In the past, Vietnam has been most commonly associated with clothing manufacturing; however, the country now has a rapidly expanding tech sector that's attracting investors from around the globe, and an increasing number of high-tech companies are beginning to set up shop there.

Factors Driving Foreign Investment to Vietnamese Tech Industry

Among the primary factors attracting the flood of tech companies to Vietnam is the country's rapidly expanding young workforce combined with low costs. As geopolitical tensions and wages continue to rise in many parts of the world, particularly in other regions in Asia, many high- tech companies have begun to turn their attention toward Vietnam. The fact that the Vietnamese government appears to be supporting the development of local tech companies through new policies serves to further the country's appeal to tech businesses. Also, the numerous financial incentives the Vietnamese government provides to high-tech companies, including corporate income tax reductions and tax holidays, make the country even more appealing to foreign investors. (To learn of other ways in which governments shape the business environment of their countries, see article: How Governments Influence Markets.)

Building a Strong Workforce

Over the last few years, Vietnam has worked diligently to transform its population into a workforce fully capable of meeting growing technological demands. Voice of America reports that Prime Minister Nguyen Tan Dung signed a decision in 2012 that established a national strategy for the country's science and technology sector. By 2020, 45 percent of Vietnam's gross domestic product will be comprised of high tech products and applications. (To read more about the potential benefits countries receive when they produce a well-trained workforce, see article: How Education And Training Affect The Economy.)

Refugees Returning Home

While the Vietnam War drove more than a million Vietnamese to leave their homeland and resettle in the United States, Canada, Australia, and other countries, many of the former 'boat people' have returned home. Often bringing foreign spouses and their offspring with them, former refugees are now embracing the growth of a middle-class and a culture that is increasingly Westernized in Vietnam. Vietnamese from overseas who are now returning home are also bringing increasing amounts of capital and technical knowledge with them. The result is a booming economy. Vietnam Economic Times reports that Vietnam's GDP now totals $509 billion.

Lower Costs Compared to Neighboring Countries

Many investors are attracted to Vietnam due to the lower costs the country is able to offer. One of the most important reasons that Vietnam is able to offer the benefit of lower costs over other countries, including China, is the fact that many of the highly skilled workers in Vietnam are looking for more than just a good salary; they are looking for a job that will help them to make a difference in the world. A new survey conducted by ITViec indicates that rather than being motivated solely by money, many of the IT workers in Vietnam are attracted to the field due to a true passion for what they do. ITViec, an IT jobs platform in Vietnam, found that among 500 IT workers polled, 84 percent chose that field due to a love of computers. Almost 50 percent of those polled stated that working on an interesting product trumped anything else. Only 12 percent of respondents ranked money as a primary job motivation. 

Numerous other factors have served to attract investors to Vietnam, a nation with a population of 90 million people. Among those factors is Vietnam's strategic proximity to China, thus providing critical shipping avenues. The country's strong emphasis on teamwork combined with a dedicated entrepreneurial work ethic has also worked in its favor in terms of attracting foreign investors. While much has changed in Vietnam since the war, family businesses are still an important part of the culture and frequently offer a welcoming attitude to foreign investors. Due to a trend of Vietnamese nationals studying abroad and then returning home to ply their talents and education, Vietnam is also able to benefit from a young workforce that has a better understanding of foreign culture. Tech in Asia reports that more than 100,000 Vietnamese students studied abroad in 2011.

Vietnam's efforts to attract high-tech firms have certainly paid off. Among the high-tech companies that have made the decision to move at least large sections of their tech operations to Vietnam are Intel, Samsung, Nokia, and LG Electronics. Due to Samsung's decision to manufacture most of its smartphones in Vietnam, the manufacturer is now Vietnam's largest exporter. Vietnam's Ministry of Planning and Investment has predicted that within the next two years, Samsung's investment in Vietnam will reach $20 billion. To date, Samsung has invested more than $12 billion in Vietnam. (To read more about Samsung's competitiveness and its place in the smartphone market, see article: How Apple and Samsung Compare... And Coexist.)

Samsung is not the only tech company expanding its operations and investments in Vietnam. Nokia has announced plans to reduce its presence in China by as many as 12,500 jobs this year. At the same time, Nokia is stepping up its manufacturing operations in Vietnam. Most of Nokia's smartphone production will be handled from the Vietnamese capital of Hanoi. 

Homegrown Startups

While big-name tech companies such as Samsung, Nokia, and Intel certainly comprise the lion's share of Vietnam's tech industry, the country is also beginning to build a strong homegrown tech base. For instance, an increasing number of local companies have begun to design their own smartphones and market them globally. Vietnam's first smartphone to be produced domestically was launched in 2013. Vietnam's government-owned telecommunications company has also begun to produce smartphones in the last few years. (See: The Industry Handbook: The Telecommunications Industry.)

Although it might seem as though Vietnam's tech industry is built on the production of smartphones, that is hardly the case. Many of the country's young college graduates are now finding jobs with firms manufacturing supplies for other tech firms. The online booking sector is also on the rise in Vietnam, further driving the country's booming tech sector.

So many tech startups are now being launched in Hanoi that it has come to be known as the tech startup capital. Among those startups is VNG, a Vietnamese startup that brought in a revenue of $100 million in 2013. Founded by Le Hong Minh, who was educated abroad and then returned home, VNG has become the country's largest software and web company. While the mobile game Flappy Bird has swept the world, many people may not be aware that the game is the product of dotGEARS, yet another Vietnamese startup.  (See article: Can Games Make You A Better Investor?)

Investors have been quick to pump funding into Vietnamese tech startups. Vingroup has stated its plans to invest $30 million into an ecommerce startup that would become the Vietnamese version of Alibaba. Appota, a Vietnamese-based mobile phone game distributor, got its start in 2011 with less than two dozen employees and has now expanded to more than 100 employees.

The Bottom Line

As Vietnam works to steadily build its technical expertise, there is tremendous opportunity to invest in Vietnam's tech industry. CNN has even ranked Ho Chi Minh City as one of the 10 best emerging cities in which to launch a startup. 

 

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