Suggestions for the Draft Decree and Regulations on the National Data Fund

In February 2024, the Prime Minister issued Decision No. 142/QD-TTg on the National Data Strategy, marking a significant step in the development and improvement of the information infrastructure to serve digital transformation. In particular, on November 30, 2024, the National Assembly officially passed the Data Law, which includes provisions on the National Data Development Fund ("Fund") – a state financial fund established to mobilize social resources to support the construction, development, exploitation, application, and governance of national data. The government is tasked with issuing regulations related to the establishment, management, and use of this Fund.

Against this backdrop, the development of a Government Decree on the National Data Development Fund is an urgent requirement. This is not only a crucial financial tool to realize the goals of the Data Law but also a foundation to promote the development of the digital economy and digital transformation in Vietnam. In this article, ALTAS Law Firm (hereinafter referred to as “ALTAS”/“We”) would like to provide some comments focusing on the unclear aspects of the Draft Decree on the National Data Development Fund (“Draft”).

ORGANIZATIONAL STRUCTURE

1.1. Regarding the structure of the Fund in Chapter II, the current draft does not specify the division of tasks among departments within the National Data Development Fund, especially in terms of monitoring and accountability. A fund with a large scale of operation and utilizing financial resources from the state budget as well as contributions from organizations and individuals requires a strict management system to ensure transparency and efficiency. Therefore, in addition to the Expert Council, there should be additional regulations on the Fund's organizational structure, proposing amendments to clearly define three key components: the Expert Council, the Executive Agency, and the Audit Committee.

1.1.1. The Executive Agency is responsible for implementing the decisions of the Expert Council, carrying out funding, investment, and data development support activities in accordance with regulations. This agency is also the one that directly receives, reviews funding applications, and organizes evaluations on the effectiveness of Fund usage. To ensure objectivity, the executive board needs clear task allocation to avoid concentrating power in a few individuals.

1.1.2. The Audit Committee plays a critical role in monitoring the Fund’s financial activities and operations, ensuring that the Fund is used for its intended purpose, targeting the right beneficiaries, and preventing misconduct. The Audit Committee should have access to all financial records of the Fund, be allowed to inspect funding approval activities, and have an independent reporting responsibility to the Expert Council. To ensure transparency, it could be stipulated that the Audit Committee must include an independent auditor or representatives from state auditing organizations.

1.2. Besides clarifying the organizational structure, specific regulations on the operational mechanisms of each department and the coordination between the Expert Council, the Executive Agency, and the Audit Committee should be added to avoid overlapping responsibilities or omissions. Establishing a transparent management mechanism with strict supervision at various levels will help the Fund operate effectively, prevent wasteful spending, and ensure that capital is used correctly for national data development goals.

FUNCTIONS AND TASKS

2.1. Regarding the functions and tasks of the National Data Development Fund in Chapter 1, the draft mentions the goal of supporting the development of the national data ecosystem, but it lacks specifics on which areas the Fund will prioritize for financing and the beneficiaries of the Fund's policies. This could lead to uneven resource allocation or a lack of focus on key areas, thus reducing the Fund’s impact. Therefore, to ensure feasibility and optimize the Fund's impact, detailed regulations should be added about the types of projects supported, approval criteria, and methods of funding implementation.

2.2. Regarding priority funding areas, the Fund should focus on activities that have a significant impact on the development of the data ecosystem. In addition, regarding the criteria for approving funded projects, clear regulations are needed to ensure that the Fund is used for its intended purpose, provides high effectiveness, and avoids indiscriminate funding requests. Key criteria to consider include: alignment with the national data development goals, technical and financial feasibility, scalability and long-term impact, commitment to data sharing, and transparency. As for the funding implementation method, a stringent approval process should be established, including steps from receiving applications, evaluation, approval, to monitoring and finalizing the results.

2.3. Overall, clarifying the priority funding areas, building specific approval criteria, and implementing a transparent funding mechanism will help the National Data Development Fund operate effectively, contribute to the sustainable development of the data ecosystem, and ensure that financial resources are used for the intended goals and bring tangible benefits to society.

BORROWERS

3.1. Clause 1 of Article 21 of the Draft Decree stipulates the borrowers as follows:

“a) Organizations providing data products and services;
b) Organizations implementing projects related to the production and business of scientific research, technology application, innovation in data construction, development, protection, governance, processing, and usage.”

3.2. Compared with other funds such as the National Technological Innovation Fund and the Science and Technology Development Fund (KHCN), it can be seen that the current beneficiaries of the National Data Development Fund are still quite limited and not comprehensive. Specifically, the National Technological Innovation Fund focuses on supporting enterprises, research institutes, and universities in research, application, and technology innovation, encouraging cooperation among parties to commercialize research results. Meanwhile, the Science and Technology Development Fund has a broader scope, allowing funding for not only enterprises but also individuals, scientific research organizations, and key laboratories, thereby promoting innovation ecosystems at different levels.

3.3. Compared to the two funds above, the borrower provisions of the National Data Development Fund are still general and do not cover all entities related to data development. Item (a) only mentions organizations providing data products and services, without specifying which sector these organizations belong to (private enterprises, state-owned enterprises, research institutes, universities, non-profit organizations, etc.). If not specified, important groups, such as data technology startups or small and medium-sized enterprises operating in this field, may be overlooked.

3.4. Therefore, to ensure comprehensiveness and effectiveness, the list of supported beneficiaries should be expanded to include research institutes, universities, data centers, and laboratories contributing to the development of the national data ecosystem.

3.5. Suggested amendment:

“a) Enterprises and organizations operating in the field of data products and services.
b) Startups, small and medium-sized enterprises, scientific research organizations, research institutes, and universities with projects applying technology and innovation in the collection, exploitation, development, protection, governance, processing, and use of data.
c) Enterprises and organizations implementing production and business projects related to the application of science, technology, and innovation in data construction, development, protection, governance, processing, and use.”

CURRENCY FOR LOANS AND REPAYMENTS

4.1. Currently, the draft does not specify the currency to be used for loans and repayments from the Fund. To ensure consistency with domestic financial regulations and minimize exchange rate risks, it is proposed to add a specific regulation that the currency for loans and repayments of the Fund will be the Vietnamese Dong (VND).

4.2. Using the Vietnamese Dong as the primary currency in Fund transactions is necessary to comply with foreign exchange management regulations, especially in accordance with the State Bank of Vietnam’s policies restricting foreign currency use in domestic transactions. This also helps avoid exchange rate risks when borrowing entities fulfill their repayment obligations, particularly in a volatile economic environment.

4.3. In addition, if the Fund needs to support projects with foreign elements, a specific regulation should be added regarding the approval of exceptional cases allowing borrowing in foreign currencies, but these must adhere to strict conditions set by the competent authorities. Adding this provision ensures transparency and stability in the Fund’s financial operations while assisting organizations and enterprises in financial planning when borrowing funds.

4.4. Suggested amendment:

“Article 20. Loan Form
5. The currency for loans and repayments is the Vietnamese Dong (VND).”

APPROVAL AND EVALUATION PROCESS

5.1. Currently, the draft lacks specific regulations on approval steps, evaluation criteria, and monitoring mechanisms during project implementation. Without a stringent and transparent process, fund allocation may become inefficient, leading to the misuse of the Fund, or even financial losses.

5.2. To ensure that the Fund is used effectively, we suggest adding detailed steps in the approval process, including:

5.2.1. Receiving funding applications: Organizations and individuals needing funding must submit an application form, providing full information about the project’s objectives, implementation plan, budget estimate, and specific execution plan.
5.2.2. Preliminary assessment: After receiving the applications, the Fund’s executive agency will check the validity of the applications, ensuring that the project meets basic requirements regarding eligibility, priority areas, and appropriate funding scale.
5.2.3. Evaluation: An evaluation board, including experts in data, technology, finance, and public administration, will conduct a detailed assessment of the project based on specific criteria.
5.2.4. Funding approval: After evaluation, the Fund’s management board will decide on funding based on the results of the expert council’s evaluation.
5.2.5. Contract signing and disbursement: Funded units must sign a contract committing to use the fund for its intended purpose, along with a specific disbursement schedule. The Fund can disburse in stages depending on the actual progress of the project.
5.2.6. Monitoring implementation: To ensure the project is implemented as committed, there needs to be periodic monitoring, requiring the funded units to report on progress, results, and challenges during implementation.
5.2.7. Post-funding evaluation: After the project is completed, a final evaluation should be conducted to measure the actual impact, how well the objectives were met, and the lessons learned.

5.3. Adding regulations on the approval process, evaluation, monitoring, and impact assessment is essential to ensure the Fund operates transparently, effectively, and truly contributes to the development of the national data ecosystem. Without clear mechanisms, the Fund could face issues such as lack of transparency in approval, irrational fund allocation, or funding projects that do not deliver real value. Therefore, detailed regulations on evaluation criteria, periodic monitoring, and information disclosure responsibilities are necessary to ensure the Fund becomes a tool to promote sustainable national data development.

TERMINOLOGY

6.1. According to Article 8 of the Draft, the Fund Director is the person responsible for managing the Fund’s activities and is also the legal representative of the Fund. However, when examining the regulations in Clause 1 of Article 44 of the Draft:

“The Fund builds regulations on procurement and asset management, submitting them to the Chairman for approval in accordance with the Fund's charter and related legal regulations. The regulation must clearly define the coordination of each department within the Fund and specify the liability of each department or individual for damages, loss, or property harm caused to the Fund.”

And Clause 2 of Article 62 of the Draft:

“2. The ministers, heads of agencies at the ministerial level, heads of government agencies, and the Chairman and Director of the National Data Development Fund, as well as relevant organizations and individuals, are responsible for implementing this Decree.”

There appears to be a discrepancy in terminology, with two provisions referring to the title “Chairman” instead of “Fund Director.” This could lead to inconsistency in the legal texts, affecting the clarity and transparency of the regulations.

6.2. To ensure consistency throughout the Draft, the term "Chairman" should be replaced with "Fund Director" in Clause 1 of Article 44 and Clause 2 of Article 62. Using consistent terminology will help avoid misunderstandings during implementation, ensure legal accuracy, and facilitate the smooth enforcement of regulations concerning the Fund's organization and activities.

LESSONS FROM THE SCIENCE AND TECHNOLOGY DEVELOPMENT FUND

7.1. Although the Science and Technology Development Fund was established to promote research, innovation, and technology application in production, many enterprises still face difficulties in effectively using the fund. One prominent issue is the situation of “low allocations, high fund balances,” meaning many businesses are reluctant to contribute to the fund due to lack of incentives or difficulties in implementation. Additionally, enterprises that have allocated funds face barriers to using them, causing the funds to remain idle and not produce practical results.

7.2. An important reason for this issue is the rigid management mechanism, which lacks flexibility and makes businesses hesitant to implement the fund. Even though guiding documents have been issued, many regulations still do not align with the actual operation of businesses, leading to difficulties in implementation. Moreover, the administrative procedures related to fund utilization remain complex, costing time and resources for businesses and reducing the policy's real-world effectiveness.

7.3. From these issues, when drafting the National Data Development Fund, lessons should be drawn to avoid the limitations faced by the Science and Technology Development Fund. First, a more flexible and autonomous mechanism is needed, allowing businesses to use the fund according to actual needs and in line with each organization’s characteristics. Instead of applying rigid regulations, open guidance should be provided to facilitate easy access and use of the fund. Additionally, simplifying administrative procedures is crucial to help businesses implement projects without facing barriers of complicated paperwork and forms.

7.4. Furthermore, it is important to enhance communication and guidance efforts to help businesses better understand the benefits of the fund and how to implement it to make the most of this resource. Finally, a monitoring and evaluation mechanism should be established to ensure the fund is used for its intended purposes, generating real value for businesses and contributing to the development of the digital economy.

7.5. By applying these experiences, the Draft National Data Development Fund can avoid the limitations of the Science and Technology Development Fund while ensuring practicality and effectiveness in implementation. If designed properly, this Fund will become an important tool to support businesses, organizations, and individuals in utilizing, managing, and developing data sustainably, contributing to the digital transformation and the establishment of a robust data economy.

7.6. In general, to ensure the effective operation of the National Data Development Fund, regulations need to be adjusted to be more transparent, with clear monitoring mechanisms, strict approval procedures, and reasonable financial policies. Adding these elements will ensure that the Fund operates towards its intended goals, supporting the sustainable development of national data and bringing tangible benefits to stakeholders.

In case of unclear matters or further information needed, please contact us for detailed guidance.

Written: Luong Van Chuong - Partner Lawyer at  ALTAS Law & Pham Uyen Thy - Legal Senior Assistant

Date: 31/03/2025