[Podcast] The Role of Digital Transformation in Economic Growth in the Southeast Region, Vietnam
7 November, 2024
Keywords: digital transformation, economic growth, Southeast region
Digital transformation is forecasted to increase the national GDP by 1.5%-2.5%. Therefore, this topic has attracted many researchers around the world, Vietnam is no exception. However, most previous studies have considered this topic at the national level, referring to the information technology factor as an additional factor expanding the economic growth model, not completely assessing the role of digital transformation as a key factor promoting long-term economic growth. Recognizing the limitations of previous studies, the research team of University of Economics Ho Chi Minh City (UEH) applied the PMG (Pooled Mean Group) analysis approach to providing long-term evidence on the role of digital transformation on economic growth in the Southeast Region, Vietnam.

Research community and policymakers focusing on the role of digital transformation in economic growth
In recent decades, digital transformation and information technology have become important factors in promoting economic growth through increasing labor productivity, reducing operating costs, and creating new business opportunities. Positive forecasts on the economic impact of digital transformation have attracted widespread attention from the research community and policymakers, especially in the context of Vietnam’s efforts to promote the application of information technology for economic development.
Researching on the role of digital transformation in the Southeast region is necessary as it provides a comprehensive view of the impact of digital transformation on the region’s economic growth in the long term, which previous studies have yet to fully assess. The study is expected to provide a scientific basis for policymakers and economic managers, who play an important role in building and implementing economic development strategies based on digital technology.
Practical evidence on the role of digital transformation in the economic growth model of the Southeast region
The study utilizes a combination of the theoretical framework of the classical and modern growth models to assess the impact of digital transformation on the economic growth of the Southeast region. Using secondary data from 2005 – 2021 of 6 Provinces and Cities in the Southeast region and the Pooled Mean Group (PMG) regression, the results have provided evidence on the role of digital transformation. Specifically, the ICT Index has an impressive regression coefficient of 0.213, showing that the impact of digital transformation on growth is quite large, confirming the important role of this factor in growth. The higher the ICT Index is, the higher the IT infrastructure and the ability to apply IT in the localities of the Southeast economic region become. This is the driving force to promote competitiveness in the international economy, improving productivity in all fields. The final result of which is economic growth within expectations. The empirical results support previous views on the positive role of digital transformation on growth, and this is also the basis for policymakers to pay more attention to the ICT factor in socio-economic development goals and plans.
In addition, the role of foreign direct investment (FDI) and human capital (measured by the proportion of workers with college degrees or higher) is confirmed in the growth model. FDI and human capital both have a positive impact on growth in the Southeast provinces and cities at the significance level of 5% and 10%, respectively, with regression coefficients of 0.124 and 0.121, respectively. Foreign direct investment is considered one of the main factors in the growth model. Many studies have confirmed the role of this capital source in improving technical infrastructure and technology transfer, positively affecting the final results of production and business activities and growth. At the same time, recent studies have acknowledged the importance of FDI when stating that this factor creates a competitive environment between domestic and foreign enterprises, helping to improve the competitiveness and survival of private enterprises, thereby promoting economic growth. Human capital is an emphasized factor in the modern growth model. This is an essential factor in the integration and transfer process as well as the application of technical technology to production with labor quality promoting growth. This result implies that policymakers should have measures to support investment while focusing on training high-quality labor.
An interesting finding of the study is that the impact of institutions assessed in terms of private economic development policies or business support services does not help increase the region’s GRDP as expected. The private economic development policy index is the index with the most components (24 indicators) in the provincial competitiveness measurement data set. The private economic development policy index suggested the rate of enterprises that had access to consulting services as well as support from the government in private economic development. This shows that the high rate of access to support services does not imply anything specific to the growth model of localities. Many indicators in the scoring of the private economic development policy index as follows: enterprises having used private suppliers for legal consulting services, or the percentage of enterprises having used technology-related services, etc. only reflect the rate of enterprises’ access to business support policies but do not reflect the quality and results of support services. The fact that enterprises access many services implies that the quality of information is not good and therefore needs support. It is policymakers who need to pay more attention to the quality of business support services, instead of focusing on quantity.
Conclusion
The results, once again, further consolidate the role of digital transformation, investment, education and institutions in growth. In particular, the impact of the information technology – communication factor, representing the digital transformation variable – needs to be considered as a key influencing factor, playing an important role as a driving force for growth. The study contributes to the theoretical framework of growth in the combination of traditional and modern growth models in the analysis. The PMG regression model is used as a suitable method to assess the long-term impact of factors on growth. However, the study has limitations as it has not fully explained the research results on the statistically insignificant impact of the business support policy index on growth in the Southeast region. In future research directions, qualitative research should combine with a more complete and expanded data set that can help assess and explain the impact of this index on growth in a more comprehensive and systematic way.
The full-text paper on The role of digital transformation on economic growth in the Southeast region, Vietnam HERE.
Authors: Nguyen Le Hoang Thuy To Quyen & Pham Quang Anh Thu – Ho Chi Minh City University of Economics.
This article is part of the series spreading research and applied knowledge from UEH with the message “Research Contribution For All”, UEH respectfully invites readers to read the next UEH Research Insights issue.
News, photos: The Authors, UEH Department of Communications and Partnership

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