When international technology companies think of setting up operations in Asia, countries like Singapore, Hong Kong, India and China have generally been the favourite places to consider.
While Singapore has been a popular choice for business and tech hubs in Asia, due to its geographical location, good infrastructure and stable government, the cost of running a business in Singapore has been rising steadily. So too are the rising costs in China and India where labour costs are no longer considered as good a value as in the past, forcing companies to rethink their Asian expansion strategy and where to set up shop.
One very overlooked Asian country is Vietnam, but that is starting to change. The Vietnamese digital economy is estimated to hit US$33 billion in value by 2025.In addition to large technology companies such as Samsung and Nokia moving some operations to the country, Vietnam’s start-up sector is also booming.
Vietnam’s lure as a tech hub
The Vietnamese government’s push into the technology sector and its adoption of Industry 4.0 across all industries, shows the country’s firm belief that the tech sector is an important industry for the country’s future economic growth. The country has also come a long way in terms of having a good infrastructure and affordable Internet connections.
We look at why Vietnam is the next big startup hub in Southeast Asia
Attractive tax incentives for foreign investors
A big lure for foreign investors or companies looking to set up operations in Vietnam are the lucrative tax incentives offered by the Vietnamese government.
The Vietnamese government prioritises investment in IT and incentivises investment in this space. Technology companies are eligible for Corporate Income Tax (CIT) incentives which include 15 years of CIT at 10 percent, four years of CIT exemption and 50 percent tax reduction for the next nine years, which are very attractive propositions for international companies looking to set up operations in the country.
Overseas technology companies setting up an office in Vietnam can also receive additional incentives such as land rent exemption for IT businesses inside tech parks built by the government, further helping to reduce their expenses.
Young population and highly educated workforce
Vietnam has a population of 97 million, with the median age in Vietnam standing at 32.5 years, making it an attractive place to do business with a large workforce to tap into.
Vietnam’s three largest IT universities are also based in the cities where the country’s technology hubs reside and provide a growing population of young coders, engineers and entrepreneurs driving economic growth and technological innovation for the country.
Another attractive feature of Vietnam is that English is taught as a second language in schools across the country. The country has also implemented OECD guidelines to the education sector with respect to English language skills of high school and university graduates ensuring that there is a relatively high level of English literacy among the younger population, thus making it an easier transition for international companies to set up operations.
100 percent foreign ownership
Unlike some Asian countries , where foreign companies can only have a maximum of 50 percent ownership with the other half needing to go to a local partner or company, Vietnam offers international companies setting up operations in the country, 100 percent foreign ownership, making setting up shop in Vietnam a very attractive proposition.
Things to consider in your expansion strategy
Expanding your business to a new country is a big step and there are a many things to consider and do before you execute this. Below are some tips that you should consider when expanding to overseas markets:
- Do your due diligence
Research, research, research. I can’t emphasise this enough.
Prior to setting up operations in a new market, it’s important to spend time in the country you want to break into. An information-gathering trip can be a focal point to develop a plan for moving forward. This generally isn’t a quick process and may take time, so be patient.
Get a good feel for the business landscape that you might be venturing to. This includes gathering information and visiting potential customers, distributors, OEM partners, and even competitors, where possible.
- Respect the culture
Always be mindful of the cultural and language differences within a country. While the majority of your workforce might speak English, there might be slight nuances that you might not be aware of.
Getting a local person’s perspective to understand how the culture, language and even taste can affect how you do business, is a valuable insight you’d want to get before you embark on this journey.
- Adhere to compliance and regulatory issues
Learning the different tax codes, business and compliance regulations and labour laws of a new country you’re looking to set up your business in, is crucial to the success of your business in that market.
Don’t be afraid to rely on an expert to help guide you through the beginning phases. There are lots of things to understand and take in, so having a local expert on hand means you don’t have to reinvent the wheel and can hit the ground running.
Expanding to new markets can be a daunting experience, but if you do your research, make sure you have the right checks and balances in place, not to mention try and immerse yourself in the culture and language, it can be a very rewarding experience. In the coming years, we can expect to see Vietnam grow from strength to strength as a tech powerhouse in Asia.
About the author
Drini Mulla is the CEO and co-founder of DEK Technologies, a technology outsourcing company that provides software and hardware development services with offices in Australia, Vietnam, Italy and Sweden. Drini has over 20 years’ experience in the global technology sector with a background in engineering.