Vietnam, a destination for international IT business

Information technology (IT) has been growing at an impressive rate of 30 percent per year, playing an important role in Vietnam’s socioeconomic development. According to the Vietnam Software and IT Services Association (VINASA), Viet Nam IT industry has been growing steadily over the past recent years.

What follows is a brief description of the main factors having an impact on the IT industry in Vietnam such as governmental support, workforce, infrastructure & environment.

Governmental support

According to the VINASA, Vietnam government has been creating favourable conditions for IT industry’s development. Those includes Resolution 36-NQ/TW dated July 1, 2014 of the Politburo on enhancing IT application and development. In this resolution, the Politburo emphasized the importance of IT development both at the governmental level (transforming paper-based processes into application and software-based processes in all level of governmental governance offices) and at the provincial level (installing security cameras, applying smart cameras for local police on their vehicles, etc.). The Politburo set out a plan for IT industry development in the period on 30 years since 2014. This resolution is perceived as a ‘golden opportunity’ for IT development nation-wide.

In 2015, Vietnam Prime Minister’s decision No. 392/QD-TTg was approved and in the decision, it is stated clearly that by 2025, the information technology sector will become a fast, sustainable and profitable economic sector with large export earnings. The IT sector will thrive for a minimum 15% growth rate per year from 2015 to 2020 in software, digital and IT services and aim to attract more foreign direct investment (FDI) projects in the key fields, among which were electronic hardware and digital outsourcing services. In addition, Vietnam will increase the competitiveness and stay among the top 10 countries providing software and digital outsourcing services in the world.

The government also issued the Resolution 41/NQ-CP dated May 26, 2016 on tax incentives to promote IT application and development in Vietnam in order to improve competitiveness and attract investment in the sector. This resolution provides preferential terms on corporate income tax and personal income tax. For example, new IT projects with over 1,000 full-time employees enjoy an annual corporate income tax of 10 percent for 15 years.

Workforce
Vietnam is rapidly developing a labour force to meet the requirements of the IT surge. Mathematics and IT are the top choices of Vietnamese students. With more than 290 universities offering IT studies and 55,000 students enrolled each year, Vietnam is a leading IT service destination in Asia.

According to a report from the Ministry of Education and Training, the country has a total of 235 universities nationwide, including 153 IT training colleges with annual output of 50,000 IT graduates.

“The matter of training high quality IT personnel is becoming a focus of both the education sector and IT businesses to satisfy work demand,” the report said.

Infrastructure & environment
Vietnam has been known for its IT & software outsourcing services and capability. For many years, MNCs such as Intel, IBM, Samsung Display, Nokia and Microsoft have chosen Vietnam to outsource their software projects. In 2018, Vietnam exported $3.5 billion worth of software, up 11.6 percent from 2017, according to the Ministry of Information and Communications (MIC).

Vietnam, driven by its growing internet penetration, smartphone adoption, and young demographics, offers huge potential for IT, tech and start-up companies. Especially the ones focusing on fintech, e-commerce, and food technology. These sectors have been the top priorities for investors in the last few years. The other sectors with potential include micro-financing, online travel, and logistics. Noticeably, on 21st of September 2019, Viettel Military Industry and Telecoms Group (Viettel) announced the implementation of 5G service and the placement of the infrastructure of Internet of Things (IoT) in Ho Chi Minh City. The Secretary of the municipal People’s Committee Nguyen Thien Nhan underlined the city’s determination to build a smart city, saying that the cooperation with Viettel to build modern ICT infrastructure and core platforms for digital society will help the city realize its vision and strategy, maintaining its leading role in the country in digital transition (according to MIC).

In recent years, there have been a bloom for start-up communities and the international unicorns in IT and technologies having their presences in Vietnam such as Grab, Go-Viet (Go-Jek), Alibaba, etc. as well as the local unicorns with investments coming from overseas tech investors namely Tiki, VinaGame (Temasek), VNTrip, Elsa (education technology), etc.

The top 7 trends in the IT sector in 2019 for Vietnam are the following: FinTech, Blockchain, Artificial Intelligence, SaaS – Software as a Service, E-Commerce, Marketplace Platform and Edtech – education technology.

Outsourcing or direct investment

International investors can consider the conventional way to outsource IT service to Vietnam service providers or they can decide to directly invest into the country’s vibrant market with high-quality workforce, supportive infrastructure and government via two options: (a) hiring IT workforce in Vietnam remotely for their company’s projects overseas or (b) set up an entity in Vietnam, recruit IT professionals in Vietnam to assist the company’s business plan both in Vietnam and overseas.

Fidinam has been assisting a number of foreign investors in IT industry to outsource their service and/or to invest in Vietnam. We support the client in decision-making process from industry research to market-entry advisory and set-up of the operations.

Tu Nguyen, Business Developer of Fidinam (HCMC)

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