Legal framework for the digital economy in Vietnam

14 December, 2020

By Do Khanh Ly | December 14 2020, 15:00 PM SGT
Photo by Peter Nguyen on Unsplash

Summary:

In recent years, Vietnam has been constantly searching for new drivers of economic growth. In particular, Vietnam has actively approached opportunities from the digital economy in general and e-commerce in particular for economic growth. During the COVID-19 pandemic, witnessing the breakdown of many traditional economic activities, the Government of Vietnam (VNG) and Vietnamese enterprises have a stronger determination for digital transformation.

Since the 2000s, the Party and the Government of Vietnam have considered the development of information technology application in economic and social fields of Vietnam as one of the most important pillars in strategic development for Vietnam. A series of legal documents of all levels have been issued, creating a foundation for the legal framework to manage and regulate aspects and activities of the digital economy in Vietnam. Accordingly, in this article we will present about (i) the general legal framework for digital transformation; (ii) the legal framework for e-Government development; (iii) the legal framework for e-commerce  development; (iv) the legal frameworks for electronic transactions development ; (v) the legal frameworks for non-cash payment development ; (vi) the legal frameworks for sharing economic activity development (; (vii) the legal frameworks for Artificial Intelligence (AI) development; (viii) the legal frameworks for smart city development; and (ix) the legal frameworks for protecting information and cyber security.

  1. General legal framework for the digital economy of Vietnam

 The VNG has been aware of the importance of catching up with Industry 4.0 and transforming the economy into a digital economy, so the VNG in recent years has adopted a series of guidelines and policies and action plan. Typically, the Decision No. 52-NQ / TW dated May 27, 2019 on the guidelines and policies to actively participate in the Fourth Industrial Revolution and Resolution No. 50 / NQ-CP dated April 17, 2020 of the Government promulgates the Government’s Action Program to implement Resolution No. 52-NQ / TW dated September 27, 2019 of the Politburo. Resolution No. 50 / NQ-CP aims to increase deep awareness of Industry 4.0 to all ministries, localities and target groups, and at the same time provide a roadmap to complete favorable institutions to actively participate in Industry 4.0 and the national digital transformation process.

Resolution 01 / NQ-CP dated 01/01/2020 on the main tasks and solutions to implement the socio-economic development plan and the state budget estimate in 2020 brings the task of digital development into focus. Accordingly, state policies need to thoroughly renovate and perfect the information technology infrastructure; develop synchronous and modern digital infrastructure; strongly develop the Vietnamese digital ecosystem with shared platforms, new services and business models; step by step proceed to master the fundamental technology to create a breakthrough for digital transformation. At the same time, Resolution 01 / NQ-CP also assigned the Ministry of Information and Communications to study the digital model and propose legal fields related to digital technology to be regulated in the coming time.

Decision No. 749 / QD-TTg dated June 30, 2020 of the Prime Minister approving the National Digital Transformation Program to 2025, with a vision to 2030 in order to realize the dual goal of developing digital government, digital economy, the digital society, at the same time forming a number of digital technology enterprises with global competitiveness. Decision 749 emphasizes the importance of digital data as treating it as an asset, as a resource, and as a prerequisite for digital transformation. Cyber security also plays an essential role as a pillar of digital transformation. Accordingly, the protection of information and data security is a mandatory requirement that digital transformation programs and plans at all levels, both national and local, must be enforced in the digital transformation process.

  1. Legal framework for E-Goverment development 

In 2014, the Politburo issued Resolution No. 36-NQ / TW on e-government. The goal of Resolution No. 36a / NQ-CP is to build an e-Government in the direction of openness, transparency, and improving the quality and efficiency of state agencies in the network environment. Over 3 years of implementation of Resolution 36a has led to important changes, forming a unified and smooth electronic document management system from the central to local levels. The process of implementing the Resolution has also built a number of national databases to serve as the foundation for e-government development based on the Prime Minister’s Decision No. 714 / QD-TTg dated May 22, 2015 on issuing the list of the national database which prioritize deployment to create an e-government development platform. Some databases have been built and have components come into operation, including the National Population Database, the National Land Database, the National Insurance Database, and National Business Registration Database.

To promote e-government development in the context of Industry 4.0, the Government has issued Resolution No. 17 / NQ-CP dated March 7, 2019 on a number of tasks and solutions to focus on e-Government development for the period from 2019 to 2020, with a vision to 2025, to replace Resolution 36a NQ-CP. Resolution No. 17 / NQ-CP emphasizes the goal of completing the e-Government foundation, developing an e-Government based on open data and data towards digital government, digital foundation and digital society; ensure information safety and cyber security.

  1. Legal framework for e-commerce development

Currently, Vietnam has a number of legal documents related to this type of business, such as: Law on Electronic Transactions, Commercial Law, Civil Code, Intellectual property law, Law on Information Technology, Law on Tax Administration, Decree 52/2013 / ND-CP on e-commerce, Circular 47/2014 / TT-BCT regulating the management of e-commerce websites. In addition, there is also Decree 185/2013 / ND-CP stipulating the sanctioning of administrative violations in commercial activities, production, and trading in counterfeit goods, banned goods and the protection of consumers’ interests with fines specific to different violations. Thus, in general, Vietnam has a legal framework with regulations governing e-commerce business activities.

In the above laws, Decree 52/2013 / ND-CP dated May 16, 2013 on e-commerce  and Law on Tax Administration are considered as the main legal documents in the legal system of e-commerce in Vietnam. Decree 52 marks a turning point in thinking innovation in state management for a modern business form in the electronic environment. Decree 52 has contributed to creating a legal framework for e-commerce activities, ensuring benefit sharing for all parties, promoting e-commerce development, thereby enhancing the competitiveness of businesses. In recent years, technology has made great strides, followed by the rapid development of e-commerce taking place in many forms with foreign factors, and violations are also more sophisticated. In that context, the Ministry of Industry and Trade (MOIT) is proposing to develop a Decree amending and supplementing a number of articles of Decree 52, including proposing additional regulations to make information transparent on ecommerce websites; adding content on the management of e-commerce activities with foreign elements; strengthening the responsibility of the owners of e-commerce flatforms; and specific regulations on e-commerce activities on social networks and the respective responsibilities of the social network management unit.

The law on Tax Administration No. 38/2019 / QH14 was passed by the National Assembly on June 13, 2019. The important highlights of the Law on Tax Administration 2019 include issues of creating a stronger legal framework to better manage e-commerce activities, combat tax loss, towards building a modern tax management system with increased enhance the effective application of information technology. The Law on Tax Administration 2019 also adds regulations related to tax administration for e-commerce in the direction of building a database and widely deploying electronic tax services such as electronic tax declaration, electronic invoices, online tax payment, ensuring good response to online public services of the tax industry.

  1. Legal framework for electronic transactions

The Law on Electronic Transactions (E-transactions) No. 51/2005 / QH11 was promulgated by the 11th National Assembly on November 29, 2005 and took effect from 1-3-2006. The 2005 Law on E-Transactions  is considered a legal framework regulating technical issues, and specific issues arising in the electronic environment. After 15 years of implementation, the Law has basically completed its mission, formed a legal foundation to promote IT application, promote e-transactions, contribute to improving the efficiency of economic activities, at the same time applying science and technology into administrative reform.

In the current period, it is urgent to implement digital transformation, promote the digital economy, especially in the context of rapid development of e-commerce on a large scale, as well as the strongly development of the online public services,  many provisions of the Law have become outdated and inadequate, becoming a barrier to economic activities and public services in the electronic environment. The provisions of the Law are not clear about the legal value, the evidence value of the data message; unclear about the legality and the case of applying electronic signatures, and there is a lack of regulations on signing and electronic contracts. In addition, the Law also shows the inconsistency in detailed regulations for data messages about the format, time to send, receive, store, convert, etc… leading to difficulties in linking and recognizing each other between systems, causing problems in the provision of online public services and electronic transactions of state agencies with enterprises and people. Besides, the provisions of the Law on Electronic Transaction on security, safety, protection, and confidentiality show overlap, not consistent with the Law on Cyber Information Security and the Law on Cyber Security. The  Law on E-transactions also lacks regulations on the use of technology and techniques in electronic transactions to ensure safety, security, and avoid risks for users due to information and data leakage.

  1. Legal framework for non-cash payments

The basic legal foundation for non-cash payments in Vietnam is Decree No. 101/2012 / ND-CP dated November 22, 2012. Decree 101 has contributed to promoting non-cash payments in recent years. In order to promote solutions to develop non-cash payments, on May 26, 2020, the Prime Minister issued Directive No. 22 / CT-TTg on accelerating the implementation of non-cash payment development solutions in Vietnam (Directive 22). Directive 22 states that, on December 30, 2016, the Prime Minister issued Decision No. 2545 / QD-TTg approving the Project to develop non-cash payments in Vietnam for the period 2016-2020 (Decision 2545). The results of 4 years of implementing the Decision No. 2545  have brought many positive results. Currently, there are 78 organizations providing internet payment services and 45 organizations providing mobile payment services. Infrastructure and technology for non-cash payment are focused on investment. Many new and modern technologies are applied in payment such as fingerprint authentication, facial recognition, using QR codes. However, the proportion of people using cash in payment is still high compared to the set target.

According to the Directive 22, the State Bank of Vietnam is assigned the task of urgently reviewing, amending, supplementing and completing the legal framework for non-cash payment and electronic payment, meeting the requirements of new payment model, product or service. Draft Decree replacing Decree 101/2012 / ND-CP on non-cash payments has been developed by the State Bank and is in the process of synthesizing comments, contributions from relevant ministries and agencies, domestic and foreign organizations and individuals. The draft also introduces for the first time the concept of electronic money, correspondent banking, as a legal basis for comprehensive digital banking development.

  1. Legal framework for sharing economic activities

High technology vehicle operations (such as Grab, Fastgo and Be) and peer-to-peer lending (P2P) operating on a specialized application software platform are typical activities of the sharing economy model; taking advantage of free resources, both human and property, this model is developing very fast, attracting a large number of employees to participate. The legal framework for shared economic activities is also gradually being strengthened.

Decree No. 10/2020 / ND-CP dated January 17, 2020, providing conditions for auto transport business replaces Decree 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 officially put into operation after the pilot period. With Decree 10, for the first time, the concept of electronic contracts as technology vehicles is recognized, and at the same time it officially refers to the application software of car booking companies, creating a level playing field for traditional taxi and technology taxi. The lawsuit between Grab Company and Vinasun arises partly due to the inadequacies of the policy on car transport business and the inconsistencies and inadequacies between the two types of passenger transportation in the traditional taxi style (Vinasun) and technology vehicles (Grab). Specifically, while Vinasun is a traditional transport business, it is subject to Decree 86, while Grab operates in the pilot phase under the 24th Pilot Project of the Ministry of Transport.

Peer-to-peer lending in Vietnam is a new business model based on a digital technology platform, connecting borrowers directly with lenders without financial intermediaries. Convenience and simple connectivity are the keys to the rapid growth of peer-to-peer lending, even though it has been there since 2016 despite the sky-high interest rates and lending fees of approximately 40% per month.  However, the lack of a legal framework is the cause of the explosion of many black credit loan apps disguised in the shadow of P2P. There is also an increase in frauds, getting customer information on short loans, and the collusion of a number of P2P companies with gangs hiding under the name of debt collection companies to put pressure on the borrower. The rapid development of P2P activities and its consequences are posing a great challenge to the management and supervision of state management agencies, especially in the context of the COVID-19 pandemic.

  1. Legal framework for the development of artificial intelligence (AI)

In Vietnam, Artificial Intelligence (AI) has been being used strongly in many fields such as health, education, agriculture, transportation, e-commerce, etc. AI is identified as a key technology to create a breakthrough that needs to be focused on development and investment. For AI development, data is extremely essential. This implies an emphasis on building large databases and ensuring the appropriate mechanisms and regulations for this large data flow are shared favorably by actors both at home and abroad. Directive No. 16 / CT-TTg dated May 4, 2017 of the Prime Minister on strengthening access capacity to the Fourth Industrial Revolution affirms that Vietnam must make efforts to improve capacity to access Industry 4.0 in which AI is one of the vital pillars that has fundamentally changed the production of the world.

The legal framework and AI development policies are also gradually being built and implemented in practice. The Government has also assigned the Ministry of Planning and Investment to develop a National Strategy on Industrial Revolution 4.0, which identifies AI as one of the priority technology industries to focus on policy groups to promote development. The Ministry of Planning and Investment is also the agency assigned to develop a project to set up a National Innovation Center according to the world’s model, with outstanding and competitive institutions. The National Center for Innovation (NIC) is expected to be a lever for the development and connection of startups, towards building a strong innovation ecosystem. On October 2, 2019, the Prime Minister signed Decision No. 1269 / QD-TTg on the Establishment of a National Innovation Center under the Ministry of Planning and Investment to support and develop the life system of entrepreneurship, innovation contributing to the innovation of the growth model on the basis of science and technology development.

In the health sector, the Ministry of Health has been proactive in formulating a plan to develop and apply AI in medicine soon. Accordingly, the Ministry of Health issued Decision 4888 / QD-BYT dated October 18, 2019 approving the Project on application and development of smart medical information technology for the period of 2019-2025. Applying and developing digital and smart technologies in healthcare contributes to building a modern, quality, fair, efficient, and internationally integrated Vietnamese health system. The project emphasizes the importance of the application and development of digital and smart technologies in healthcare to contribute to building a modern, quality, fair, efficient and integrated Vietnamese health system into international system.

Ministries and localities have also shown an interest in AI development. However, building regulations to ensure effective regulation of AI activities is not easy and so the legal framework for AI activities is still at a primitive level. The reality shows that AI offers many opportunities and potentials, but the development and application of AI also comes with many risks and issues related to intellectual property, AI’s legal status, ethical issues, privacy, personal data rights, dispute resolution or risk mechanism when applying AI products. For example, in online dispute resolution, if you rely on AI to assign arbitrators / mediators to specific cases, the legal basis and ability to blame is not easy. These legal gaps need to be studied and formulated for appropriate legal regulations.

  1. Legal framework for smart urban development

Determining smart cities will be an inevitable trend, the Party and Government of Vietnam have focused on implementing specific policy documents such as: Resolution No. 05-NQ / TW dated November 1, 2016 of the Central Committee of the Party (term XII) clearly stated: “soon deploying the construction of a number of special economic-administrative zones; give priority to the development of some smart cities”; Resolution No. 13-NQ / TW dated January 16, 2012 of the Politburo on building a synchronous infrastructure system in order to make our country basically become a modern industrial country by 2020; Resolution No. 36-NQ / TW dated July 1, 2014 of the Politburo on promoting IT application to meet the requirements of sustainable development and international integration.

In the context of urban areas in Vietnam increasingly strongly develop in the direction of smart connection to meet increasing human needs. However, the construction and development of smart cities also face many challenges related to many global issues such as urban competition; climate change, rising sea levels, and sustainable development associated with green growth. Identifying smart city development is an inevitable trend, the Party and Government are clearly aware of the importance of a legal framework to guide and regulate smart city development and construction activities.

Resolution No. 05-NQ / TW dated November 1, 2016 of the Party Central Committee (Session XII) on a number of major guidelines and policies to continue to renew the growth model, improve the quality of growth, labor productivity, economic competitiveness including giving priority to develop a number of smart cities. In order to concretize and guide localities in the implementation, the Government has developed an Action Program to implement Resolution No. 05 / NQ-TW shown in Resolution No. 27 / NQ-CP dated February 21, 2017 promulgating the Government’s Action Program to implement Resolution No. 05-NQ / TW and Resolution No. 24/2016 / QH14.

Next is Decision No. 950 / QD-TTg dated August 1, 2018 approving the Project for sustainable smart urban development in Vietnam for the period of 2018 – 2025 and an orientation to 2030. The project has identified the points and principles of people-centered smart urban development towards the goal so that all parts of society can enjoy benefits. The project also emphasizes the construction of information technology infrastructure, the use of information and communication technology equipment and facilities in construction, and smart urban management and monitoring. The sustainable smart city development project sets out 10 groups of tasks and solutions, in which it also emphasized the task of researching and perfecting the system of legal documents and mechanisms and policies for sustainable smart urban development in Vietnam.

  1. Legal framework for information safety and cyber security

Information security and cybersecurity are regulated by two Laws. First,  the Law on Cyber ​​Information Security or the Law No. 86/2015 / QH13 dated November 19, 2015, providing for activities of cyberinformation security, rights and responsibilities of agencies, organizations and individuals in ensuring information security; civil code; 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 Cyber ​​Security or the Law No. 24/2018 / QH14 dated 12/6/2018 provides for the protection of national security and assurance of social order and safety on cyberspace, along with the responsibility of the institution related agencies, organizations and individuals.

The Law on Cyber ​​Security defines the government’s authority to control the flow of information and protect critical network infrastructure. In many provisions of the Law, the issue that attracts the most attention from the business community and users are the issue of free flow of data and issues of data and user data privacy. This is also a controversial issue in the commenting process for the Draft Law because of concerns about privacy and the abuse of collected data by users, especially when the Law is built in parallel with Vietnam preparing to join a new generation of free trade agreements (CPTPP, EVFTA).

The CPTPP Agreement also provides a framework for ensuring the free flow of data cross borders. In the E-commerce Chapter, the contents of Vietnam’s commitments in a number of key areas stipulate that CPTPP members must ensure the free flow of information across borders for business activities by electric method excluding information or data held or processed by the Government or the State, or authorized by an agency or organization to hold or collect. A notable point is the rule “CPTPP members are not required to use or locate servers in the host country as a condition of business. However, CPTPP countries have the right to issue separate management requirements for using or placing servers, including requirements to ensure security and confidentiality of communication ”. The Agreement also stipulates that CPTPP countries agree to “not sue Vietnam if the provisions of Vietnam’s cybersecurity are considered inconsistent with the CPTPP Agreement. Specifically, there are two obligations regarding the freedom of cross-border information circulation and server system in the host country in the Chapter on E-commerce within 5 years from the date of entry into force of the CPTPP Agreement. This also implies that Vietnam still needs to carefully review the regulations on cybersecurity to consider amending it to suit its commitments in the CPTPP to avoid future legal conflicts.

In terms of personal data protection, the Ministry of Public Security has completed the draft document to request the formulation of a Decree on personal data protection to collect comments from agencies, organizations and individuals to ensure the legal framework for personal data protection and ensure the operation of e-Government.

  1. Conclusion

The legal framework of Vietnam already has the basic foundations for the development of fields related to digital economy. The context of the COVID-19 pandemic raises an urgent need, and at the same time creates an opportunity, to be more urgent and decisive in finding and encouraging industries and economic activities based on digital platforms. The Government of Vietnam is deeply aware of the situation and problems posed, demonstrating its efforts and determination to promote the digital economy to develop. Conclusion No. 77-KL / TW dated May 29, 2020 of the Politburo on the policy of overcoming the impact of the COVID-19 pandemic to restore and develop the country’s economy emphasized the urgent need to quickly approach new, modern and effective forms of production and business, thereby strengthening business capacity to participate in new value chains. Promoting digital economic development is one of the key long-term solutions highlighted in Conclusion 77, with specific contents including:

  • Accelerate the development of a policy and legal framework, perfect the legal framework for new business models and digital transformation applications;
  • Promote development of digital government, digital society, digital society, innovation and application of science and technology. Focus resources to develop a number of shared technology platforms, core national database systems; ensure safety technical infrastructure and information security. Building and developing a system of national, regional and local innovation centers; supporting and developing a startup ecosystem, innovation.

In general, Vietnam has made efforts to create a legal framework to promote the development of the digital economy. However, in the process of implementing the key policies of the party and the government and developing policies to promote the digital economy development, the VNG has not yet provided a clear inplementation guidline. The lack of clarity leads to overlapping Vietnamese laws, making it difficult to enforce the law and delaying law enactment (specifically, the cybersecurity decree, one of the reasons that the VNG is missing deadline for issuing the decree is the functional overlap between the Ministry of Public Security, Ministry of Public Security, and Ministry of Defense.)

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