The Growing IT Industry in Vietnam (InCorp Global)

Technology
May 16, 2022 - InCorp Global Pte Ltd


This is a thought leadership article looking at how recent IT industry advancements will function as catalysts for attracting foreign investments in Vietnam from PrimeGlobal member firm InCorp Global in Singapore. 

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Vietnam has worked tirelessly to strengthen its IT industry by attracting several foreign investments. The development in rules and policies by the government to better mobilize foreign investments in the IT sector is keeping the dream of total digitization in Vietnam alive for the next decade. In this article, we discuss how recent IT industry advancements will function as catalysts for attracting foreign investments in Vietnam as well as its role in developing the economy.


Specific Industries Investors Need to Look Out For

Fintech

The prospects of the fintech sector in Vietnam look very promising. It is forecasted that the market's largest share will be attributed to digital payments with an estimated total transaction value of USD 16,996 million. An expanding middle class, increased internet usage, and a young population makes for an ideal environment for the fintech sector to develop.

Artificial Intelligence

While still in its early stages, AI in Vietnam has followed worldwide trends in human resources, education, healthcare, agriculture, transportation, and e-commerce. The Vietnamese government released a national strategy on research, development, and application of artificial intelligence (AI) until 2030, according to OpenGovAsia. This is in order to gradually transform Vietnam into an innovation hub in ASEAN and throughout the world. Three national big data and high-performance computing centers and ten AI trademarks are targeted as part of the strategy.

E-Commerce

Vietnam ranks 28th with a revenue of USD 6 billion in 2020. During the last decade, the Vietnamese eCommerce market increased by 51%, contributing to the global growth rate of 29% in 2020 according to Ecommerce DB. eCommerce revenue is on the rise and will continue over the next few years. East and Southeast Asia will drive this growth, thanks to their expanding middle classes and lagging offline shopping infrastructure.

Software Outsourcing

Over the last decade, software outsourcing has grown in popularity in Vietnam. In comparison to typical outsourcing destinations such as China and India, Vietnam has emerged as a better and more cost-effective option. This is partially due to the government’s heavy investment in IT and software, related education incentives which are now bearing fruit.

Education Technology

In 2018, Vietnam's education technology (Edtech) got USD 55 million in funding. Edtech centers’ capacity to bridge the gap between traditional education environments and learning demands inspired by the commercial sector is driving this investment. As a result of the pandemic and a series of lockdown measures introduced in 2021, the edtech sector has further boomed to an impressive USD3 Billion on the back of the Vietnamese people’s openness to embrace the full digitalization of all aspects of the economy, including education.


IT outsourcing from Vietnam

In the next few years, Vietnam's IT outsourcing will have several advantages that will help it grow and attain a high position in the global software industry. It is appealing to competent employees with tech degrees and software due to the well-paid wages that are higher than that of the national average.

Vietnam's IT outsourcing has a competitive advantage in accessing Japan, Singapore and Korea’s industrialized digital markets, due to the similar time zones. Furthermore, Vietnam also has a sizable diaspora, allowing it to access clients and management skills from all over the world, including key IT markets like the United States and Europe.


Why invest in Vietnam’s IT Industry?

For global technical businesses aiming to develop into a range of areas, Vietnam has proven to be a lucrative market. For example Fujitsu, Japan's ICT behemoth, has been adopting its new business strategy in Vietnam. Fujitsu has only marketed products to Japanese enterprises since it arrived in the nation in 1999.

Furthermore, Decree No. 108/2006/ND-CP details the implementation of numerous laws connected to the Investment Law and the manufacture of software products and digital resources. The decision includes special incentives to stimulate investment, such as a preferential tax rate of 10% for 15 years, as well as a tax exemption for four years and a 50% decrease for the next nine years.

Vietnam has become one of the most attractive investment markets in Southeast Asia. The ICT industry, in particular, and its digital economy, appear to be the most competitive. The Ministry of Information and Communications (MIC) aspires to make the country a leading digital destination and economy in Southeast Asia by 2030, recognizing the government's experimentation with numerous new digital technologies.


Top IT startups in Vietnam (2021 update)

This is a list of some of Vietnam’s most promising IT startups in terms of Innovation, growth, management and societal impact.

1.   Cribl

Cribl is a data-in-motion observability pipeline startup that gives administrators complete control over their data. Since its inception, Cribl has grown into a global leader of remote-first businesses.

2.   Topica Edtech Group

In Southeast Asia, Topica Edtech Group is a significant online education company. Several accredited US universities recognize credit earned through Topica-powered programs, and the Topica Uni works in a tie with 16 universities, including several prestigious institutions in the USA, Philippines, and Vietnam. 

3.   Rever.vn

Rever is a technology business that specializes in real estate and was founded in early 2016. To provide their customers with the best value, Rever uses technology to provide price comparison tools that use market data analysis systems, monitor the listing of properties, and manage online transactions to bring out the best deals to buyers and sellers. 

4.   Base.vn

The goal of Base.vn is to create an open and intelligent platform that houses all of Asia's best business apps. Based in Vietnam, Base.vn has a comprehensive technology platform that is critical for businesses to accomplish breakthroughs. 

5.   VNG

VNG Corporation (VNG) is a Vietnamese technology firm, and one of the largest, that focuses on digital content and online entertainment, social networking, and e-commerce. It was created in 2004. Online games, platforms, digital payments, and cloud services are the four primary industries that VNG concentrates on. Many of VNG's core products, such as Zalo, ZaloPay, Zing MP3, and 123phim, have garnered hundreds of millions of consumers. 

6.   GOSTREAM

The Gostream Technology Corporation was founded in October 2017 at a time of rapid technological development. GoStream develops technology, tools, and services that enable content creators to evaluate and communicate with their audiences across many platforms. 

7.   Tribee

The Tribee app/web platform helps businesses connect, recognize, and reward their employees to increase work productivity. In addition to being a powerful tool for businesses, it is designed with the goals of employees as well, making it an effective tool for increasing employee satisfaction. 


Future of Vietnam’s Digital Economy (IT Industry)

There are several reasons to believe that a positive transformation will occur: there has been a recent surge in both digital hardware and software exports, Vietnam's young population is rapidly adopting new mobile internet services, and the government is enacting far-reaching ‘Industry 4.0’ policies to jump-start the modernization of Vietnam's major industries and grow new ones.

Vietnam will be able to continue the rapid and sustained growth in the next phase of development if it masters the digital economy.

Over the next 25 years, Vietnam has an essential window of opportunity to transition to a more digital economy and get rid of the middle-income country status. To foster collective upskilling – across the workforce and society – and enable a successful digital transformation, strong national leadership, institutions, and policies are required.


Challenges

The IT industry in Vietnam has moved up the value chain, offering more value-added services. However, the industry is still in its early phases of development due to the country's relatively late embrace of the internet. Furthermore, a lack of education and training for IT professionals continues to be a barrier to progress.

There are also infrastructure issues to consider. As there are several internet providers on the market that all use the same gateway, a malfunction at the source might create obstacles.

Another issue is a lack of intellectual property (IP) protection in the country. Moreover, there are no dedicated IP courts yet and users have also faced security breaches on the internet. The culmination of these factors has led to numerous start-ups registering in other countries, most notably Singapore. However this is a major which is recognized by the government and they are working with their foreign counterparts to enact strict IP regulations.


Conclusion

Despite the challenges, the IT industry in Vietnam has had promising yearly growth rates due to increased demand from other industries, IT-based curriculum implementation, more disposable incomes, and fast increasing internet penetration rates.

Meanwhile, because of low labor costs and favorable tax rules, large multinational corporations such as Samsung, Nokia, and LG continue to grow their operations in Vietnam. Due to the country's strong economic development and political stability, the software export industry is likely to continue to grow at a quick pace, according to Oxford Business Group.


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InCorp Global Pte Ltd

Headquartered in Singapore, InCorp Global is a leading corporate services provider, with an established regional presence across seven Asian countries, including Indonesia, India, Hong Kong, Philippines, Vietnam, and Malaysia. The group services more than 12,000 corporate clients across various industries, including asset / fund managers, as well as family offices. They are official partners with key government authorities in the region, such as Singapore’s Economic Development Board, a government agency that is tasked with bringing in foreign direct investments into Singapore.

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