Since 2017, Vietnam has grow to be a startup center competing closely with regional leaders. Then got here 2020, when the country saw a rise in investments of USD 400 million, which clearly shows that the country can rival Indonesia as a growing marketplace for technology investments in Southeast Asia. Although the variety of deals declined by 22% in the primary half of 2020 in comparison with the identical period in 2019, mainly attributable to the economic impact of Covid-19, fundraising by Vietnamese startups showed signs of recovery within the second half of the yr.
Experts imagine that there are lots of aspects influencing Vietnam’s emergence as a startup hub in Southeast Asia. These include revenue growth in digital sectors corresponding to fintech and e-commerce, rising consumer spending, growing interest from foreign investment funds – particularly Japanese, Singaporean and South Korean VC funds – and targeted government support.
Even foreign investors have played a crucial role in financing Vietnamese startups. For example, in February 2020, Affirma Capital invested $34 million in Sieu Viet Group, which focuses on online recruitment. Japan’s SoftBank and Singapore’s GIC have invested $300 million in fintech VNPay. American 500 Startups intends to take a position in 80 Vietnamese start-ups by 2021.
The technology sector dominates
Between 2016 and 2019 alone, capital invested in tech startups increased eightfold, reaching a peak of $861 million in 2019. Hanoi and Ho Chi Minh City, particularly, have created a strong ecosystem for tech startups. In recent years, financing rounds have been dominated by sectors corresponding to e-commerce, fintech, artificial intelligence (AI), food technology, enterprise solutions and IT services.
For example, within the fintech industry, there have been 123 startups in Vietnam in 2020, in comparison with just 44 in 2017. These trends reflect the strong growth potential of Vietnam’s digital economy and the flexibility of Vietnamese startups to seize market opportunities.
Government support
To encourage entrepreneurship, the Vietnamese government has established a lot of funds on the state, provincial and city levels to support start-ups. In addition, the federal government also collaborated with countries and banks to develop financing and innovation programs, provide loans, technical training and business mentoring.
This has seen Vietnam’s startup ecosystem show impressive growth while keeping the pandemic under control. Following the recent rapid growth within the variety of technology startups in Southeast Asia, Vietnam launched a program on October 5, 2020 to speed up startup formation and speed up recovery after the cessation of investment in the primary half of 2020 attributable to Covid-19. The goal is to advertise the country’s innovation, benefit from recent opportunities, increase productivity and increase employment.
A giant lure for foreign investors or corporations seeking to arrange operations in Vietnam is the lucrative tax incentives offered by the Vietnamese government. The Vietnamese government is prioritizing IT investments and inspiring investments on this space. Technology corporations can profit from corporate income tax (CIT) relief, which incorporates 15 years of corporate income tax at the speed of 10%, 4 years of corporate income tax exemption and a 50% tax reduction for the following nine years, which is a really attractive proposition for international corporations wanting to extend their operations within the country.
Foreign technology corporations opening offices in Vietnam may additionally receive additional incentives, corresponding to land lease exemptions for IT corporations in government-built technology parks, which is able to further help reduce their expenses. Additionally, unlike some Asian countries where foreign corporations can own a maximum of fifty% of the shares and the opposite half must go to an area partner or company, Vietnam offers international corporations establishing operations within the country 100% foreign ownership, making it possible to ascertain an up shop in Vietnam is a really attractive proposition.
