308 Journal of Reviews on Global Economics, 2020, 9, 308-320 E-ISSN: 1929-7092/20 © 2020 Lifescience Global Sources of Output Growth of the ICT Sector in Vietnam Dang Thi Viet Duc 1,* and Dang Huyen Linh 2 1 Posts and Telecommunications Institute, Km 10, Nguyen Trai Str., Hanoi, Vietnam 2 Vietnam Institute for Development Strategies, Ministry of Planning and Investment of Vietnam Abstract: Vietnam has early set the strategy to develop ICT as the enabler for social-economic development and the Vietnamese ICT sector has grown significantly over the past 20 years. This paper analyses the development of the ICT sector by examining the sources of output growth and the structural changes in two periods of 2007-2012 and 2012- 2016. The decomposition results show that the growth of the ICT manufacturing sector is attributed to export in both periods. However, the ICT manufacturing export was mainly based on components import; the sector neither could make any technological progress nor could manufacture products for import substitution. The ICT media and content sector’s growth was primarily due to technology advancement in 2007-2012 which led to the household demand-based development in the period 2012-2016. The ICT services sector shifted from primarily served government to household demand while technology was also significantly improved. The results of decomposition analysis are consistent with the macroeconomic situation as well as the ICT policies that the Vietnamese government has implemented over the past years. The paper points out the achievements and limitations in the ICT development policies and suggests directions for ICT policymakers in Vietnam in the coming period. Keywords: ICT, sources of growth, structure decomposition analysis, IO, Vietnam. 1. INTRODUCTION According to the definition and classification of Vietnam (MIC, 2019), which is consistent with OECD and UN’s classification (OECD, 2009; UN, 2008), the ICT sector has three sub-sectors, including ICT manufacturing, ICT media and content, ICT services. In Vietnam, the ICT sector has grown rapidly in the past years although the development policies are very different for each sub-sector. The revenue of the information technology industry (hardware, software and digital content) has increased about 20 times, from $5,220 million in 2008 to $102,973 million in 2018, and the number of employees in the industry increased nearly 5 times in 10 years (MIC, 2009; 2019). Vietnam has become a major manufacturer and exporter of electronic products in the world, and the export turnover of electronic products has increased by two digits for many consecutive years (GSO 2019). The number of households with computers doubled in 10 years, from 10 computers per 100 households in 2008 to 21 in 2018. By 2018, nearly 100% of enterprises have used computers with software applications for their production and business activities. Vietnam's mobile phone subscriber density was growing fast. From a position lower than most developing countries in 2007, the mobile phone subscriber density in Vietnam reached 145 for every 100 people in 2018, which was *Address correspondence to this author at the Posts and Telecommunications Institute, Km 10, Nguyen Trai Str., Hanoi, Vietnam; Tel: ++84914932612; E-mail: ducdtv@ptit.edu.vn higher than the average of the world and developed countries (ITU, 2019). Vietnam's internet usage density is also higher than other countries of the same economic level, approaching that of the developed countries with 70 people using the internet for every 100 people in 2018 (ITU, 2019). From an application perspective, e-commerce has become an integral part of business operations. The proportion of enterprises receiving orders via social networks reached 49% in 2019 (Bureau of E-commerce and Information Technology, 2019). Most Vietnamese people watch the news on electronic newspapers, cable TV, and digital television. The rapid development of Vietnam's ICT in recent years coincided with the progress in development policies in the field. For ICT hardware manufacturing, the integration policies were pushed. In 2007, Vietnam joined the WTO, followed by the signing and implementation of many bilateral and multilateral free trade agreements (FTAs) with countries around the world. The focus of integration policies is to create a free and equal investment and business environment based on international laws. Besides, Vietnam has implemented many policies to encourage foreign investment such as corporate income tax reduction for FDI (foreign direct investment) enterprises. All FDI enterprises get maximised income tax exemption and reduction period of 13 years (4 years of tax exemption and 9 years of tax reduction). For FDI enterprises producing electronic equipment and high technological products, the tax reduction rate is 50%. The tax rate also continuously decreased from 28% in 2004-2008 to 25% in 2009-2013, 22% in 2014-2015, and 20% from