Vietnams Rising IT sector: Strength of the People

Another article I recently wrote on the rise of the IT sector in Vietnam and the support structures and general business culture surrounding it. The original article was published on channelnewsasia.com

HO CHI MINH: Vietnam, for the last few years, has seen remarkably strong, continuous growth, averaging 6.15 per cent each year since 2000.

Urbanisation and a growing middle class are fuelling economic growth and driving the creation of new commercial opportunities. 50 per cent of the population have access to the internet and more than a third use smartphones.

At the same time, Vietnam has become increasingly attractive for new investors, and local talent is developing rapidly, even as the country has to compete against Singapore, Hong Kong and other regional stars.

In particular, Vietnam’s software industry is poised to become the Silicon Valley of Asia, especially through the aptly named US$1.5 billion project Silicon City, located just outside Ho Chi Minh City.

Indeed, Ho Chi Minh presents itself as the jewel in the crown of Vietnam’s success story.
As Vietnam’s largest and most progressive city, Ho Chi Minh is the engine of the country’s growth. At a growth rate of 8.5 per cent a year, Ho Chi Minh City has been transformed in the last ten years – with plans for a new airport in the pipeline in addition to a mushrooming central business district and a massive growth in waterfront developments.

The new metro system is also nearing completion, and will link the outlying reaches and university district to the centre and ease some of the traffic congestion around rush hour.

Ho Chi Minh City is also the epicentre of the start-up scene in Vietnam, where most of Vietnam’s 3,000 start-ups operate. In May 2016, early-stage venture fund 500Startups pledged a further US$10 million to their Vietnam fund. Other venture capital companies like CyberAgent Ventures and SeedCom are also active and investing in new firms.

The landscape of Ho Chi Minh City has changed vastly over the past five years, with old villas and historic municipal buildings replaced by sprawling construction zones. (Photo: AFP)

Ho Chi Minh has even produced one of Southeast Asia’s unicorns – game developer VNG which became the first Vietnamese technology company to hold an IPO in the US in June, and has more than 70 million users from Vietnam, Myanmar, Japan, South Korea and Malaysia on its chat app called Zalo alone.

How did Ho Chi Minh city get to where it is today, and what explains Ho Chi Minh’s phenomenal growth in the start-up scene?

YOUNG, AMBITIOUS AND WELL-EDUCATED

Ho Chi Minh’s start-up scene may involve new and emerging technology, but at its core is a story about people.

Over the past ten years, thousands of young, aspiring Vietnamese entrepreneurs have moved into Ho Chi Minh City to create their own start-ups – many of which are in developing tech solutions including e-commerce platforms, apps and games.

Coworking spaces and cafes also have sprung up all across the city to meet the demands of a class of entrepreneurs who network frequently and work in small groups without a dedicated office space.

The start-up scene owes its success in part due to the strong push by the Vietnamese government. Officials have promised financial support of US$90 million to more than 2,000 local hi-tech start-ups, and made plans to set up innovation hubs that provide training programmes, legal consulting and networking activities to connect start-ups with universities and research centres.

But the key differentiator that makes Vietnam's start-up scene particularly vibrant is the quality of the Vietnamese people working in that sector.
Vietnamese talent is internationally competitive, increasingly well-educated, mobile and tech-savvy.

Vietnam has a high literacy rate of 94.5 per cent and OECD studies have placed Vietnam 17th out of 65 countries on PISA tests. Government promises to improve the academic qualifications and business capabilities of its workforce seem to be bearing fruit. Education also continues to make up 20 per cent of government spending.

Vietnamese college and university students have been scoring very highly in internationally ranked tests in recent years, offering a pool of skilled labour for prospective entrepreneurs.

Many young Vietnamese are also sent overseas to study and return with grand ideas of starting their own companies. An estimated 21,000 Vietnamese students attended American universities last year, the sixth largest number of foreign students in the US.

The students we have encountered in our work in Ho Chi Minh are smart, bright and spunky, and achieve some of the highest grades worldwide in our tertiary education programmes across Asia, the Americas and Europe.

Vietnamese youth are also highly tech-savvy.
Of the 91 million population, 40 million are online, using Facebook, WhatsApp, and their own local social networks to communicate, socialise and sell. Teenagers' Facebook feeds are filled with gossip about local celebrities, and clothes and make-up being sold by friends on a small scale.

The young are intensely entrepreneurial and business minded, and many of them open small Facebook shops stocked with items bought on trips to Thailand or made at home, and then delivered around the city in person or by Grab bike courier. It’s not only Facebook; local networks such as Zalo are also immensely popular, with Zalo reaching 10 million users within a year-and-a-half of its launch.

Approximately 21 per cent of the country has a Facebook account. Despite government concerns over criticism and scrutiny of Vietnamese politics in previous years, Vietnam's public policy towards social networks and online communication is becoming more relaxed.

Unlike developed countries like Singapore, Vietnam is experiencing the dividends of a population boom. 70 per cent of the population of Vietnam is under 30, and Vietnamese youths are highly ambitious and internationally-minded.

They take ideas like the transport sharing economy Grab and Uber introduced, and try to implement them in a way more suited to the Vietnamese market. Given their abundance in Ho Chi Minh, scooters and motorcycles are shared instead. While the populace have taken smoothly to these apps, there have been tensions with the existing transport and taxi networks as older models struggle to adjust.

More than 40 years after the Vietnam War, Vietnam’s diaspora is also slowly returning.
Young and well-educated Vietnamese born overseas to parents who fled Vietnam after the Vietnam War – known as the Viet Kieu - are returning in droves and adding to the pool of talent.

Even though Vietnam is attracting ambitious young executives from all over Asia, many say they find it hard to compete with bright and savvy local talent. It is no surprise why.

Ho Chi Minh City in Vietnam has several hubs for graffiti and street art, including this collection of colonial buildings that were reportedly occupied by the CIA during the Vietnam War. (Photo: AFP/Hoang Dinh Nam)

STRONG FAMILY SUPPORT

Young Vietnamese are able to focus on building strong start-ups because they also enjoy family support: Vietnamese family units typically consist of three generations living in a single house. Without a pension system, children take care of parents in old age and grandparents provide childcare and support while young parents are out working.

This strong family nucleus has been a source of support and safety net for young Vietnamese executives. They can devote more time and energy to their businesses, secure in the knowledge that they can turn to their parents to manage the household and not worry about childcare.

In this respect, Vietnamese talent with families have a huge advantage over those in other countries, and even over expatiates living on their own in Vietnam.
BIG COMPANIES A CASUALTY

There is one downside to the growing start-up scene in Ho Chi Minh - scores of companies who employ local Vietnamese engineering talent become casualties in the fight for talent.

Indeed, talented young Vietnamese have become hard to retain in a competitive business environment. Despite the laws on minimum wages and social security, as well as ensuring that hired Vietnamese have sufficient commission, incentives and bonuses, most

They formed the charming backdrop to Graham Greene's sin-filled city in "The Quiet American" but Saigon's colonial buildings are fast disappearing, sparking fears the metropolis, now known as Ho Chi Minh, is losing its unique charm. (Photo: AFP/Hoang Dinh Nam)

The cycle usually starts after companies dish out an extra month’s pay to employees just before the Lunar New Year or the Tet holiday, usually in late January. With this bonus in their pocket, many do not return to work afterwards.

Attrition is highest after Tet. Data gathered by recruitment sites show 68 per cent of young local Vietnamese staff reported wanting to quit their jobs then.

SWEET SPOT

All things considered, Vietnam is in a sweet spot now. Its ease of doing business is on par with China and recruitment demand is up 32 per cent.

Strong growth is likely to persist. Vietnam’s economy could expand at an average of 6.3 percent in the next three years, with all categories of demand buoyed by strong foreign direct investment and manufacturing exports, according to the World Bank.

With a young, ambitious and business savvy-Vietnamese population, it is not hard to see why.

Stephanie Jones is associate professor of organisational behaviour at the Maastricht School of Management and Ho Chi Minh’s University of Technology’s School of Industrial Management. Rafael Masters is an MBA graduate at the same school and has lived in Ho Chi Minh City for the last nine years.

Originally Published: http://www.channelnewsasia.com/news/asiapacific/commentary-ambitious-and-smart-youths-in-ho-chi-minh-are-9113836