Jeff Paine, managing director at the Asia Internet Coalition, talked with VIR’s Thanh Tung about opportunities for international investors in the Vietnamese market throughout 2019.
How do you think Vietnam measures up to other Asian nations in information and communications technology (ICT)?
Vietnam has grown to become one of the most attractive investment markets in the region across several sectors, but the ICT industry and its digital economy stand as the most promising. From growing e-commerce, online gaming, travel booking, and offline-to-online platforms such as ride-hailing and food delivery, Vietnam’s digital economy continues to thrive, with its gross merchandise value being 4 per cent of the country’s GDP, higher than any other country in Southeast Asia.
The ICT sector will continue to be a driving force for growth and transformation in the Vietnamese economy, especially in delivering Industry 4.0 ambitions, as this will secure the country’s strong competitive regional position in the coming decades.
What opportunities can you see in Vietnam for overseas investors to deploy ICT solutions and technology to help make the economy smarter?
Leading global technology companies have traditionally chosen Vietnam as a place to build large manufacturing facilities that supply equipment and products to the world, creating more jobs, developing human capital with technical expertise, and creating a more digital-savvy society.
Today we are beginning to see an expansion from these investments focused on manufacturing hardware to developing software and more application-based services. These foreign funds are critical to Vietnam, especially for the transfer of knowledge and bringing in global best practices that are crucial for the development of a local yet world-class ICT industry.
In recent years, the Vietnamese government has taken steps to attract local talent back home. This has enabled a burgeoning entrepreneurial scene, where startups and small businesses that leverage technology have emerged.
The opportunities from this are enormous, as the availability of local tech talent in a market of nearly 100 million people will create a foundation upon which international technology companies can invest and develop innovative products and services that can serve both local and regional markets. Grab, which opened a research and development (R&D) centre in Ho Chi Minh City in 2017, is an example.
However, Vietnam’s attractiveness to the international tech industry in the long term will depend on whether the right policies are in place to support the development and growth of the digital economy.
These include allowing Vietnamese entrepreneurs and businesses to leverage global Internet platforms and services to grow, and setting up proper regimes for data management, privacy, and cybersecurity, which will enable data to flow freely across borders, while ensuring that risk is managed.
In 2019, Vietnam will officially launch 5G services. How important is this to potential investors?
Vietnam was one of the last countries in Southeast Asia to roll out 4G services. As 5G requires a significant amount of investment, plans to launch within the year are certainly ambitious, but will be a step forward for the development of new and cutting-edge services that depend on nearly instantaneous data communications.
Vietnam’s foresight and national strategies around Industry 4.0, smart cities, startups, and the National Innovation Network Programme will be enabled by state-of-the-art 4G and next-generation 5G, so this is an important piece of the nation’s economic transformation and growth plans.
However, the digital economy is not just about infrastructure and hardware. It is critical that equal focus is given to ensuring that the right policies and smart regulations are in place to support the development of an open and innovative digital ecosystem that will attract foreign investment.
What challenges do you foresee for investors from infrastructure and the business and investment climate?
The biggest challenges that they face in Vietnam are in navigating policies that govern the Internet economy today. In line with its Fourth Industrial Revolution ambitions, Vietnam is keen to capitalise on the opportunity presented by the digital economy.
However, the rush to regulate data flows and mandate local data storage through the newly-enacted Law on Cybersecurity will impact both foreign investment and the ability of local startups and small businesses to grow using global technologies such as cloud computing.
Under commitments of new-generation free trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA), Vietnam will open its doors wider to foreign investors in the ICT industry. Meanwhile, startups are surging. How will the deals impact this?
FTAs such as the EVFTA and the CPTPP, which has just come into effect on January 14, will help Vietnam strengthen its economy, attract foreign investment, and boost exports. By Vietnam’s own estimates, GDP will grow by $1.7 billion and exports by over $4 billion by 2035, up 1.32 per cent and 4.04 per cent, respectively.
That said, the impact on Vietnam will largely depend on how the country addresses future challenges and opportunities. Startups, in particular, stand to benefit the most from knowledge, expertise, and technology transfer from global groups coming into the country and partnering with them in business.
Continued growth and foreign investment is necessary for startups to flourish, be competitive, and for the country to continue its rapid upward economic trajectory and achieve its goals in the digital economy.
In order to develop an e-government in favour of enterprises and people, Vietnamese Prime Minister Nguyen Xuan Phuc recently established a national committee on e-government. What should the committee focus on in order to operate effectively?
According to the Vietnam E-commerce Association, this market in the country is valued at more than $5 billion, and in the next four years this could double. The impact of the Internet on the economy is estimated at 2-3 per cent of GDP, while the figure is expected to rise to 40-50 per cent in the future.
In short, Vietnam has a lot to gain. If the country wants to capitalise on the opportunities that a robust digital economy brings, the committee will need to carefully consider and recommend guidelines and policies that are clear and can be implemented to bring about long-term positive benefits for the country and its people.
Laws take years to draft, and are difficult to roll back, while technology often evolves far too quickly for the legislative process to catch up.
In order to future-proof new policies and regulation to a certain extent, the committee should look to larger and more developed economies for how they developed their digital ecosystem, and look at ways of collaborating and engaging with industry and other stakeholders to develop legislation that is clear, consistent, and continues to support the growth of the Vietnamese digital economy.