Ho Chi Minh City, still commonly known as Saigon, is at the heart of Vietnam’s tech revolution. Source: Wikimedia
Vietnam’s rise as a tech giant is becoming increasingly well documented. A convergence of factors, including a demographic balance that has produced an abundance of trained computer engineers in recent years, an excellent educational system and political moves in Hanoi to relax economic controls make it an increasingly attractive target for global technology investors.
The nation’s legendary work ethic should not be dismissed either. The drive that enabled previous generations to defeat three permanent members of the UN Security Council in conflict, France, the USA and China, since the Second World War appears to be manifesting itself in technological wizardry.
Vietnam’s tech startups are emerging as a force to be reckoned with as foreign private equity funds bet the country’s talented young engineers will yield more successes like the international hit game Flappy Bird.
Last month, Goldman Sachs and Standard Chartered raised their investment in the developer of e-wallet MoMo by US$28 million, while Silicon Valley’s venture capitalists 500 Startups unveiled a US$10 million Vietnam-based fund.
One 500 Startups investment in automated marketing service Beeketing, founded by college drop-out Truong Manh Quan, 26, who estimates his revenue this year will reach US$2 million, predominantly from the US market.
“We thought we’ll invest in something like 10 to 20 companies over a 12-month period,” explains 500 Startups partner Eddie Thai. “But it quickly became clear, there’s a lot more good companies to invest in.”
In the three years since Hanoi’s .GEARS released Flappy Bird, the Asean economy has become the production hub of South Korean titan Samsung and other corporations with factories in Vietnam, including LG Electronics, Panasonic and Toshiba, have expanded into research and development.
This week Hanoi announced proposals to change legislation to ease venture capital’s entry into the market.
The Ministry of Planning and Investment drafted new rules which seek to make it easier for domestic and foreign venture capital funds to operate in the country where startups are still in serious need of funding.
The move is the Communist Party’s latest effort to turn the country into a startup nation with 5,000 tech firms by 2020. Changes are taking place so quickly that it Vietnam is likely to make this target at a canter.
Singapore’s startup community Tech in Asia estimated that there were about 1,500 Vietnamese startups in operation. That number, relative to population, would mean the country has a higher concentration than the 2,100 in Indonesia, 2,300 in China and 7,500 in India.
The new rules would enable funds to acquire licences within three days after an application without a size limit.
Currently, investment funds in Vietnam are managed in accordance with laws on securities investment funds, meaning that they must have a minimum capital of US$2.2 million or at least 100 investors.
And the country has many pull factors to attract investors. Vietnam has a cheaper workforce than in China, membership of the Trans-Pacific Partnership trade bloc and EU free-trade deals, plus incentives aimed at luring investment.
But key is Vietnam’s tech-savvy population with a median age of 30.
“Vietnam has the highest-performing computer science students I’ve ever encountered,” says Neil Fraser, a software engineer at Alphabet Inc’s Google.
The Organisation for Economic Cooperation and Development ranks Vietnam’s 15-year-olds’ educational attainment in science and maths above those in the US, Australia and Britain.
“The exercises I watched them solve … would be considered challenging problems for a Google hiring interview,” Fraser says.
The state, so domineering in other areas of Vietnamese life, maintains a light touch over the tech sector.
Hanoi offers little support beyond legal advice and a US$10,000 investment under a scheme dubbed Vietnam Silicon Valley. In contrast, China announced a US$6.5 billion fund primarily for tech and green energy startups in 2015, while India promised US$1.5 billion in January.
But Vietnam appears to have targeted lucrative areas so far.
Vietnam specialises in e-commerce, a sector where sales grew around 35 per cent last year to US$4 billion, and where a 2.7-per-cent contribution to overall retail sales suggested there was significant growth potential.
“I plan to grow this company for five years then sell it,” says Beeketing’s Quan. “Then I may become an angel investor myself.”
Tech logistics firms such as Giaohangnhanh help reduce overall logistical outgoings in Vietnam to a fifth of gross domestic product last year from a quarter a year before.
Meanwhile food-finder app Lozi received a combined seven-figure investment from DesignOne Japan and Singaporean Golden Gate Ventures.
Tran Minh Son, one of four Lozi founders, left his degree course in Pennsylvania to concentrate on the app.
“It was like cutting my legs off so I’ve no way back,” Tran says. “My parents complained quite a lot. They said, ‘You’re not my son – move out’.”
Lozi, started in 2012, announced it had 600,000 registered users and 4 million unique visits a month.
Insulated by destabilising factors, like the South China Sea dispute, political interference from Hanoi or the current drought, Vietnam’s tech sector appears to destined to become an increasingly important factor in the wider Asean economy.