IT SECTOR
RESEARCH REPORT
This project is funded
by the European Union
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EU-Vietnam Business Network (EVBN)
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Ho Chi Minh City, Vietnam
Useful contacts
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Further reading:
Information and Data on Information and Communication Technology (2013) - National Steering
Committee on ICT (NSCICT), Ministry Of Information and Communications of Vietnam
http://english.mic.gov.vn/
Vietnam E-commerce report 2013, Vietnam E-commerce and Information Technology agency
http://www.vecita.gov.vn/
Vietnam Information Technology Report, Business Monitor International
http://www.businessmonitor.com/
Vietnam Software Association (Vinasa)
http://www.vinasa.org.vn/
Vietnam's 2014 White Book on Information and Communication Technologies (ICT), Ministry of
Information and Communication of Vietnam
http://english.mic.gov.vn/
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taken to reflect the views of the European Union
TABLE OF CONTENT
0.
INTRODUCTION
4
1.
HARDWARE
5
1.1. Hardware production and export
5
1.2. Hardware domestic sales
9
2.
SOFTWARE
10
2.1. Business Software
13
2.2. Security Software
14
2.3. Open Source
15
2.4. Piracy
16
3.
17
IT SERVICES AND E-COMMERCE
3.1. IT Services
17
3.2. Internet Development
18
3.3. E-commerce Sector
23
4.
GOVERNMENT REGULATION AND POLICIES
27
5.
BARRIERS AND REGULATIONS
29
3 EVBN IT Sector
00 INTRODUCTION
The IT sector in Vietnam is an expanding industry with hardware and software markets, ecommerce, and IT services being supported by general economic growth as well as by
governmental and foreign investments. Besides a strong electronics hard-ware production sector,
estimated at US$34.7 billion exports in 2014, Vietnam’s IT industry is also driven by a
strengthening e-commerce sector, in which sales to end-customers (B2C) are estimated at
US$2.2bn in the past year.
Furthermore, the positive development is fueled by IT services and the software sector (which
account for US$660 million and US$470 million of sales in 2014, respectively).
Showing a promising year-on-year increase, the IT industry is mostly driven by growing demand
coming from other industries, escalating consumer spending and rapid Internet penetration.
These reasons might have supported the establishment of some big corporations such as
Samsung and Nokia alongside with reasonably labor costs and favorable taxation policies.
On the other hand, various threats and drawbacks are inherent in the industry, such as a high
level of pirated software, low credit card penetration, followed by pitfalls common to Vietnam’s
economy in general frequently changing regulations, red tape etc. Furthermore, some significant
differences on successful market entrance between big players and SMEs are worth investigating.
The report will analyze all sectors based on its importance in Vietnam’s IT industry. Therefore it is
divided into three main chapters: the hardware sector, the software sector as well as IT services
and e-commerce. Moreover, the main industry trends and developments as well as major barriers
and regulations are outlined providing SMEs with a broad overview of the Vietnamese IT market.
4 EVBN IT Sector
01 HARDWARE
1.1
Hardware production and export
The hardware industry grew substantially between 2008 and 2013 according to the 2014 White
Book on Information and Communication Technology (ICT) in Vietnam, representing the largest
sector out of the IT industry.
Currently, Vietnam’s hardware-electronics exports are estimated at US$34.7 billion in 2013,
representing a 52% year-on-year increase, while hardware-electronics imports accounts for
US$26.4 billion, representing a 35.7% year-on-year increase.
ICT (US$, bln)
2008
2009
2010
2011
2012
2013
Hardware-electronics Exports
2,8
3,4
5,7
10,9
22,8
34,7
Hardware-electronics Imports
5,7
6,5
7,6
10,4
19,4
26,4
Source: 2014 White Book on Information and Communication Technology (ICT) in Vietnam
The recent establishment of world-leading companies factories such as Samsung, Nokia and
others has helped to promote Vietnam as a production location and has significantly increase
export sales.
According to the data from 2013, mobile phones accounted for a substantial 63% of total export
value (US$21.86bn), followed by automatic data processing machines at 10%, printers with 7%
and integrated circuits with 6%. The data reveals that Vietnam has become a promising mobile
technology exporter. For example, China’s mobile phones exports were estimated at US$41.55bn
in 2013.
Vietnam Hardware Export Turnover 2013
Mobile phones
14%
Automatic Data Processing Machines
6%
Printers
7%
63%
10%
Intergrated Circuit
Other
Source: Vietnam Information Technology Report 2014
5 EVBN IT Sector
Among all sectors, Vietnam’s hardware production sector showed the highest level of growth
between 2008 and 2013. Fueled by strong global demand for hardware exports, leading
manufacturers like abovementioned Samsung and Nokia are even looking to expand production
further. For example, Microsoft considered to move its entire Nokia production from China to
Vietnam, while Samsung has announced plans to spend up to US $3bn to create a new
smartphone factory in Vietnam (alongside with another US$2bn plant the company already runs in
the country).
Vietnam’s Hardware Sector – Total Revenue (2008 – 2012)
Source: 2013 White Book, Vietnam’s Ministry of Information and Communications
6 EVBN IT Sector
Despite the high level of sales, the hardware production sector accounts for only a minority of the
total technology firms in the country. The reason is that the sector favors large companies,
because they can achieve economies of scale in production. The software and digital content
industries, on the other hand, contain countless market niches that can support a huge number of
boutique businesses.
Total number of registered enterprises in the IT industry sector (Enterprises)
2009
2010
2011
2012
2013
Hardware industry
992
1273
2763
2431
2485
Software industry
1756
2958
7044
7246
6832
Digital content industry
2844
2312
3289
3883
4498
Source: Viet Nam Information and Communication Technology 2014
Comprised of only few enterprises, the hardware production sector employs a large portion of the
country’s technical workers. Many of these workers are unskilled or semi-skilled factory laborers
whose average incomes fall roughly in line with those of other manufacturing sectors.
Number of employees
2009
2010
2011
2012
2013
Information technology industry sector
226300
250290
306754
352742
441008
Hardware industry
121300
127548
167660
208680
284508
Software industry
64000
71814
78894
80820
88820
Digital content industry
41000
50928
60200
63242
67680
Source: Viet Nam Information and Communication Technology 2014
In 2013, total employment in the hardware industry reached over 208,680 employees, which
accounted for 59% of the whole IT industry. Since the sector’s rapid growth, the latest rough
estimation for hardware workers in Vietnam was around 440,000 (which presumably accounts for
nearly 65% of the whole IT industry).
7 EVBN IT Sector
The rapid growth in the hardware sector started in 2010, when Intel built its US$1 bn chip
manufacturing plant in Ho Chi Minh City. The latest data on the biggest hardware players in
Vietnam shows how electronics factories grew substantially (dollar figures indicate the amount
each company has committed to its Vietnamese factory):









Samsung Electronics (South Korea), US$2.2 billion, November 2012
Nokia (Finland), US$300 million, early 2013
Fuji Xerox (Japan), US$120 million, November 2013
JBL (USA), US$100 million, June 2012
Terumo BCT (USA, Japan), US$94 million, May 2012
SOC Vietnam (Japan), US$62.5 million, November 2012
Nidec Seimitsu (Japan), US$40 million, July 2012
Brother Vietnam (Japan), US$25 million, December 2012
Bujeon Electronics (South Korea), US$10 million, October 2012
The most significant newcomers in this list are Samsung and Nokia. Nokia is still the dominant
player in the Vietnamese mobile market and Samsung contributes a notable 10% of Vietnam’s
whole hardware exports. Besides Nokia, most of the mentioned electronics manufacturers are from
South Korea and Japan. Low labor costs are likely to be one main attraction point for companies.
For example, wage levels between China and Vietnam differ remarkably: for China: US$ 2,472
annually, US$ 1,19 hourly; for Vietnam: US$ 614 annually, US$ 0,3 hourly.
Average of wage per employee in the
IT industry sector (USD/person/year)
2009
2010
2011
2012
2013
Hardware industry
1809
2201
2279
2281
2301
Software industry
4093
5123
5034
5009
5025
Digital content industry
3505
4896
5267
5201
5268
Source: Viet Nam Information and Communication Technology 2014
Due to the low-skill works required in the hardware industry, the wage level is significantly lower
than for the other sectors.
8 EVBN IT Sector
1.2
Hardware domestic sales
Hardware market (2011 – 2018)
e/f – BMI estimate / forecast Source: BMI
The hardware sales market in Vietnam remains
buoyant, with demand growing in the retail
sector since 2013, driven mostly by enterprises
and the public sector.
BMI forecasts Vietnam's computer hardware
market value to increase at a Compound Annual
Growth Rate (CAGR) of 11% in local currency
terms from 2014 to 2018 to reach a value of
VND 74.9trn (US$ 3,5bn). This fast rate of
growth will be driven by rising incomes,
economic confidence and trends within the IT
market, with the main growth driver being the
availability of affordable tablets and notebooks.
Government spending remains supportive of the IT hardware market through initiatives mostly in
the education and healthcare sectors. Credit programs are provided to raise household PC
penetration in rural areas, which is estimated to be still below 10%, compared to 50% in higher
income urban areas. Currently Hanoi and Ho Chi Minh City account for around 85% of all
notebook sales.
While improved access to credit is a short-term factor in boosting sales, a longer-term trend is the
spread of network infrastructure, including fixed and wireless broadband, which is boosting
demand for devices for both productivity and content consumption. Telecommunication operators
such as Viettel are also emerging as significant distribution channels for notebooks as vendors
seek tie-ups.
Thus Vietnam’s younger generation, growing economy and growing demand, together with lowcost labor, might allow the country to become not only a promising sales market, but a world
renowned hardware manufacturer in a near future. With such prominent companies, as Samsung
and Nokia making substantial impact into Vietnam’s high-tech export, supported by smaller local
companies, Vietnams is considered to be on the cusp of hardware-oriented economy.
9 EVBN IT Sector
02 SOFTWARE
In contrast to the sizable hardware electronics
subsector, Vietnamese software sector is much
smaller valued at only US$470mn of sales in
2014. With around 75% of the market consisting
of local software vendors, the market is mostly
dominated by low-cost software products.
Software market (2011 – 2018)
e/f – BMI estimate / forecast Source: BMI
Local software producers by and large provide
their products to the government as well as
small- and medium-sized companies (SMEs)
while larger Vietnamese companies are more
likely to buy higher-priced software from
multinationals. The latter capture around 25% of
the market. Regarding software supporting
services, Vietnamese customers are said to
become more demanding and thus expect
higher levels of support for their software
products compared with the past.
Despite its small size, the domestic software industry has witnessed significant growth over past
years. According to Business Monitor’ latest data, software sales are estimated at VND 10.1trn in
2014 (US$470mn), and the number is expected to grow significantly to VND17.9trn in 2018
(US$832mn), CAGR of around +16% in local currency terms). The number of companies in the
sector has also grown significantly in recent years, showing a stronger increase compared to the
hardware and the digital content industry.
Total number of registered enterprises in the IT industry sector (Enterprises)
2009
2010
2011
2012
2013
Hardware industry
992
1273
2763
2431
2485
Software industry
1756
2958
7044
7246
6832
Digital content industry
2844
2312
3289
3883
4498
Source: Viet Nam Information and Communication Technology 2014
10 EVBN IT Sector
On the other hand, the number of employees in the software industry only surged by 39% from
2009 up to 2013, whereas the number of workers in other sectors increase more sharply by 135%
and 65%, accordingly.
Number of employees
2009
2010
2011
2012
2013
Information technology industry sector
226300
250290
306754
352742
441008
Hardware industry
121300
127548
167660
208680
284508
Software industry
64000
71814
78894
80820
88820
Digital content industry
41000
50928
60200
63242
67680
Source: Viet Nam Information and Communication Technology 2014
Banking and finance, oil and gas, aviation and telecoms, which are also growing rapidly in
Vietnam, are forecasted to be the biggest spending software segments, thus creating the best
opportunities for foreign vendors. These segments offer the biggest potential for both customized
and off-the-shelf packaged software.
Spending opportunities in the financial segment will be driven by regulatory compliance in
governmental and business sectors, as well as potential new regulations introduced in the wake of
the global financial crisis. Mobile operators are investing in new OSS (Operating Support
Systems) to reduce costs and support delivery of new services.
Growing PC penetration, as well as new technologies and business models, including 3G mobile
and WIMAX, and industry-growing trends such as software-as-a-service (SaaS) and open source
will provide areas for growth within the Vietnamese software market going forward. Most demand
remains for on-premises subscription models, due to the greater perceived security and degree of
control. However, as Internet infrastructure improves in Vietnam, more demand for alternative
models such as SaaS and other cloud computing services is expected to occur.
The government is a significant software-purchasing segment in Vietnam and accounts for about
30% of total IT spending. The 7,000 government agencies offer considerable opportunities at
national provincial and municipal levels. A particular area of opportunity are tax agencies of all
administrative tiers as governments look to increase the efficiency of tax collection. Vietnamese
government's intention to implement e-government may become another driver in the segment.
11 EVBN IT Sector
Vietnam is also known as an outsourcing destination for various IT projects and services, with an
estimated 25% share of the whole software industry in Vietnam. Outsourcing companies in
Vietnam provide its’ services mostly to the U.S., Japan and several European countries. The
country has recently outplayed India to become the second-largest software outsourcer for Japan
(following China), according to the Vietnam Software and IT Services Association.
The Ho Chi Minh City-based company: FPT Software serves as a good example for the positive
development of the software sector. The software outsourcing company with revenues topping
US$100mn. in 2013 stated its annual revenue has expanded at a 30% rate over the last few years,
while other local outsourcing companies collectively generated US$31.99 million in revenue, a
34% year-on-year increase, according to Quang Trung Software Park of HCMC.
Both local software producers and exporters /outsourcers are showing steady growth. The given
report will now elaborate on the most common subsectors to illustrate market opportunities and
potential niches.
12 EVBN IT Sector
2.1
Business Software
In 2013 local vendors reported continued robust sales of business software, such as ERP
(Enterprise Resource Planning), CRM (Customer Relationship Management) and others.
The demand for EPR, CRM and business intelligence solutions is expected to grow rapidly due to
untapped potential in various segments of the Vietnamese economy, such as banking and
finance, HORECA (a sector of the food service industry, for establishments which prepare and
serve food and beverages for Hotels, Restaurants & Caterers) and others. Data analytics and
database software likely to be a growing area and account for a larger portion of software
budgets. Despite the fact that majority of Vietnam’s corporations and some smaller local
enterprises are looking forward using well-known software, there is a niche for smaller vendors
and customized solutions.
13 EVBN IT Sector
2.2
Security Software
The government of Vietnam is strengthening its investments in security software due to frequent
hacking attacks. The most recent announcement, an investment of US $42mn to create the
National Centre for Network Security Technology, was made by the Ministry of Public Security,
the Government Secrecy Committee and the Ministry of Industry and Trade. The Law on
Information Security was also updated in order to improve the cyber security environment
including combating attacks originating in Vietnam.
Stronger support for domestic firms producing information security products is also expected in
the near future, according to officials. The Vietnam Computer Emergency Response Team
(VNCERT) stated that in order to ensure information security and protect national digital
sovereignty, domestic products should achieve a 50% share of the market. VNCERT called for tax
incentives for domestic firms to assist them in a competitive global marketplace against vendors
such as Symioatec, Kaspesky, McAfee, Trend Micro, Bit Defender and Aviram.
A survey by Internet security company BKAV revealed that the losses incurred by viruses ran to
US$373mn annually in 2012. This was calculated by the disruption to work caused by the
presence of viruses. The survey also highlighted an increase in attacks on company websites in
Vietnam, with 425 in March 2013, nine originating in Vietnam and 416 from foreign countries. This
level of disruption is generating renewed interest in security software and solutions. However, like
elsewhere in the software market, vendors will face the same challenges of price sensitivity as
well as piracy.
BKAV, along with CMC, the most prominent domestic cyber security firm in Vietnam, reported that
less than 50% of computers in Vietnam have anti-virus software installed. While the low
penetration of security software creates opportunities for foreign players in the subsector,
currently the market is less dynamic than 3-4 years ago when a large number of international
vendors moved into it. Experts attribute this fact to general reluctance of local enterprises and
consumers to spend on copyrighted software, preferring free software or no protection.
14 EVBN IT Sector
2.3
Open Source
The global economic downturn may have added to the interest towards open-source software due
to its perceived lower cost and access to codes. Both governmental and businesses customers in
Vietnam were looking more closely at open-office-type, open-source software, as well as free
services such as Google Docs, which are funded by advertising.
Ho Chi Minh City officials spent around US$1,4mn on open source software in 2013, primarily for
the city's state agencies. To put this figure in context, there were around US$11mn spent on
software licenses for state agencies and also on licenses for business and social organizations in
2013 in HCMC. In 2014 the development of open source software for the public sector was partly
frozen, when Director of the Communist Party Central Committee Office's Informatics Center, stated
that the government was stopping the adoption of open source software. He cited a lack of available
technical maintenance staff, making the deployment of services impractical for the time being.
The government has not permanently abandoned open source software deployments, but the trend
of using proprietary software might provide an opportunity for foreign SMEs to fill existing niches.
15 EVBN IT Sector
2.4
Piracy
While Vietnam's software market is considered to be a developing area, the piracy rate remains a
drag on the market at 81% in 2013, according to a press release from the BSA (Business
Software Alliance). Despite this, it leaves Vietnam off the list of the top 10 countries for software
copyright infringement, the piracy rate remains extremely high and above neighboring markets
such as India, Thailand and China.
APAC Piracy rate 2013
UNLICENSED SOFTWARE
INSTALLATION RATES
COMMERCIAL VALUE OF
UNLICENSED SOFTWARE ($M)
ASIA PACIFIC
2013
2011
2009
2007
2013
2011
2009
2007
Australia
21%
23%
25%
28%
$743
$763
$550
$492
Bangladesh
87%
90%
91%
92%
$197
$147
$127
$92
Brunei
66%
67%
67%
67%
$13
$25
$14
$13
China
74%
77%
79%
82%
$8767
$8902
$7583
$6664
Hong Kong
43%
43%
47%
51%
$316
$232
$218
$224
India
60%
63%
65%
69%
$2911
$2930
$2003
$2025
Indonesia
84%
86%
86%
84%
$1463
$1467
$886
$411
Japan
19%
21%
21%
23%
$1349
$1875
$1838
$1791
Malaysia
54%
55%
58%
59%
$616
$657
$453
$311
New Zealand
20%
22%
22%
22%
$78
$99
$63
$55
Pakistan
85%
86%
84%
84%
$344
$278
$166
$125
Philippines
69%
70%
69%
69%
$444
$338
$217
$147
Singapore
32%
33%
35%
37%
$344
$255
$197
$159
South Korea
38%
40%
41%
43%
$712
$815
$575
$549
Sri Lanka
83%
84%
89%
90%
$187
$86
$77
$93
Taiwan
38%
37%
38%
40%
$305
$293
$227
$215
Thailand
71%
72%
75%
78%
$869
$852
$694
$468
Vietnam
81%
81%
85%
85%
$620
$395
$353
$200
Other AP
91%
91%
90%
91%
$763
$589
$303
$56
TOTAL AP
62%
60%
59%
59%
$21041
$20998
$16544
$14090
Source: BSA Global Software Survey
16 EVBN IT Sector
In 2013, the Copyright Office of Vietnam reported that software piracy continued to decline, but
remains a serious issue. The software piracy rate has declined from 90% to 81% from 2014 to
2013. Currently Vietnam is aiming to reduce the software piracy rate to 55% in a few years. (55%
is the regional average for South East Asia, according to US's Business Software Alliance, BSA).
Despite a poor record with pirated software in Vietnam, a considerable part of the market, mostly
big players from government and business sectors, are shifting towards using licensed software,
which provides opportunities for software producers and services. While some companies and
organizations are using well-known branded software, for others, the lower cost of solutions
provided by smaller enterprises still remains the main point of attraction. Moreover, the growth,
and therefore, diversification of various markets will support the niche of customized software,
which gives opportunities for SMEs.
17 EVBN IT Sector
03 IT SERVICES AND E-COMMERCE
3.1
IT Services
Internet services market (2011 – 2018)
e/f – BMI estimate / forecast Source: BMI
Although still rather small, the IT services
segment is expected to be the
outperforming sector for the medium term.
Spending is estimated to be US$660mn by
the end of 2014, up 17.3% from
US$563mn in 2013. Growth is forecasted
to continue over the medium term with a
sectorial CAGR of 16.5% from 2014
to2018, and value of the market expected
to reach US$1.2bn in 2018. The growth of
Vietnam as a destination for business
processes and software development
outsourcing is expected to be a strong
driver over the medium term.
Research by the Ministry of Information and Communication (MIC) in 2013 found that the
domestic IT services market had strong growth potential, while outsourcing demand is also
projected to grow rapidly. The MIC identified the following areas as the most potential growth
drivers: system integration and development and data services. Due to the sharp increase in
available data and information, companies require enhanced services ranging from simple
(migration to new systems) to more complex demands such as business intelligence. Looking
further ahead, the MIC expects infrastructure leasing, training, consultancy, website development,
e-commerce, app development and data services to be services in highest demand in the future
Growing demand for digital infrastructure projects in segments such as banking, telecoms, energy
and government attracts global IT service leaders such as IBM to invest in Vietnam. Large local
organizations such as FPT have also targeted this opportunity and announced plans to compete
with established multinational vendors and offer high quality outsourcing services. To conclude, it
is possible to say that the demand for IT services is currently growing and generating opportunity
for providers.
18 EVBN IT Sector
3.2
Internet Development
One of the biggest supporting factors for the growth of all IT-related subsectors is Internet
penetration, therefore it is important to highlight the status of the Internet in Vietnam. As per the
latest data from the government, the Internet reach in Vietnam stands at 44% (about 63%-70% in
urban areas and between 25-35% in rural areas) according to data of 2014).
In comparison with other countries in SEA, Vietnam is considered to have high Internet
penetration. For example, the latest data by August 2014 disclosed by US Census Bureau,
InternetWorldStats, CNNIC, IAMAI shows the following figures for Vietnam’s neighboring
countries: Thailand (35%). Malaysia (65%), Philippines (36%), Hong Kong (73%), Singapore
(73%), China (44%). Among all of the countries mentioned, Vietnam is currently showing the
fastest pace of Internet penetration’s growth.
44% INTERNET REACH AMONGST THE HIGHEST ANYWHERE
Internet now represents a majority of the consuming population
National
Urban
Rural
44%
63%
30%
Source: Government Statistics, GroupM and Epinion Data
19 EVBN IT Sector
The age profile of Internet users is quite comparable to neighboring countries. It shows that in
Vietnam mostly young people are engaged with Internet usage (15-34 years old, 74%), while
senior citizens account only for around 26% of the whole population of “netizens”. The distribution
reflects the general age profile of Vietnam as a relatively “young” country. Furthermore, senior
citizens are generally more conservative when it comes to new technologies which holds also true
for Vietnam.
Age profile of ASEAN netizens
% of Online Population by Age
Vietnam
42%
Thailand
Singapore
Philippines
Malaysia
Indonesia
32%
45%
24%
29%
27%
26%
43%
16%
22%
27%
25-34
35-44
45-54
7% 4%
17%
31%
37%
8% 5%
14%
25%
40%
15-24
14%
8%
9% 5%
10% 6%
19%
8% 4%
55+
Source: comScore
20 EVBN IT Sector
According to the latest surveys, 92% of all Internet users go online daily. Around 87% of
Vietnamese “netizens” go online to update information, such as reading of news, 73% use social
networks or forums, 71% access e-mail, 20% shop online.
Frequency of Internet using in Vietnam
92%
Daily
3%
2%
3%
Weekly
Monthly
Other
Source: Survey of E-commerce and Information Technology Agency 2013
Purposes of accessing Internet
Update information
87%
Participate in forum or SNS
73%
Access email
71%
For work purpose
70%
Watch movies, photos, listen to music
66%
Research & study
58%
Play games
Buy & sell online
Others
37%
20%
60%
Source: Survey of E-commerce and Information Technology Agency 2013
21 EVBN IT Sector
Laptops and mobile phones continued to be the most popular devices to access Internet in big
cities (60% and 50% respectively), while in rural areas hourly Internet-cafes are still popular
seeing the lower PC penetration among those who earn less. On the other hand mobile Internet
due to its affordability (a price for unlimited 3g package can be around US$2 per month) is quite
popular among Vietnamese as well.
Devices to access Internet
60%
50%
46%
12%
Desktop
Laptop
Mobile
phone
Other
devices
Source: Survey of E-commerce and Information Technology Agency 2013
22 EVBN IT Sector
Vietnam is also considered to be an attractive market for online gaming in the region, currently
dominated by Chinese and Korean online games. The country is becoming a more popular
destination for investors in the online gaming industry. For gaming clients only (games installed on
computers and played online), the market value for 2012 was estimated at approximately
US$220mn which grew to US$291mn in 2014, illustrating a growth of 32%.
Vietnam’ biggest online gaming provider – VNG Corporation – currently has around 30 million
users on its gaming platform, social network, other services and mobile applications, which is
roughly one third of the population. The company’s distribution network reaches the majority of
the country’s 15,000 Internet cafés, which serve a gaming community by distributing VNG’s
prepaid gaming cards. With its estimated revenue of around US $100mn in 2012, VNG’s market
share of the Internet market in Vietnam was roughly 50%.
All in all, the rapidly increasing Internet penetration in Vietnam, supported by growing interest in
social networking, e-commerce, gaming and other online activities, makes Vietnam a country with
considerable potential for new players in e-commerce and related segments.
23 EVBN IT Sector
3.3
E-Commerce Sector
Together with Vietnam’s growing economy, consumer spending in the e-commerce sector also
increased. In 2013, VECITA, the Ministry of Industry and Trade collected data from the biggest ecommerce enterprises in Vietnam. The survey’s result revealed that the estimation of ecommerce sales per online buyer accounted for approximately US $120 in 2013.
Vietnam B2C E-Commerce sales estimates 2013
Vietnam
population
2013
90 mil. people
Internet users
penetration (%
population)
E-commerce
sales per online
buyer (USD)
Online buyer
penetration (%
internet users)
B2C E-commerce
sales (USD)
36%
$120
57%
$2.2 billion
Source: Survey of E-Commerce and Information Technology Agency
Despite the fact that the average spending is still very low, a survey among Internet individual
users in Hanoi and Ho Chi Minh City revealed that in 2013 around 57% of them purchase items
online at least once, which proves the interest among Vietnamese consumers for considerably
new ways of shopping.
24 EVBN IT Sector
The most favorable items to purchase were fashion, cosmetics products, technology and
electronic products, household products, air tickets and others.
Which of the following purchases are you planning to make online over the
next six months? (November, 2014)
31%
16% 16%
13%
Source: Epinion Online Consumers Research 2014
25 EVBN IT Sector
5%
5%
Other
Online media (software,
apps...)
Mobile phone, tablet
Household care
Groceries
3%
Health & Beauty
2%
Hardcopy books
2%
Event, cinema tickets
Computer, laptop
Clothing, shoes & accessories
Car, motorcycle & accessories
Cameras, camcorders
Baby goods & toys
`
Entertainment & hobbies
5%
4%
9%
7%
Travel reservation (flight,
hotel...)
8%
7%
TV, DVD players, audio
systems…
11%
Which method of payment do you prefer
for online purchases? (November 2014)
3%
2%
In Vietnam, most online shoppers still prefer to
pay in cash (56%), but the figure is becoming
smaller year on year supported by a growing
penetration of debit and credit cards.
20%
While Internet penetration grows rapidly along
with the economy, the rate of Internet users
purchasing items online is predicted to increase
significantly by 2015.
56%
11%
32%
Cash on delivery
Credit/Debit card
Other
Bank transfer
Mobile top-up
I do not buy online
Source: Epinion Online Consumers Research 2014
Vietnam B2C E-Commerce sales forecasts 2015
Vietnam
population
2015
93 mil. people
Internet users
penetration (%
population)
45%
E-commerce
sales per online
buyer (USD)
$150
Online buyer
penetration (%
internet users)
B2C Ecommerce sales
(USD)
Growth
level
Rate
High
70%
$4.3 billion
Moderate
65%
$4.08 billion
Low
60%
$3.7 billion
Source: Forecasts by E-Commerce and Information Technology Agency
The table shows that online sales are expected to increase in 2015 in comparison with 2013.
Given that the estimations hold true, Vietnam’s B2C e-commerce sales will reach around $4 bn.,
which is almost twice as much as in 2013 ($2.2 billion) according to E-commerce and Information
Technology Agency.
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Of the 20 most popular and well-known e-commerce websites in Vietnam (such as Lazada,
Vatgia, 123mua, and others) as well as dozens of small enterprises, 78% of them were
established out of their own budget, 14% from the state budget and 8% of them received foreign
investment capital.
Investment capital for E-Commerce websites
Source: Survey of E-commerce and Information Technology Agency 2013
To summarize, despite the relatively low online sales, it is fair to assert that the e-commerce
sector will continue to grow due to improvements in Vietnam’s economy, high rate and pace of
Internet penetration, as well as consumers’ growing spending supported by interest towards
online purchases.
27 EVBN IT Sector
04 INDUSTRY TRENDS AND DEVELOPMENTS
Government IT Strategy
In 2012, the Vietnamese government unveiled ambitious plans for developing the country's IT
industry. According to a draft plan released in 2012 by the Information Technology Department of
Vietnam's Ministry of Information and Communications, the government pledged to invest US
$111,6mn from the State Budget in the ICT sector by 2020. The government's strategy for IT
development focuses on four major areas: enhancing IT application, developing the local IT
industry, developing ICT infrastructure and improving employee recruitment strategies in the IT
industry. The government also hopes to attract US$5mn of foreign investment into the IT industry
by 2015, supported by a strategy of revising some tax policies in order to incentivize both foreign
investors and local producers.
IT Education Standards
Currently the government of Vietnam is considering setting up new IT skills standards to raise the
skill level of IT engineers to international levels. While the lack of international-standard qualified
engineers is seen as a bottleneck for the continuous development of the IT sector, Vietnam plans
to have 1mn of qualified IT engineers working in the industry by 2020.
Since the number of applicants for ICT specializations had dropped considerably (by around 1015% each year since 2009) due to the economic recession and the attraction of other disciplines
like economics, banking and finance, the government is looking forward to improve IT training
quality and the curriculum of many ICT training programs by narrowing the gap with improved
educational programs. The strategy includes to import international training programs with the
support of the “advanced programs” project of the Ministry of Education and Training, joining with
foreign counterparts in various forms, like opening foreign training schools in Vietnam that provide
international and regional IT training curricula (ACM, ASEAN, etc.), or franchising.
28 EVBN IT Sector
Cyber Security
Vietnam faces serious cyber security threats, which could become a real issue as it seeks to
promote the outsourcing and software development industries. In 2013 it was reported that the
government was investing US$42mn in the creation of the National Centre for Network Security
Technology. The center will be managed by the Ministry of Public Security, the Government
Secrecy Committee and the Ministry of Industry and Trade. The government also updated the
Law on Information Security, which closed for public comment in 2013. It is likely to improve the
cyber security environment including combating attacks originating in Vietnam.
Government Cloud
Various government departments have started to utilize cloud services by implementing new
standards and policies, with a major objective being to make cost savings and enhance resource
efficiency. Since 2011 the MOET instructed local education and training departments to shift to
cloud computing. The ministry views the cloud model as suitable for the education sector and with
the potential to have significant cost benefits. The Ministry of Natural Resources and the
Environment claimed to have made 20% investment cost savings after an initial period of
virtualizing the IT infrastructure. The ministry has now put in place a strategy to further utilize
cloud computing in IT applications and is putting in place standards and policies to enable this.
29 EVBN IT Sector
05 BARRIERS AND REGULATIONS
Taxation policies in IT
Software businesses are offered exemption from corporate income tax for four years, and there
are preferential personal income tax policies for those who directly participate in software
production, as well as value added tax (VAT) discounts on software products. These tax
exemptions apply to all companies regardless of their ownership type.
However, it is important to keep in mind, that the aforementioned taxation policies do not imply
that a small or medium company can directly benefit from them. This is because the actual
practice and application of these policies can be timely due to excessive red tape and inherent
corruption issues, both of which are common in Vietnam. Moreover, regulations can change fast
in Vietnam.
Software Security Certification
In 2013, the Director of the Information Technology Department of the Ministry of Information and
Communication, stated that only around 1.5% of software companies in Vietnam have ISO/IEC
27001:2005 certificates for information security. The certificates are important for IT firms,
business and institutions applying IT solutions. So far only banks, finance and data centers have
focused on information security certificates. The primary barrier to achieving information security
certificates is the fee required, as well as the requirement that all software must have licenses, to
be eligible. The government is offering a total disbursement of VND 20bn for firms obtaining
ISO27001 certificates for information security. The government has also moved to tighten
enforcement of copyright regulations. Decree 47.2007.NP-CP, which became effective in 2009,
allows for a penalty of up to VND 500mn for instances of software piracy.
30 EVBN IT Sector
Labor shortage in the industry
Despite the fact that Vietnam is considered to be a country with one of the cheapest labor costs
among the region, experts in the industry are stating some negative changes. Currently, there are
two main trends regarding labor in the IT industry: IT specialists’ wage expectations are growing,
coupled with an increasing desire to work in a world-renown company. On the other hand, decline
in the quality of IT personnel has been noted along with a drop in students choosing IT-related
fields of study. Manpower shortages are becoming a challenge for domestic software businesses.
They lack experienced engineers who are capable of mastering modern technologies as well as
having good foreign language skills. For example, FPT Corporation plans to recruit more than
1,000 new employees annually, but in fact it usually falls short by about 300 IT workers a year.
Governmental preferences towards local IT enterprises
In 2013 a draft resolution from the Ministry of Information and Communications proposed
allocating at least 2% of the state budget towards boosting the IT sector each year. The fund will
be used to help Vietnam catch up with regional rivals and move up the value chain in areas such
as outsourcing and software development. The MIC claims that the development of the IT sector
will make a positive contribution to Vietnam’s economy overall through the modernization of
various industries, and thereby improve international competitiveness.
Vietnamese players are boosting their businesses
There are opportunities in Vietnam to reduce outsourcing in the IT industry and focus on made-inVietnam software products, supported by the government and local companies’ business
strategies. Some domestic software businesses are boosting investments in research and
development to create new products and technologies.. Creating their own products will obviously
yield higher earnings and drive the companies up the value chain.
Local clients’ preferences
The preference of local clients for large and well-known brands and companies, the process of
convincing Vietnamese clients to contract a SME can be a challenging on might pose challenges
to new and relatively small companies In spite of this, expertise in niche areas or services may
help a small or medium company to succeed in this market.
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