Vietnam Joining Technology Race?

Could Vietnam become a high-tech powerhouse of innovation, luring international investment and vaulting the country up the development ladder?

The Ministry of Science and Technology is sponsoring a Silicon Valley Project aimed at pushing the country to be more than a simple producer of electronic parts (Intel has a US$1 billion plant in the country) to create a strong startup industry and innovative firms.

The recent success of Flappy Bird, one of the most downloaded apps ever, is regarded as evidence of Vietnam’s larger potential (despite its engineer deciding to take it off the market permanently).

The project’s mission statement is not dissimilar to the Communist Party’s mid-1990s ideas about the upcoming “knowledge era.” It includes US$400,000 for startup costs, to be allocated to incubation, acceleration, seed funding, and eventual exits, according to the Tech in Asia trade website.

”This is the time for Vietnam to join in the technology race. Countries which fail to change with this technology-driven world will fall into a vicious cycle of backwardness and poverty,” said a Vietnamese official.

The government-backed and sanctioned creativity and entrepreneurship has been praised, although it has also been pointed out how it may rather clash with many of the internet restrictions set out in varied laws such as Decree 72, passed last September, which makes it illegal to distribute any materials online that "harm national security” or “opposes" the government, limits users to "providing or exchanging personal information" through blogs and social media outlets, bans the distribution of "general information" or any information from a media outlet including state-owned outlets, and requires that foreign web companies operate servers domestically if they target users in Vietnam, according to a description of the law by Wikipedia

Of course Vietnam’s ministries don’t always march in sync and what the Ministry of Information and Culture believes to be good may clash with a more pro-tech Ministry of Science and Technology.

However, in addition to pointing out that US$400,000 is a minuscule amount of money to replicate a vast tech complex in California, Vietnam should also probably look at other countries that have tried to artificially stimulate Silicon Valley environments.

They are usually built around a free intellectual atmosphere, an efficient and rigorous copyright system, plenty of available capital, and are sited next to a great university or complex of them – such as Stanford, the University of California at Berkeley and San Francisco schools and neighborhoods. The complex surrounding the Massachusetts Institute of Technology and Harvard in the northeastern United States is another.

By contrast, those countries without these ready advantages don’t do very well. Malaysia’s highly touted Multimedia Super Corridor, a hobbyhorse of former Prime Minister Mahathir Mohamad, has faltered, unable to attract either significant startups or multinationals. It has lapsed pretty much into what MSNBC called a “real estate play” mostly populated by call centers. The country’s university system at its best is second rate and its ability to attract foreign direct investment has long been frustrated. Its intellectual atmosphere has deteriorated along with its rancid political situation.

Singapore, which has invested heavily in technological research and advancement through its universities and incubators, in fact looks almost certain to pass Malaysia. The Wall Street Journal pointed out that venture-capital tech investments in Singapore last year outstripped those of Japan, South Korea and Hong Kong. However, Singapore itself, despite years of government investment and coddling of biotechnology, media and entertainment, has had mixed success. While the country has remained publicly committed to Internet freedom, it has been largely unable to foster any kind of innovative spirit in its education system.

Hong Kong also tried to set up a tech center called Cyberport, designed to help local businesses capitalize on the development of information technology. As with the Malaysian version, it is largely a real estate play that benefited Richard Li, the son of tycoon Li Ka-shing.

Vietnam’s legal system “is a minefield where many startups are at risk of unknown fines,” wrote An Minh Do in the Tech in Asia website. ”They’re also at risk of being treated by the legal system as an SME instead of a startup, which is unable to incur the same costs an SME would.”

That Vietnam has taken up the internet quickly and with great passion is beyond dispute but there are still gaps in the industry. Everyone may be using Google but few local businesses are profiting from the web and mobile boom.

Bryan Pelz, an IT developer, says there is “no means for direct monetization.”

“The banking industry and regulatory environment hasn’t taken strong steps to lay the groundwork for easy online payments,” Pelz said. “Essentially nobody has credit cards. If you’re building a website and hope to charge users or make a living off advertising, it’s a tough road in Vietnam.”

And despite talented hackers and software engineers — Flappy Bird was designed by a Vietnamese engineer — with experience and skill comparable to the rest of Asia, software isn’t considered a hugely lucrative field, according to Pelz.

Of those aged 15 to 24, according to Cimigo, 95 percent are online and spend more than two hours each day on the web, either in internet cafes, on desktops or on the phone. Ninety five percent use it for news. Google remains the top rated site in Vietnam, followed by local entertainment hub Zing. News sites Dan Tri and Tuoi Tre also feature, as does Yahoo!, Facebook and YouTube.

Last year a Russian-backed challenger to Google called Coc Coc (knock knock) opened shop. It has aimed to take some of Google’s 97 percent market share, the reasoning being that Google had no offices in Vietnam and did not have algorithms well written enough to understand Vietnamese well. Unlike other startups it was backed with serious investment and a staff of over 300, according to the Associated Press.