Enduring the hardest-ever period, international investors in Vietnam have been heading to technology-driven new business models during 2020 in a bid to weather the storm of COVID-19, expecting brighter prospects in the new year on the back of new motivations and plans.
Rather than manufacturing or real estate, technology-backed models have become the kings of interest among businesses and investors in different sectors over the year, ranging from e-commerce and education to healthcare and banking.
Gomi, a South Korean-run technology startup founded in Vietnam in recent months, is becoming popular in a country home to thousands of South Korean fashion lovers, and where spending on fashion is still high despite the global health crisis.
That is the analysis of Hong Sun, vice chairman of the Korea Chamber of Business in Vietnam, which represents about 7,000 South Korean enterprises here. Sun added that COVID-19 has been preventing businesses from direct meetings, so instead they have been hosting online conferences and discussions, with the trend prompting new online-based business approaches.
“Investing in technology startups has become a new business model among South Korean investors in Vietnam. In the past, no South Korean investors could find such a business in this country,” he told VIR.
Together with Gomi, other South Korean-founded technology startups in Vietnam are making moves such as Ok Xe and Go to Joy.
“Businesses like these have been gaining good initial results are expected to create a fresh and promising atmosphere among South Korean investors in Vietnam,” Sun noted.
As the coronavirus tore through industries this year, a number of companies came to a screeching halt, with the rest having to think about new changes to survive – and technology-based business has become the most-sought after solution.
South Korea is not alone as many others from Europe, Japan, Singapore, and elsewhere have been anticipating new opportunities from the country’s acceleration of digital transformation, with ICT now playing an increasing role in the country’s economic development.
According to the Ministry of Information and Communications, the country’s total ICT revenue reached over $112 billion in 2019.
Evidently, Japanese companies are wasting no time in Vietnam. According to the Japan External Trade Organization (JETRO) in Hanoi, digital transformation is a keyword for the whole region, and there are many players in the space – from multinational corporations and domestic small- and medium-size enterprises to international startups.
“The next significant trend is that such enterprises with superior technology could invest in the country,” elaborated Takeo Nakajima, chief representative of JETRO Hanoi. “We help companies in Japan and Vietnam meet and collaborate through different channels, including business matching, seminars, and one-on-one introduction. Vietnam has a unique potential with both a manufacturing base and ICT capability,” he said.
Meanwhile, European companies seem to be focusing on embracing new-found chances for trade and investment. According to Nicolas Audier, chairman of the European Chamber of Commerce in Vietnam (EuroCham), Europe contains some of the world’s leading digital companies, and EuroCham members have been active in the fields of digital infrastructure, ICT solutions, and smart cities during the year.
Ericsson and ABB are some of the outstanding examples of how EuroCham member businesses have made huge steps in these fields. Specifically, Ericsson is moving with its ambitious 5G-backed plans in Vietnam. Other European companies are preparing to increasingly benefit in 2021 and beyond on the back of the EU-Vietnam Free Trade Agreement.
The landmark agreement now entering into force can be considered a “roadmap to recovery” since falling tariffs and growing market access are expected to boost trade and increase the flow of foreign direct investment (FDI) into 2021 and throughout the next decade.
Outwith the prospects for EU groups, businesses closer to home are also dipping their toes into this country’s markets. Singapore’s ShopBack website and mobile app in August made its official debut in Vietnam, bringing about a smarter way for local online shoppers. The following month travel startup TASTECH, also from the city-state, officially launched an online booking platform featuring a curated collection of luxury hotels across Southeast Asia, including Vietnam.
In the banking and financial sector, meanwhile, fintech is rising with the United Kingdom in particular recognising the advantages here. As a leading global fintech hub, British companies are keen on plans to expand investment into the sector in Vietnam.
With growing interest, sci-tech and ICT have continued to be among the most attractive sectors to international investors and businesses in Vietnam during the year, despite the pandemic. As shown in statistics from the Ministry of Planning and Investment, Vietnam’s total registered FDI in sci-tech and ICT hit about $1.25 billion in the first 11 months of 2020.
Policies make impact
Vietnam has made huge strides in accelerating its national digital transformation this year by issuing a number of policies in this field.
In fact, the country’s tech market has been a magnet for international businesses and venture funds even before 2020. According to Singaporean-based VC firm Cento Ventures, for the first time, investment in Vietnamese startups has even exceeded Singapore. Funding for Vietnamese-based startups accounted for 18 per cent of the total investment in the region, or $741 million, in 2019 – a huge jump from a year earlier when it only accounted for 4 per cent, or $287 million.
This trend has now been further reinforced with the approval of the National Digital Transformation Programme by 2025 with vision towards 2030, and other targets.
Under this programme, the country has set the target to be named among the 50 leading countries in e-government by 2030; for the digital economy to make up 30 per cent of GDP; and for people to be able to enjoy and experience smart services in healthcare, education, banking and finance, transport, environmental protection, and energy supply.
In line with approval, ministries, agencies, and provinces have been deploying digital transformation by building new policies and developing infrastructure to tap into their own advantages and specific characteristics.
In addition, this is also backed by the country’s new FDI attraction strategy with high-tech as a focus to offer incentives and supporting policies, as well as the Politburo’s Resolution No.52-NQ/TW issued in 2019 on guidelines and policies to proactively participate in Industry 4.0. This includes the establishment of the Vietnam National Innovation Centre, which will offer special incentives for investment projects at the facility.
Industry insiders said that all of these together become new motivations for companies, prompting the business community to venture further into the technology market. This transformation is expected to continue at a faster speed, creating the biggest-ever impacts along the three pillars of digital government, digital economy, and digital society.
These new motivations, such as the National Strategy on the Fourth Industrial Revolution – with a focus on investing in selected tech for Industry 4.0, developing infrastructure and e-government, and building on the performance of tech-related commitments in free trade agreements – are expected to continue drive a new business and investment wave in the months to come.