HO CHI MINH CITY (09/08/2000) - An injection of venture capital allied to a relaxing of restrictive regulations can initiate a chain reaction of growth in Vietnam's IT market, according to Don Lam, from the financial services group at PricewaterhouseCoopers LLP.
It is only through investment and technology transfer that Vietnam will be able to meet its ambitious growth goals for the IT industry. The challenges to growth are still such that investors here will need to be bold, and look at long-term advantage instead of short-term profit, Lam said in a presentation at Vietnam IT Week here Friday.
"Foreign direct investment and local IT expertise is still lacking, but there is a significant opportunity for investors, particularly in the software sector," Lam said. "Vietnam's software market grew by 45 percent last year alone, and is now a $54 million market."
The government plans for software to become a $500 million industry here by 2005, although analysts see $250 million to $350 million as a more achievable figure.
If there is enough funding for IT start-ups, that will increase the competitive environment and strengthen local IT companies. That success in turn will encourage people to train for IT careers, and as successes become more visible, attract even more investment funding, according to Lam.
But the process crucially depends on whether the government adopts a more market-friendly approach, in terms of deregulation and particularly taxation, Lam said.
"People think that Vietnam is a cheap place (for labor)," Lam said. "But when all the taxes are taken into account it is not that cheap to the employer -- not much more competitive than India."
Software piracy is also hampering the industry's development, causing revenue loss to local software developers as well as scaring off potential foreign investment, according to Lam. Vietnam's piracy rate is still around 99 percent, according to recent studies by the Business Software Alliance (BSA).
Internet access in Vietnam remains slow and costly, and the presence of a national firewall prevents many popular Internet-based business applications being used, according to Lam.
However, the signing of the trade agreement with the U.S. is meant to lead to liberalization of the telecommunications industry here by 2002, promoting competition and therefore improving service, Lam said.
"The government is looking at more private-sector involvement in the Internet market, and this sector will take off with the upcoming liberalization," Lam said.
National telecommunications monopoly Vietnam Posts & Telecommunications Corp. (VNPT) has said that the country need $15 billion to develop the domestic IT industry, well beyond the amount the government can provide.
"It goes back to whether there will be enough investment," Lam said. "Venture capital is the biggest thing in the U.S. for developing the IT industry. As far as I know, there is none in the Vietnam IT industry."