From Nike sportswear to Samsung smartphones – just about any commercial product you can think of is manufactured in the ASEAN nations.
Vietnam, as part of this regional organization, is currently experiencing unprecedented economic growth at around 6.7 percent this year – the fastest rate in Southeast Asia. This is boosted by foreign direct investment and manufacturing.
Another factor behind the meteoric rise of Vietnam’s high-tech cities? The field of software development outsourcing – which is becoming more and more alluring to international companies because of its competitive advantage on the market.
Vietnam’s economy has known rapid change, evolving from its agrarian foundation to become a modern, business-driven marketplace. Today, Vietnam takes 5th place in the 2019 A.T. Kearney Global Services Location Index – a survey listing countries with the best potential to deliver business services to global companies.
“Vietnam had the 3rd largest increase in the business environment score, driven by a large score increase in the country infrastructure component.” – AT Kearney
The country’s outsourcing success has become a competitive concern for its Indian and Chinese counterparts as companies like Intel, IBM, Samsung Display, Nokia, and Microsoft continue to invest in Vietnam – drawn by its panoply of business benefits.
Hanoi, a Fast-Growing Tech City
Hanoi, the capital-city of Vietnam, is ranked 3rd in the World’s Top 20 Most Dynamic Cities taking into account a range of socioeconomic and commercial real-estate indicators. Also known as the most attractive destination for foreign investors in Vietnam, the city of Hanoi has flourished in terms of GDP and FDI, surpassing Ho Chi Minh and southern Binh Duong province.
As of March 2019, Hanoi attracted more than 4.05 billion USD in foreign direct investment (FDI) – 10 times higher than the same period last year. The city has also recorded a GDP growth rate of 6.99 percent in the first quarter of 2019 – equal to the same period in 2018.
Pentalog made the right choice ten years ago, when we launched an office in Hanoi. To this day we continue to build strong relationships both with colleagues and partners. At the same time, we became a trusted IT outsourcing service provider for international clients.
Here’s what you stand to gain when you choose Pentalog’s office in Hanoi to boost your business growth:
Lower Labor Cost
The labor cost to work with IT outsourcing companies in Vietnam is economically attractive. Services are up to 30% less expensive than in India and half the cost when compared to Eastern European countries.
In Vietnam’s (and other Asian countries) case, the hourly rate is around $30 per hour while in Eastern Europe, a software developer can earn as much as $50 per hour. Only Africa can rival Asia’s labor costs; all other tech hubs in the world are significantly more expensive.
Skilled, Educated, and Loyal Employees
Because Vietnam functions as a collectivist society, residents value close & long-term commitment to the “member” group – be that families, friends or coworkers. These types of communities foster strong relationships where everyone takes responsibility for fellow members of the group. Employees are loyal, take pride in building connections and enjoy growth opportunities without moving from one workplace to another.
In terms of hard skills, Vietnam has over 120,000 IT specialists and more than 40,000 new ICT graduates from a total of 400,000 each year. It is estimated that 62% of scientists in the entire country live and work in Hanoi.
Focus on Technical Education
Hanoi is the largest center of education in Vietnam, hosting over 50 universities and colleges with ICT training programs that ensure all graduates are able to meet an existing need on the global market.
The first Western-style universities in Vietnam were set up in Hanoi, as well as the largest technical university in the country – Hanoi University of Technology.
Vietnam is also listed in the top 10 countries worldwide with the most engineering graduates.
The education system in Vietnam strives to ensure students obtain a proficient grasp on the English language and invests heavily in STEM education. With a 20-year-old young IT outsourcing market, Vietnam’s major high-tech cities continue to grow, business-wise and attract international clients.
Incentives for the IT Industry
In Vietnam, some prioritized industries receive preferential treatment from the government – such as corporate tax cuts and exemptions, credit incentives, and exemption or reduction in land and water surface lease fees for science and technology enterprises.
Decree 13/2019 encourages high-tech companies to consider relocation to Vietnam by providing detailed instructions on the process to obtain what is called a “Scientific/Technology Enterprise Certification.” With this certification, businesses can take advantage of the strong government incentives in Vietnam.
Specifically, tax incentives may include up to four years of tax exemptions and a 50% tax break for the following nine years. Decree 13 also outlines many credit incentives, and financial support from national science & technology development funds.
Established in 1998, Hanoi’s Hoa Lac High-tech Park (HHTP) was Vietnam’s first high-tech park and is currently the country’s largest. While Vietnam has over 190 industrial parks and plans to increase this number to 500 by 2020, HHTP is one of only three national-level high-tech parks, alongside Saigon High-tech Park and Danang High-tech Park. The HHTP was created with the intention to become Vietnam’s leading high-tech industry cluster for manufacturing, research and development, and innovation.
According to the Vietnamese government, about 12,600 people live and work there and it is expected that the HHTP’s residential and professional population will reach 229,000 by 2030.
Pentalog’s office in Hanoi is situated in the Cau Giay business district, home to both mature companies and startups.
Beneficial Business Deals
Vietnam’s geographical position (GMT +7 time zone) and the city’s proximity to the border allow smooth collaboration with USA’s west coast, Europe, and China; a near 24-hour productivity cycle is ensured this way.
There are also ambitious investment plans underway to develop the infrastructure of major industrial poles in the country, easing the flow of business operations and improving logistics.
So, if the first thing that comes to mind when thinking about Vietnam are beautiful beaches, majestic mountains, and delicious gastronomy – you now know there’s plenty more the country has to offer.
Vietnam also has a rich, long history. Vietnamese people make efforts to preserve their national identity and cultural heritage which has been passed down from generation to generation – resulting in a great fusion between traditional and contemporary values.
When you take these factors into account along with the growing GDP, level of technical talent, modern tech infrastructure, and high retention rates – you’ll get a grasp of the country’s future which is ripe with opportunities, especially for businesses.
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