakthrough change in the national ranking for E-Government, Digital Government, E-Participation and Open Data as assessed by the United Nations. To realise these targets, the strategy has identified 06 groups of vital tasks, which are:

(1) Completing the legal environment:

(2) Developing digital infrastructure (cloud-first);

(3) Developing national systems and digital platforms;

(4) Developing national digital data;

(5) Developing national services and applications; and

(6) Assuring national cyber security.

About digital society

Digital society is understood as a society that naturally integrates digital technology into all aspects of life, where people are connected, able to interact and master digital skills to use digital services, thereby, forming new relationships in the digital environment, forming digital habits and digital culture. The digital society’s basic characteristics, including Digital citizens, Digital connection, and Digital culture.

The widespread application of digital technology in society, contributes significantly to improving the quality of people's lives, especially in the fields of education and healthcare. Many technological applications are implemented in the education and training sector, as well as in educational management. In the healthcare sector, nearly 100% of hospitals nationwide have deployed hospital management software applications. In 2022, the adult population with electronic payment accounts was 90%⁽⁶⁾.

Decision No. 411/QD-TTg has outlined specific tasks directly linked to the enhancement of the digital society. These tasks include:

(1) Develop a digital workforce by focusing on the development of a digital labor force that has new skills relevant to cloud computing, AI, big data, system architecture, software technology, UI & UX design, cyberinformation security.

(2) Develop digital skills, digital citizens, and digital culture aiming for comprehensive popularization of digital technology to establish a fair and pervasive digital society, thereby developing the potential, pride of Vietnam and trust of the people in cyberspace.

2. Legal framework to support digital government, digital economy, and digital society.

Recently, multiple legal documents have been promulgated at various administrative levels, laying the foundation for regulating and operating multiple aspects of Vietnam's digital economy, government, and society. Thesedocuments include two types: a general legal framework for each pillar that provides overall guidance, and field-specific legislative documents within each pillar. Based on laws and decrees issued by the National Assembly and the Government on digital transformation, ministries and local governments have issued many policies supporting digital transformation in both the public and private sectors.

About digital economy

The stateagencies involvedin supporting the digital economy in Vietnamincludethe Ministry of Finance (Regulating e-banking and e-finance; formulating policies on tax and finance to promote ICT application), the Ministry of Industry and Trade (Regulating e-commerce and ICT application in industries), the Ministry of Science and Technology (Regulating activities related to R&D and innovation; promoting the application, research, development and transfer of key technologies), the Ministry of Information and Communications (Regulating the telecommunications and information technology industry),etc.⁽⁷⁾.

In recent years, the Vietnamese Government has introduced a series of guidelines, policies, and action plans to facilitate the digitaltransformation in the economy: Decision No. 52-NQ/TW datedSeptember 27, 2019 onthe guidelines and policies to actively participate in the Fourth Industrial Revolution; Resolution No. 50/NQ-CP dated April 17, 2020 promulgates the Government’s Action Program to implement Resolution No. 52-NQ/TW; Decision No. 749 / QD-TTg dated June 30, 2020 onproving the National Digial Transformation Program by2025, with a vision towards2030 in order to realize the dual goal of developing digital government, digital economy, the digital society, while at the same time forming a number of digital technology enterprises with global competitiveness; DecisionNo. 411/QD-TTgdated March 31, 2022 onapproving the National strategy for development of digital economy and digital society by 2025, with an orientation towards 2030.

Furthermore, Vietnam is steadily finalizing the legal framework to support the implementation of the keytasks and sectors of the digital economy outlined in Decision No. 411/QD-TTg:

Electronic transactions: The Law on Electronic Transactions (E-transactions) No. 20/2023/QH15was promulgated by the 15^th National Assembly on June 22, 2023 and takes effect from July 1, 2024. This new law has added specific regulations on types of information systems serving electronic transactions, electronic trading accounts, electronic signatures, data messages, electronic certificates, electronic contracts, etc., which facilitates the transition of “offline” transactions to digital environments, addressing the significant demand for electronic transactions within the digital age.

Digital infrastructure and high technology: There are severallegal documents in this field, namely theLaw on Information Technology 2006, the Law on Telecommunication 2009, the Law on High Technology 2008, and the Law on Radio Frequency 2009. Besidesthese, there are relevant guiding decrees, such as Decree No. 71/2007/ND-CP detailing the Law on Information Technology, Decree No. 25/2011/ND-CPdated April 6, 2011on guiding the implementation of the Law on Telecommunication, and Decree No. 154/2013/ND-CPdated November 8, 2013on concentrated information technology parks.

Platform economy and sharing economic activities: on August 12, 2019, the Prime Minister issued Decision No. 999/QD-TTg approving the Project to promote the sharing economic model to ensure an equal business environment between sharing economy and traditional economic models. This Decision has laid alegal foundation demonstrating the State's "support" helpingtechnology companies within the sharing economic model. Additionally, Decree No.10/2020/ND-CP dated January 17, 2020 and Decree No. 47/2022/ND-CP dated July 19, 2022 amendscertain articles of Decree No. 10/2020/ND-CP, provides conditions for the business operation of automatic transportation,replacingDecree No. 86/2014/ND-CP dated September 10, 2014, and is considered to be progressive, paving the way for the modernization of transportation and the operation of technology car companies like Grab,and  Be, toofficiallybeput into operation after the pilot period.

E-commerce development: Currently, Vietnam has a number of legal documents related to this type of business, such as: the Civil Code, the  Commercial Law of2005, the Law on Intellectual Property 2005, the Law on Tax Administration 2019, Decree No. 52/2013/ND-CP on e-commerce dated May 16, 2013, Decree No. 85/2021/ND-CP amendingthegovernment’s Decree No. 52/2013/ND-CP on e-commerce dated September 25, 2021, and Circular 06/VBHN-BCT regulating the management of e-commerce websites dated March 15, 2022. In addition, there is also Decree No. 98/2020/ND-CP dated August 26, 2020 prescribing penalties for administrative violations against regulations on commerce, production and trade in counterfeit and prohibited goods, and protection of consumer rights, which regulates the violations against regulations on e-commerce.

Fintech: Vietnam currently does not have a completed legal document regulatingFintech activities. These policies are scattered amongmany different legal documents, such as the Law on Electronic Transactions, the Law on Information Technology, Decree No. 165/2018/ND-CP dated December 24, 2018 on e-transactions in financial operations, Decree No. 35/2007/ND-CP dated March 8, 2007 on electronic transactions in banking activities, and Decision No. 1813/QD-TTg approving the scheme for development of non-cash payment in Vietnam for the periodof2021 - 2025…

However, In line with Government Resolution No. 100/NQ-CP on September 6, 2021, “on the proposal to develop a decree on the regulatory sandbox mechanism for financial technology (Fintech) activities in the banking sector”, the State Bank of Vietnam is currently responsible for drafting the content of this experimental mechanism.

E-invoices, under the provisions of Article 91 of the Law on Tax Administration 2019, Decree 123/2020/ND-CP and Circular 78/2021/TT-BTC, businesses are required to use electronic invoices when purchasing goods and services from July 1, 2022. In general, the legal framework for electronic invoicing is well-established with the Decree No. 119/2018/ND-CP dated September 12, 2018 prescribing electronic invoices for the sale of goods and provision of services, and Decree No. 123/2020/ND-CP dated October 19, 2020 prescribing invoices and records, as well as and other guidance documents.

Information security and cybersecurity: The issue of information security and cybersecurity isregulated by twoLaws. First, the Law on Cyber ​​Information Security dated November 19, 2015, provides for activities of cyberinformation security, rights and responsibilities of agencies, organizations and individuals in ensuring information security; standards and technical regulations on cyber information security; doing business in the field of network information security; developing human resources to secure network information; state management of network information security. Second,  the Law on Cybersecurity dated June 12, 2018 protects national security and ensures social order and safety in cyberspace, along with the responsibility of the institution-related agencies, organizations and individuals. Additionally, Decree No. 53/2022/ND-CP dated August 15, 2022, elaborates on several articles of the Law on cybersecurity of Vietnam and Decree No. 13/2023/ND-CP dated April 17, 2023, on protecting personal data,are the latest documents aimed at data protection and cyber security.

About digital government:

Since the early years of the 21^st century, the Vietnamesegovernment has considered developing and applying technology to theactivities of state agencies. In 2014, the Politburo promulgated Resolution No. 36-NQ/TW concerning e-government, which delineated the prioritisation of information technology adoption for administrative management and public services. On April 15, 2015, the Government issued Resolution No. 26/NQ-CP on promulgating the Government's Action Program to implement Resolution No. 36-NQ/TW, with the tasks of building effective e-government and providing online public services at a high level and in many areas.

To promotethe developmentofe-government in the context of Industry 4.0, the Government issued Resolution No. 17/NQ-CP dated March 7, 2019 on several tasks and solutions to focus on e-Government development for the period of2019 to 2020, with a vision to 2025. Resolution No. 17/NQ-CP emphasises the goal of completing the e-government foundation and developing data-basede-government. Toadapt to the National Digital Transformation Program, the Prime Minister signed Decision No. 942/QD-TTg dated June 15, 2021, to approve theStrategy for developing e-government towards a digital government inthe 2021 – 2025periodwith an orientation towards 2030.

In fact, digital government and digital economy have several key tasks in common. Consequently, specific tasks within the digital government are governed by the legal documents, such as the Law on Electronic Transactions 2023, the Law on Cybersecurity 2018, the Law on Information Technology 2006, etc. Additionally, many legal documents have been issued to create a legal basis for building and developing the Digital Government in Vietnam, such as Decree No. 30/2020/ND-CP on records management dated March 5, 2020, Government Decree No. 45/2020/ND-CP dated April 8, 2020,on implementing administrative procedures in the electronic environment, Government Decree No. 47/2020/ND-CP dated April 9, 2020,regulating digital data management, connection and sharing activities of state agencies, and Decree No. 42/2022/ND-CP dated June 24, 2022 prescribing the provision of online information and online public services by regulatory bodies.

About digital society:

Digital skills andliteracy are the most important factor in a digital for individuals to operate and work in a digital environment safely and healthily.On July 30, 2021, the Prime Minister issued Decision No. 1373/QD-TTg approving the Project “Building a learning society in the 2021-2030 period,” including the Program “To build a nodel of learning citizens” inthe digital society.The program sets thetarget of90%of universities will apply digital education and develop digital learning materialsby 2030. Additionally, 80%of secondary schools, education facilities, and vocational training facilities will conduct management, teaching, and learning in the digital environment. Learning citizens in a digital society need to be equipped with digital skills and know how to use and control modern devices, such as smartphones, tablets, laptops, etc., to participate in learning anytime, anywhere on the network environment⁽⁸⁾.

About thedigital identity, on September 5, 2022, the Government issued Decree No. 59/2022/ND-CP regulating electronic identification and authentication. Accordingly, every individual or organisation possesses an electronic identity. This electronic identity represents the subject's information within the electronic identification and authentication system, enabling a unique identification of the individual or organisation in the digital environment. Additionally, the Ministry of Public Security has unveiled a draft Law amendingCitizen Identification, which is scheduled to replace the 2014 Law on Citizen Identification, adding regulations on the management and issuance of citizen’s identity cards (ID cards), the inclusion of more information onID cards, development of electronic identification (e-ID), as well as supplementing and integrating more citizen data into the National Database on Population so that Citizen ID Cards and the National e-Identification Application (i.e., VNeID) can be utilised more in both public services and private transactions⁽⁹⁾.

3. Limitations and solutions

Although, Vietnam has recently issued many important legal documents, creating a legal framework for the development of the digital economy, e-government, and digital society, the legal system supporting digital transformation still has some limitations:

Firstly, to advance the digital economy and digital government, a critical objective is to establish a robust database and promote data interoperability. However, the capacity to share and open data among states agencies remains restricted. Presently, the primary obstacle to implementing open data initiatives in Vietnam is the limitations within the legal framework⁽¹⁰⁾. The government has established a legal digital data-sharing framework through Decree No. 47/2020/ND-CP. However, to ensure effective implementation, additional guiding documents are needed to provide the necessary guidance and capabilities for state agencies. The common mindset in many state agencies is to keep data closed by default, believing that state-related data should be safeguarded and not publicly disclosed unless required by law.

Furthermore, the varying interpretations of what constitutes open data, which can be shared with the public, and confidential data, have caused concerns among agencies when it comes to sharing public information. In November 2023, after over three years implementingDecree 37, the National Data Portal (data.gov.vn)⁽¹¹⁾ has posted a total of 10,394 datasets each year, averaging 8 new sets per day. However, 95% of these datasets pertain to the social sector, resulting in an imbalance in the available data.

Secondly, despite the rapid development and promising potential of Vietnam's Fintech sector, it faces substantial limitations and risks for both businesses and investors. This is primarily due to the absence of comprehensive legal frameworks governing Fintech activities. Despite the State Bank's proposal for the Decree on regulatory sandbox for Fintech submitted to the government approximately two years ago, it has not yet been issued. The forthcoming enactment of such a decree is eagerly anticipated by banks and Fintech companies, as it will introduce a testing mechanism for online lending, thereby fostering the growth of digital finance across Vietnam⁽¹²⁾.

Additionally, a lack of synchronization in technology updates among various organizations and businesses, both generally across Vietnam and specifically within the financial and banking sectors, has impeded the capacity of Fintech companies to leverage collaborative opportunities with financial institutions for product and service offerings.

Thirdly, the requirement for a sandbox mechanism extends beyond just the Fintech sector, it applies to various sectors of the economy. As outlined in Decision No. 411/QD-TTg, an essential task in enhancing the legal framework is the establishment of a sandbox for innovative digital services and business models within the new digital economy. There is no legal space for piloting new business models and services, particularly for the Internet/platform digital economy. Consequently, numerous organizations and businesses remain cautious about innovating and introducing new models, products, and services.

To address these limitations, it's essential to emphasize the following solutions:

1. Develop and enact legal documents and regulations for regularly updating open data at all levels of government, from central to local agencies. These should cover aspects such as the utilization and access to open data, as well as the sharing of information among different open data sets. This legal framework will serve as a foundation for various stakeholders, including public servants, citizens, and businesses, to engage in compliance with established rules and authority.

2. Finalize and release the Decree on the regulatory sandbox for Fintech. Building upon this foundationtoestablish a comprehensive legal framework for Fintech, encompassing detailed guidelines for Fintech service activities and other relatedregulations.

3. Establish a sandbox testing framework for managing the development, testing, and application of digital products, solutions, services, and business models. This framework should include clear provisions for space, budget, and time limits for testing.

4. Continue finalizing and issuing legal documents currently in the drafting phase, such as the Law on Citizen Identification.

5. Provide legal guidance and training on digital transformation. Develop training programs and legal guidelines related to digital transformation to ensure that individuals, businesses, and organizations clearly understand legal requirements when participating in the digital economy and digital government. This will contribute to improving digital culture and digital skills.

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REFERENCES

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(2), (5), (6) Vu Thanh Nguyen, Pham Lan Anh: National Digital Transformation: Current Situation and Policy Implications for Vietnam, https://kinhtevadubao.vn.

(3) Hoang Xuan Lam: Potential for digital economic development and digital transformation in Vietnam. Industry and Trade Magazine, 2023.

(4) United Nations: UN E-Government Knowledgebase, 2022. https://publicadministration.un.org/

(7) Cameron A, Pham T, Atherton J: Vietnam Today – first report of the Vietnam’s Future Digital Economy Project, CSIRO, Brisbane, 2018.

(8) What is Digital Society? Digital Society in Vietnam, n.d.,  https://vietnamblockchain.asia.

(9) Baker McKenzie: Vietnam: Draft Law on citizen identification - Implications on data-related rules, 2023. https://insightplus.bakermckenzie.com.

(10) Building a comprehensive legal framework for the data market and digital services, https://phaply.net.vn.

(11)  National Data Portal, 2023. https://data.gov.vn/

(12) Slow promulgation of the Decree on Sandbox for Fintech, 2023. https://vnbusiness.vn/