The COVID-19 pandemic has created waves around the globe since its onset almost one year ago. The mass effect on the economy has been detrimental to many countries and slowed traditional business operations. For those that were able to ramp up their digital footprint, the viral outbreak could well be a positive catalyst for change, especially when it comes to investment trends. 

This move to digital enterprises is impacting on the Vietnam funding landscape in particular. Its funding rate dropped by only 22% and the 2021 trends aren’t painting a bleak picture either—as long as it can maintain its status as one of the fastest-growing startup ecosystems in the ASEAN region.

The tech startup ecosystem in Vietnam has significantly benefited from the young, tech-savvy population and growth of the middle-class. In 2019, Vietnam’s startup scene raised $861 USD million and was on route to becoming a huge player in the venture capitalists investments game. Despite the COVID-19 snag, the trends for the next 12 months show they are still in the running to be at the top of the region’s investment list.

Critical factors for growing investment

Because of the need for social distancing and other pandemic suppression efforts, digitization has become central to how well a business continues to function right now. Cashless payments and consumer trust were on the rise in Vietnam before the pandemic, but now these have found further impetus in the need for change, rather than just being fun innovations.

Logistics is another vital area of interest in Vietnam as the country’s eCommerce scene begins to grow. According to reports, 40 active startups are aiming to provide e-logistics such as grocery delivery services and online store-to-door purchasing.

The rise of manufacturing for digital products such as phones, electronics, and computers has also played a vital role in Vietnam’s overall revenue during 2020. The boom in high-tech product creation is showing no signs of abating thanks to investments such as China’s USI wearable electronic circuit boards, Japan’s automotive system electric wires for cars, and Taiwan’s Victory project that makes computers.

Growth in the face of a pandemic

Considering that Vietnam experienced some small growth in revenue during the pandemic while many other countries experienced decline shows of its resilience. It also displays a promise of what future investment opportunities could hold for the up and coming tech scene in the country.

The Vietnamese government has played its part in encouraging economic growth and has been pushing exports, investments, and consumption to help get things back on track. A handful of recently-implemented government policies could help keep the upward trajectory trending. These include the EU-Vietnam Free Trade Agreement and the EU-Vietnam Investment Protection Agreement. 

A global campaign to help lower tariffs and introduce a better way to trade among countries, The Regional Comprehensive Economic Partnership, was just signed on November 15. The most significant free trade agreement to date and the largest of its kind in the world, it could spell massive success for Vietnam’s GDP.

The Vietnamese government has also taken things a step further for low-revenue producing businesses by giving companies with less than $8.8 million USD in revenue a reduction on corporate taxes of up to 30%.

Addressing challenges

While it is currently good news for the region when it comes to large scale investments and the tech industry, there are some challenges that Vietnam has to face before it can get its expanding digital economy truly off the ground. The World Bank estimates that the GDP will fall to 1.5%. This drop would be a steep fall from the 7% it has been in recent years. If the forecast is accurate, Vietnam will see a lower rate of growth than it has in decades. It will still be ahead of its regional rival Thailand, which is likely to see a significantly larger decrease in GDP.

The unemployment rate in the region has felt the pandemic impact, and now sits at the highest it’s been for the last ten years. Unfortunately, even those still lucky enough to have jobs have received fewer hours and lesser pay which could cause the rate to climb even higher. This change in fortune could be a disaster for a country in need of a bustling economy to continue to develop.

With investments in the region poised to make a comeback after the modest fall this year, the Vietnam funding landscape is one to watch closely. The 2021 trends see the ASEAN region coming out on top, but only time will tell which of the countries in the area will thrive rather than just survive. One thing is for sure—Vietnam is pulling out all the stops to try to return to its pre-COVID economic growth rate of 6.5%, and by encouraging recent investment trends, it might just achieve its goal.