Page 104 - ISC PROCEEDINGS 21.4

The period 2021-2025 represents the most significant phase of digital economy
expansion in Vietnam's post-renovation history. The digital economy's share of GDP rose
from 12.87% in 2021 to 14.02% in 2025, equivalent to approximately USD 72.1 billion,
1.64 times the 2020 baseline (NSO, 2026). The e-Conomy SEA 2025 report ranks Vietnam
as Southeast Asia's second-fastest-growing digital economy, with an overall valuation of
approximately USD 39 billion at year-end 2025 representing 17% year-on-year growth
(Google, Temasek, & Bain & Company, 2025). Digital technology industry revenue
reached VND 4 quadrillion (approximately USD 151.8 billion) in the first ten months of
2025, up 52.4% year-on-year, reflecting accelerating integration of digital services into the
broader economy. Critically, these gains have yet to be reflected proportionately in TFP
statistics, a divergence that motivates the analysis in Sections 4.2 and 4.3.
AI deployment has accelerated in parallel. Revenue from AI-integrated applications
surged 78% in the first half of 2025 (VNA, 2025c). Vietnam hosts more than 40 AI startups
attracting USD 123 million in investment, approximately 5% of total AI investment in
Southeast Asia, and a startup ecosystem of nearly 4,000 innovative firms spanning AI,
fintech, green technology, and digital solutions, including four technology unicorns
(InnoEx, 2025). AI investment in 2024 reached approximately USD 80 million, nearly an
eightfold year-on-year increase.
At the sectoral level, AI applications are beginning to generate measurable
productivity gains in specific contexts. In manufacturing, AI deployment at Korean
electronics firm Novas EZ's Vietnamese facilities achieved a 25% increase in production
volume, a concrete demonstration of AI's direct operational TFP potential in labor-
intensive settings (Google, 2024). In agriculture, IRRI's AI-enabled real-time pest, disease,
and climate monitoring for climate-resilient rice varieties directly addresses the
productivity frontier of a sector employing approximately 30% of Vietnam's workforce
(Google, 2024). In healthcare, Vietnam's AI healthcare market reached USD 1.78 million in
2025 and is projected to grow at 32.52% CAGR through 2034 (IMARC Group, 2025). In
public administration, the State Audit Office's AI-assisted provincial database review and
Da Nang's AI-powered public service chatbot represent early but significant AI-driven
efficiency improvements in government TFP.
Vietnam's Global Innovation Index (GII) 2025 ranking of 44th globally and 3rd in
ASEAN, with world leadership in High-Tech Imports, High-Tech Exports, and Creative
Goods Exports (WIPO, 2025), confirms integration into global technology production
networks. However, as the following subsections demonstrate, production-network
integration and domestically generated TFP improvement are fundamentally distinct
outcomes.
4.2. The Vietnam AI productivity gap: adoption without transformation
Despite these achievements, a critical divergence persists between high AI adoption
rates and measurable economy-wide productivity transformation, the Vietnam AI
productivity paradox, which empirically confirms the J-curve dynamic described in Section 2.1.
First, TFP contribution and labor productivity remain structurally constrained. CSIRO
(2025) research found that TFP, the metric capturing technology and organizational
innovation's contribution to growth, comprised only approximately 20% of total output-
per-worker growth in Vietnam's analyzed period, with the remainder driven by factor
accumulation (capital deepening and labor expansion) rather than technological progress.
This TFP share is low by the standards of upper-middle-income economies, and reflects
the reality that AI has not yet triggered the organizational restructuring and knowledge

103