Key Industries to Watch – Technology News

As Vietnam transitions from a low-tech manufacturing base to a more service-driven economy, its information technology (IT) sector is rapidly emerging as a strong player in the global market. With the IT industry receiving significant interest from both domestic enterprises and international technology vendors, Vietnam is now seen as a formidable competitor in IT services alongside nations like China and India. This shift has been driven by the rise of Industry 4.0, with Vietnam embracing advanced technology and digitization across sectors. For investors seeking high-growth opportunities in Southeast Asia, Vietnam’s IT sector offers a compelling case.

In this article, we explore the five IT sub-sectors currently driving growth in Vietnam and examine the government’s supportive measures that continue to fuel expansion.

1. Fintech

Vietnam’s fintech market has seen exponential growth, driven by the country’s burgeoning middle class, rising internet penetration, and youthful population. By 2020, this sector was projected to generate $7.8 billion in revenue. With over 120 companies in this space, Vietnam’s fintech industry spans services from digital payments to wealth management and blockchain.

The digital payments segment dominates the fintech landscape, with apps like MoMo, Moca, and ZaloPay gaining wide popularity. These mobile payment platforms are addressing the unbanked and underbanked populations, offering an accessible, cashless alternative in a country where cash has traditionally been the dominant transaction method. Peer-to-peer lending (P2P) is also on the rise, with Tima, Growth Wealth, and Trust Circle leading the market, providing accessible credit options outside traditional banks.

Blockchain and cryptocurrency represent the third rapidly expanding segment within fintech. Companies such as TomoChain and Kyber Network have emerged as key players, capitalizing on blockchain’s potential for faster, more secure transactions. The government’s openness to blockchain was underscored when Vietnam hosted its first international blockchain conference in 2018, positioning itself as a pioneer in Southeast Asia’s blockchain ecosystem.

2. Artificial Intelligence

Artificial Intelligence (AI) in Vietnam, though still developing, has demonstrated strong potential across diverse applications. AI technologies are increasingly integrated into sectors such as human resources, education, healthcare, agriculture, transport, and e-commerce.

The conglomerate FPT Corporation exemplifies AI adoption, using smart traffic systems in Ho Chi Minh City to manage urban congestion. Viettel Group, another major Vietnamese company, applies AI to endoscopic procedures, enhancing healthcare services. Viettel also utilizes AI to combat cybersecurity threats, highlighting the technology’s importance in both public and private sectors.

Government support has further boosted AI’s prospects. With Resolution No. 50-NQ-TW, Vietnam has committed to raising the proportion of high-tech businesses to 50% by 2025. This policy seeks to attract foreign direct investment (FDI) in advanced technology and Industry 4.0 applications, promising continued growth for AI.

3. E-commerce

Vietnam’s e-commerce industry is poised to be Southeast Asia’s third-largest market by 2025, following Indonesia and Thailand. E-commerce activity is particularly robust in Hanoi and Ho Chi Minh City, with these cities contributing 70% of total national sales. This leaves room for growth in rural markets, which, thanks to strong internet connectivity, are ripe for e-commerce penetration.

Vietnamese platforms such as Shopee, Sendo, and Tiki compete with international giants like Lazada, attracting a broad consumer base across age groups. Social media platforms, notably Facebook and Instagram, have become informal marketplaces where small businesses and individual sellers reach customers directly.

Despite this growth, challenges persist, especially around logistics costs and customer trust. Over the past four years, the sector attracted over $1 billion in investment, underscoring investor confidence despite these obstacles.

4. Software Outsourcing

Vietnam’s software outsourcing industry has gained a strong foothold, emerging as a cost-effective alternative to outsourcing powerhouses like China and India. In 2018, Vietnam’s software industry generated $8.8 billion in revenue, driven by high demand for outsourced software development services from international firms.

The Vietnamese government actively supports this industry through policies that encourage the establishment of high-tech parks and provide incentives for outsourcing companies. Da Nang, for example, has become a prominent software outsourcing hub, especially for Japanese businesses seeking affordable, high-quality solutions.

To expand Vietnam’s position as a global outsourcing destination, further development is required in English proficiency and scalable infrastructure. However, with government-backed initiatives and a young, tech-savvy workforce, Vietnam is well-positioned to grow in this area.

5. Education Technology

Vietnam’s education technology (Edtech) sector attracted $55 million in investment in 2018, as private and public sectors alike recognized the potential of tech-driven learning solutions. With a large K-12 population and a strong cultural emphasis on education, the Edtech industry has ample room for growth.

Vietnamese startup Everest Education exemplifies success in this sector, receiving a $4 million investment from a Hong Kong-based firm. Companies like Violen.vn, Hocmai.vn, and Topical are leveraging technology to offer personalized, interactive learning experiences to students across the country.

Foreign investors from countries including Japan, Singapore, and South Korea are increasingly interested in Vietnam’s Edtech potential, seeing opportunities to capitalize on both domestic demand and a receptive market for innovative education solutions.

Government Initiatives and Incentives for IT Growth

Vietnam’s government has played a proactive role in fostering IT industry growth through a series of incentives and supportive policies. The country offers IT companies corporate income tax (CIT) exemptions for up to four years, followed by a 50% tax reduction for an additional nine years, and then a 10% CIT rate for 15 years—significantly lower than the standard 20% rate. Similar incentives apply to companies involved in computer programming, which also benefit from a 0% value-added tax rate on their services.

Additionally, Resolution No. 41/NQ-CP provides a 50% reduction in personal income tax for workers in the IT sector, attracting talent and incentivizing foreign professionals to work in Vietnam. High-tech parks are being developed in cities like Da Nang and Ho Chi Minh City, with land rent exemptions and streamlined administrative procedures, making them attractive hubs for IT companies. The government’s goal to integrate Vietnam into the ASEAN Smart City Network further reinforces its commitment to digital transformation.

Building a Skilled IT Workforce

Vietnam is steadily working to address the talent gap in the IT sector, with universities now producing over 25,000 technical graduates annually. The government’s ambitious target to develop one million IT workers by 2020 reflects its commitment to fostering a highly skilled workforce capable of sustaining long-term growth in the sector. This influx of trained professionals, combined with increasing English proficiency, addresses one of the key challenges previously faced by foreign firms operating in Vietnam.

Despite these positive developments, challenges remain. Retaining local talent, improving English proficiency to meet international standards, and developing large-scale IT outsourcing capabilities are critical to Vietnam’s continued success in this field. However, with both the public and private sectors actively investing in skills training and technology adoption, Vietnam’s IT workforce is poised for improvement.

Conclusion

Vietnam’s IT sector is on an upward trajectory, driven by substantial government support, a dynamic workforce, and rapidly growing sub-sectors such as fintech, AI, e-commerce, software outsourcing, and Edtech. By embracing Industry 4.0 and establishing itself as a member of the ASEAN Smart City Network, Vietnam is positioned as a key player in Southeast Asia’s digital economy.

For investors and technology firms seeking competitive markets with high growth potential, Vietnam offers a compelling proposition. With continued investment, regulatory support, and a commitment to skill-building, Vietnam’s IT sector is set to expand further, making it a key industry to watch in the coming years.

Source: http://techblog.s3corp.com.vn/?p=2289