Vietnam Rolling Out Digital Economy Strategy

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By Lien Hoang

Sept. 23 – Last month, several Vietnam Communist Party apparatchiks joined a delegation to the U.S. to learn about startup ventures. Linh Han, project manager of Vietnam Silicon Valley, said that some of the party members initially appeared “skeptical” of what they were seeing and hearing from their U.S. hosts. But then they visited accelerators in Silicon Valley, he said, and by visit's end all of the state officials in the group had been converted.

“They saw how new companies, young startups are built in the U.S. and what impact those companies already have in the ecosystem,” Han told Bloomberg BNA. “That made them very happy and interested.”

Young companies are important to Vietnam, where 90-95 percent of businesses are small or medium-sized. They're now part of a broader, emergent strategy by the government to encourage startups and e-commerce with funding, legislation, mentorships and other support that authorities hope will strengthen Vietnam's economy overall. Blending free enterprise and central planning, the communist leadership wants businesses to innovate, but it also wants a hand in how they do that.

Vision for 2020

Policymakers are rolling out a national strategy to push more citizens toward a digital economy. A draft prime ministerial decision seen by Bloomberg BNA sets targets for 2020, including an online presence for 60 percent of the country's businesses. The draft also says in the next five years, 80 percent of companies should allow customers to order through mobile apps or internet sites, 30 percent of the population should be shopping online and electronic payments should be available for 70 percent of utilities and at all supermarkets.

“The internet and e-commerce need to be a strategic choice for companies to enhance their competitiveness,” said Tran Huu Linh, director of the Vietnam E-commerce and Information Technology Agency under the Ministry of Industry and Trade. “So now e-commerce plays a meaningful and important role both for the macro economy and for individual businesses.”

State Funding

On one of his frequent visits to Ho Chi Minh City to meet tech companies, Linh told Bloomberg BNA that so far this year, the state has doled out $1 million to startups. The program lets new companies apply for up to 70 percent of their capital needs from the government.

Linh's work is part of a 16.5 million-euro project, funded mostly by the European Union, to cut poverty and develop the economy through e-commerce. That's in addition to the $3 million the Ministry of Science and Technology used to create Vietnam Silicon Valley, which Han said helps startups by linking them with venture capitalists, offering mentors and training government officials.

Han said Vietnam is also investing in tech entrepreneurs through a $100 million loan from the World Bank and a separate initiative backed by Finland called the Innovation Partnership Program.

“In the last two years, the government has spent a lot of effort to promote the startup ecosystem and innovation in Vietnam,” Han told Bloomberg BNA.

Foreign Links

Any attempts to boost financing would be welcome by Nguyen Tuan Minh Hien, head of marketing at Gamebank, an e-retailer for games. He suggested the government set up meetings to introduce foreign investors and other venture capitalists to domestic firms.

“To be honest, my personal feeling is that those opportunities are currently going to the ‘big guys,' not to small and medium enterprises or startups,” Minh Hien said by e-mail.

He also would like authorities to facilitate innovation by lowering tariffs on machine imports. Minh Hien said Vietnamese companies could use high-tech equipment from abroad to do research and keep up with global advancements in technology.

Imports are a challenge for Zalora, too, according to Jose Finch, managing director for the fashion e-retailer. He told Bloomberg BNA that customs can slow down e-commerce because it takes so much time and money to get products tested by inspectors. Finch recommended the customs department fast-track importers that have internationally reputable brands and good track records.

‘Trust of Customers’

Perhaps a larger barrier standing in the way of web businesses is customer confidence. Shoppers worry that it's not safe to pay companies electronically, so 73 percent of e-retailers use cash-on-delivery in Vietnam, according to a survey released in December by World Bank financing arm IFC. Most Vietnamese don't shop online at all, some fearing they'll order a product but receive something defective. Finch said it doesn't help that there's such a huge range of online vendors, including informal merchants who use Facebook to sell their wares.

“This makes customers not trust e-commerce as much as in other areas of the world,” Finch said in an interview at his office, just outside downtown Ho Chi Minh City. “So I think the government has been trying to push in this sense, trying to promote e-commerce, and try to gain some more trust of customers.”

Linh, from the e-commerce agency, agreed the state should do more to raise awareness among consumers so they'll consider online businesses safe. He said Vietnam is also working to protect intellectual property rights, create a national management system for e-billing, prepare students for the digital economy, and pass its first regulation on mobile apps and mobile commerce.

The draft decision that outlined goals for 2020 makes clear these are priorities for the Southeast Asian nation. Online business, the draft says, is an important way for Vietnam to “increase its competitive capacity amid international integration; strengthen its ongoing industrialization; and modernize the country.”

To contact the reporter on this story: Lien Hoang in Ho Chi Minh City at correspondents@bna.com

To contact the editor responsible for this story: Joseph Wright at jwright@bna.com