Vietnam shows its potential as a global force in the tech industry

In the past 36 years, Hanoi has changed enor­mous­ly. The Viet­namese cap­i­tal still has the tourist-mag­net city cen­tre with Hoan Kiem Lake, pho­to­genic nar­row hous­es, Ho Chi Minh’s impos­ing mau­soleum and peace­ful tem­ples amid con­stant traf­fic noise. But since 1986, when Viet­nam start­ed attract­ing sig­nif­i­cant for­eign invest­ment and encour­ag­ing entre­pre­neur­ship against a back­drop of a social­ist gov­ern­ment under the Doi Moi (“restora­tion”) eco­nom­ic pol­i­cy, Hanoi has grown along with the tech­nol­o­gy sec­tor.

There are new­er dis­tricts, where old­er homes and busi­ness­es are over­shad­owed by mod­ern glass tow­ers hous­ing cor­po­ra­tions and apart­ments for a grow­ing mid­dle class. Here, the tech­nol­o­gy sec­tor is help­ing steer the Viet­namese econ­o­my away from reliance on agri­cul­ture. 

In addi­tion, the gov­ern­ment attracts tech­nol­o­gy com­pa­nies to Viet­nam with a tax incen­tive that gives such busi­ness­es a pref­er­en­tial tax rate of 10% for 15 years. John Breen, geopo­lit­i­cal con­sul­tant for Sibylline, says Viet­nam “has the poten­tial to become a hub for tech­nol­o­gy when you con­sid­er the government’s strate­gic efforts to strength­en the country’s dig­i­tal econ­o­my, which could reach US$52bn (£43bn) by 2025.”

“Vietnam’s inter­net econ­o­my hit 16% growth year on year in 2020, the high­est in south-east Asia, and it has the poten­tial to reach US$220bn in gross mer­chan­dise val­ue by 2030,” Breen adds. “Under the Nation­al Dig­i­tal Trans­for­ma­tion Pro­gramme, the Viet­namese gov­ern­ment aims to sup­port key eco­nom­ic sec­tors, which include finance and bank­ing, man­u­fac­tur­ing, ener­gy and health­care.”

Growing Vietnamese companies and attracting investment

Cau Giay dis­trict is an exam­ple of the new face of Hanoi. Devel­op­ment began in 1996 with the aim of encour­ag­ing indus­tri­al growth. FPT, with its new­ly opened tow­ers, locat­ed in Cau Giay, is a tech com­pa­ny that has ben­e­fit­ed from being in Viet­nam since 1999. It launched as a soft­ware out­sourc­ing busi­ness, aid­ed by a state sub­sidy, and now offers prod­ucts and ser­vices for indus­tries includ­ing avi­a­tion, media, auto­mo­tive, health­care, logis­tics and man­u­fac­tur­ing. 

Ta Tran Minh, vice pres­i­dent of GAM FPT, the company’s auto­mo­tive divi­sion, is upbeat about the future, par­tic­u­lar­ly as car man­u­fac­tur­ers in Korea, Japan and the US mar­kets are embrac­ing their lat­est soft­ware solu­tions. He says Viet­nam has “become more and more attrac­tive for the tech­nol­o­gy indus­try”, which he attrib­ut­es to a com­bi­na­tion of gov­ern­ment sup­port for tech com­pa­nies keen to set up in the coun­try and a skilled young pop­u­la­tion.

While many bright stu­dents are still encour­aged to pur­sue med­i­cine or law, Minh says that careers such as soft­ware engi­neers are appeal­ing to more young peo­ple, espe­cial­ly when they can study and take advan­tage of good job oppor­tu­ni­ties in Viet­nam. As well as glob­al projects, such as auto­mo­tive soft­ware, FPT has been devel­op­ing a young, ambi­tious work­force by invest­ing in mul­ti­ple star­tups under the FPT Ven­tures umbrel­la since 2015.  

“We are work­ing with uni­ver­si­ties here and in oth­er coun­tries and can use the results here in Viet­nam,” says Minh, on how FPT is help­ing avoid a brain drain of young pro­fes­sion­als.

As well as an excit­ing pool of young tal­ent, Breen says Viet­nam pro­vides mar­ket access to a young, edu­cat­ed, tech-savvy pop­u­la­tion across Asia. While 88% of peo­ple in ASEAN coun­tries have smart­phone access, almost 70% are unbanked which, Breen says, pro­vides “a sig­nif­i­cant mar­ket oppor­tu­ni­ty” for dig­i­tal pay­ments and remit­tances.

Brad Gray, senior vice pres­i­dent APAC of Exclu­sive Net­works, views the coun­try as “a piv­otal loca­tion with­in the region” for part­ner­ships and dis­tri­b­u­tion. 

He is opti­mistic about Viet­nam as a mar­ket for the France-head­quar­tered company’s cyber-secu­ri­ty solu­tions, with the Sci­ence, Tech­nol­o­gy and Inno­va­tion Strat­e­gy 2021–2030 help­ing devel­op local and inter­na­tion­al tech firms: “The growth in all things dig­i­tal in the coun­try has been on an expo­nen­tial rise … [with] Viet­nam grow­ing into a major tech hub, espe­cial­ly with­in the start-up space in recent years.” 

Competing with China, working in the region

China’s ongo­ing adher­ence to a zero-Covid pol­i­cy has enhanced Vietnam’s appeal as a desir­able loca­tion for tech­nol­o­gy invest­ment. Minh says that while cus­tomers were look­ing pre­dom­i­nant­ly to Chi­na or India for tech­nol­o­gy part­ners, many of FPT’s cus­tomers are think­ing about Viet­nam instead.

“Chi­na has been hav­ing a lot of shut­downs, which is obvi­ous­ly unfor­tu­nate for Chi­na, but I guess is an advan­tage for Viet­nam,” says Minh.

Breen reit­er­ates Vietnam’s strong posi­tion, describ­ing the coun­try as “a strong can­di­date for many com­pa­nies con­sid­er­ing a ‘Chi­na plus one’ sup­ply chain diver­si­fi­ca­tion strat­e­gy”, thanks to an effec­tive pan­dem­ic response, the region’s geopol­i­tics and Vietnam’s rel­a­tive­ly low labour costs. As well as Beijing’s zero-covid pol­i­cy, tech­no­log­i­cal decou­pling between west­ern coun­tries and Chi­na, attempts by Bei­jing to clamp down on cen­sor­ship and data stor­age rules – and the lat­est risk of mil­i­tary con­flict over Tai­wan – have affect­ed the busi­ness envi­ron­ment. 

“At the geopo­lit­i­cal lev­el, Viet­nam has strength­ened bilat­er­al rela­tions with major economies in East Asia, Europe and North Amer­i­ca over shared strate­gic con­cerns, which has cul­ti­vat­ed eco­nom­ic oppor­tu­ni­ties such as a free trade agree­ment and an invest­ment pro­tec­tion agree­ment with the Euro­pean Union in 2019,” says Breen.

This has drawn big names to Viet­nam, accord­ing to Breen, such as LG Display’s US$750m port invest­ment in the north­ern city of Haiphong and Apple start­ing a tech­ni­cal and man­age­ment recruit­ment dri­ve in 2020 for roles in Hanoi and Ho Chi Minh City, as well as shift­ing some iPad pro­duc­tion capac­i­ty from Chi­na to Viet­nam. 

But Breen cau­tions that if Viet­nam is to take a sim­i­lar approach to Chi­na regard­ing cyber­se­cu­ri­ty laws that man­date cor­po­ra­tions to pro­vide user data and restrict social media con­tent, the risks for tech com­pa­nies could increase. In addi­tion, oth­er fac­tors, such as cor­rup­tion, issues with trans­paren­cy and affil­i­a­tions with groups that are viewed unfavourably by the rul­ing Com­mu­nist Par­ty, could harm the busi­ness envi­ron­ment.  

Despite Breen’s warn­ings, Gray remains opti­mistic about the future of busi­ness in Viet­nam and its rela­tion­ship with Chi­na. He says the two coun­tries are “fun­da­men­tal­ly dif­fer­ent, in terms of demo­graph­ics, work­force, resources, and skilled labour with­in the indus­try” and that shar­ing a bor­der has helped Viet­nam “in terms of strate­gic place­ment” to grow as a region­al tech hub.

Minh, mean­while, is keen for FPT to look beyond Chi­na for region­al part­ner­ships and tal­ent acqui­si­tion, with 11 loca­tions in Japan, two Bangkok offices for the Thai mar­ket, and a strong pres­ence in the Philip­pines since 2015. In par­tic­u­lar, Minh says the com­pa­ny is expand­ing its human resources with tal­ent from the Philip­pines as part of its dri­ve to “cre­ate a glob­al work­ing cul­ture”, while still upskilling Viet­namese soft­ware engi­neers.  

He con­cludes: “The tal­ent stays in Viet­nam, we stay in Viet­nam and we can all help sup­port Viet­nam.”