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NEWS UPDATES Asean Affairs        20  April 2011

Vietnam’s IT industry languishes

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Despite its huge potential, Vietnam’s software industry has failed to develop as rapidly as it could have.

The decade-old industry has some impressive achievements, including an increase in revenue every year. Its turnover last year was 20 times the 2001 figure while its workforce had grown 10 times. Vietnam has also become an important global provider of software services.

But growth in the last few years has remained far short of potential.

There is huge demand for software products and services, particularly in public administration and industry.

But with the local industry unable to meet the needs, the main beneficiaries are foreign companies who get contracts worth millions of US dollars.

For instance, the IT infrastructure needed to set up a personal income tax management system is now being provided by two foreign firms with FPT only acting as a contractor.

Many Vietnamese firms like Petrolimex, Cement Corporation, and Thu Duc House Company are ready to pay foreign IT companies for overall management solutions.

Domestic banks spent dozens of millions of dollars each to create core banking – the services provided by a group of networked branches – to develop personal banking and even larger amounts for carrying out administration measures and operate the core banking system.

Many state enterprises are also potentially large customers for the software industry.

Vietnamese IT companies only had the capability to undertake minor projects under sub-contracts with foreign partners, experts said.

The Corporation for Financing and Promoting Technology, or FPT, for example, is one of the country's largest IT companies but has only 6,000 workers involved in software and IT-enabled services. Of them, half are deployed in sub-contracted projects.

The number of IT companies with even 500 software engineers remains modest.

The limited numbers preclude Vietnamese IT companies from landing major deals, experts pointed out.

Prof Dang Huu, former Minister of Technology and Natural Resources, said there was a fairly good policy framework in place to develop IT, especially software services.

However, the polices were not proving very effective because administrative officials and managers ignored them, he said.

Le Manh Ha, director of the HCM City Department of Information and Communication, also underlined the role of these people in fostering the IT industry's growth.

Agencies and enterprises using public funds must give priority to sourcing IT products and services from domestic firms, with failure to do so entailing severe penalties.

But Ha said this regulation was not being implemented because officials at such agencies and enterprises demanded bribes.

He also blamed IT firms for lacking systematic development strategies, especially for marketing and advertising their products and building brands, saying this has made it difficult for them to get a firm foothold in the market.

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