By Dat Nguyen
As part of the country’s plan to modernize and catch up to other developed economies, Vietnam is hoping to be one of the first countries to jump on the so-called “fourth industrial revolution” bandwagon. In fulfilling this highly ambitious vision, the Vietnamese government has planned to begin trials of fifth-generation mobile networks, or 5G, this year in major urban centers like Hanoi and Ho Chi Minh City. However, Vietnam launched its 4G service nationwide only a few years ago. The Southeast Asian country expects to rollout 5G commercially by 2021, an unrealistic goal for any developed country, let alone a developing one.
Many media outlets, both inside and outside Vietnam, have cited 5G as a driver for economic growth, improving businesses, and enhancing people’s lives. However, it is not clear how Vietnamese businesses and people are likely to benefit from an early adoption of 5G. Vietnam’s vertical industries and workforces are not at an advanced enough stage to take full advantage of new mobile technology. The most likely beneficiaries are Vietnam’s oligarchic telecoms, 5G equipment providers, and foreign companies in Vietnam.
The Vietnamese government granted the first license to test 5G networks to Viettel, the country’s largest mobile carrier, which has over 60 million subscribers in a country with a population of almost 100 million. The state-owned telecom operator will be allowed to begin 5G trials in Hanoi and Ho Chi Minh City this year. The trials are expected to be completed by January 2020.
While Viettel dominates the Vietnamese mobile market, other competing mobile carriers, MobiFone and Vinaphone, are also expected to launch their own 5G network by 2021. Although the commitments by state and private sectors to quickly roll out 5G networks are laudable, there already seem to be challenges.
As reported by the Nikkei Asian Review in November 2018, Vietnam had planned to upgrade its mobile network by 2020. However, one month later, the newspaper reported that Vietnam would plan to roll out 5G networks by 2021. The reasons for this delay were not stated, though it is not necessarily a surprise.
5G should provide a “fiber-like” experience to mobile users and is crucial to the successful implementation of AI-driven and data intensive applications such as autonomous driving cars and remote medical analysis. But the new mobile technology is highly technical, requiring substantial human capital and financing to fully utilize its potential.
According to the Financial Times, this year alone South Korean carriers have spent a combined $2.6 billion to develop 5G networks. Likewise, Japanese telecoms have agreed to invest $14 billion to develop 5G nationwide.
The total investment amount for 5G development in Vietnam is not available publicly. But it has been reported that in order to develop its own 5G technology, Viettel plans to spend $40 million, a fraction of what more technologically-advanced South Korea and Japan have spent. For Vietnam to deploy 5G nationwide, it would require billions of dollars and years of accumulated technical know-how. Although the plan to develop 5G in-house is commendable and would make Vietnam less dependent on foreign technology, the crucial ingredients like funding and human capital are lacking to make this plan a feasible one.
Yet falling behind on 5G adoption could have major economic implications for Vietnam’s army of factory workers and ability to catch up to regional developed economies like South Korea, Singapore, and Japan. As manufacturers adopt automation along with industrial Internet of Things, replacing workers with autonomous robots, there will be less demand for Vietnamese workers.
The economic implications of 5G for developed countries such as South Korea and the United States are perhaps more evident. Early this year, the U.S. and South Korea launched their first commercial 5G networks. For years, these countries have been developing self-driving automobiles and advanced AI products, which are ready to take advantage of the higher speed and low latency that comes with 5G networks.
Therefore, the benefits of 5G are more likely to be captured by foreign companies from these developed economies as they bring in their own workers and technology. Vietnamese graduates have high aptitudes for learning science and technology, but lack the English language proficiency to really be an asset to their multinational employers.
As reported by Vietnamese media, education in the country suffers from poorly trained graduates. While universities across the country produce many graduates every year, there seems to be a job skills mismatchbetween workers and employers. Many university graduates are left without jobs related to their field of study, ending up selling food on the street or driving for the ride-hailing service, Grab.
Moreover, Vietnam currently lacks developed vertical industries that could exploit the benefits of 5G technology, namely, self-driving cars, virtual and augmented reality, and AI intensive-data services.
One possible benefit to the Vietnamese economy of an early adoption of 5G is providing the network infrastructure for technologically-advanced foreign companies to invest in the country. One could see South Korean firms bringing business applications powered by 5G technology to the country. Lotte Mart, a Korean-owned supermarket chain, which has 13 locations in Vietnam, could use augmented reality to enhance the shopping experience. Likewise, Samsung could take advantage of 5G by implementing the industrial Internet of Things in its smartphone factories in Vietnam. However, factory productivity is increased at the expense of employing less Vietnamese workers.
While Vietnam’s effort to catch up technologically is laudable, the economic benefits of 5G are unlikely to be fully realized until local industries and talents are first developed. Local consumption of social media and internet content will likely increase with the faster 5G networks, but the biggest winners of early 5G adoption in Vietnam will be local telecoms and foreign companies.
Dat Nguyen has a degree from the Johns Hopkins University School of Advanced International Studies and now lives in Vietnam, writing on the political economy and culture.
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