Vietnam’s lagging 5G ambitions

Asia World

Author: Phan Le, ANU

On 10 May 2019, Vietnam became one of the first countries to successfully establish a 5G-powered phone call. It was a milestone for the country given Hanoi’s ambitious plan to deploy a 5G network for commercial operations by 2020 using domestically-developed technology. But while Vietnam’s 5G rollout is on the right track, fully realising this ambition still requires overcoming myriad challenges in technology, national security and governance.

Viettel's President and CEO Le Dang Dung is seen at his office during an interview in Hanoi, Vietnam 4 January 2019 (Photo: Reuters/Kham).

Viettel's President and CEO Le Dang Dung is seen at his office during an interview in Hanoi, Vietnam 4 January 2019 (Photo: Reuters/Kham).

Heralded as a revolution in network speed, latency and coverage, 5G opens up massive business opportunities in a wide range of fields such as virtual reality, intelligent manufacturing, smart cities, immersive education, digital health care and driverless cars. 5G’s huge potential has catapulted a global race to gain first-mover advantage.

While late to 4G deployment, Vietnam has been quick to join the 5G race. The country’s largest carrier, Viettel, has invested US$40 million in 5G since 2015. Viettel has vowed to self-develop 80 per cent of core network infrastructure by 2020, with a further aim to become a global 5G supplier. In 2019, Vietnam’s largest conglomerate, Vingroup, announced plans to launch its new 5G smartphone in US and EU markets by 2020. More broadly, the country enjoys a booming tech start-up scene and a rapidly-expanding tech user-base, both eager to take advantage of 5G benefits.

The incumbent government deserves some credit for Vietnam’s 5G progress. Since taking office in 2016, government leaders have prioritised technology as the key engine of economic growth, with 5G serving as the most important foundation for the digital transformation process.

The government has introduced a series of tech-supporting policies. These include Resolution 41 in 2016 on tax incentives for IT development and application and Decree 13 in 2019 which provides corporate income-tax remissions and credit incentives for science and technology enterprises. Government-led initiatives — such as Project 844 which supports the start-up ecosystem — are catalysing the surge of tech start-ups in the country.

On the human-resources side, computer science and other STEM subjects are emphasised right from elementary school, while innovation partnership programs with tech companies are modernising the country’s top engineering and technical vocational institutions. As Asia’s hottest destination for foreign direct investment, the country also benefits from skilled-employee training initiatives by multinationals such as Samsung, LG, Siemens and Jabil.

But while Vietnam is on track to roll out 5G by 2020, maintaining a reliable network and developing local 5G manufacturing capabilities are a different story.

From a technical standpoint, Viettel’s demonstration on 10 May reveals neither the company’s capability to meet its goal of 5G self-reliance, nor its ability to roll out a 5G network which is standards-compliant, robust and feature-complete. Viettel’s biggest goal of self-developing its core network equipment, including multiple state-of-the-art chipsets, likely amounts to a pipe dream. Even leading 5G suppliers — Huawei, ZTE, Nokia and Ericsson — still rely on external chip developers such as Qualcomm or Intel.

Likewise, Viettel’s desire to become a global 5G supplier is hindered by the formidable patent barrier. Paying for multiple patent licenses will drive up the production costs of Viettel devices and reduce their price competitiveness compared with patent-owning suppliers. The pricing issue is especially challenging as the company has shunned 5G cooperation with Huawei — the market leader in cost-saving — due mainly to national security risks.

The desertion of Huawei technology highlights serious national security concerns over the rapid deployment of 5G in Vietnam. The country is no stranger to cyberattacks and cybercrimes, suffering the eighth highest malware infection rates globally in 2016. More than 18,000 websites with the national .vn domain have been hacked since 2010, including almost half the websites of state agencies. The rapid deployment of 5G will expose Vietnam’s already vulnerable networks to even more cyber-threats. Being an early adopter of this evolving technology means that the country will have to find its own solutions to many of these problems.

The key to winning the 5G race, and to limiting its security risks, is ensuring that all stakeholders — from regulatory bodies to individual tech users — are well-prepared for the advent of 5G. While the government has been active in promoting both tech-supporting and cybersecurity policies, the effectiveness of these policies often remains in doubt. Resolution 41 in 2016, for example, promised a 50 per cent reduction in personal income tax for individuals working in hi-tech sections of the IT industry. It also promised a preferential corporate income tax of 10 per cent for IT start-ups. Three years later, not a single firm nor individual benefits from this incentive scheme.

The 2018 Cybersecurity Law has also had questionable effects. It requires all foreign online service providers to store the data of users in Vietnam locally for cybersecurity purposes. The security benefits of this law are unclear given Vietnam’s vulnerable ICT infrastructure, and this mandate will undoubtedly obstruct free data flows and raise the cost of doing business in the ICT sector.

Despite initial achievements, Vietnam’s 5G ambition still faces a mountain to climb. The most important next step is for the government to go beyond promoting policies. It should begin effectively implementing, evaluating and revising policies that reward innovation, strengthen cybersecurity and prioritise the growth of domestic firms. Winning the 5G race is only meaningful if all stakeholders — state, businesses and individuals alike — can reap benefits from the digital transformation process.

Phan Le is a PhD candidate at the Crawford School of Public Policy, The Australian National University.

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