Vietnam slated to be the next IT hub

Font Size

Print

Feedback

Email

Discuss

: On a recent trip to Hanoi last summer, I had no trouble communicating with my family via e-mail as there were Internet kiosks on almost every street corner.

People in Vietnam routinely talk about the “Intel effect” of 2006 when the company raised its initial investment from $300 million in February 2006 to $1 billion in November 2006. A visit to Hanoi-based FPT software confirmed my thoughts on the staggering boom in Vietnam’s IT industry. The company was founded in 2004 but boasts an impressive clientele that includes Microsoft, IBM, Hitachi, Toshiba and HP.

IT is one of the fastest growing sectors in Vietnam, growing at 22% annually. Experts say that Vietnam’s IT spending will rank within the top 10 in the world by the end of 2008. Perhaps, this is the result of the enormous amount of public spending in the sector. In 2007 alone, the government invested about $1.4 million on IT related projects. In addition to hardware and software, Vietnam has also been ranked as a top telecommunications market.

The mobile phone market quite literally is fast and furious—while most telecom firms are state-owned, price wars among them are common. A major worry is that these companies are using their energies inefficiently by competing domestically when they could invest in telecom infrastructure to compete internationally.

What accounts for the boom in Vietnam’s IT sectoring? Firstly, the government adopted as a national IT policy in 1993 and has been slowly, but steadily easing restrictions on the industry ever since. A landmark achievement for the sector was in 1999 when the government allowed all companies—except those that are 100% foreign owned, to buy or lease surplus telecom capacity. Vietnam’s young educated labour force is also a major driver of the industry.

During the visit to FPT software, I was stunned by the fact that the average employee is only 26.5 years old and is fluent in English, Japanese or French. About 90% of FPT Software’s employees have post-graduate degrees and the remaining 10% are college graduates.

Despite such rosy statistics, Internet access in Vietnam remains confined to large urban centres. Business and industry analysts consistently point to the existence of corruption as a major impediment to continued expansion in the sector. Additionally, Vietnam’s poor record on intellectual property rights protection, especially software piracy keeps would-be foreign investors at bay. Recently, Vietnam was ranked among the top five countries with the highest rates of piracy and even beat China to earn this dubious distinction.

There may be hope on the horizon as Vietnam’s ministry of post and telematics recently signed a Memorandum of Understanding with Microsoft pledging its support for intellectual property rights protection. As part of this, the Vietnamese government will legally purchase licenced copies of Microsoft software for all state agencies.

There is no denying that Vietnam’s IT sector is poised for future growth and this will create newer opportunities in knowledge-based industries. As my colleague at the Hanoi school of business put it, “We do not want to be known as a textile centre.” When I asked the gentleman how he viewed competition from India’s well-established IT industry, he remarked, “It’s a big ocean for all of us but we are closer to Japan.” The optimism in his statement was palpable.