Michael Sainsbury
October 23, 2015

Vietnam tech sector in full swing

Vietnam tech sector in full swing

Hanoi harbour during National Day: Vietnam is far less daunting than China with few cities to pick from

In all the hoo-ha over the opaque (and problematic Trans Pacific Partnership trade deal between 12 countries), a rather sizeable nugget of good news for Australia, and particularly its technology sector, appears to have been missed.

Apart from tiny Brunei Darussalam, Australia has free trade agreements with the other regional nations involved in the deal: Japan, South Korea, Malaysia, Singapore and New Zealand.

Now for the first time, Australia has a free trade deal with one of Asia’s most promising and increasingly technology-heavy economies: Vietnam.

It is the world’s second most populous Communist-run nation after China – the country has an estimated 93.5 million people, but gets surprisingly little media attention beyond its growing strategic importance in the context of the territorial disputes over the South China Sea.

The TPP will go some way to changing that. According to the Eurasia Group, Vietnam is poised to be one of the biggest winners from the deal and the biggest in Asia with the agreement potentially boosting GDP by 11 per cent by 2025.

Vietnam’s exports will grow by between 28 per cent and 37 per cent in the same period, according to various estimates.

TPP signatories accounted for 39 per cent of Vietnam's total exports and 23 per cent of imports in 2014. 

As companies continue to move factories to the low-wage countries, Vietnam will surely move close to the top of everyone’s lists, after the TPP deal that will give Vietnamese electronics and IT sector access to the wealthy US, Japanese, Canadian and Australian markets in a way that Chinese and South Korean based factories will not.

As the Fitch Ratings agency noted “the potential positive effect on trade could be transformative,” following Vietnam’s recent FTA with the European Union.

The deal comes at a time when Vietnam’s technology sector is moving into full swing. Already Samsung, Intel, LG and Microsoft – to name just a few of the world’s big tech firms - have been early movers in commissioning major manufacturing plants in Vietnam and others are set to follow.

Vietnam’s tech sector is very much mobile centric, and as the mind-blowing success of the seemingly innocuous mobile phone time-passer Angry Birds demonstrated, ecosystems around major investments do not take long to take root although there have been legal obstacles. The government has vowed to overcome these in its bid to achieve its aim of having 5,000 local technology companies by 2020.

There’s a nascent start-up scene emerging, too.

Like other Southeast Asian nations, Vietnam, despite its authoritarian government, is far less daunting a prospect that China. 

There’s no bewildering number of big cities to pick from, there are just three: the capital Hanoi, commercial capital of Ho Chi Min City (Saigon) and emerging central tech hub Da Nang – which has the added benefit of being an established beach resort.

Some companies prefer to use Singapore as a base or at least as a place to incorporate an Asian company. But as any expatriate will tell you, there is nothing like being there and getting your hands dirty to enhance your chances of success.

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