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September 17, 2023

Vietnam Investment Opportunities in Technology and Innovation: A Rising Star

Vietnam Investment Opportunities has emerged as a promising investment destination for technology and innovation over the last decades. Statistics from Google, Temasek and Bain & Company showed that Vietnam has had the highest growth in the digital economy in Southeast Asia with a 28% increase from $18 billion in 2021 to $23 billion in 2022. With a strong focus on developing its science and technology sectors and government support, the country offers a range of opportunities for investors looking to capitalize on its rapid growth.

Support and Initiatives from Vietnamese Government

The Vietnamese government has recognized the critical role of technology and innovation in driving economic growth and has implemented various initiatives to foster investment in this sector. According to the Vietnam Innovation & Tech Investment Report 2023 by Vietnam National Innovation Center (NIC) and Do Ventures, the government has also introduced favorable policies and incentives to attract in technology and innovation. These include tax breaks, streamlined administrative procedures, and support for research and development activities, offering attractive Vietnam Investment Opportunities.

Thanks to the recent bilateral and multilateral free trade agreements, Vietnam was ranked as the 3rd place in Southeast Asia in terms of deal count, and 4th place in terms of deal value. At a government level, the Foreign Investment Cooperation Strategy for 2021-2030 aims to raise the proportion of registered flows from certain countries and territories to over 70% in the 2021 - 2025 period and 75% in 2026 - 2030. It also targets to increase the number of multinationals listed in Fortune Global 500 doing business in Vietnam by 50 % by 2030. Other related Vietnamese agencies like NIC have actively assisted investors throughout the investment process, offering valuable guidance and facilitating market entry.

Therefore, many multinational conglomerates have chosen Vietnam as a manufacturing base, including Samsung, LG, and Foxconn. Other international groups including Panasonic, Yamaha, Bosch, GE, HP, and Piaggio even have local research and development (R&D) operations, suggesting the country is not only a manufacturing hub but also a potential of innovation and marketing. There have been also the development of public-private partnerships (PPPs) and the establishment of innovation centers and technology parks like those in Hanoi and Ho Chi Minh City to facilitate collaboration between industry and academia.

 
Last year, foreign investors poured money into 19 out of the 21 civil economic sectors of the country, in which technology is one of the most invested fields. In terms of new projects, technological projects accounted for 16.7% of total projects in 2021. Together with other capital sources, according to UNDP Vietnam, investors appear to be prioritizing high technology, together with other sustainable industries like green energy, education and health care.


Overview of Vietnam Investment Opportunities Areas (IOAs) Identified by the SDG Investor Map. — Source: UNDP Vietnam

Vietnamese government has implemented various measures to accelerate digital transformation through alterations in perception, business strategies, and incentives for the digitalization of firms, administration, and industrial operations. This has created opportunities for tech companies in Vietnam, particularly in the areas of cloud computing, artificial intelligence (AI), machine learning (ML) and big data analytics.

Favorable Ecosystem for Technology Development

The technology and innovation landscape in Vietnam is rapidly evolving, driven by a vibrant startup ecosystem and a young, tech-savvy population, with over 64 million internet users and a smartphone penetration rate of over 70%. Vietnam has a fast-growing startup ecosystem, with more than 3,000 startups in various fields such as fintech, e-commerce, health-tech, and logistics. Some of the most successful Vietnamese startups include VNG, Tiki, and Sendo and Ho Chi Minh City becomes the hottest technology hub, following by Hanoi. 


Source: World Bank, Ministry of Information and Communications, and Vietnam Internet

The increase of incubators, accelerators, and co-working spaces provide startups with the necessary resources and mentorship to thrive. World Intellectual Property Organization (WIPO) also ranks Vietnam as 48th place out of 132 economies, after Singapore (7th) and Thailand (43rd) in the Global Innovation Index (GII) 2022. 

The major driving force for Vietnam’s digital economy growth is e-commerce, with a 26% growth rate over last year. After COVID-19, Vietnam is among the countries that have quickly restored business activities to a new normal. However, some new consumption trends formed and promoted during the pandemic are still being maintained. About 90 % of digital consumers want to increase their use of e-commerce platforms in the next 12 months. Most consumers are focused on food delivery services (60%) and online grocery shopping (54%).

E-commerce is thought to be one of the most attracting industries for both local and international investors, with not only international players Shopee and Lazada, but also those Vietnamese startups like Tiki. According to Google, Temasek, and Bain & Company's "eConomy 2022" report, customers will keep their online purchasing habits in the new normal period, with eight out of every ten individuals continuing to purchase online for convenience. However, with worries about the pandemic and global economy, consumers are tightening their purse strings, which explains why average spending is lower than two years ago. Digital consumers in Vietnamese cities have the highest digital adoption service level with 96%, 85% and 85%, respectively, for e-commerce, food delivery and transport.

Digitalization and innovation have also opened a new gateway for telecommunications. Mobile virtual network operators such as Mobicast (a subsidiary of Masan Group), are wireless communication service providers that do not own the wireless infrastructure. They partner with traditional mobile network operators instead to use their radio spectrum-based transmission services and wireless network infrastructure to provide telecom services to consumers.

Digital financial services also continue to thrive in Vietnam. The digital lending sector posted the fastest CAGR (compound annual growth rate) at 114%. Together with Indonesia, Vietnam has significantly ‘right to win’ of digibanks in Southeast Asia with low digital inclusion of the unbanked and underbanked offers sizable headroom. There have been some digital-only banks (neobanks, challenger banks) competing with traditional ones, who have also adopted digitalization, in delivering the most convenient banking services yet with almost no costs to their customers. The superapps, e-wallets and different types of loyalty programs have also found great Vietnam Investment Opportunities in acquiring and serving Vietnamese customers in recent years.

Meanwhile, the frequency of Vietnamese people consuming digital content is lower than the region’s average level. About 23% of polled people said they watch videos on demand once a week at least, while 19% spend time on online games and 16 % listen to music. The Southeast Asia average rates are 33%, 29% and 28% respectively, slowing back to trendline after the pandemic. 

Two-way M&A Trends in Vietnam

Vietnam's attractiveness for foreign investment in technology and innovation is increasing, as evident from the inflows reported in 2023. Venture capital firms from around the world are actively seeking Vietnam Investment Opportunities in Vietnam's technology and innovation sectors. This influx of capital has fueled the growth of startups and bolstered the country's innovation ecosystem.

Despite the winter funding, investors continued to express interest in Vietnamese startups, with only a minor decrease in the number of foreign funds investing in Vietnam in the past year. For the first time, Vietnamese investors have taken the lead as the most active investors. According to the research by Do Ventures, NIC and Cento Ventures, local venture capital firms play a more important role in the Vietnamese start-up ecosystem due to their early-stage funding in comparison with more established foreign funds. In 2022, the local funds accounted for 46% in total deal counts and 45% in total deal value, marking the highest record of US$ 287 million.

Vietnam made a remarkable debut as the one of the most active investors in region, when owning both domestic and oversea tech businesses. Earlier this year, The Sherpa, another subsidiary of Masan Group, has committed to invest up to US$105 million for a 25% stake in Trust IQ, the Singapore-based tech firm that owns credit scoring platform Trusting Social. With this deal, Masan aims to accelerate its application of AI and ML in retail and consumption, the company said in a statement. Both sides will work on building a credit access platform for consumers in Vietnam and across Asia based on loyalty programs without requiring proof of income, among other projects.

Another example was Masan Group’s investment in Nyobolt, a UK-based startup, whose fast-charging innovation can allow 2 times faster than the current quickest one in the market. The deal has been processed via H.C. Starck - a subsidiary of Masan High-Tech Materials, owner of Nui Phao poly-metallic mine in Vietnam. Nyobolt's technology uses HCS's advanced tungsten materials in the battery anode coating to generate high-quality batteries. With record-high power density and ultrafast charging speed, this new-generation battery will compensate for the shortcomings of conventional batteries such as hyper-sensitivity, thermal stress, and exorbitant cost. Last year, Nyobolt received investment of GBP45 million ($53.3 million), helping the company scale up its operations in the UK and the US to focus on the development of next-generation tungsten batteries.

With these investments, Masan Group not only gains access to cutting-edge technologies but also establishes valuable partnerships with global players in their respective industries. These collaborations allow for knowledge sharing, technology transfer, and potential synergies, creating Vietnam Investment Opportunities for mutual growth and market expansion. As their ‘Go Global’ goals, Masan Group continues to invest in technology-driven ventures, completing their innovative digital ecosystem in Vietnam and expanding to other countries.

Looking ahead, Vietnam's investment landscape in technology and innovation appears promising, ranked as one of the most robust and active markets in Southeast Asia. The government's commitment to fostering a conducive environment, coupled with the country's young and tech-savvy population, provides a solid foundation for further growth. The ongoing development of innovation centers, technology parks, and incubators will continue to nurture entrepreneurial talent and attract investment. 

It is crucial for investors to stay updated on the evolving regulatory framework, investment incentives, and emerging technologies in Vietnam. The continuous advancements in areas such as AI and ML, fintech, and renewable energy present exciting Vietnam Investment opportunities for investors seeking to capitalize on Vietnam's potential. Investors who recognize Vietnam's potential and take their actions at early stages can benefit from the country's rapid economic growth and contribute to its journey towards becoming a leading player in the global tech and innovation arena. On the other hand, Vietnamese companies have also put their efforts in promoting both domestic and international start-ups. With the aim of possessing the most modern innovation and technologies, leading Vietnamese companies and ventures funds could take these Vietnam Investment opportunities to close the gaps of Vietnam with other developed countries.

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