-

NATIONAL ECONOMICS UNIVERSITY

FACULTY OF TRADE AND INTERNATIONAL ECONOMICS

GROUP WORK
Logistics and Supply Chain Management
Subject: Implementing e-procurement in Pharmaceutical Industry in Viet Nam:
Challenges and Prospects

Team Members:

11200643 – Nguyen Van Chien

11202541 – Le Hoang Thien Minh
11203239 – Tran Thu Phuong
11205872 – Phan Nhat Linh
11206046 – Nguyen Huu Manh

Ha Noi, 2023

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 Table of Contents
I. Introduction ............................................................................................................... 1
II. Literature Review .................................................................................................... 2
2.1. Defining e-procurement ..................................................................................... 2
2.2. E-procurement process ...................................................................................... 3
2.3. E-procurement applications .............................................................................. 4
2.4. Benefits of e-procurement ................................................................................. 5
2.5. Impediments and risks of moving towards E-procurement ........................... 7
III. Methodology ........................................................................................................... 8
IV. Discussion of Findings ......................................................................................... 10
4.1. The health commodity procurement system in Vietnam ............................. 10
4.2. Corruption Challenges..................................................................................... 11
4.3. The benefits of implementing e-procurement ............................................... 11
4.3.1. Transparency and Accountability .............................................................. 12
4.3.2. Efficiency..................................................................................................... 12
4.4. Challenges affecting the effectiveness of e-procurement in Viet Nam ........ 13
4.4.1. Lack of ICT infrastructure ......................................................................... 13
4.4.2. Inadequate funding ..................................................................................... 13
4.4.3. Lack of ICT skills and training .................................................................. 14
4.4.4. Security and privacy concerns .................................................................... 15
V. Conclusion and Recommendations ...................................................................... 16
5.1. Conclusion ......................................................................................................... 16
5.2. Recommendations ............................................................................................ 17
VI. References ............................................................................................................. 19

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 Implementing e-procurement in Pharmaceutical
Industry in Viet Nam: Challenges and Prospects
I. Introduction
In the realm of healthcare, pharmaceuticals hold a pivotal role in safeguarding
and improving the well-being of a nation's population. Vietnam, like many
developing countries, grapples with the ever-mounting challenges posed by the
escalating costs of medications, a predicament further exacerbated by the
prominence of medicines within the broader spectrum of healthcare expenses.
The consistent and steady increase in drug spending per individual is
noteworthy. In 2005, the average per capita expenditure on pharmaceuticals
stood at $9.85, which then surged to $22.25 in 2010 and reached $44 in 2015
[20]. The average annual growth rate during 2005-2010 was an impressive
17.7%, and between 2010 and 2015, it maintained a robust 14.6% growth rate.
Assuming this growth trend persists at a minimum rate of 14% annually until
2025, projections indicate that per capita drug spending is poised to double to
$85 in 2020 and quadruple to $163 by 2025 (National Library of Medicine ,
2017). Recent statistics from Vietnam's Social Insurance system underscore the
gravity of this issue, revealing that medicine expenses consistently account for a
substantial 60-70% of overall healthcare costs, particularly within the
framework of health insurance (Vietnam Briefing , n.d.).

The pharmaceutical landscape in Vietnam boasts both diversity and richness,

marked by a substantial number of domestically produced drugs and an
increasing proportion of these products fulfilling the nation's healthcare
requirements. The production value of domestically manufactured
pharmaceuticals has witnessed a significant upswing. According to a general
report, Vietnam’s pharmaceutical market is valued at about 6.2-6.4 billion
USD/year. Vietnam’s pharmaceutical market is also forecast to reach 16.1
billion USD in 2026 (viracresearch, 2023) . This transition heralds a shift
towards self-sufficiency in medication production, with an augmented
proportion of drug consumption value attributed to domestically crafted
remedies. Over the years, the number of active substances and drug ingredients
has witnessed substantial growth, empowering the local pharmaceutical industry
to meet a more extensive spectrum of healthcare needs.

However, as Vietnam's healthcare system endeavors to ensure the consistent

supply of medicines to hospitals and patients, it is confronted by a host of
challenges in the procurement process, especially within the public healthcare
sector. Traditional tender mechanisms have displayed notable inefficiencies,
necessitating an urgent overhaul and reinforcement of the procurement
procedures to secure more reasonable drug prices. The implementation of

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electronic tendering, with its potential to enhance the quality and effectiveness
of procurement processes while addressing the shortcomings inherent in
traditional methods, emerges as an inevitable and imperative step in optimizing
pharmaceutical procurement within the nation.

One underlying challenge that underscores the need for digital transformation in
the pharmaceutical procurement sector is the reliance on imported raw materials
for drug production, with approximately 90% of essential ingredients being
sourced from abroad. Notably, antibiotics and vitamins account for more than
80% of these imports, with China and India emerging as the primary suppliers,
constituting 25% and 21% of the market share, respectively (Vietdata, 2022).

In this backdrop, the pharmaceutical industry in Vietnam hinges on the interplay

between two vital distribution networks: the treatment distribution network
comprising hospitals and healthcare units, and the commercial distribution
network, encompassing branches, agents, distributors, and drug stores. The
application of e-procurement in the pharmaceutical sector holds the promise of
addressing these multifaceted challenges, with a focus on enhancing the quality
and effectiveness of drug procurement while circumventing the hurdles intrinsic
to traditional methods.

The stage is thus set for a comprehensive exploration of the implementation of

e-procurement in the Vietnamese pharmaceutical industry, dissecting the
challenges that exist and the promising prospects that lie ahead. In this
endeavor, the present article delves into the nuances of this transition, drawing
insights from the specific context of the North Western region, and aims to shed
light on the critical role that e-procurement is poised to play in this pivotal
sector. However, as this transition unfolds, a slew of issues surrounding
information dissemination, accessibility of tender documents, and fairness in the
evaluation process needs to be addressed. In summary, the traditional tendering
approach in pharmaceutical procurement, while well-intentioned, entails
substantial time, effort, and financial costs, and it is against this backdrop that
the merits of e-procurement become all the more apparent.

This article serves as a stepping stone towards unraveling the complexities of

implementing e-procurement in Vietnam's pharmaceutical industry. By offering
a closer examination of the challenges and prospects, it contributes to the
broader dialogue on optimizing pharmaceutical procurement processes in a
dynamic and evolving healthcare landscape.

II. Literature Review

2.1. Defining e-procurement

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E-procurement has been defined in various ways. According to Aberdeen Group
(2001), e-procurement refers to the establishment of online procurement
markets that are exclusive to a particular organization. These markets automate
communication, transactions, and collaboration between partners in the supply
chain. The goal is to improve collaboration, streamline processes, control costs,
and enhance information exchange within and across organizational boundaries.
On the other hand, Chaffey (2002) argues that e-procurement should focus on
improving performance in terms of the "five rights" of purchasing: sourcing
items at the right price, delivering them at the right time, ensuring the right
quality, obtaining the right quantity, and sourcing them from the right supplier.
While there may be variations in the scope and level of detail in these
definitions, they all emphasize the use of electronic technologies to support the
procurement function. Building on these commonalities, the following
definition was developed for this research: "E-procurement is the integration,
management, automation, optimization, and facilitation of an organization's
procurement process using electronic tools, technologies, and web-based
applications."

2.2. E-procurement process

Typically, any procurement process (Figure 1) starts with the collection of
supply requirements, which involves collection of information across
departments and sometimes from geographically distributed locations. Mostly
these supply requirements are needed to satisfy production requirements. This is
followed by the collection of product and vendor information from varied
sources in the market and in varying formats. The third step is the preparation of
the Request for Quotation (RFQ), a document that usually outlines the
purchasing requirements of the buying organisation as well as the purchasing
conditions. An RFQ ranges from a simple form, which includes part numbers,
quantities and request delivery dates to more complex documents that include
detailed specifications and purchasing terms. Many times such RFQs provide
the supply plans of the buying organisation to satisfy production requirements.
The fourth step is publishing the RFQ to the open market or sending it to
preselected supplier groups. After posting the RFQs, the collection of supplier
quotations follows. In this step, the quotations from suppliers are received in a
variety of formats. The sixth step is the evaluation and selection of Quotations.
The quotations are evaluated against criteria such as cost, delivery time, vendor
reliability and quality. Sometimes, when the quotation is high, there is a
renegotiation between the buying organisation and certain suppliers, hence, the
RFQ is modified and Steps 3 to 6 are repeated until an agreement has been
reached. This is followed by notification of the selected suppliers once the best
quote has been selected. The final step involves generation of the purchase
order and its execution. The purchase order is generated usually by the

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company’s Enterprise Resource Planning (ERP) system using the information
from the selected quotation

Figure 1: Procurement process

2.3. E-procurement applications

E-procurement encompasses a range of tools and applications that serve
different functions within the procurement process. De Boer et al. (2002)
identified several key e-procurement applications and outlined their
functionalities and roles within the procurement process:
 E-sourcing involves using the internet, often through B2B marketplaces,
to identify potential new suppliers. This step occurs during the
information-gathering phase of the procurement process.
 E-tendering entails sending requests for information or price quotes to
suppliers electronically and receiving their responses. The focus of e-
tendering is on the product or service being procured. This step, which
may include an initial screening process, occurs during the supplier
contact phase.
 E-informing pertains to the exchange of information about suppliers, such
as quality certifications, financial status, or unique capabilities. This
aspect of e-procurement does not involve transactions but rather focuses
on supplier data from various sources, including third-party information
providers and the buyer's own investigations.
 E-reverse auctions enable buyers to purchase goods and services at the
lowest price or based on a combination of price and other conditions.
These auctions, conducted in real-time, involve bidding between the
buyer and the supplier. This step takes place during the negotiation phase.
 E-MRO (maintenance, repair, and operations) and web-based ERP
(enterprise resource planning) systems facilitate the creation, approval,
and processing of purchasing requisitions, order placement, and goods or
service receipt. E-MRO primarily deals with indirect items, while web-
based ERP focuses on product-related items. This step occurs during the
fulfillment phase.

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  E-collaboration involves the exchange of accurate and up-to-date
purchasing-related information between the buyer and suppliers. This can
include product versions, blueprints, sales forecasts, and other relevant
data. It also encompasses the use of collaboration tools such as virtual
meeting rooms, bulletin boards, and shared knowledge management
systems. The goal is to enhance coordination and reduce errors in the
procurement process.

2.4. Benefits of e-procurement

E-procurement systems consist of several components that contribute to
fulfilling orders, including increasing data transparency, automating
procurement processes, and integrating anti-fraud and anti-counterfeit
technologies. The inherent feature of e-procurement systems is to improve
transparency in the procurement of medicines, which plays a crucial role in their
ability to combat corruption and fraud in the procurement process of
medications (Noyola L., 2015). E-procurement systems offer a fundamental
advantage in their ability to transform information into a digitized format that is
readable, writeable, storable, and searchable. This advantage applies to various
phases of the procurement process, including pre-bidding, bidding, and award
stages, as well as processes such as issuing requests for proposals or tenders,
pricing tenders, and making award decisions. Government officials have
recognized and praised e-procurement systems for their potential to enhance
transparency and reduce the risk of bid rigging (Humphreys G., 2015).
By providing greater access to electronic transaction data in procurement, these
systems can also promote compliance with public procurement policies and
laws. They generate audit trails that enable scrutiny of decisions and actions,
contributing to transparency and accountability initiatives such as e-government
and open government (Wicaksono AP, Urumsah D, Asmui F, 2017). This
increased availability and integrity of data facilitate public oversight and help
ensure adherence to procurement regulations.
Enabling open and accessible data in e-procurement systems can have
significant benefits in terms of providing critical information about bidding and
award processes, including details on actual bidding procedures and outcomes,
as well as drug acquisition prices. This increased transparency promotes
competition and acts as a deterrent against collusion and other forms of bid
rigging. In addition to transparency, e-procurement systems have the capacity to
leverage computational science methods, such as machine learning, through the
storage of detailed electronic data fields related to procurement transactions and
decisions. This allows for the development of machine learning approaches that
can detect fraud and abuse in tender processes, similar to the data mining
techniques employed in healthcare claims data analysis (Mackey TK, 2017).

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An example of the application of machine learning in e-procurement involves
the optimization of pharmaceutical pricing and acquisition to identify the best
deals for pharmaceutical products (Wickramasinghe NS, Fadlalla AM, Geisler
E, et al., 2018). However, while this example demonstrates potential cost
savings, our review did not uncover specific empirical studies on the use of
artificial intelligence within e-procurement systems for detecting corrupt
practices.
Furthermore, e-procurement systems can facilitate the integration of other
procurement-related technologies, such as anti-counterfeiting and fraud
detection measures, into a comprehensive and interconnected solution. By
incorporating these technologies, e-procurement systems can further enhance
procurement processes and mitigate risks associated with counterfeit products
and fraudulent activities.
While e-procurement systems offer various benefits such as increased
transparency, automation, and integration with other technologies, the most
significant function of these systems is often seen as their potential for cost-
savings (Bartsch P, 2012). In the context of medicines procurement, the ability
of e-procurement systems to reduce procurement costs is a crucial factor driving
their adoption (Smith AD, Flanegin FR., 2018). For instance, a review of e-
Health interventions in Romania in 2016 found that e-procurement was utilized
by the Ministry of Health for acquiring medicines in various therapeutic areas,
with an expected cost saving of approximately $1.5 million (Ministry of Health,
2016).
Cost savings can be achieved through process improvements, as demonstrated
by a pilot e-procurement system implemented in Greek, Spanish, and Belgian
hospitals, which significantly reduced the time required to create a list of goods
and to prepare tenders (Ketikidis PH, 2015). Another case study in Spain
reported cost savings of 20% for the purchase of healthcare products from a
psychiatric hospital (Hidalgo DJV, 2014).
However, it is important to consider the costs associated with technology
adoption, training, maintenance, integration, implementation, and information
security when assessing the actual cost savings. Estimates of cost savings, like
those in Romania and other countries, may sometimes be overly optimistic
(Ministry of Health, 2018). Challenges in realizing cost savings can arise from
non-compliant purchases, where procurement contracts' terms and conditions
are not adhered to. For example, a study on the implementation of e-sourcing
tools by Glaxo Smith Kline (GSK) revealed that non-compliance in
procurement prevented the company from achieving additional savings of
between $80 and $120 million. GSK addressed this issue by creating an internal
online portal that provided information on complaint procedures and authorized
vendors, resulting in a decrease in non-compliance (Kulp SL, Randall T,
Brandyberry G, et al., 2020).

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While e-procurement systems have been explored to enhance transparency,
automation, technology integration, and cost reduction, their potential to
directly detect, report, and enforce against fraud and corruption in medicines
procurement has received less attention. Few examples exist where e-
procurement systems effectively address both cost-savings and corruption
reduction. The case study of Ukraine stands out as an exception. It should be
noted that the adoption of e-procurement systems is primarily driven by cost-
savings estimates and has not directly linked anti-corruption measures to
improving cost-savings or health outcomes. This suggests that non-
technological barriers may hinder the full implementation of e-procurement
systems as anti-corruption tools.

2.5. Impediments and risks of moving towards E-procurement

While the technology behind medicines e-procurement systems has the potential
to enhance transparency, accountability, and anti-corruption efforts, there are
other factors beyond technology that need to be considered. System design and
addressing factors such as trust and confidence among users play crucial roles in
the successful implementation of e-procurement systems (Cullen AJ, 2019).
Centralization of e-procurement systems has been studied for its benefits in
improving logistics management processes and achieving cost-savings (Davila
A, 2019). Evidence suggests that centralized digital and non-digital
procurement solutions can lead to direct cost savings, reduced stock outs of
pharmaceuticals, and increased drug availability (Seidman G, 2017). The
adoption of Vendor Managed Inventories, which allow vendors to fill orders
based on real-time inventory information, can also contribute to cost savings
when combined with broader e-procurement adoption.
Despite the advantages of medicines e-procurement solutions over traditional
electronic data transfer methods like Electronic Data Interchange (EDI), overall
adoption of e-procurement systems has been slow, even in developed countries
(Davila A, 2019). Case studies in Switzerland, for example, have shown slow
adoption of e-procurement in hospitals, and there is a need for integrating
specific technologies like RFID, computerized physician order entry (CPOE),
unit dose system of medication distribution (UDDS), and supplier relationship
management (SRM) to enhance the utility of e-procurement systems and
promote broader adoption (Mettler T, 2009).
Legacy procurement practices and user perceptions about the limitations of e-
procurement systems pose challenges to their adoption in the field of medicines
procurement. Overcoming these challenges may require addressing user
concerns, providing training and education, and demonstrating the capabilities
and benefits of e-procurement systems compared to traditional methods.

A 2019 synthesis of interviews with materials management officials of Oregon

hospitals found that the perceived inability of management to negotiate lower
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prices with suppliers was a major barrier to the adoption of e-procurement
(Andries C, 2019). Conversely, a 2020 study analyzing case studies of the
hospital–supplier relationship found that adoption of e-procurement resulted in
hospitals’ consolidation of suppliers and a consequent deepening of hospital-
supplier relationships (White A, Daniel EM., 2020). This study indicates that e-
procurement can enable hospitals to better assess the relative quality of
suppliers, and also that e-procurement can facilitate long-term collaborations
between hospitals and suppliers which may lead to improved quality of care.
While dated, these studies provide insight into potential challenges in other
countries that are beginning their cycles of medicines e-procurement system
exploration, adoption, implementation, and management, particularly in settings
where the introduction of widespread and reliable information and
communication (ICT) infrastructure is still developing. Finally, technical
standards must change as organizations transition from EDI to e-procurement
systems. Electronic business transactions, including those for e-procurement,
once relied upon technical standards relating to EDI, specifically the United
Nations/Electronic Data Interchange for Administration, Commerce and
Transport (UN/EDIFACT), approved by the International Organization for
Standardization(ISO) as ISO 9735 (Vlasov, 2014). With the Internet facilitating
the transition of electronic communication from private networks to open
networks, the business community migrated largely toward technical standards
relating to XML (a markup language for encoding documents largely used for
Internet sites and applications).Hence, technical standards setting will be critical
toe-procurement adoption as it will increase interoperability between different
systems, encouraging greater data exchange, and ideally enhancing transparency
that can drive future anti-corruption solutions with robust data sharing. In 2015,
the World Bank issued the Open Contracting Data Standard (OCDS), a
guideline for government procurement, which requires public accessibility of
procurement information from planning to the end of a contract with data and
processes ranging from tenders to also including bids, participants, and
decision-making processes (Hakvoort R ,2015). The OCDS marks a critical step
in e-procurement standards setting and has the potential to pave the way for
greater adoption, including in the case of medicines public procurement.
However, challenges regarding implementation of this highly technical standard
(particularly in low technical capacity settings), adoption from both public and
private sectors, ensuring consistent and quality data, and enabling users to
actually use data to improve e-procurement and root out corruption are all
critical factors not fully addressed.

III. Methodology
In conducting our research on the implementation of e-procurement in the
pharmaceutical industry in Vietnam, we rely primarily on secondary data.
Secondary data refers to information that has been previously collected and is

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readily available from existing sources. In the context of our study, this data
encompasses a wide range of documents, reports, and datasets obtained from
government agencies, academic institutions, industry associations, and other
authoritative sources. The decision to utilize secondary data for our research is
based on several compelling reasons.

One of the primary factors that influenced our choice of secondary data is the
extensive availability and accessibility of information related to the
pharmaceutical industry and e-procurement in Vietnam. Given the importance
of pharmaceuticals in healthcare and the significance of e-procurement in
enhancing the pharmaceutical supply chain, a wealth of relevant data has been
accumulated over the years. These data sources are readily accessible and
provide a comprehensive view of the subject matter.

Secondary data research offers the advantage of time and resource efficiency.
Collecting primary data through surveys, interviews, or experiments can be a
resource-intensive process that requires substantial time and financial
investment. In contrast, utilizing existing secondary data allows us to bypass the
data collection phase, thereby saving both time and resources. This efficiency is
particularly advantageous in the context of our research, where we aim to
analyze historical trends and patterns in the pharmaceutical industry and e-
procurement practices.

Secondary data provides access to a large and diverse sample size. The data
sources we are leveraging have accumulated information from a wide range of
sources, including government agencies, international organizations, and
industry reports. This extensive sample size allows for a more comprehensive
analysis of the subject matter, enabling us to draw statistically significant
conclusions and insights. The breadth and depth of data are essential for
addressing the multifaceted challenges and prospects associated with e-
procurement in the pharmaceutical industry in Vietnam.

Given the historical context of our research, secondary data enables us to

examine the evolution of pharmaceutical procurement and e-procurement in
Vietnam. By accessing historical records and trends, we can gain valuable
insights into how the industry has evolved over time and the challenges it has
faced. This historical perspective is vital for understanding the dynamics and
changes within the pharmaceutical industry, which will inform our analysis of
the current challenges and future prospects of e-procurement.

Secondary data sources, especially those from reputable government agencies

and industry experts, are typically considered credible and valid. These sources
often undergo rigorous data collection and verification processes, enhancing the

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reliability of the information they contain. By relying on established and
credible sources, our research benefits from the authority and trustworthiness of
the data, ensuring the quality of our findings and conclusions.

The application of secondary data in our research on implementing e-

procurement in the pharmaceutical industry in Vietnam is a reasonable and
pragmatic approach. It offers extensive, credible, and historical data that enables
us to conduct a comprehensive analysis of the challenges and prospects
associated with this critical sector. This methodology aligns with the research
objectives and provides a solid foundation for our study.

IV. Discussion of Findings

4.1. The health commodity procurement system in Vietnam
In the Vietnamese healthcare industry, the most common form of
procurement is bidding. The process of procurement bidding in Vietnamese
healthcare industry for drugs (pharmaceutical drugs, herbal drugs, traditional
drugs, vaccines and biological products) and medicinal materials at public
health facilities includes: Division of bidding packages and drug groups;
planning, form, method, and organization of selecting drug supply contractors;
regulations on centralized drug procurement and drug price negotiation using
state capital, health insurance funds, revenue from medical examination and
treatment services and other legal revenue sources of public medical facilities.
On that basis, it can be understood that drug bidding is the process of
purchasing drugs and medical supplies applied to units that use funding from
the state budget, health insurance funds as well as other organizations’ legal
revenue stream for medical and medicinal purposes.
There are many forms of procurement bidding, such as open bidding, limited
bidding, appoint contractors… The types of products allowed in healthcare
procurement bidding, the steps by step instruction on how to inititate a
procurement bidding process must follow provisions and laws that are regulated
by the Vietnamese Government. The system aims to ensure the quality, safety,
and efficiency of healthcare commodities, as well as to promote fair competition
and transparency among suppliers.
Even though the system faces some challenges and limitations, such as the
accessibility and affordability of products, the ability for organisations to
negotiate, and the potential risks of corruption and fraud, the healthcare
procurement system in Vietnam is expected to continue growing and
developing, as the government and the industry work together to address the
challenges and leverage the potential of the healthcare commodity prices
procurement system.
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4.2. Corruption Challenges
Corruption in the healthcare procurement system in Vietnam has been a
significant challenge. One of the main issues has been the high costs of
medicines and medical equipment due to corruption, which has resulted in many
people being unable to access the vital care they required. According to the
Vietnam Chamber of Commerce and Industry (VCCI), 59% of businesses
understand the "unwritten rule" that when bidding for public procurement, they
must pay a "commission". A study also revealed that 40 to 60% of the price of
off-patent medicines in Vietnam was typically spent to induce prescribers to use
the medicines, and to persuade procurement officers within hospitals to buy
them. This practice not only inflates pharmaceutical prices but also wastes
valuable resources allocated to pharmaceutical products and services.
In response to these challenges, the Vietnamese Government has been
implementing reforms to curb corruption and promote integrity in the public
healthcare system. For example, earlier this year, the government removed the
ceiling price of drugs, which was a fixed maximum price that the government
set for each drug. This change allows the market to determine the price of drugs
based on supply and demand, and encourages more competition and innovation
among drug manufacturers and distributors. Another change that the
government made was to increase transparency in procurement bidding, which
means that the government discloses more information about the bidding
process, such as the criteria, the evaluation, and the results. This change helps to
prevent collusion and manipulation among bidders, and to ensure fair and
objective selection of suppliers.
They have also implemented social accountability mechanisms such as
patient feedback, citizen monitoring, public grievance and redress, and
participatory budgeting. These efforts have had a beneficial impact on reducing
corruption and improving efficiency and patient care. However, the fight against
corruption in the healthcare sector a comprehensive approach, addressing both
systemic issues like procurement processes and regulatory oversight, and
individual behaviors such as unethical practices.
4.3. The benefits of implementing e-procurement
The implementation of an e-procurement system in the healthcare sector in
Vietnam has the potential to significantly curb corruption issues. E-procurement
allows clinicians, physicians, and practitioners to manage their orders by getting
exactly what they want. This system can prevent them from violating
procurement rules and regulations mandated by the Vietnamese Government

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4.3.1. Transparency and Accountability
One of the main advantages of e-procurement is its transparency. Every
transaction is recorded and can be audited, making it difficult for corrupt
practices to go unnoticed. This transparency not only deters corruption but also
builds trust among stakeholders. This means that all actions, decisions, and
processes involved in the procurement are documented and can be reviewed and
analyzed. This level of transparency makes it difficult for corrupt practices to go
unnoticed, as irregularities or deviations from the standard procedures can be
easily detected.
Transparency in e-procurement extends beyond just deterring corruption. It
also builds trust among all stakeholders involved, including healthcare
providers, suppliers, and patients. When the procurement process is transparent,
it assures stakeholders that the process is fair, objective, and free from bias or
favoritism. This can enhance the credibility and reputation of healthcare
providers, and can encourage more suppliers to participate in the procurement
process.
4.3.2. Efficiency
In an e-procurement system, the procurement process is automated, making
it more efficient and less prone to errors and fraud. Moreover, e-procurement
can significantly cut down purchasing costs. By automating procedures and
doing away with paper-based procurement processes, healthcare institutions can
save a lot of resources. This is particularly beneficial for a country like Vietnam
where high costs of medicines and medical equipment have been a significant
issue, so reducing cost in the procurement processes can lower the cost of
healthcare products.
Additionally, e-procurement can facilitate better decision-making. For
example, it can help doctors and medical staff save physical consultation time
and communication time with patients, and make decisions faster with the
support of improved analytics.

In the past, Vietnam had already taken steps in integrating an e-procurement

system. In 2009, a pilot e-procurement system was initiated that included an e-
bidding component. Although the tender evaluation was conducted manually in
the pilot system, which created a barrier for user adoption, it marked a
significant step towards the digital transformation of Vietnam procurement
system.

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 That being said, the implementation of an e-procurement system in
Vietnam's healthcare sector offers immense potential for curbing corruption and
improving the efficiency and transparency of the procurement process.
However, the success of e-procurement in curbing corruption in Vietnam's
healthcare sector depends on several factors. These include the government's
commitment to fighting corruption, the availability of necessary infrastructure
and resources, and the willingness of healthcare providers and suppliers to adopt
the new system.
4.4. Challenges affecting the effectiveness of e-procurement in Viet Nam
4.4.1. Lack of ICT infrastructure
According to a recent industry report, Vietnam’s ICT market had an estimated
value of USD 7.7billion in 2021, and is expected to grow at approximately 8
percent per year from 2022 to 2026 as both the public and private sectors
increase adoption of ICT solutions. The government of Vietnam has identified
ICT as a major industry and socio-economic growth driver and is urging
government agencies at all levels to apply advanced ICT solutions towards the
goals of improving operational efficiencies and providing better governance
services

However, Vietnamese suppliers are still relatively new and may not be able to
offer the same range of solutions and services as foreign suppliers. Vietnam
does not have enough supporting technologies in place to build a
comprehensive e-procurement system which is one of the main reasons behind
the failure of developing an e-procurement system.
Many organizations in the pharmaceutical industry may lack the necessary
hardware and software to effectively implement e-procurement solutions,
resulting in a digital divide.
4.4.2. Inadequate funding
Implementing e-procurement systems can be costly, including the expenses for
software, hardware, and training, which can be a barrier for smaller
pharmaceutical companies.

Cost has the most significant impact on the adoption, implementation, and
performance of e-procurement. Budget allocation is required to not only
purchase the required infrastructure but also for maintenance purposes (Rotich
& Okello, 2015). Technology being a fast-paced industry implying that regular
maintenance activities, including updates, are required to ensure that all systems
as well as physical infrastructure is up to date. Adequate support is necessary
for maintaining technology as well as improving user competence. Training
costs are vital in sustaining the ease of use, improved usefulness, and better user
attitude.

13
Total administrative costs (Soares-Aguiar & Palma-dos-Reis 2008) for firms
using EPSs account for only 33.2% of the costs of the same organization in its
traditional system using paper-based processes. Automation of requisition
generation bears the most cost saving effect, which touches upon organization’s
net income directly. (Divaportal, n.d.)
4.4.3. Lack of ICT skills and training
In terms of IT competency, e-procurement systems require technical expertise
for setup, maintenance, and troubleshooting. Organizations in Vietnam,
especially smaller ones, struggled to find and retain IT professionals with the
skills and expertise required to manage and secure e-procurement systems. This
led to gaps in technical competency and hindered the successful implementation
of e-procurement solutions.

Even the companies want to intigrate e-procurement to their system, they still
need a proper training which is essential for users to navigate and utilize e-
procurement platforms efficiently. These training programs covered various
aspects of e-procurement, such as using the platform, understanding
procurement policies, and ensuring data security. The effectiveness of these
training initiatives varied among organizations. Without adequate training,
procurement professionals may struggle to adapt to new digital processes,
leading to inefficiencies and errors

Change Management is a critical facet of e-procurement implementation in

Vietnam. The transition from traditional procurement methods to digital
systems can be met with resistance, whether it's reluctance to part with
established paper-based processes or skepticism regarding the benefits of e-
procurement. To effectively address this challenge, organizations need to
formulate comprehensive change management strategies. These strategies
should encompass clear communication to highlight the advantages of e-
procurement, the development of training programs, and the provision of
continuous support to help employees embrace and adapt to new technologies
and processes.

Vendor-Specific Skills: The e-procurement landscape is characterized by a

diverse array of software solutions, each with its own unique features and
functionalities. Organizations operating in Vietnam must invest in the
development of vendor-specific skills among their staff to ensure efficient
utilization of their chosen e-procurement platform. This entails a deep
understanding of the platform's capabilities, troubleshooting, and customization,
as required. As organizations often work with multiple suppliers, each
employing their proprietary e-procurement software, the proficiency of staff
with various platforms is crucial.
14
Scalability: The concept of scalability in the context of e-procurement in
Vietnam revolves around the system's ability to adapt and grow alongside an
organization's expanding procurement needs. As businesses in Vietnam
experience growth, their procurement requirements become more intricate,
involving a larger number of suppliers and more extensive procurement
processes. Challenges related to scalability can emerge when an initial e-
procurement system struggles to efficiently handle the increased volume and
complexity of transactions. To ensure the sustainability and efficiency of their
e-procurement systems, organizations should prioritize scalability in their
system's design and capabilities. They need to be equipped to accommodate the
burgeoning needs of the organization as it expands, without a significant drop in
operational efficiency or performance. To delve into the specifics of scalability,
one may refer to pre-2022 case studies, research articles, and industry reports
that offer insights into the strategies and challenges associated with managing
the scalability of e-procurement systems in the Vietnamese business
landscapeAs organizations grow and their procurement needs expand, the skills
and training required to manage a more extensive e-procurement system may
become a challenge. Adequate scalability in terms of workforce capabilities is
necessar
4.4.4. Security and privacy concerns
Cybersecurity Threats: E-procurement systems involve the storage and
exchange of sensitive procurement data, including financial information,
supplier details, and pricing agreements. Vietnam, like many countries, faces a
growing threat of cyberattacks and data breaches. The fear of data breaches and
cyberattacks can make organizations hesitant to adopt e-procurement platforms.

To enhance cybersecurity in the public and private sector, the Vietnamese

Government issued Decree 14 in June 2019. This decree mandates government
agencies to implement cybersecurity measures and allocate a minimum of 10%
of their annual IT expenditure between 2020 and 2025 towards cybersecurity
solutions and initiatives. (Le, 2023)

Data from Kaspersky, a cybersecurity firm, revealed that Vietnam, in 2022,

experienced a 33.8% decline in the number of ascertained and intercepted
online attacks. With a total of 41,989,163 cases, Vietnam ranked 49th globally,
a dip of 17 positions relative to 2020. The successes stem from robust
enforcement of cyber regulations and multifaceted security measures’
implementation at the state level.
Data Privacy Laws: Compliance with data privacy regulations, such as the
General Data Protection Regulation (GDPR) and local data protection laws, can
be challenging. Ensuring that e-procurement systems are aligned with these
regulations is essential but can be complex and resource-intensive.
15
Supplier Data Security: E-procurement often involves sharing sensitive
information with suppliers. Ensuring that these suppliers have robust data
security measures in place can be a concern, especially for organizations dealing
with a wide range of suppliers with varying levels of security readiness.

Insider Threats: These threats can manifest as employee misconduct,

negligence, or even collusion with external parties. To effectively mitigate
insider threats, organizations must adopt a multi-faceted approach.

First and foremost, robust access control mechanisms should be implemented.

This involves restricting employees' access to sensitive procurement data based
on their roles and responsibilities, adhering to the principle of least privilege.
Continuous monitoring and auditing of user activities are essential to identify
suspicious behavior and prevent unauthorized access. Moreover, organizations
should invest in security awareness and training programs to educate employees
about the risks associated with insider threats and encourage a culture of
security and vigilance.Data security concerns extend beyond external threats.
Insider threats, such as employee misconduct or negligence, can be a significant
challenge in maintaining the security of e-procurement systems.

Data Encryption and Access Control: Implementing strong encryption and

access control measures is crucial to protect e-procurement data. Ensuring that
these measures are properly implemented and maintained can be a technical
challenge.

V. Conclusion and Recommendations

5.1. Conclusion
In Vietnam, the adoption and effectiveness of e-procurement systems face
several significant challenges that hinder their successful implementation. These
challenges span various domains, including ICT infrastructure, funding, skills
and training, and security and privacy concerns. Despite the government's
efforts to promote the adoption of advanced ICT solutions, there are still
barriers to realizing the full potential of e-procurement in the country.
The lack of adequate ICT infrastructure in Vietnam is a fundamental issue.
While the government recognizes the importance of ICT, local suppliers often
lack the technology and expertise required to build a comprehensive e-
procurement system. This limitation not only affects the government but also
private organizations, especially in the pharmaceutical industry, where the
digital divide remains a challenge.
Inadequate funding is another significant hurdle. Implementing e-procurement
systems can be expensive, making it a barrier for smaller pharmaceutical
companies and organizations with limited budgets. Proper budget allocation is
16
necessary for purchasing infrastructure, maintaining technology, and providing
essential training, which is crucial for ensuring the success of e-procurement
initiatives.
The shortage of ICT skills and training poses a further obstacle. Smaller
organizations struggle to find and retain IT professionals with the expertise
needed to manage and secure e-procurement systems. Without proper training,
procurement professionals may face difficulties in adapting to new digital
processes, leading to inefficiencies and errors. Change management and vendor-
specific skills also require attention to ensure a smooth transition to e-
procurement and proficiency with chosen platforms.
Security and privacy concerns are paramount. With the growing threat of
cyberattacks and data breaches, organizations may hesitate to adopt e-
procurement systems. Compliance with data privacy laws and ensuring supplier
data security can be complex and resource-intensive. Insider threats and
technical challenges related to data encryption and access control demand
special attention to safeguard sensitive procurement information.
5.2. Recommendations
 Invest in ICT Infrastructure: The government and organizations should
invest in building a robust ICT infrastructure to support the development
of comprehensive e-procurement systems. Collaborative efforts with local
and international technology providers can bridge the technology gap.
 Allocate Sufficient Funding: Organizations need to allocate adequate
funding for the implementation and maintenance of e-procurement
systems. Budgets should include not only the purchase of infrastructure
but also training and ongoing maintenance.
 Prioritize ICT Skills and Training: Training programs should be
implemented to equip staff with the necessary skills to operate e-
procurement systems efficiently. Organizations should focus on change
management strategies to facilitate a cultural shift toward digital
procurement.
 Enhance Security Measures: Robust cybersecurity measures, including
data encryption, access control, and compliance with data privacy laws,
should be a top priority. Organizations should work closely with suppliers
to ensure their data security readiness.
 Regularly Update and Improve E-Procurement Systems: Given the fast-
paced nature of technology, organizations should commit to regular
updates and improvements to their e-procurement systems to stay ahead
of security threats and evolving requirements.
 Government Support and Regulation: The government should provide
regulatory support and incentives for organizations to adopt e-
procurement systems. Creating a conducive environment for digital
procurement will encourage its widespread adoption.

17
 Collaboration and Knowledge Sharing: Organizations should collaborate
and share best practices and experiences related to e-procurement.
Sharing knowledge can lead to more effective implementation and help
overcome common challenges.

18
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Group’s list of students & Workload allocation
No. Student Student name Tasks
ID
1 Lê Hoàng Member Introduction
Thiên Minh Methodology
2 11203239 Trần Thu Member Literature Review
Phương
3 Nguyễn Hữu Leader Discussion of Findings
Mạnh
4 11200643 Nguyễn Văn Member Discussion of Findings
Chiến
5 11205872 Phan Nhật Member Conclusion and
Linh Recommendations
Summary and editing

23