Digital economy: The best option for exports during the Covid-19 period

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Import and export of traditional goods is facing many difficulties due to the effects of Covid-19. Photo: N.Linh

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In the first half of this year, Vietnam's import and export was heavily influenced by the Covid-19 pandemic in a less favorable direction. However, looking in the opposite direction, Deputy Minister of Industry and Trade Cao Quoc Hung said: “This is really a time for businesses to realize the superiority of the digital economy and the more urgent requirements of the transformation process. In the recovery phase after the Covid-19 pandemic, digital transformation will help Vietnamese businesses, especially small and medium enterprises, to find a more flexible business model, while reducing costs and expenses to overcome difficulties.”

In the first half of this year, the export value reached US$122.8 billion, up 0.2% over the same period last year; the import value reached US$117.3 billion, down 2.9%.

Except for the industrial processing group with a slight increase of 0.8%, the export of all commodity groups decreased compared to the same period last year. Specifically, the export of agricultural and aquatic products reached US$11.7 billion, down 4.6%; the export of fuel and mineral products is estimated at US$1.5 billion, down 34.5%.

Many important export items also recorded a decrease compared to the same period last year such as: Textiles and garments reached US$13.18 billion, down 12.7%; footwear reached US$8.13 billion, down 6.9%.

With more specific analysis on digital transformation, the representative of Multilateral Trade Policy Department (Ministry of Industry and Trade) said that international trade promotion is not a new activity, these are the "offline" activities to bring goods to other countries and introducing them at fairs and product showrooms. These direct trade promotion activities have a relatively high rate of closing orders compared to indirect or online promotion activities, although they have a high cost with logistics.

However, when Covid-19 happened, new units gradually thought about shifting to online trade promotion. When comparing between the two forms, offline and online, the online form can be organized seamlessly with short costs and can be done on a variety of platforms. This form eliminates the three main limitations of the direct form: geography, accessibility and quantity, and ultimately cost.

The representative of the Multilateral Trade Policy Department assessed that when the Vietnam-EU Free Trade Agreement (EVFTA) was implemented, the digital transformation opened the ability to access a large market, the EU, where there is a developmentinformation technology system; provide Vietnamese businesses with a tool to access the EU market more effectively than previous forms.

“With the opportunity from the EVFTA, the trend of switching from traditional business to digital platforms is becoming increasingly common and is considered an effective solution to help businesses penetrate and expand export markets in the context thatVietnam is increasingly integrating deeply into the world economy. According to the Vietnam E-Commerce Index Report 2020, many Vietnamese businesses have implemented e-commerce to support import-export under both enterprise-to-business (B2B) and enterprise-to-consumer (B2C) models,” Deputy Minister Cao Quoc Hung said.

Awareness of change is a big barrier

On promoting digital transformation and promoting exports through e-commerce, Dr. Vu Tien Loc, Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) said digital transformation is a more inclusive concept but very close to the popular concept or e-commerce. E-commerce and a higher level of digitizing import and export activities is a great revolution in international business activities.

However, Mr. Loc said that until now, the issue of digital transformation as well as the application of e-commerce is still quite strange for many businesses in Vietnam.

There is a view that, this is the job of large businesses and does not recognize this is also a requirement for small businesses.

“At the present time, there are still many businesses that are indifferent to digital and consider digital transformation to be just a means to “show”or be a cost, not an important investment to improve competitive advantage. Thinking "fear of losing, afraid to change" is the biggest barrier to the digital transformation of businesses,"said Vu Tien Loc.

State and business companion

The Ministry of Industry and Trade assessed that exporting in the second half of the year can be expected from the implementation of the EVFTA. This is a great opportunity for Vietnam to access the second largest import market in the world with a population of over 508 million people and a GDP of about US$18,000 billion.

“If the disease is controlled in Europe and EVFTA will be implemented, Vietnamese enterprises will have great advantages from reducing or eliminating tariff barriers on the EU market to exploit this market. In addition, businesses can accelerate digital transformation to join new supply chains to replace traditional ones that have been disrupted or stalled due to the Covid-19 pandemic, and expanded and morediversified the import-export markets, reducing dependence on a certain market group,"said Deputy Minister Cao Quoc Hung.

Emphasizing that digital transformation success or failure depends not only on technological factors but also on political determination and national institutions, Vu Tien Loc said that he wants to carry out electricity trade. If the government wants to convert digital assets, it is the Government's responsibility to create a modern institutional system with appropriate laws, synchronous infrastructure, and supply of skilled human resources, creating an ecosystem for e-commerce, for a digital economy.

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"In order to implement the Government's resolution on the implementation of the national digital transformation program, it is necessary to further enhance activities, mobilize, propagate and raise awareness for enterprises. However, the State and businesses need to work together. Businesses also need to actively innovate models, establish a management model based on digital technology, towards creative, sustainable, inclusive development goals,”Vu Tien Loc said.