Country watch: Vietnam

Date: 27.04.2004

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The IT market in Vietnam

General

2002 saw good growth for Vietnam’s IT market, which for the first time reached the US$400 million milestone, twice as much as in 1998. The growth rate for last year was 17.6%, a remarkably high rate compared to the 13% rate of the previous year. However this was still short of the strong growth rate of previous years. It took two years to add US$100 million to the IT market (from US$300 million to US$400 million), while before that (1998-2000), it took just two years to jump from US$200 million to US$300 million.

The five leading IT companies that provide IT products and services to the Vietnamese market in 2002 got a total revenue of US$150 million, accounting for 37.5% of the total IT market of products and services. Of these, FPT, the leading company provided 24%.

Software and services market

The market for software and services was worth US$75 million in 2002, accounting for 18.75% of the total US$400 million IT market value, a lower percentage compared to 20% in 2001. This ratio was lowered than the world average and revealed that there was an imbalance between investing in hardware and software and that software copyright violations were still high.

The state of the software industry

The number of entities registering to do service and software production in Vietnam is now 2,500, of which it is estimated that 400 are really doing business in this field.

Thanks to preferential policies for service and software production (corporate income tax is exempted), the number of businesses registering in the field of software production increased quite fast. In the first six months of 2003, HCMC had 250 new businesses registering to engage in IT trading and production, of which 90 wanted to do service and software production (36%). It is estimated that in 2003, there will be 200 new entities engaging in software business and in the whole country, there will be 350 new entities.

HCMC Computer Association estimated that 40% of them (150) will not be able to operate, 25% will have some operations and then suspend themselves, 35% (some 120) will be listed as “viable” software companies.

The number of people engaging in software production has increased to 8,000 from 6,000 after one year. They created a total value of service/products worth US$75 million, or a productivity of US$9,400 per person per year.

At present, Vietnam has 8 dedicated software parks that are operational, of which there are 3 in HCMC and the rest are in Hanoi, Haiphong, Can Tho, Danang and Hue. Except for Quang Trung Software Park and SSP, most of the other dedicated software parks are not running efficiently as they do not attract a lot of offshore investment and have not been able to help companies renting space within these parks.

Doing subcontract works and producing software for export have shown encouraging signs. However, the number of entities able to achieve annual software export turnover of more than US$1 million is about 10. Some Vietnamese software and service programs have been highly valued by foreign partners such as TMA, Fsoft, CDiT and others.

At present, only one out of all Vietnamese software companies has the CMM (level 4) certification since 2002. None of them got this certification during the past 12 months. Twelve software companies obtained ISO 9000 certificates and during the first six months of 2003, another company (Softech Danang) got this certification.

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