Digital economy is often defined as encompassing economic activities arising from the connection of individuals, businesses, devices, data, and operations via digital technology. 

It includes online connections and transactions across various fields and technologies, such as the Internet, mobile technology, big data, and ICT. Hardware like computers, internet systems, and other technological devices, as well as hardware factories, are essential investment assets facilitating transactions.

According to the US Bureau of Economic Analysis (BEA), the digital economy includes: digital infrastructure necessary for computer networks to exist and operate, digital transactions conducted through this infrastructure (e-commerce), and digital content created and accessed by users in the digital economy.

With this principle, BEA calculated GDP from digital economy, and calculations showed that digital economy just made up 9.9 percent of GDP in 2022. The number of workers in digital economy just accounted for 5.6 percent of the labor market in the same year. As such, digital economy has higher productivity than the average productivity of the national economy.

Regarding the development, the contribution by the digital economy to GDP in 2017-2022 did not change significantly. The GDP of the sector grew by 7 percent per annum on average, but the labor force just increased by 3 percent.

The largest segments of the digital economy include digitized information services (42 percent), e-commerce (23 percent), infrastructure hardware like computers and phones (11.3 percent), and infrastructure software (23.6 percent). 

The international community has not agreed on a clear definition of digital economy activities. The debate centers on whether digital economy encompasses only digital service production, or includes the production of tools like computers and mobile phones as well, or even includes facilities that store hardware to serve the digital economy.

Hardware production in the US economy just accounted for 8.4 percent of its digital economy in 2022. And the exclusion of hardware in calculating digital value will lead to a very slight decrease in the proportion of the digital economy to GDP by 1.1 percent, or from 9.9 to 8.75 percent.

However, the situation may be different in other economies.

Excluding hardware production is worth asking, because some countries just manufacture tools for export, and do not use them to create digital economy services in their countries.

Countries like Vietnam and potentially China exemplify this scenario. The country mostly makes mobile phones for export, and the question is whether to include production when calculating the value of digital economy.

A Chinese report cited by UNDP showed that digital economy in China makes up 41.5 percent of GDP, while Vietnam’s is 13 percent. However, in the provinces, where Samsung’s mobile phone manufacturing factories are located, such as Bac Ninh and Bac Giang, digital economy makes up 40 percent of the provincial GRDP. And more than 40 percent of Vietnam’s imports and exports serve outsourcing for the digital economy.

What does it mean when Vietnam’s and China’s digital economy proportions are higher than the US? 

EU countries have discussed digital economy in recent years. However, they focus on assessing the use of digital information tools, broadband and 5G use. 

An article was published in 2020 which, after showing statistics about digital economy and GDP, came to the conclusion that digital economy just made up 6 percent of GDP, of which ICT was 5.5 percent, which was much lower than the US’s 10 percent.

The other finding was that many European countries with lower development level had a digital economy proportion to GDP higher than that of more developed countries. Czechia, Hungary and Estonia had proportions higher than that of Germany and the UK.

So, it was unclear if digitization sharpened the difference between countries or reduced the difference.

Digital economy or hi-tech economy?

So, the measurement of the digital economy’s contribution to GDP as currently conducted reveals little utility.

The US Census Bureau is collecting information about ‘High-tech Industry/economy’, which is understood as STEM (Science, Technology, Engineering, Mathematics)-based enterprises. STEM and near-STEM workers in the US are about 22.7 million people, accounting for 14.6 percent of the total workforce of 156.4 million.

Vietnam cannot ignore conventional industries such as textiles and garments to create jobs for workers, nor can it ignore the more advanced industry-producing normal chips used in everyday tools, but it needs to focus on developing a platform for advanced science and technology. 

Amending the Law on Foreign Investment with regulations to attract hi-tech FDI, together with strongly developing STEM training, will contribute significantly to hi-tech economy development.

Vu Quang Viet