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| Vietnam’s young are
hooked on the Internet. |
| Courtesy Embassy of Vietnam |
The government of Vietnam wants to see a software
industry with an annual turnover of $500 million,
says Industry Vice Minister Nguyen Xuan Chuan, but
lacking infrastructure and above all insufficient
intellectual property rights (IPR) enforcement represent
serious challenges.
Intellectual property rights problems are on U.S.
Ambassador Raymond Burghardt’s list of serious
problems as well. But Burghardt thinks he is not just
representing American software makers and artists
when he presents his grievances to Vietnamese officials.
Local software producers are concerned because their
rights are not protected. Based on his experience
in Taiwan and South Korea, Burghardt thinks that as
long as a government does not act decisively on IPR
protections, local companies lose out. On the plus
side, he says, the government takes domestic concerns
more seriously. So a policy of support for domestic
firms may help address the IPR issue more effectively.
The director of the Vietnamese Internet and software
giant FPT, Nguyen Thanh Nam, fully agrees. “Vietnam
is a very attractive place to do business for international
software giants. Our cost structure is half that of
India. Another advantage over India is that our people
are extremely eager to learn and to do new things,
to move forward.”
So what is holding Vietnam back? Microsoft already
shortlisted FPT as a subcontractor, but then decided
to stay away due to fears about protection of its
source codes. “We need to create software parks,”
Nam suggests. “It is unrealistic to believe we
can get rid of piracy in our society soon, but we
can protect a software park. And foreigners should
pilot these parks.”
Ho Chi Minh City has built a software park, Quang
Trung Software City. “We want it to be the largest
concentration of software companies in Vietnam, like
Bangalore in India,” says Chu Tien Dung, the
park’s managing director.
Situated in the outskirts of Ho Chi Minh City in District
12, Quang Trung Software City has 47 companies with
2,000 employees to date, and hopes to expand soon
by another 1,000 software experts. Created by the
city government, the software park hopes to lead the
way in transforming Ho Chi Minh City’s economy
from one focusing on food processing and basic manufacturing
towards a focus on the industries of the future.
Vietnam hopes for subcontracting opportunities with
global corporations, and Dung thinks that Vietnam
could be particularly interesting as a center for
export into the region – Indochina and even all
SE Asia.
He thinks the Bilateral Trade Agreement will give
Vietnam the decisive push to improve its record
on IPR protection, which is needed to lure international
corporations to Vietnam. But he adds that whatever
the situation on the street, it is possible to protect
the property of tenants within Quang Trung Software
City.
Long ways to go
A Japanese study of the sector is doubtful that Vietnam’s
software sector will take off in the immediate future.
Most Vietnamese companies, the study commissioned
by the Japanese International Cooperation Association
finds, were established recently and lack managerial
as well as technical skills to play in the big league.
By the end of 2002, the industry was comprised of
approximately 300 firms, employing 6,000 programmers.
Half of the firms were less than two years old.
The main problem is not the technical skill of the
programmers, though, but the lack of business plans.
Too many companies do not produce to specific orders,
but produce and try to sell, taking a high risk of
not finding a receptive market.
Tran Luong Son, the managing director of VietSoftware
agrees with that assessment. He says that software
firms are established by software engineers, and they
tend to lack management skills. But he thinks that
working as subcontractors to large, foreign firms
will mitigate the problem and in the long run these
partners will assist their subcontractors to develop
managerial skills, business plans and the like.
In addition, there is the Vietnam Competitiveness
Initiative, funded by the U.S. Agency for International
Development. The program identifies the most competitive
companies and assists them in capacity-building.
The initiative selected four clusters in two cities,
among which is software in both Hanoi and Ho Chi Minh
City. Experts are working with the companies in these
clusters “to identify weaknesses in their competitiveness,
formulate strategies, implement initiatives and remove
constraints to growth in the local, regional and global
economies,” according to a Competitiveness Initiative
document. The clusters can then serve as a model for
others in industry and academia to emulate.
The Japanese study asserts that while labor costs
are very low, so is productivity, with a Vietnamese
programmer producing only $8,000 worth of software
per year.
But Son says that while college graduates need extra
training when they join VietSoftware, it takes them
very little time to reach international levels. In
fact, he says, the biggest issue is retention, as
the top of the crop get offers from South Korea or
the United States after no more than two years on
the job. “So the risk of losing intellectual
property rests on the Vietnamese company, not the
foreign client,” he says with a smile.
Industry Vice Minister Chuan thinks that the basic
problems of the industry, such as improved training
or IPR protection, can be solved. At the moment, he
says, there is too much overlap between the responsibilities
of various ministries to support, regulate and protect
this complex industry effectively. “And where
overlap occurs, nobody has the final authority. This
needs to be streamlined.”
This streamlining of government portfolios is one
of the Prime Minister’s top priorities. Success
in this task would bode well for the software industry. |
