Vietnam’s Tech Industry is Booming
Vietnamese employees are finding new opportunities embedded in the digital world as their workforce is integrated into French IT company, Linkbynet in Ho Chi Minh City. A comparative decade ago, apps were primarily developed in California’s Silicon Valley, but now these digital innovations are being churned out by Vietnam’s booming startup sector, an industry spearheaded by enthusiastic local techies trained overseas but now opting to return home in search of opportunities.
Digital Transformation as the Centerpiece
In 2020, the Vietnamese government announced its national strategy on digital transformation which aims to expand the digital economy’s share of gross domestic product from 14% currently to 20% by 2025. This would be instrumental for the Southeast Asian nation as it has set its sight on becoming a high-income economy by 2045. According to the World Bank, continual 10% expansion in digital sectors will yield monetary gains over 2021-45 in excess of US$200 billion, an amount equivalent to the country’s current GDP. This expansion would set the stage for officials to lay the groundwork to support tech entrepreneurs and boost innovation in science with plans to spend 1% of GDP on scientific research.
Investor Interest and Support of Startups
Vietnam’s startup scene drew significant investor interest in 2022, ranking third in terms of deal count in Southeast Asia and fourth in deal value, according to a recent report by venture fund Do Ventures and the National Innovation Center, a government unit under the Ministry of Planning and Investment. Notably, the report revealed a dip in the total value of investment in Vietnamese startups, totaling only $634 million in 2022, a 56% year-on-year fall from the record high of $1.4 billion in 2021. This, despite the fact that fintech, retail, health care, and payments remained the most in-demand sectors for funding.
Significant Startups in Key Sectors
Digitalization was identified to be crucial for agriculture, one of the country’s most important economic sectors. The Ministry of Agriculture and Rural Development in 2022 announced plans to build smart rural areas by 2025, focused on improving production efficiency and the introduction of specialized digital infrastructure for farmers. This shift towards digitalization created opportunities for startups like Koima, an agritech startup aimed at helping small-scale farmers increase their income, transform their traditional farm to agroforestry, which improves biodiversity, and gain access to financing without high interest rates through its crowdfunding platform.
Buzzworthy Sectors for Investors
Speaking to CNBC, local investors identified their areas of focus, which range from retail to logistics and emphasize that health care, food and logistics, including transportation and delivery solutions are particularly ripe for technology disruption due to soaring consumer activity from Vietnam’s expanding middle class.
Challenges and Opportunities
However, the influx of capital into the digital tech field is accompanied by several structural obstacles that could limit growth going forward. Regulatory framework, limited investment in research and development by large corporations and a scarcity of skilled professionals were flagged as potential challenges limiting the potential for cross-industry collaboration and innovation. Nonetheless, investors remain optimistic about future opportunities in the startup market in Vietnam and have identified the potential for the VC market to flourish again in the coming years.
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