Vietnam — best outsourcing destination in South East Asia?
So why Vietnam? For starters, Vietnam is a very beautiful country with probably the best cuisine in South East Asia and has now become the eighth largest provider of IT services globally.
It is also home of a primary school curriculum were Vietnamese kids begin to learn basic programming when they are in their second Grade only. Google engineers who visited Vietnam in 2013 found that by the time the pupils are in third Grade, they get familiar with Windows and typing. Grade Four sees them begin programming in Logo, “starting with sequences of commands, then progressing to loops” and by Grade Five they are “writing procedures containing loops calling procedures containing loops”. The Google engineers found that Vietnamese Grade 5 students were performing at least on par with their grade 11 peers in the USA when given standard Google interview assignments to solve.
These trends continue in High School and University. The Vietnamese government wants to develop one million IT workers by 2020. As of November 2019, more than 25,000 technical engineers graduate from universities yearly. Tech giants like Samsung, Microsoft, LG, and Intel have all set up base of operation in Vietnam and getting an early grab on the top programmers coming out every year.
The government prioritizes investment in IT and incentivizes investment in this space. IT companies are eligible for a corporate income tax exemption for up to four years, followed by a 50 percent tax reduction for up to nine years. Subsequently, this is followed by a 10 percent CIT rate (compared to the traditional 20 percent for a period of 15 years). The government unveiled similar CIT incentives for computer programming activities as well, including a value-added tax of zero percent.
Vietnam’s IT growth is expected to remain intact growing approximately 30 percent a year. The government is keen to promote the application and development of IT and this is shown in its embracing of Industry 4.0 and the ASEAN Smart City Network. Resolution No 41/NQ-CP lays out specific preferential policies for the IT sector, including a 50 percent reduction in personal income tax for workers employed in the IT sector.
Areas where one can observe high growth is
- Fintech, where digital payments and Blockchain is winning traction. A rising middle class, growing internet usage, and a young population present a great combination for the Fintech sector to thrive.
- The artificial intelligence (AI) industry in Vietnam shows strong potential. While still developing, AI in the country has followed global trends in application to human resources, education, healthcare, agriculture, transport, and e-commerce.
- E-commerce. Vietnam’s e-commerce market could be ranked third after Indonesia and Thailand by 2025, according to the E-Business Index 2019 report by the Vietnam E-Commerce Association though Vietnam’s e-commerce activity is most active in Hanoi and Ho Chi Minh City. Sales from these cities account for 70 percent of the country’s total.
- Outsourcing. Vietnam has emerged as a much cheaper outsourcing destination compared to traditional markets, such as China and India, though more attention will be needed to improve English speaking skills to cater to global firms. Outsourcing firms with western tech leads working on the ground with Vietnamese developers is the winning combination for the time being.
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