VN needs to increase innovation capacity

Why is the WEF focusing on entrepreneurship, the private sector and the fourth industrial revolution at the upcoming event?

The WEF is very focused on the fourth industrial revolution all the time, not just this event. Our chairman, Professor Klaus Schwab, feels very strongly that technology is moving at a faster rate and the speed of change is accelerating. He feels that if we look at the world today, we can see so many disruptive technologies, including blockchain, artificial intelligence, drones, advanced robotics and so on. He feels that these technologies are going to be deeply disruptive and transformative to the economy, society, jobs, business models and the speed of disruption is getting faster and faster. He feels it is critical that different stakeholders in society, particularly the government and businesses, come together to shape these technologies in a positive way because technologies can deliver very bad outcomes and they can deliver good outcomes. It depends on how we steer them today. And I think that the WEF is very focused on trying to understand what the fourth industrial revolution means for all of us and how we can steer it in a positive way that prioritises humans. So we don’t get excited just about the technologies but we think about the implications of technologies on people and society. It’s important that we develop ways to steer these technologies, to manage them, to govern them in a way that’s positive.

Here in ASEAN, the WEF is also very focused on trying to understand what the fourth industrial revolution means for the region, what it means for Việt Nam and what it means for ASEAN. We want our summit to be a moment when we can bring in some of our thinking, research and ideas. We want the government, businesses, academics and civil society to engage into a conversation on how we make sure this fourth industrial revolution can be positive for the region. ASEAN has a very large, young population and it’s growing very quickly. The workforce is expanding by 11,000 people every day, and will continue at that rate for the next 15 years.

So it’s a huge increase in the number of workers in ASEAN, but this is happening at exactly the same time as technology is potentially making it harder for people to find jobs. Advanced robots can out-compete low-cost labour, so if you’re thinking about building factories, increasingly human labour can’t compete with robots. In the services sector, artificial intelligence is now, in many ways, out-competing human brain power. On the roads, there are a lot of people being employed as taxi drivers and truck drivers but in some parts of Asia, self-driving vehicles are already at work. So you can see we have a very challenging situation where the workforce is getting much bigger but the number of jobs might be shrinking. You have to think about how we can create new jobs and new industries to absorb all of these new workers. This is a very powerful example of one of the challenges of the fourth industrial revolution.

Regarding entrepreneurship, start-up companies are driving disruption and transformation. We want to invite the startups to help us understand the changes that are happening, what the industries and economies will look like. It’s important that they help us understand these changes, but also if we can provide jobs for the expanding workforce it will be the startup companies that are going to be the companies of the future. These are going to be the companies that create new jobs, new industries and the new future-focused economy so we need to bring them into the summit to connect them with established business leaders and government leaders so that we can understand how to steer all of these developments in a positive way.

I think entrepreneurship and startups, in many ways, will be the leading force of the revolution and we need to be able to bring them into the conversation on how we should react to all of the changes. I think also if you look across the Southeast Asia, the entrepreneurs and startups are seen with real energy and dynamism. You can see tech unicorns (companies with valuation of more than US$1 billion) emerging in many places (Singapore, Philippines, Malaysia). And I think it’s a very exciting moment to be involved in entrepreneurship in Southeast Asia because there is so much energy and exciting developments. And given the technological shift, there’re so many opportunities for entrepreneurs to do interesting things.

You’ve talked about the bad and good impacts of the fourth industrial revolution on the business community, especially startups. If you look at the Vietnamese economy and its business community, how do you evaluate the strengths, weaknesses and competitiveness of the local companies?

I think anyone looking at the Vietnamese economy will see it is doing very well. Economic growth is around 7 per cent. Inflation is low, stable. International trade is rising year on year. I think that’s a very good indication in the sense that foreign investors are looking for opportunities. The stock market has doubled in the last couple of years, again, clearly a reflection of some exciting things happening here.

So I think that fundamentally, there are some very exciting things happening in Việt Nam and the economy is looking quite strong. Of course, the competitiveness of the companies depend on which companies you look at, which sector you’re working with and I think there are some differences between private companies and State-owned enterprises (SOEs). There is a fact that companies in the private sector have seen higher growth, are more efficient and more innovative than State-owned companies. I think one of the challenges is trying to improve the performance of SOEs. The Government is very committed to it and they’re making progress. The strongest SOEs have been privatised, the weaker ones have been improved in terms of corporate governance and management capability. Given that SOEs are such a big part of the economy, it’s important that they keep improving. But in the private sector, we see some highly competitive companies. And I think you can see some strong examples of startup companies doing very interesting things.

Which are the biggest challenges for local startups and businesses?

I think there are many things that startups find difficult. Capital is critically important and it’s always a challenge for startups. This is true no matter what country you’re looking at and it’s true here in Việt Nam.

Technology is always an issue for a company, but if you look at the fundamental technology landscape in Việt Nam, it’s getting better. The WEF does assess the readiness of a country in terms of embracing the fourth industrial revolution. And certainly there are weaknesses here in Việt Nam. The fourth industrial revolution is about connectivity, and you have to be able to connect people and things. If you look here in Việt Nam on the people side, more and more people have smartphones and internet access. People are becoming connected and the tech foundation creates a rich landscape of opportunities in Việt Nam because you have a big population and a tremendous opportunity. Another idea is connected things. If you look at cities, you need to connect street lamps, buses and cars to be able to have smart cities and the ecosystem that enables the fourth industrial revolution to take place.

I think there are lots of infrastructure issues on the technology side that the Government should address. But on the people side, you can see strong progress and that creates a very exciting opportunity. You have a lot of vibrant startups in Việt Nam and it’s interesting to see startups from the rest of the region are also looking at Việt Nam as an opportunity. One obvious example is in ride-hailing services. Grab is well-established here, GoJek from Indonesia is about to launch. The reason for that is people are connected and that creates opportunities for entrepreneurship to flourish.

What recommendations do you have for the Vietnamese Government to solve existing problems?

There are lots of issues. Every year, the WEF produces the Global Competitiveness Index and it measures a whole set of things that are important for an economy to be healthy, competitive and dynamic. If you look at the index, it ranks countries around the world. Last year, Việt Nam ranked 60, and 55 this year. Việt Nam is improving in the rankings, but a rank of 55 means you clearly have room to improve. Some of the areas in need of improvement include the function of the labour market. It should be more flexible, easier for companies to hire people, to fire people, to respond to opportunities, it should be easier for people to move from one part of the economy to another part as opportunities change, risks change, economy evolves.

We have talked about technology readiness and infrastructure, which are also important. I think in the area of law, there is also room to improve. Entrepreneurship succeeds when you have legal certainty and strong laws. So this is a very important. And I think one of the weakest areas identified in the index is something called “capacity to innovate”. That’s tremendously important for startups to be able to grow here. We measure it by looking at things like the amount of money being used in research and development, the number of patents filed by countries every year, the ability of companies to commercialise ideas into healthy businesses.

The “capacity to innovate” is a broad idea that needs some attention. When we hold the summit in September, we will invite some of the most exciting startups across ASEAN. The things that startups will discuss are how we improve the innovation ecosystem, the environment for startups and entrepreneurship. We’re hoping when we come out of the summit, we will have a set of ideas and recommendations that the Government can take away and think about what policies they can pursue and improve the ecosystem for startups and entrepreneurship. — VNS