Paris, 2045. A French university lecturer is explaining how Vietnam, once a poor country, has grown to become one of the world’s digital powerhouses. To his wide-eyed students, he explains how the country opened itself to global technologies in the 2020s.

He describes how Vietnam leveraged its geographical location, modernized its communications infrastructure, and adjusted its institutional and legal frameworks to shape this evolution. Perhaps the most startling success, he tells his students, is how the country was able to transform its labor force to become one of the most digitally skilled in Asia.

This vision of the future is the one anticipated by the latest national development strategy adopted by Vietnam’s Party Congress in February 2021. The digital sector is viewed as one of the country’s engines of growth over the next decades, enabling Vietnam to achieve its ambition of becoming a high-income economy by 2045. Such a transformation will not be a small undertaking.

As with other technological revolutions in the past, such as electricity, the digitalization of the economy will have tremendous implications for individual lives and society as a whole.

These changes are already visible in front of our eyes but are expected to become even consequential in the future.

The World Bank has started to analyze what all these changes will mean for Vietnam. Our economic modeling shows that the rapid digital transformation envisioned by the Government could indeed help the country achieve its ambitious goals. If digital sectors expand by about 10 percent every year, the cumulated monetary gains for the economy will exceed US$200 billion over 2021-45, or about the size of the country’s current GDP.

Not only will the digital sectors become a more important part of the economy, but the use of computers, information technology tools, and digital platforms will create productivity gains for the rest of the economy. These gains would exceed the investment costs required to achieve this rapid expansion, which are estimated in the range of US$35 billion over the next two decades.

The main takeaway of this exercise is that the success of digital transformation of the Vietnamese economy will require upgrading the digital skills of its local labor force. Otherwise, Vietnam will gain little (or not as much as expected) from this process, as many Vietnamese won’t be able to find a job. 

Upgrading the skills of the workforce is by no means is impossible for Vietnam. One could expect the domestic labor market to adjust gradually over time as the excess demand for skilled labor leads to higher relative wages that will in turn incentivize workers and firms to further invest in education and training. However, such market-driven adjustment will take time, as demonstrated by international experience. Workers may not have the information or the financial resources to invest in longer education paths, while firms may be reluctant to train workers who could take their new skills to competitors.

Digital transformation in Vietnam: Skills must transform too (worldbank.org)

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