Vietnamese businesses launch new products losing to Cambodia

The rate of Vietnamese enterprises launching new products in the past three years is higher than Laos but lower than Cambodia.

About 23% of Vietnamese enterprises claim to have introduced a new or significantly improved product or service in the past three years. This rate is lower than Cambodia and the Philippines at over 30% and higher than some other Southeast Asian countries such as Laos, Malaysia and Thailand. This is one of the notable results in the study entitled “Enhancing competitiveness and linkages of small and medium enterprises” recently published by the World Bank (WB).

“Data shows that Vietnamese enterprises are trying to improve their products and production processes no less than their counterparts in other countries in the region, but rarely introduce new products with completely new functions compared to existing products to the market,” the report commented, adding that the reason is because Vietnamese enterprises improve products with the main goal of cutting production costs.

The World Bank notes that while a large proportion of Vietnamese firms declare spending on R&D, the average amount spent as a percentage of total revenue remains lower than in most other Southeast Asian countries. At the same time, relatively few firms invest in licensed or patented knowledge to support innovation efforts.

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Specifically, the level of payment for R&D of Vietnamese enterprises is also slightly lower than that of Cambodia and is not high compared to many Southeast Asian countries. Accordingly, Vietnamese enterprises spend 1.6% of annual revenue on R&D, while this rate in Cambodia is 1.9%. Notably, Lao enterprises spend up to 14.5% of annual revenue on R&D. This rate in some countries such as the Philippines is 3.6% and Malaysia is 2.6%.

The report also said that medium and large enterprises innovate more than small enterprises. 26% of medium and large enterprises declare spending on R&D while only 9% of small enterprises invest in this activity.

About 20% of Vietnamese businesses claim to provide training to their employees to develop and introduce new products or processes. This rate is higher than Laos, Malaysia, and Thailand, but again lower than Cambodia and the Philippines.

In general, the levels of product innovation, process innovation, and R&D spending of Vietnamese enterprises are all at the average level in Southeast Asia. In particular, Cambodian enterprises are more active than Vietnamese enterprises in these activities. Although Lao enterprises do not have a new product launch rate as high as Vietnamese enterprises, their future prospects are remarkable when the R&D spending ratio on revenue is quite high.

According to many experts, the pressure on Vietnamese enterprises to absorb new and innovative technology is increasing in the 4.0 Revolution if they do not want to fall behind neighboring countries.

“If we want to move up the global value chain, the key issue is technology and innovation. The fourth revolution is making the line between manufacturing and services increasingly blurred. For example, Apple's approach. Their product is the iPhone, which is the result of manufacturing, but in fact they mainly provide services. Their revenue from services created by the ecosystem that the phone creates is huge,” said Mr. Nguyen Thang - Director of the Center for Analysis and Forecasting, Vietnam Academy of Social Sciences.

“Local companies in Vietnam need to improve their technological capabilities. We did not have advanced technology like now, and we had to learn from Taiwan and Japan. Learning cannot be done overnight, but step by step, by linking up with foreign companies,” Jang Yoonho, Director of Partner Support at Samsung Electronics Vietnam’s Vietnam Purchasing Center, recommended the urgency of learning new technology to have more business opportunities with the company.

According to VNE