Vietnam has gotten attention since last year when it announced that it would be one of the twelve signatories to the Trans-Pacific Partnership (TPP), a trade agreement ending over 18,000 tariffs between the participating countries.
However, one other part of this country that deserves equal attention is its tech scene. Attracting copious amount of foreign investments into its local startups, Vietnam offers all the conditions needed to successfully hatch multi-million dollar tech firms.
The Best Frontier Market for Startups?
Vietnam has taken the world by storm, the most striking example being the simple yet highly addicting game Flappy Bird that was created Dong Nguyen. This brought the spotlight of the world to shine on Vietnam even though this was not the start of the country’s association with technology.
Vietnam has long been home to manufacturing plants from the world’s top tech firms such as LG Electronics, Panasonic, and Toshiba. However, in recent years, the country has also seen itself transform into the Southeast Asian production hub for the South Korean electronics giant Samsung.
With the country’s recent integration into the AEC, TPP, and increased presence of international tech firms, more investors are looking to put their money into the local startup scene, hoping their bets will pay off.
Around March of 2016, Goldman Sachs and Standard Chartered managed to raise US$28 million for a local e-payment operator with over 2 million customers and incredible transaction growth of over 30%. Silicon Valley-based venture capitalist 500 Startups has also announced that it will create a US$10 million fund focused on Vietnamese startups.
It seems like these investors are betting on hitting another goldmine, and it is highly probable that they will strike gold considering that most of Vietnamese startups are in e-commerce. This is a sector which, despite nearly no federal support provided, grew an astounding 35% last year to US$4 billion, with even more ample room for growth.
Some may still be confused as to how Vietnam has come this far in terms of in the field of technology. InvestAsian finds that there are several factors contributing to the advances the country has made over its neighbors.
First of all, as previously mentioned, Vietnam is part of the new trade agreement just recently established which gives the country a competitive edge over its neighbors, such as Laos and Cambodia.
Second, the country produces some of the highest-performing computer scientists in the world, according to many sources. A software engineer from Google mentioned that Vietnam has the highest-performing computer science students, with many of them acing the company’s interview questions on problem solving. The Organization for Economic Co-operation and Development ranks the average Vietnamese teenager to be on a higher level of proficiency in terms of math and science.
Third, the country offers a cheaper labor cost than even China. As manufacturing costs rise in China, more large multinational companies flee to countries such as Vietnam, the Philippines and Cambodia. This is a huge incentive for potential investors.
Fourth, the market for tech products is there. Many investors note that the one striking property of Vietnam is the young tech-savvy population with a median age of 30. This means that the acceptance rate of tech products is much higher than what can be found in a lot of other countries.
Last but not least, the country has a great deal of startups in comparison with the population. In fact, concentration-wise, Vietnam has a higher ratio of population to startups than Indonesia, China, and India.
With arguably the fastest growing tech scene in Asia, Vietnam looks to draw an increasing amount foreign investment over the next decade.