Over the past few years, Vietnam has develop into a rising star in Southeast Asia. The favorable economic climate also supported the emergence of the digital economy and a growing startup ecosystem. The latest wave of the pandemic has also perpetuated digital trends which have accelerated Vietnam’s path to becoming the subsequent digital economic powerhouse in Southeast Asia.
Although its history spans hundreds of years, Vietnam only began to open its economy in 1986, the 12 months the Doi Moi reforms were announced, and has been evolving rapidly since then. According to the World Bank, Vietnam currently has over 745 listed firms, which accounted for 68.6% of gross domestic product (GDP) in 2020. Below is an outline of a very powerful events and developments which have shaped the Vietnamese economy in 2020 over the past 35 years.
Current stable macro environment
After 35 years, Vietnam’s economy is flourishing and attracting many foreign investors. In 2020, Vietnam was certainly one of the few countries on the earth to record GDP growth of two.9%. Vietnam’s GDP per capita rose to $2,800 from just $422 in 1986.
Taking a more in-depth have a look at Vietnam’s GDP growth drivers, it may be seen that Vietnam is moving away from agriculture towards industry and services, which currently contribute about 75% of the country’s GDP. Over the last decade, exports of domestic firms increased by 137%, while exports of firms with foreign capital increased by 422%.
Another factor contributing to Vietnam’s economic growth is its golden population structure. As the economy grows, so does urbanization, reaching 37%, creating major cities including Ho Chi Minh City, Ha Noi, Da Nang, Hai Phong, Bien Hoa, and Can Tho.
Ultimately, the positive macro environment has made Vietnam a lovely destination for foreign investors. Vietnam was recognized as certainly one of the 20 largest FDI receiving economies on the earth with an inflow of USD 16 billion, ahead of other comparable countries and ahead of Singapore and Indonesia. In 2021, despite the intense consequences of Covid-19, planned FDI investments in Vietnam increased dynamically by 22% year-on-year.
The Spread of the Digital Economy in Vietnam
Going forward, the digital economy is predicted to play an integral role in maintaining the country’s growth momentum. Even still in its early stages, Vietnam’s digital economy shows enormous potential, driven by government support, society’s rapid digital adoption and, ultimately, the pandemic that has accelerated digital trends.
Government efforts towards digital transformation
Recognizing the importance of the digital economy, the federal government has launched various initiatives to spice up growth on this space. In 2020, Prime Minister Nguyen Xuan Phuc signed Decision No. 749/QD-TTg approving the National Digital Transformation Program for 2025, setting goals for the country until 2030.
This includes improving web infrastructure and the provision of 5G services, digitizing government and applying the technology in various socio-economic sectors. The government projects that the digital economy will account for 30% of Vietnam’s GDP by 2030, an ambitious goal considering that the digital economy currently contributes 8.2% of GDP. Nevertheless, it shows the federal government’s optimistic approach to Vietnam’s digital economy and willingness to support the digital ecosystem. A tech-savvy population and growing digital trends
Vietnam is among the many top ten countries with the very best variety of smartphones, with 63.1 million of them in use. Nevertheless, digital penetration in Vietnam lags behind other countries within the region at 73%.
However, the country is predicted to meet up with its competitors within the region as nearly all of Vietnam’s population is young and of working age, indicating tech-savvy consumers who will even be more open to switching to online services. Together, they shape the expansion and direction of the digital economy based on their online behavior. According to a report by Google, Bain & Co. and Temasek, e-commerce GMV in Vietnam is predicted to grow at a CAGR of 31%, outperforming other ASEAN countries and pushing e-commerce GMV to $26 billion in 2025. Tiki, Local Vietnamese e-commerce player and Lazada , one other regional player, is lagging behind Shopee and faces stiff competition for the second place by way of market sharing. Sendo, one other local e-commerce player, ranks fourth and focuses on consumers in lower-tier cities.
Another trend that’s emerging among the many young population is the trend of cashless payments. With over 40 licensed e-wallets operating in Vietnam, the digital payments market is buzzing faster than ever, and winners are beginning to emerge resembling Momo, Shopeepay, ZaloPay, Viettel
Pay etc. Accelerating digital adoption consequently of the pandemic
While existing trends persist, the pandemic has accelerated adoption rates as social distancing measures unleash recent consumer habits. Since 2020, Vietnam has experienced 4 waves of the Covid-19 pandemic, with social distancing measures restricting personal activities resembling going to highschool/work, shopping, in search of non-COVID-19 related medical care and visiting the bank. Once consumer behavior becomes habitual, it becomes more rigid, so even when restrictions are lifted, they’re more likely to proceed using online services to fulfill their every day needs.
While there remains to be much work to be done within the digital economy, it has delivered impressive results, with GMV expected to succeed in $14 billion in 2020, representing a CAGR of 30% since 2015. The potential of Vietnam’s digital economy has caught the eye of many enterprise capital funds, leading to an energetic investment environment for technology firms over the previous couple of years. Between 2018 and 2020, the capital invested in Vietnam amounted to $1.2 billion. Moreover, consistent with the overarching trends of the digital economy, investments are flowing mainly into FinTech (payments), retail and education. Most of the transactions concerned pre-sowing, seed and series A transactions.
Venture capital funds proceed to reveal their commitment to the market because the Vietnamese Venture Capital Funds Alliance was recently established with 17 enterprise capital funds committing to speculate $800 million in startups over the period 2021-2025.
Vietnam is emerging as the subsequent startup hub in SEA
Taking advantage of the opportunities offered by the digital economy, Vietnam’s startup ecosystem is evolving and growing rapidly, making Vietnam the subsequent startup hub in Southeast Asia.
Macro Tailwind
As indicated earlier, Vietnam’s stable macro-environment is poised to support the event of the digital economy and start-up ecosystem. With high GDP growth, Vietnam also has a growing middle class with rising disposable incomes, indicating greater demand for a greater quality of life. According to the Global Innovation Index 2021 by the World Intellectual Property Organization (WIPO), Vietnam is essentially the most revolutionary country amongst lower-middle-income countries, rating higher than neighboring countries Indonesia, Thailand and the Philippines. According to research by the World Economic Forum, Vietnam is among the many top ten countries with the very best variety of engineering graduates (100,390 in 2015). According to MOET, Vietnam scored 505 in comprehensive reading, the thirteenth highest rating amongst 79 participating countries and territories. This result’s remarkable provided that Vietnam is among the many program countries with a lower per capita income ($4,098 in 2010 PPP dollars). Vietnam can be certainly one of the most important recipients of remittances on the earth; They expect that by 2030, there shall be 8 unicorns in Vietnam.
Existing unicorns and shortly paving the best way for others
Vietnam currently has three unicorns, proving that the present digital climate in Vietnam is suitable for startups to thrive in the approaching years.
VNG: Founded in 2004 as Vinagame after which renamed VNG in 2008, the corporate has evolved from Vietnam’s first online gaming company to certainly one of the leading IT and entertainment service providers within the country.
Sky Mavis (creator of Axie Infinity): Founded in 2018, Sky Mavis is the fastest company to realize unicorn status in Vietnam. Momo has closed its Series D and is becoming Vietnam’s next FinTech unicorn. Tiki is the primary local e-commerce player in Vietnam and can achieve unicorn status in 2021 after securing Series E funding. In seven years, KiotViet has grown to now serve over 110,000 small and medium-sized enterprises across Vietnam. After successfully raising funds for its Series B, KiotViet is aggressively expanding and expanding its offerings to digital payments and trade lending, spreading the prosperity of Vietnamese small and medium-sized enterprises.
summary
The digital economy shall be certainly one of the most important aspects driving Vietnam’s economic growth in the approaching years. The digital economy, underpinned by solid macroeconomic fundamentals, a progressive government, and an increasingly technologically savvy and young population, offers startups great potential to find and create value. With its current impressive momentum, Vietnam is well on its solution to becoming the subsequent digital economic powerhouse in Southeast Asia.
Reference:
Insider, V. (2021, November 4). Vietnam shall be the subsequent digital powerhouse in Southeast Asia. Here’s why – Vietnam Insider. Vietnam expert. https://vietnaminsider.vn/vietnam-will-be-the-next-digital-powerhouse-in-sutheast-asia-heres-why/?fr=operanews.
