Production at a Japanese firm operating in Tân Thuận Export Processing Zone in HCM City. — VNA/VNS Photo Danh Lam

HCM CITY — HCM City is piloting a new mechanism to streamline and incentivise business use of science-technology development funds for research and development (R&D) and innovation.

The city’s Department of Science and Technology has developed a project to pilot the use of business science and technology (S&T) development funds in the city for the 2025-28 period.

The project focuses on researching fund allocation, use, and management in the city, and proposing a mechanism for businesses to use their funds in a way that is suitable for the city’s specific characteristics.

The city is the country’s most dynamic hub for S&T advancement and innovation.

Its contemporary growth paradigms underscore the catalytic role of S&T and innovation – predominantly fuelled by private sector investment.

The city nonetheless confronts significant obstacles to realising its full potential, the most troublesome of which is the necessity to dismantle regulatory constraints hampering the effective deployment of corporate S&T Development Funds.

National statistics reveal aggregate allocations to these funds exceeding VNĐ23 trillion (US$900.7 million) across 1,381 enterprises, with disbursements surpassing VNĐ14 trillion ($548.2 million).

Relative to the total number of existing businesses nationwide, the proportion allocating S&T funds remains comparatively modest.

Within the city, a mere 127 businesses have formally reported establishing such funds, including 70 state-owned and 45 private entities.

Businesses frequently encounter difficulties completing the stipulated procedures for executing S&T projects, which often stop their application and necessitate bidding for project implementation.

The existing legal framework lacks robust incentives or explicit provisions to galvanize private sector investment in S&T and innovation.

The guidance provided by Circular No. 05/2002/TT-BKH-CN, applicable to all enterprise types, contains certain provisions ill-suited or insufficiently nuanced for state-owned enterprises, and notably, precludes funding for external entities.

Capital investment to upgrade machinery and equipment for operational purposes necessitates a meticulous, multi-stage process from idea conceptualisation and technology selection to investment deployment and operational integration.

This process often lasts several years, contingent on a multitude of variables.

Chip Design Lab at the Training Centre of HCM City's Sài Gòn Hi-Tech Park. — VNA/VNS Photo Tiến Lực

The city’s Department of Science and Technology has proposed a pilot mechanism designed to unlock the potential of S&T Development Funds.

The proposal advocates that state-owned enterprises, corporations, and business groups operating within the city be authorised to control selection and direct assignment, and grant sponsorship approval without bidding.

Full reimbursement for S&T project expenditures would be guaranteed in instances where projects are prematurely terminated or fail to meet pre-defined objectives due to extenuating circumstances.

Businesses would be granted autonomy in selecting S&T projects directly related to their core business activities, without sectoral constraints.

The pilot scheme proposes implementing a “sandbox” regulatory environment, enabling businesses utilising the fund for novel projects to procure new machinery and equipment for operational deployment without the prerequisite of replacing existing assets with demonstrably superior technology.

This proposal received significant support from S&T businesses at a formal discussion called “Proposing the pilot programme to utilise S&T Development Funds of businesses in the city for the 2025-28 period”, held recently by the city Department of Science and Technology.

The department recommended allowing state-owned enterprises to invest in technology R&D, venture capital, and innovation start-ups.

The proposal also allows the fund to support, without exceeding 30 percent of the total cost, technology innovation projects.

Nguyễn Việt Dũng, director of the city’s Department of Science and Technology, said the proposed pilot mechanism is based on the principle of incentivising proactive corporate investment in initiatives supporting innovative start-ups, promoting internal S&T advancement, implementing digital transformation directly impacting operational efficacy, and fostering collaborative partnerships with S&T organisations, S&T enterprises, and innovative start-ups.

"These measures will empower businesses to deploy their funds more proactively and effectively," he said.

They are accelerating progress towards the strategic objective of ensuring that by 2028 at least 60 percent of the aggregate fund value will have been allocated to S&T projects, R&D initiatives, technological innovation, and new product development.

About 10 innovative start-up projects in the S&T domain will have been supported through fund allocation.

A 30-percent increase in fund utilisation by pilot businesses will have been achieved for the implementation of digital transformation projects aimed at enhancing corporate production, and operational and managerial capabilities. — VNS