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.”