Vietnam can become the next digital powerhouse

Vietnam is already in the top 20 nations with most Internet users

At a recent workshop in Hanoi on ­unlocking the full potential of Vietnam’s digital economy, Quint Simon, head of public policy in Southeast Asia for Amazon Web Services (AWS), surprised hundreds of business leaders and experts by revealing that Vietnam is one of the top nations in the world for raising spending in cloud computing, at 64 per cent per year.

AWS, a subsidiary of Amazon, provides on-demand cloud computing platforms to individuals, companies, and governments.

“I believe that Vietnam will soon become a nation with a digital economy. Cloud computing is a favourite in Vietnam where many enterprises are using it for their operations,” Simon said, explaining that this method means companies can completely protect information without fear of it being stolen.

“For example, Amanotes, a fast-growing app publisher, currently has hundreds of millions of users. This is typical of Vietnamese companies with cloud computing,” she continued. “Masan Group is also using cloud to manage its stores in Vietnam. Many Vietnamese agencies and enterprises are seeking our support in cloud applications.”

Associate professor Vu Minh Khuong, from the Lee Kuan Yew School of Public Policy, also cited a survey on cloud applications conducted with more than 500 enterprises in Vietnam. It stated that expenditures by Vietnamese businesses currently grow at an annual average of 64.4 per cent, compared with the ASEAN’s average at 49.5 per cent, and the world’s 42.5 per cent.

“Enterprises in Vietnam are developing very fast, especially in the context that it remains a developing nation, with relatively low per capita income,” said Khuong, a member of an economic consultancy group for Prime Minister Nguyen Xuan Phuc. “Vietnam boasts much potential to develop its digital economy.”

Full of opportunities

According to the Asia Internet Coalition (AIC), an industry association that addresses internet and ICT policy issues across the continent, Vietnam currently has “very big potential for economic development.” The AIC boasts members including tech leaders Amazon, Apple, Facebook, Google, LinkedIn, and Twitter.

“The development of the digital economy is a challenge, but also an opportunity for Vietnam to solve problems in economic development, particularly the restructuring of the banking and commercial sector,” said Do Khanh Ly, representative of AIC in Hanoi. “In Vietnam, the digitalisation trend can be seen in almost all sectors, from payment to healthcare, education, tourism, and transport. The government’s plans and strategy on Industry 4.0, smart cities development, and startups, all backed by 4G/5G mobile phone networks and the Internet of Things, have helped the IT industry grow strongly.”

A recent Economist Intelligence Unit report showed that spending on IT in Vietnam was estimated at $6.4 billion in 2017, which was estimated to grow to $6.5 billion in 2018. In 2017, spending on IT hardware continued to represent the largest share (88.8 per cent) of total spending, with software and services representing 4.6 and 6.6 per cent of the market, respectively.

Key players in the hardware market include suppliers from Taiwan, China, the US, and Japan. Major players in software globally include those from the US, Germany, China, Russia, and Vietnam.

The World Economic Forum’s Global Information Technology Report in 2016 ranked Vietnam at 79th of 139 on the Networked Readiness Index, an increase of six grades in comparison with 2015.

As per AIC statistics, with a population of more than 100 million, Vietnam is among the regional nations with relatively high growth in digitalisation.

Vietnam currently has more than 136 million mobile phone subscribers, with 54.2 per cent of the population directly connected to broadband. This has launched Vietnam into the top 20 nations with the highest number of Internet users. In 2019, Vietnam will deploy 5G services and digitalise many sectors in the economy.

“The value that the Internet has created for the economy is tantamount to 2-3 per cent of the GDP, which is expected to skyrocket to 40-50 per cent in the future,” Ly said.

“The Vietnamese government has set a target of reaching the top 10 globally in terms of software production and digital content,” she added. “We think this target will be easily met with a strong telecommunications industry.”

Jake Jennings, executive director of International and Regulatory Affairs at AT&T, sees Vietnam’s great potential in developing a digital economy through the country’s bright landscape for IT and cloud computing, as well as its wide smartphone coverage.

“This will help Vietnam create many new jobs in the near future,” Jennings said.

Since 2007, the Texas-based telecommunications giant has boosted its presence in Vietnam. AT&T co-operates with Vietnamese groups like Vietnam Posts and Telecommunications Group (VNPT), and Viettel. It is now exploring opportunities to expand its partner networks in the country.

According to the European Chamber of Commerce in Vietnam (EuroCham), the country is catching the eyes of the world with a strong inflow of foreign direct investment. Many foreign investors wish to invest into digital solutions in Vietnam, which is now beginning to develop smart cities amid an expansion of urbanisation.

“ICT and digital technology have been helping Vietnam develop strongly,” said EuroCham co-chairman Denis Brunetti, who is also president of Ericsson Vietnam, Myanmar, Cambodia, and Laos. “For Vietnam, we estimate that 5G addressable revenues for operators can increase by up to $1.1 billion by the year 2026, depending on where they are in the value chain. It’s no surprise that 18 per cent of this opportunity is coming from manufacturing.”

Building a strong digital economy

According to Simon of AWS, foreign firms like Amazon, Apple, and Google expect that the government will pump more funds into improving education and training quality.

“A good education and training system will be key to Vietnam if it wants to develop its own digital economy. Lessons from almost all developed nations in the world have proved this,” she said.

Ly of AIC noted that in order to materialise its dream to develop a sturdy digital economy, Vietnam needs to “create a strong strategy.”

Specifically, the government should boost its programme on developing an e-government in all sectors including transport and tourism, building e-payment infrastructure with solutions to limit cash-based payments, and support e-commerce development.

“Vietnam is now suffering from a lack of IT human resources. This is a big challenge for it to successfully develop its digital economy. Thus, the country needs to pay more attention to human resources training,” Ly recommended.

According to Brunetti of EuroCham, in order to effectively harness the potential, one of the biggest solutions would be investing more heavily into education and training. The government and universities should co-operate to produce sufficient qualified human resources for the digital age.

Nguyen Trong Nghia, deputy CEO of VNPT, noted that the government is beginning to develop digital-related policy, and the business is supporting the government in developing digital content and the digital economy.

“We have signed 20 deals with cities and provinces nationwide to develop smart cities,” Nghia said.

“By 2020, we will have to recruit about 5,000 IT engineers, but this will be difficult given the current context of IT engineer shortages,” he added.