Sharing economy embracing 4.0 era

This new business model offers numerous advantages for the parties involved. The market becomes more competitive and diversified, transaction costs are reduced, and providers have access to a wider consumer base and increased demand. Business opportunities based on digital foundation are multiplied, creating new jobs and increasing incomes, as well as promoting innovation.

Vietnam is well positioned to exploit the growing opportunities in the sharing economy thanks to its well-educated, tech-savvy, and young population. Sharing economies in Vietnam are quite diverse; in recent years, sharing economies have developed in transportation, tourism, and hotels, and they are expected to expand in a variety of other industries as well.

At the same time, many new technologies are being applied in the digital payments sector such as fingerprint authentication, facial recognition, and QR codes.

Digital transformation has also been a driver for change in public administration. Vietnam is an ambitious country with a long-term growth strategy and has demonstrated its willingness to embrace changes by implementing e-government solutions. Such efforts have translated into the formation of an e-document management system with several national databases and the introduction of e-invoicing, amongst others.

But while the sharing economy is bringing positive changes and opportunities, it also threatens the survival of businesses adopting traditional business models. And with fast-developing sharing economy models, the legal framework is lagging.

There are some issues to be tackled when embracing the new business model of sharing economies, which are mainly related to market entry and business conditions, tax collection, users’ interests, workers’ rights, and information security. These issues could create challenges related to uneven competition, economic concentration, the development of informal markets, and a lack of tools to protect users.

Within the sharing economy, it is extremely difficult to register a business if it is related to new business lines that are unfamiliar to state agencies. Due to a lack of definition for such new businesses and clear market entry rules, local officers tend to reject applications or apply unreasonable requirements. The current way of thinking is to ban anything that cannot be managed, thus hindering the development and growth of new businesses.

For example, cryptocurrency trading and peer-to-peer lending are not yet eligible for business registration in Vietnam as they pose high risks for customers, including personal data leakage, and cyberattacks, or could involve customers in money laundering and tax evasion.

The absence of a comprehensive and clear legal framework can also result in the proliferation of many black credit loan apps disguised as peer-to-peer lending by leveraging the grey areas of the current legal framework.

Amid a contradictory and unclear legal framework, businesses and users are exposed to increased risks. To this end, the Vietnamese government has actively approached opportunities in the sharing economy. And especially after the pandemic peak, there is a stronger will to embrace the digital transformation of the local economy.

The government for example has adopted a series of guidelines and policies to catch up with Industry 4.0 and digital transformation and is now adapting the legal framework to include new flourishing businesses arising from the sharing economy.

For example, Decree No.85/2021/ND-CP on e-commerce was aimed at strengthening the responsibility of e-commerce platforms, adding specific regulations on social networks, and improving the management of tax collection.

The result is a clearer definition of e-commerce, excluding businesses only involved in website and application design (thus not directly participating in the business operations of e-commerce platforms) and including social networks meeting certain conditions, such as the Facebook marketplace.

Additionally, the decree clarifies market access conditions in compliance with the Law on Investment and mandates a guaranteed payment system. On the other hand, there are still areas requiring adjustments, for example, the regulations surrounding electronic transactions. Specifically, many provisions have become outdated and could become a barrier to economic activity.

In general, the Vietnamese government should focus on creating a level playing field, encouraging innovation and competition, and improving regulations on transactions, contracts, property rights, ownership, and also dispute resolution mechanisms.

The sharing economy has brought countless benefits to the market, economy, consumers, as well as governments which set down the path of implementation across the globe.

Today, the workshop on “Deploying sandbox to strengthen the foundations of the sharing economy” is taking place at the headquarters of VIR.

Sharing economy platforms have taken Vietnam by storm in recent years, especially in the fields of transportation, hotel bookings, and fintech. However, the rise of internet-based sharing services like Grab, FastGo, Airbnb, and Agoda has caused a headache for policymakers to adjust the regulations to manage disruptive businesses.