By Ly Do | February 19 2021, 10:00AM SGT
Photo by Huỳnh Tấn Hậu on Unsplash
The growth rate of Vietnam’s digital economy in recent years has always been at a high level. According to Google and Temasek estimates in the E-conomy Southeast Asia digital economic report in 2020, Vietnam’s internet economy in 2020 will reach about USD 14 billion and it is forecast to reach USD 54 billion by 2025. In 2020, Vietnam witnessed the effects of the Covid-19 pandemic on the economy and the breaking down of the supply chain in Vietnam. However, Vietnam has also experienced an explosion in demand for using the Internet by the Vietnamese people. Before the pandemic, on average, a Vietnamese spent 3.1 hours per day accessing the Internet for personal purposes. During the social distancing period, this number increased to 4.2 hours and now it is 3.5 hours. In 2020, Vietnamese people using new Internet services increased 44%, much higher than other countries in the region. Of which, 94% continue to use the new service. E-commerce increased 46%. Online communication increased by 18%. Investment in the Internet sector in Vietnam in 2020 also exploded with 151 transactions with a value of USD 935 million.[1]
Such a rapid development of the digital economy has been a positive shift for the Vietnamese economy and society. However, in the development process, several problems arise and state intervention is required for the economy to operate effectively, reducing negative impacts on society. The Government of Vietnam (VNG) is amending Decree 52/2013 / ND-CP E-commerce (Decree 52); Decree 06/2016 /ND-CP on management, provision and use of radio and television services (Decree 06); Decree 72/2013/ND-CP on the management, provision and use of Internet services and online information (Decree 72); and Decree 181/2013 / ND-CP regulating the implementation of a number of articles of the advertising law (Decree 181).They are determined to catch up with the 4th industrial revolution and transform the economy into a digital economy.
The Prime Minister in June signed a decision on approving the national program on digital transformation. Vietnam considers digital platforms, cybersecurity and open technology as the major factors to create ‘digital confidence’, and considers institutional reform as the decisive factor for digital transformation. The Ministry of Information and Communications (MIC) viewed 2020 as the year of Vietnam’s national digital transformation strategy. “Make in Vietnam” is the slogan created with an aim to promote the domestic ICT industry. It conveys the strategy and the development orientation of Vietnam’s digital technology firms. Prime Minister Nguyen Xuan Phuc on December 30, 2020, issued the National Strategy on the Industry 4.0 by 2030, to fulfil the goals set in Politburo Resolution No 52-NQ/TW, which outlines policies guiding Vietnam’s active involvement in Industry 4.0. The next part of this article will cover some issues that the Government of Vietnam (VNG) has been facing in 2020 in the process of completing the legal framework for the digital economy.
I. Development of telecommunications infrastructure for high-speed Internet
Affordable, high-speed Internet is the backbone of any digital economy. Vietnam has made great strides in expanding the reach of the Internet from virtually zero in 2000, to 70 percent of the population today[2]. On September 27, 2019, the Politburo issued Resolution 52-NQ/TW on the orientation and proactive policies for Vietnam’s participation in Industrial Revolution 4.0, which sets a target of having nationwide 5G network coverage in place by 2030. This was also one of the specific targets enshrined in the National Strategy on Industry 4.0 signed by the Prime Minister on December 31, 2020, and in the National digital transformation program to 2025, orientation to 2030 issued in June 2020. To realise this ambitious vision, the Government has planned to test fifth-generation (5G) mobile networks in major urban centres such as Hanoi and HCM City. Vietnam is one of the earliest countries to successfully pilot 5G technology worldwide[3]. Commercializing 5G by 2021 is a target for Vietnam to implement national digital transformation[4]. But the path to commercialization still poses difficulties. The problem is that the current frequency planning of Vietnam is not currently suitable for 5G. In 2020, the MIC developed many legal documents related to frequency planning and auction of frequency use rights. The document notably includes:
• Circular 18/2020/TT-BTTTT on the the planning for the 2300-2400 MHz frequency band and 2500-2690 MHz.
• Circular 19/2020/TT-BTTTT on the frequency planning for 24,25-27,5 GHz.
This is the appropriate frequency band for developing 4G today and 5G in the future.The MIC is planning to reserve the frequencies being used for 2G and satellites for new technologies. Circular 43/2020/TT-BTTTT about national technical regulations on terrestrial mobile communication equipment, which takes effect from July 1, 2021, states all mobile phones manufactured or imported into Vietnam must use Evolved Universal Terrestrial Radio Access (E-UTRA) or 4G technology. This means all mobile devices with simply 2G, 3G or combined technology would not be produced and imported into Vietnam. Phones which were produced and imported before July 1 would still be allowed to be sold. The circular was considered a step towards turning off 2G in the first quarter of 2022 as well as the programme of universalisation of smartphones.
II. Investment, licensing and services provided in the cyber environment[5]
Licensing requirement
According to the laws in Vietnam, a number of services must be licensed when provided in the network environment:
• Payment intermediary service: Decree 101/2012 /ND-CP on non-cash payments is proposed to be amended.
• E-commerce activities: Decree 52/2013 /ND-CP on e-commerce is proposed to be
• Social network services: Decree 72/2013/ND-CP regulating the management, provision and use of Internet services and online information is proposed to be revised.
• Online game services: Decree 72/2013 /ND-CP on the management, provision and use of Internet services and online information is proposed to be amended.
• Aggregated information website: Decree 72/2013 /ND-CP regulating the management, provision and use of Internet services and online information is proposed to be revised.
• OTT services: Decree 06/2016 /ND-CP on management, provision and use of radio and television services is proposed (Decree 06 on OTT management) to be revised.
• Online film services services: The cinema law is being revised.
• Online advertising services: Decree 181/2013/ND-CP regulating the implementation of a number of articles of the advertising law is proposed to be amended.
• Ride-hailing services: Decree 10/2020/ND-CP regulating automobile transport business and conditions for conducting automobile transport business.
• E-money (bitcoin) services: Currently being implemented under the provisions of property in civil law.
• Peer-to-peer lending services: Currently complying with the provisions of civil law
Licensing requirements for services provided in the current cyber environment create many challenges for the following reasons:
• Doing business in the cyber environment is largely based on initiatives. Services developed from these initiatives are often continually updated/upgraded. Among them, there are also many services that will fail, only a few will succeed and grow on a large scale. This feature makes it inappropriate to license services provided over the network environment.
• The licensing regulations for newly created products and services will increase the cost of entering the market. It greatly reduces the number of products that can be offered for testing in the market. This significantly reduces the growth rate of the digital services industry.
• Some services may not need to be managed by licensing. For example, according to Decree 52/2013 / ND-CP, e-commerce websites must be registerd with the MOIT. But in order to simplify some administrative procedures, e-commerce floors that do not have an online ordering function should not have to apply for permission as prescribed in Decree 52/2013 /ND-CP. This requirement for registration or notification should be simplified.
• Some services need to be managed by business conditions such as P2P lending, virtual currency trading (bitcoin). However, these services are very new. The VNG needs more time to research and to make regulations to manage them appropriately. So, for these services, the sandbox management mechanism is appropriate. Therefore, the State Bank of Vietnam (SBV) is asking for permission from the Prime Minister for developing a Decree on sandbox management mechanism for fintech.
Investment and restriction of market access for foreign investors
The restriction of market access for foreign investors is a issue posed when drafting legal documents related to the digital economy in Vietnam. This issue will be considered on three angles such as the current regulations in the law of Vietnam, protectionism for some sectors, and Vietnam’s international commitments.
a. Current regulations in the law of Vietnam
Currently, the TV pay field has limited foreign investment. Accordingly, foreign-invested enterprises wishing to do business in this field need the Prime Minister’s approval. However, for OTT services, restricting foreign-invested enterprises will not work when OTT services are still provided across borders in the cyber space.
According to the investment law of 2020, some services provided on the Internet need to have business conditions such as TV programs, music works, movies, banking, advertising. This regulation will block the jobs/industries which will arise in the future, especially in the digital economy.
b. Protectionism for some sectors
While developing the draft decree amending Decree 52 on ecommerce and the draft decree amending Decree 06 on OTT management, the issue of protectionism has been raised. However, it should be noted that in a digital economy, services are provided across borders on the Internet. Therefore, the measures to restrict foreign investors from entering the market will not be effective.
c. Vietnam’s international commitments
According to the VCCI’s report on the flow of business laws in 2020, Vietnam still has the right to restrict market access in the digital economy sectors. However, foreign businesses have also invested in some areas such as e-commerce and payment intermediaries in Vietnam. If Vietnam introduces regulations restricting the proportion of foreign capital in these sectors, it will be like requiring foreign investors in these enterprises to sell their capital. This will lead to the risk of international investment disputes where the VNG will be the accused.
Classification of services provided in the cyber environment
The classification of services in some of the decrees proposed to be revised is also unclear. Due to some new services, their business models are unclear and changeable, so state agencies have difficulty in classifying the services. Therefore, the promulgation of regulations to manage the services in the digital economy requires coordination amongst state agencies to ensure consistency, avoiding the situation that an enterprise must meet too many regulations which conflict, overlap and cause difficulties for business operation. Some specific cases are as follows:
• Ride-hailing services: in the past, the ride-hailing service and sharing economy concepts were very new. Not only in Vietnam, many countries around the world have difficulty when distinguishing ride-hailing service as a transport service or just a brokerage service. Therefore, Decree 10/2020/ ND-CP regulating automobile transport business and conditions for conducting automobile transport business has been postponsed many times until January 17, 2020, when the Government issued this Decree. Currently, in Decree 10, the Vietnamese government has distinguished “ride-hailing service” and “transportation service” through the concept of “deciding the rate to charge the freight and directly operating the vehicle – driving”.
• OTT services: the classification of this service during the drafting of Decree 06/2016/ ND-CP on management, provision and use of radio and television services (Decree 06) is also very controversial. There are 3 comments as follows;
- • Opinion 1: websites and applications that allow listening to music, listening to audio files, watching movies or watching videos provided by the website’s administrator, not provided by the user, are called broadcasting services. It will be covered in Decree 06.
- • Opinion 2: This is a content service, online information (online content). It must be under the management of Decree 72/2013 / ND-CP on the management, provision and use of Internet services and online information (Decree 72).
- • Opinion 3: Online films should be considered a film dissemination service under the cinema law.
• E-commerce platforms and social networks: e-commerce platforms are governed by the MOIT and Decree 52/2013 / ND-CP on e-commerce. The social network will be managed by the MIC and Decree 72. In Decree 72, a social network is defined as a website or an application that allow users to actively post content and share them with other users. As such, e-commerce platform can also be considered a social network with commerce-focused content. In addition, many social networks today have also opened more functions to support users to post commercial information. This is an issue that when amending Decree 52 and Decree 72, the MOIT and the MIC should consider. If the MOIT treats a social network with function to support commerce but does not have the online ordering function like an e-commerce website as presided in Draft Decree 52 released in October 2020 for public consulation, is not reasonable.
III. Censorship of information content in the cyber space
The toxic information appearing in the cyber sapce is a major concern of the VNG. Therefore, many policies, regulations and measures were introduced by the VNG to address this issue such as the Law on Information Technology, Decree 72/2013 / ND-CP on the management, provision and use of Internet services and online information (Decree 72), the Law on Cyber Secuirty, the law on cinema, the Law on advertising, the Press Law.These regulations form an important part of the legal framework for the digital economy in Vietnam. According to Vietnamese law, the information to be removed is the following information:
• Information that infringes on the interests of the community includes information against the Party, the Government, national hatred , national secrets, violent information, pornographic information.
• Prohibited information from children is information incompatible with a child’s development.
• Information infringing on personal and organizational interests including information that offends individuals, organizations, privacy secrets, intellectual property rights.
• Fake information/fake news.
The view of protecting the cyber space from harmful information is correct. However, it is difficult when applying regulations on the elimination of malicious information. Because the definition of malicious information is too general, it is not clear. Enterprises cannot distinguish which information is information contrary to culture and customs of Vietnamese people, which information is violent information, which is pornographic information. In many cases, enterprises do not know which goods and services belong to the group that cannot be sold online.
Online content censorship mechanism
Currently, Vietnam is applying both pre-check and post-check mechanisms to online content. However, which mechanism is more effective? It is still very controversial in Vietnam. When revising the Law on cimema and Decree 06 on OTT management, the issue of pre-checking or post-review of online film and video content is central to policy discussions. The current draft law on cinema applies a pre-check mechanism to movies. Draft 06 on OTT management applies a pre-check mechanism for films and videos with political, news content, while other content such as music, performance, game shows, and sports will apply post-check.
Most information on social networks applies post-check when requested by state agencies. However, Decree 72 requires businesses to have filters to remove information that violates the Vietnamese law, but there are no more detailed provisions on this filter.
For online games, according to Decree 72, the mechanism of pre-check is applied. However, business recommended that this requirement should be revised. Online games should be post-checked in order to reduce procedure burden.
News content is allowed to be broadcasted only when it is edited by a Vietnamese press. Aggregate information website may only republish information published by Vietnamese press agencies.
In addition, the Anti-Fake News Center, managed by the Authority of Broadcasting and Electronic Information (the ABEI) under the MIC, was launched on January 12 with its portal at tingia.gov.vn to receive reports on fakes news from agencies, organizations and individuals. The portal includes four main categories – receiving fake news report; identifying and labeling fake news; counting fake news and publishing other news.[6]
Currently, in addition to the request to remove information, some businesses providing services on the Internet have corrected and explained for cases of fake information. Accordingly, in many cases, instead of requesting to remove information, Vietnamese state agencies can request the platform provider/ business to make corrections, explanations accompanying that information. This is also a measure that state agencies should consider to include in legal documents.
IV. Personal data protection
Collecting personal data
Aware of the importance of user data, the VNG is considering personal data (PD) as a new national resource, helping the country to bolster the development of digital economy . So, it is necessary to protect it. However, personal data protection (PDP) is a very new issue, not only for Vietnam but also for other countries in the region and the world. The government has assigned The Ministry of Public Security (MOPS) to study and draft a decree to protect personal data. Reviewing the Vietnamese law, we see that in the laws on information technology such as the law on cyberinformation security, the law on information technology, and the law on cybersecurity, there are also basic provisions to protect data. Specifically, (1) collecting information of an individual can be conducted with the consent of that individual; (2) only use personal information collected for a certain purpose with the individual’s consent; (3) It must take measures to ensure safety for PD; (4) does not provide PD to a third party. However the regulations on PDP in the legal documents of Vietnam are fragmented.
On February 9, 2021, the MOPS released the Draft Decree on Personal Data Protection (PDP Draft Decree) for public consultation. The draft Decree proposes for the first time the regulation of specific rights of data subjects, cross-border transfer of data, processing of sensitive personal data, and other related subjects. The Draft Decree introduced guidance of principles in Personal Data Protection as following:
• Lawfulness: Personal data (PD) can only be obtained in necessary situations in accordance with the laws.
• Purpose Limitations: PD can only be processed for the purpose that was registered or declared.
• Data Minimization: PD can only be obtained to the extent necessary to achieve the purpose set.
• Use Limitations: PD can only be used when there is consent from the data subjects or when it is required by authorities.
• Data Quality: PD should be updated and complete to ensure its processing.
• Security: Security measures should be applied to protect PD from being processed.
• Informed Data Subjects: The data subjects have the right to know and be informed about the processing activities over their PD.
• Confidentiality: PD should be kept confidential while being processed.
Some of these principles are somewhat similar to those found in the General Data Protection Regulation (“GDPR”), which includes regulations on data minimization and purpose limitation.
User Authentication
For user authentication, the current Vietnamese law only stipulates mandatory authentication for financial transactions, payments, and electronic signatures for sellers on e-commerce exchanges. For other transactions on social networks, Decree 72/2013/ND-CP only requires authentication via email, phone number, but there is no higher measure.
User authentication in banking transactions: In December, 2020, the VNG passed the Circular No 16/2020/TT-NHNN (Circular 16) amending and supplementing a number of articles of Circular No. 23/2014/TT-NHNN (Circular 23) guiding the opening and use of payment accounts at payment service providers. Accordingly, banks may apply an electronic Know-your-Client (eKYC) process to open payment accounts, instead of the traditional face-to-face one. It means that the government of Vietnam made it possible for banks to comply with a common anti-money laundering, or AML, requirement digitally. Know Your Client, or KYC, has long been an element of Vietnam’s banking law and serves to supplement the global standard AML law.
On e-commerce activities, user authentication regulations are applied more closely to sellers. In Draft Decree 52 on e-commerce (Draft Decree 52) which was released for public consultation in October 2020, the MOIT requests that the vendor declare contact information so that users can contact when there is a dispute. Draft Decree 52 requires e-commerce exchanges to authenticate sellers’ information, but does not specify the form of authentication.
Storage and usage of user data
Vietnamese law prohibits buying and selling user data. This is provided in civil, administrative and criminal law[7]. However, it is not clear whether PD is a business secret, a form of intellectual property protected under the law on intellectual property. In 2020, The MIC also drafted and the Government issued Decree 91/2020 / ND-CP on combating spam messages, and spam calls. This Decree has set forth strong requirements and measures in protecting personal information or using personal information for the purpose without the consent of the owner of that personal information.
V. Digital Taxation
In the past, when the Internet was not widely disseminated in Vietnam, supporting cross-border service providers to do services such as advertising on social networks were usually companies and businesses in Vietnam. The tax authority has no trouble asking these companies to declare and pay foreign contractor taxes (FCT) on behalf of foreigner service providers. Nowadays, when the Internet is widely available, there are many individuals and households participating in this work. However, it is very difficult to ask them to file taxes and to pay FCT. This tax administration is no longer appropriate. Because these individuals do not have year-end tax finalization, there is no basis to ask them to declare and pay FCT on behalf of foreign contractors. To address this issue, Decree 126/2020 /ND-CP requires cross-border service providers to proactively declare and pay taxes on revenue generated from Vietnam. If the cross-border service provider does not comply with this requirement, commercial banks will be required to proactively withhold tax on payments made to that provider. However with this provision, businesses have raised concerns about double taxation.This is also one of the barriers to let them enter the Vietnamese market.
[1] VCCI’s Report on the flow of business laws in 2020
[2] https://vnetwork.vn/news/thong-ke-internet-viet-nam-2020
[3] https://techwireasia.com/2020/12/vietnam-is-ahead-of-the-game-with-commercial-5g/
[4] https://vietnamnet.vn/en/sci-tech-environment/vietnam-ready-to-commercialize-5g-by-2021-693503.html
[5] VCCI’s Report on the flow of business laws in 2020
[6] http://hanoitimes.vn/vietnam-has-anti-fake-news-center-315877.html
[7] http://dtd.com.vn/che-tai-xu-phat-doi-voi-hanh-vi-mua-ban-thong-tin-khach-hang-a150.html
