Many leaders still don’t think of Vietnam as a particularly tech-savvy country. Read the article and you might get a pleasant surprise.
As nations strive to harness the transformative potential of advanced technologies, Vietnam stands at the precipice of a promising opportunity.
Having recognized the critical role of technology and innovation in driving economic growth, the Vietnamese government for nearly two decades has been investing heavily in STEM education while putting great emphasis on developing policies that appeal to tech businesses.
With minimal investment barriers, robust incentive schemes, and a workforce rich in skilled technologists, Vietnam has gradually morphed into a captivating investment hub.
In 2023, Vietnam witnessed a significant surge in registered FDI inflows, reaching a total of $36.6 billion, marking an impressive 32.1% year-over-year increase as reported by the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment.
Vietnam’s allure as an investment destination is further bolstered by the emergence of such influential engineering organizations as LG, Apple, Samsung Display, Nokia, IBM, and Microsoft in the country’s high-tech markets.
Nation’s consistent pursuit of ushering in a new era of innovation has established the digital technology industry as a cornerstone of the Vietnamese economy, propelling the country toward becoming a digital powerhouse.
Figures from the Ministry of Information and Communications show that, in 2023, Vietnam’s information and communications sector generated revenue exceeding VND3.7 quadrillion ($154 billion), marking a 1.49% year-on-year growth.
Presently, Vietnam is home to more than 70 000 digital-related companies mainly distributed in the most important economic birthplaces of the country – Hanoi, Ho Chi Minh, Hue City, and Da Nang City.
Several of these technology firms have already established themselves as key global players. At the end of 2021, two Vietnamese startups, Sky Mavis and MoMo, achieved unicorn status, joining the ranks of previously recognized unicorns VNG (2014) and VNLife (2019).
Vietnam’s Rise: A Promising Haven for IT Outsourcing
Vietnam’s commitment to fostering innovation and creativity across the tech sector has also not gone unnoticed by the global outsourcing industry.
Over the last decade, an increasing number of businesses looking to delegate their IT projects are turning their attention to this once titled by Forbes “small but mighty outsourcing powerhouse” in the Asia-Pacific.
Statista says that revenue in the Vietnamese IT outsourcing market is expected to surpass US$698.90m in 2024.
With a strong focus on innovative software development, digital content, and business process outsourcing, the nation is the top alternative to traditional IT outsourcing destinations, such as India, the Philippines, or China, which have become oversaturated.
Still, what exactly sets Vietnam apart, and why brands seeking to build cutting-edge software systems should be particularly keen to look towards this innovative haven?
A Closer Look on Vietnam’s Thriving Tech Sector
Human Capital and Skills
Vietnam excels in the IT sector with a highly skilled workforce, evident from its top-ranking software engineers and international programming awards.
With a strong emphasis on STEM education and a vast pool of information technology engineers graduating annually from over 400 local world-renowned universities like Duy Tan, Ton Duc Thang, and Vietnam National University in Ho Chi Minh City, the country boasts a flourishing tech landscape.
Efforts to enhance English proficiency further elevate Vietnam’s competitiveness and appeal to global businesses.
In a survey conducted in June 2021, it was revealed that English stood out as the top preference among foreign languages, with 86% of the participants actively studying it.
As of today, Vietnam is in the top 10 regions in Asia with the highest English proficiency rankings.
Additionally, the young workforce’s adaptability and low salary expectations contribute to Vietnam’s attractiveness for tech firms looking to thrive and expand.
The average salaries of Vietnamese developers are much lower than any of their global counterparts. For instance, as of April 2024, a developer in the USA earns an average monthly salary of $7,475, which is twelve times higher than the average monthly salary of a Vietnamese programmer.
Developers’ salary by position in the IT industry (relatively up to 3 years of experience working in specific technology)
Source: 2023 Vietnam IT Market Report by TopDev
Along with that, Vietnamese employees tend to exhibit strong loyalty towards their employers. Such devotion stems from the strong emphasis on family bonds, leading professionals to remain close to home instead of seeking opportunities abroad like colleagues from India, the Philippines, and Malaysia.
Government Support for the Digitalization
Vietnam is undergoing an ambitious digital transformation journey, driven by the Information and Communication Infrastructure Master Plan (2021-2030), with a Vision to 2050. Issued as Decision 36/QD-TTg, this detailed plan includes the development of high-speed internet, specialized IT parks, and green data centers, with a focus on implementing extensive cybersecurity measures to establish the country as a leading center for network security in Asia by 2030.
Preceding efforts to accelerate digital transformation comprised Decision No. 392/QD-TTg (2015), Decision No. 149/QD-TTg (2016), and Directive 16/CT-TTg (2017).
Notably, the national digital transformation index witnessed a remarkable 48% surge from 2020 to late 2023, highlighting Vietnam’s swiftly advancing digital transformation journey.
Furthermore, in the 2023 Global Innovation Index (GII) by the World Intellectual Property Organization, Vietnam moved up two spots to secure the 46th position among the 132 economies featured, showcasing its progress in innovation.
Ranking of South and Southeast Asian countries by economic health driven by digitalization
Source: Robocash Financial Group’s research
Investment Opportunities
Due to its fast-growing economy, youthful and educated tech talents, many of whom are familiar with Western business practices and culture, lower labor costs compared to other countries, and favorable government policies, Vietnam is an appealing destination for tech investors looking for sustainable long-term growth opportunities.
With the country’s participation in more than 18 Free Trade Agreements (FTAs), Vietnam benefits from trade privileges in the Asia-Pacific region, ASEAN, Europe, and beyond, granting investors expanded access to international markets and supply chains. Additionally, Vietnam’s membership in the WTO and compliance with key global Intellectual Property Protection agreements demonstrate its dedication to harmonizing with worldwide legal standards, safeguarding investor interests and reinforcing intellectual property rights.
Numerous multinational tech conglomerates, such as Samsung, LG, and Foxconn, have selected Vietnam as a manufacturing base. Additionally, global corporations like Panasonic, Bosch, and General Electric have established local research and development facilities, indicating that Vietnam is not only a manufacturing center but also a hub for innovation and marketing.
A report from the National Innovation Center, a government department under the Ministry of Planning and Investment, and the venture fund Do Ventures, reveals that in 2022, the nation experienced the most significant growth in the digital economy among Southeast Asian countries, with a 28% rise from 18 billion in 2021 to 23 billion.
FDI inflows in Vietnam (in billion USD)
Source: Investment Outlook, Vietnam 2024, by ARC GROUP
Strong Startup Ecosystem
For more than ten years, Vietnam has been proactively fostering a robust startup ecosystem by implementing policies and initiatives to drive growth and entrepreneurship, which appears to be working.
A deeper delve into Vietnam’s startup landscape reveals a rich tapestry of rising tech stars and success stories.
Notable names like VNG Corporation, Vietnam’s first unicorn, which initially focused on gaming before expanding into cloud computing solutions and services, along with e-commerce giants like Buy2sell, Tiki, and Sendo, show the dynamic nature of the industry.
Furthermore, companies such as online education platform Topica, blockchain gaming giant Axie Infinity, and digital health pioneer Vinmec represent the entrepreneurial energy flourishing within Vietnam’s tech landscape.
Green Transition
Following years of economic expansion, partly at the expense of the environment, the Vietnamese government is now placing greater emphasis on sustainable practices, with cleantech innovation emerging as a key focus area.
Policies such as the Resource Mobilization Plan (RMP) for the Just Energy Transition Partnership and the National Strategy on Green Growth Strategy have set ambitious targets for increasing the share of renewable energy in the country’s energy mix and reducing carbon emissions, which confirm Vietnam’s commitment to digital transformation that aligns with green growth principles.
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If you want to explore how custom software can elevate your business, reach out to us. We’re here to answer your questions and discuss how we can collaborate to boost your business operations.
