Vietnam’s tech sector headed for big things — if the government lightens up

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Vietnam’s tech sector is on its way up, and some investors say the potential is enormous. But the country is at a crossroads: if the government relaxes its overbearing, regulation-heavy attitude, big things could happen. If not, the industry may never reach its full potential.

The rise of Vietnam’s digital industry comes amid a surge in Internet-based startups, Internet access and use of social media in Vietnam and throughout Southeast Asia. Vietnam is the region’s fastest growing smartphone market – mobile phones are how many Vietnamese access the Internet – and that market saw a 27 percent increase in demand from last year, according to GfK, a German market researcher. The country has an educated pool of local talent, and overseas investors are also eyeing the country’s tech market closely.

But despite such promise, Vietnam ranks no. 148 in global economic freedom, and critics fret over what they call a worrying array of regulations on the Internet industry, such as requirements imposed last year requiring licenses and stipulating that content administrators posting information on news sites and social media have university degrees. There is also a draft law that would require companies like Google, which provide services in Vietnam but have no office in the country, to have representation in Vietnam.

Venture capital expert  Jenny Q. Ta (shown in the photo above), who has plans to begin assisting Vietnamese startups make the move to the U.S., told Borderless that Vietnam is governed by “jungle laws.” That means laws can change suddenly, according to the whim of officials, she said. “There are no concrete rules. What may be today, could easily change tomorrow,” said Ta, who grabbed headlines in the U.S. by becoming a millionaire entrepreneur in the late 1990s, at age 27.

Indeed, the government’s attitude toward helping the tech industry is inconsistent at best. On the one hand, the government understands the value of Internet innovation in terms of adding to GDP, as well as the impact of that on public sentiment. This is why major Vietnamese conglomerates – which are close to the government – are also hiring multinational agencies for advice and design, Anh-Minh Do, a Vietnam-based editor for Tech in Asia, told Borderless. But on the other hand, an increased amount of regulations makes it difficult for Internet-based businesses to plan for the future, because no one knows what new rules will come out next, investors said. The government may want the Internet economy to thrive, but at the same time is suspicious of free speech, the linchpin of so many successful online ventures, such as Twitter and Facebook.

Perhaps the most poignant example was the site HaiVL, a humor site that had over 4 million Facebook followers but was shut down by the authorities. The site, which allowed people to share humorous photos, had allegedly allowed followers to post and share what authorities deemed inappropriate content, such as “offensive” stories about the country’s national heroes.

Yet, there are signs that the government may at least be amenable to listening to the tech community’s concerns. Last month, Deputy Prime Minister Vu Duck Dam met with the most prominent leaders in the country’s tech ecosystem, who made requests including more transparency for legal issues relating to startups, reported Tech in Asia. Still, the outcome remains to be seen, and there are no guarantees that the country’s government will suddenly shift to a more open, less restrictive stance. Change, if it does happen, may take some time.

At any rate, the government has not blocked platforms like Facebook, as China has, and the country boasts 30 million monthly active users per month –nearly a three-fold rise since late 2012. Vietnam’s  Prime Minister Nguyen Tan Dung said earlier this year that it would be “impossible” for the government to block Facebook, which now boasts 1 billion users per day worldwide. Vietnam does not have the capacity – and currently, at least, does not have the political will – to put up a massive, China-style firewall that would block certain sites and check who is viewing what.

Ta said that in Vietnam, the popularity of U.S. tech brands and products could influence the country’s government.

“The bottom line is, U.S. brands are very trendy and hot in Vietnam for the working class and the wealthy,” she said.

“But although this is true, there is no guarantee that just because these brands are well-liked, that the government are going to shift their status quo to allow more economic freedom,” she added.

Vietnamese certainly would rather choose e-commerce sites like Amazon and Ebay over that of Alibaba, for example. Or they would rather buy an iPhone over that of a Chinese made phone, like XiaoMi for example, she said.

Ta’s e-commerce and social networking platform, Sqeeqee, was launched earlier this year. As of June, the company has surpassed approximately 200,000 to 250,000 users. Out of these, an estimated 10 percent to 12 percent are from Vietnam or of Vietnamese ethnicity, she said.

 Aside from trends, practicality drives many tech customers, as many Vietnamese do not trust their own homegrown shopping websites to safeguard their credit card information. According to a Nielsen study released last year, credit card security is a major concern of several Southeast Asian countries, and 55 percent of Vietnamese said they do not trust giving their credit card information online.

That, Ta says, is one reason why her online platform Sqeeqee – which is both a social networking site and an e-commerce site – is getting noticed in Vietnam.

Sqeeqee would not be blocked in Vietnam, as it would bring economic development to the country, she said.

“Everybody needs e-commerce. Vietnam has tons of people opening a profile on Sqeeqee and they add stuff that they’re selling, from Vietnam. We are in America, we go into Sqeeqee and search my e-commerce platform and see all these unique products. So why would Vietnam block a platform like mine? It brings income and revenue into that country,” she said.

Ta said Vietnam still needs foreign capital, and some observers said that could drive the country to relax restrictions on the tech industry a bit more. In sharp contrast to China, which heavily backs companies like e-commerce behemoth Alibaba, Vietnam cannot afford to go it alone. That means, whether Vietnam’s government likes it or not, it will have to loosen the regulations if it wants its up-and-coming tech sector to be able to compete globally, said experts and observers.

Ta said there’s a phenomenal amount of future growth potential for overseas investors.

“However, the only path that Vietnam would need and must head towards is where China has been the past five to ten years,” she said. “Vietnam needs to tap into the tech industry, Wall Street, and make major investments in startups, just as China has launched a number of such companies on America’s financial boulevard – Wall Street.”

 

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