Credit: Tom Fisk
One recently signed trade agreement in 2020 - or the year of uncertainty - has reassured Australia and Vietnam’s youth innovators for a positive outlook in 2021 and beyond.
On 15 November, Ministers from 15 countries including Vietnam and Australia, signed the Regional Comprehensive Economic Partnership (RCEP), following eight years of negotiations. This agreement, representing the largest free trade agreement in history, encompasses a market of US$26.3 trillion and a population of 2.3 billion people.
While much commentary has emerged about implications for RCEP broadly, this agreement entails significant opportunities for emerging leaders from Australia and Vietnam in the innovation and start-up space – the impacts of which will be accelerated by the digital transformation brought about by the global response to COVID-19.
Innovation and start-up ecosystems in Australia and Vietnam
Australia and Vietnam remain among the fastest innovators globally and most importantly, regionally. Concurrently, both countries have been recognised as world leaders, for their conducive start-up ecosystems.
According to the Global Innovation Index (GII) 2020 report, Australia has maintained its strong ranking, sitting at 23rd place globally, and 6th place in the Southeast Asia and Oceania group. Hailed an ‘economic miracle’, Vietnam has soared through the GII, jumping from 71st place in 2014, to 42nd place in 2020. It has also been crowned number one economy in the lower middle-income group and declared an ‘innovation [over]achiever’ for the last 10 consecutive years. Vietnam has emerged as a production centre for both IT hardware and services, such as software development outsourcing.
Key to the success of both countries' innovation ecosystems, is the ease of doing business. The World Bank undertakes an annual global assessment of economies around the world in the ‘Ease of Doing Business’ rankings, which measure all aspects of doing business, including the conduciveness of the regulatory environment around start-ups. On this front, both Australia and Vietnam have demonstrated a commitment to enhancing the ease of doing business. Indeed, among 190 competing economies, Australia has maintained its strong ranking at 14th place and Vietnam continued to rise from 99th place in 2013, to 70th place in 2020.
The success of both markets, particularly Vietnam, is attributed to a commitment to free trade and partnerships in innovation. Having already signed 12 free trade agreements, the Vietnamese government has continuously pursued reforms throughout the pandemic. This includes improving and increasing domestic competition and promoting fairer competition for business by providing tax breaks, improving access to credit information, upgrading IT infrastructure for tax payments, and providing other incentives for investment in start-ups. Furthermore, the local start-up community is growing strongly in Vietnam’s main cities, and foreign investment is expected to rise with the new government incentives. More and more graduates are also choosing to seek venture capital funding to launch start-ups.
COVID-19 supercharging digital transformation in Vietnam
According to a recent report by Google, Bain and Tamesek, Vietnam’s various stages of lockdowns have enhanced engagement of new consumers on the digital marketplace. As many as 41% of all digital service consumers are new and 94% intend to continue such engagements post-pandemic. This mass increase of technology use has also increased the demand for technology solutions, and the economic value of the digital economy in Vietnam.
Figure 1: Internet Gross Merchandise Value of Vietnam (US $Bn) (Bain, 2020)
Youth involvement in start-ups
In this context, the supportive regulatory environment in both countries, backed by start-up incubators and accelerators like 500 Startups Vietnam or Stone & Chalk Innovation Hub in Australia, has encouraged young entrepreneurs to invest in their own innovative ideas. This is particularly the case in Vietnam, where youth under 24 account for 40% of the 97 million population.
Hang Do, 2017 AVYLD alumni and Vice President of Business Development and External Relations at young retail holding group, Seedcom states:
‘The strong domestic demand for products and services across retail, logistics, technology and agriculture is strengthened by Vietnam’s smart and proactive regulatory environment, which continues to instil confidence within the start-up community to scale impact and reach beyond Vietnam’s borders.’
According to Austrade, Vietnam has the third-highest rate of business start-ups in Southeast Asia. These young entrepreneurs, social innovators and business leaders are also playing a vital role in helping to expand links between Australia and Vietnam, with bilateral trade growing at 12% per year.
Figure 2: Vietnamese fastest growing B2C e-commerce platform (Tiki, 2020)
With innovation and technology clearly shaping the development of the region, there is no doubt that RCEP will help stimulate both economies, post COVID-19 pandemic. The signing of the agreement demonstrates the commitment of both countries, and the broader region, to one set of rules across a range of different sectors. This will facilitate broader understanding for youth-led start-ups and innovation, by making it easier to understand the ‘rules of the game’.
Andrew Duck, 2019 AVYLD Alumni and CEO and Founder of Aversafe, a tech start-up focusing on reducing credential fraud and improving graduate mobility in emerging economies, says:
‘RCEP addresses data localisation barriers by preventing countries from imposing measures that require computing facilities to be located within their own territories. This will reduce the cost of building data storage facilities and enhance the ease of doing business. In addition, the agreement includes both countries’ commitments to promote privacy and consumer protection, which will help facilitate digital trade in the region and support consumer confidence in the online environment.’
Following considerable disruption to Asia-Pacific trade flows during 2019-2020 due to the pandemic, the implementation of RCEP will help to further reduce barriers to these flows within the Asia-Pacific region over the medium to long-term.
According to 2019 AVYLD alumni and CEO and Founder of social enterprise, Enable Development and tech start-up Enabler Interactive, Huy Nguyen:
‘As the ICT industry continues to be a major driving force for Vietnam’s development, RCEP will create opportunities for fast-acting Australian ICT businesses – especially for IT service providers, software developers and cloud technology developers. RCEP will give Australia’s economy advantageous access to Vietnam’s consumer market of 97 million people, generating export growth opportunities in the third-largest consumer market in Southeast Asia, which accounts for 7.9% of regional GDP.’
In this regard, while RCEP may feel like just another free trade agreement, in reality it will create the largest free trade market in the world, compiling numerous sporadic regional agreements into a uniform set of rules. For enthusiastic and innovative young entrepreneurs, such an agreement will provide regulatory certainty and confidence to engage in the broader regional markets. For Australian and Vietnamese entrepreneurs, it will provide greater opportunities for collaboration and partnerships where all parties clearly understand the rules.
Disclaimer: The views and opinions expressed in this article are those of AVYLD and the authors and do not necessarily reflect those of any other organisation.
(1) Council on Foreign Relations (2020), ‘The RCEP Signing and Its Implications’
(2), (3), (4) Global Innovation Index (2020), ‘Global Innovation Index 2020: Who Will Finance Innovation?’
(5) Austrade (2017), ‘ASEAN Now Report’
(6), (7) World Bank (2020), ‘Doing Business 2020 Report’
(8) Ministry of Industry and Trade of the Socialist Republic of Vietnam (2020) ‘International media highlights Vietnam’s economic success in 2019’
(9) Vietnam Briefing (2020), ‘Vietnam Proposes Corporate Income Tax Cut to Boost Economy after COVID-19’
(10), (11) Vietnam Briefing (2019), ‘Vietnam Ranked 70th for Ease of Doing Business: World Bank’
(12), (13) Nikkei Asia (2020), ‘Vietnam to drive high-tech start-ups with new incentives’
(13), (14) Austrade (2019), ‘Vietnam’s Innovation Ecosystem 2019’
(15) Google, Temasek, Bain & Company (2020), ‘e-Conomy SEA 2020’
(16) Central Intelligence Agency (2020), ‘The World Factbook: Vietnam’
(17) Austrade (2019), ‘Vietnam: Asia’s creativity hub for 2019’
(18) Australia’s Department of Foreign Affairs and Trade (DFAT), Vietnam Country Brief.
About the authors:
James is a Policy & Program Officer at the Australia-Vietnam Young Leadership Dialogue, currently working in international trade. An admitted lawyer in Queensland, he is also completing a Master of Governance and Public Policy at the University of Queensland, following studies across Australia, France, Singapore and Vietnam. As a former DFAT New Colombo Plan Scholar, James has experience across KPMG Vietnam & Cambodia and several law firms in Australia.
Jenny is an Events Coordinator at the Australia-Vietnam Young Leadership Dialogue, currently working as an Integration Aide at Thornbury High School. In completing a Bachelor of Arts (International Studies, Communications & Media Studies, Chinese Studies) at Monash University, she undertook studies and work experience in Indonesia, Malaysia and Switzerland.