The document discusses Vietnam's information technology industry and makes several recommendations to further its growth. It notes that Vietnam's IT sector has grown at 16% annually from 2011-2015, but challenges remain. Specifically, it recommends that Vietnam: 1) Reduce costly internet connection prices and increase transparency in pricing to attract more investment. 2) Strengthen data protection laws and increase enforcement to boost consumer trust and investment. 3) Improve IT education and training programs to develop a skilled workforce and meet its goal of 1 million skilled IT workers by 2020. 4) Revise aspects of its draft IT services decree to avoid placing unnecessary burdens on companies and ensure the legal framework supports industry growth.

1. Vietnam – Information Technology - 2015
Overview
The Information Technology (IT) industry has become an important economic sector in
Vietnam, with an estimated compound annual growth rate of 16% over the 2011-2015 period.
In September 2010, the Prime Minister of Vietnam signed Decision No. 1755/QD-TTg
approving the national strategy on 'Transforming Vietnam into an Advanced Information and
Communications Technology (ICT) country. The objectives outlined in this strategy
included: developing ICT human resources and the ICT industry; continuing to develop and
improve telecommunications and IT infrastructure; and effectively applying IT in
Government agencies, enterprises and society. Our ICT Sector Committee welcomes these
commitments, as we believe the sector could be a significant driver of future economic
growth.
Vietnam has shown significant potential in the outsourced and offshore services sectors, and
an increasing number of local companies, including FPT Software, is providing these types of
services to multinational corporations. In the meantime Flappy Bird, a mobile gaming
application developed by a single Vietnamese programmer in Hanoi and over several weeks
the top selling product on the application stores for both Android and iOS Devices, generated
worldwide admiration and press attention, highlighting and praising Vietnamese IT skills and
innovation.
Nevertheless Flappy Bird is a single case in an otherwise limited local IT market. Even the
largest IT companies with more than 2,000 developers and valued at 1 billion USD are not
scaling as much as their counterparts in Singapore, China, Japan or South Korea, which are
better able to offer their services outside their domestic markets (e.g. Kakao Talk, Alibaba,
Rakuten, etc.).
The ICT Sector Committee believes that the existing legal framework (mainly Decree
72/2013/ND-CP on the management, provision and use of internet services and online
information and the IT Services Decree draft) and infrastructural (high pricing and its lack of
transparency for leased lines) framework are obstacles that are hindering Vietnamese
businesses from realising their full potential.
Furthermore, considering the upcoming ASEAN Economic Community in 2015, Vietnam
risks falling further behind its regional competitors like the Philippines and Indonesia.
Vietnam still ranks 84th in the Network Readiness Index, which highlights that affordability
still constitutes the best aspect of the country's performance. However, the most worrisome
issues revolve around the quality of the political, regulatory and business environments, on
which we have struggled to perceive sufficient progress over the last year.
To facilitate the further growth of the outsourcing industry as well as the local start-up
community and its businesses, a stable and affordable Internet connection is an absolute

2. necessity. Vietnam’s high bandwidth leased lines are up to four times more expensive than
those of comparable countries. Additionally the same services from the same suppliers are
being charged differently to end users, highlighting the lack of transparency and consistency
in pricing. We recognise that pricing for international leased lines is complicated and that it
depends on many factors. However, as mentioned by us in last year’s Whitebook and
throughout the year, the lack of pricing transparency from the IT service providers will
continue to have a major negative impact on investments into the Vietnamese IT market.
Furthermore, to Decree 72 demonstrates that the Vietnamese Government understands the
impact of the IT industry on society at large. However, we believe its regulations impose
certain unreasonable requirements on foreign and domestic companies, which understandably
curb their activities and hamper and slow down growth. Furthermore, these measures may
restrict Vietnam’s access to international products, services and knowledge, and it may
adversely affect the development of the IT sector, as well as further reduce the country’s
competitiveness in the regional market. Upon its entering into effect on 1 September 2013,
Decree 72 still lacks some important implementing Circulars, resulting in continued
uncertainty and insecurity in the industry, which will contribute to a continued negative
sentiment about further and future investment from international organisations into Vietnam’s
IT sector.
Below, we will provide further details on concerns that we feel the Vietnamese Government
should prioritise to help reach its targets as set out in the National ICT Strategy. These
concerns, which were selected by our members through a careful process of deliberation and
discussion, include internet connection costs, data protection and privacy laws, and education
and training.
Internet Connection Costs
Relevant Ministries: Ministry of Information and Communications (MIC)
Issue description
Internet connection is more than ever a requirement for any business establishment and it is a
lifeline for most Vietnamese and foreign enterprises. It is also the source of revenue for many
of the online companies and the IT industry.
The Access Price Benchmarking’ study by TRPC in the first quarter of 2013 and another
survey made by the ICT Sector Committee show that Vietnam is amongst the most expensive
countries in Asia for high-speed Ethernet and leased lines (which are the most commonly
used connectivity means) with the differences ranging from a multiplier between 2 to 10.
Subsequent to that first meeting, although we understand that Internet connection prices are
under Government regulation, we have not been able to get confirmation of how exactly the
legal pricing method is actually applied. Furthermore, despite that prices should be public,
this is seldom the case and at the time of writing, few ISPs adhered to this.

3. Apart from the costs, the quality of the Internet connection is at risk because there is only a
single internet backbone (i.e. Vung Tau) and there is little redundancy in the event of a failure
of this backbone, which results in slow speeds that literally can slow down everyone’s
businesses.
In short, the issues with Internet connection are: price, pricing transparency and risk in its
quality.
Potential gains/concerns for Vietnam
The main concern for Vietnam is the attractiveness of the country regarding the costs and
reliability aspects of its Internet connection, which are significantly growing criteria for
investors benchmarking and due diligence analysis. This affects Vietnam’s attractiveness for
companies to start operations, and for those already established to expand their investments.
Hence high costs, low transparency and the lack of reliability all increase risks that influence
downwards the investment appetite for FDIs as well as significantly hamper the achievement
of the National IT Strategy of 2010.
The ICT Sector Committee is convinced that a reduction of these costs would increase the
attractiveness of Vietnam for companies without reducing profits from ISPs, which would
benefit from having more subscribers and increased bandwidth requirements from existing
customers wanting to enjoy a much better price/service ratio.
Recommendations
The ICT Sector Committee would like to suggest the following changes:
• The number of ISPs is limited in VietnamP
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P, which does not encourage fair pricing.
The MIC could open the licence of operation to more suppliers. Licensing requirements
should also be simplified. This follows the Ministry’s direction of opening up to attract
investments in the telecommunication sector and would also be in line with Vietnam’s WTO
commitments;
• Pricing by ISPs is not transparent and often results from the subscribers’ negotiation
ability. MIC can increase the transparency in pricing by making it mandatory to publish the
rates on ISPs’ websites;
• The MIC could enforce the application of the legal framework on Internet services
pricing; and
• Having a single backbone poses a risk and the MIC could plan further extensions to
increase reliability.
Data Protection and Privacy
Relevant Ministries: Ministry of Information and Communications (MIC)
Issue description

4. We recognise that the Government understands the importance of data protection and
privacy. The recent policies outlined in Decree 72/2013/ND-CP on the management,
provision and use of internet services and online information look to ensure that a user’s
personal information is always secured as per modern standards of data protection. The
Decree includes several provisions dealing with privacy and personal data (articles 21.6-21.8)
and violation of these rules is considered a criminal act.
However, we are of the opinion that the awareness and application of these policies, among
the general population and companies alike, is insufficient. Specifically, compliance
enforcement is inadequate and needs to be addressed to bring the country in line with best
practices implemented in other parts of the world.
To this end, the ICT Sector Committee believes it is important to raise public awareness
around the importance of data protection and privacy. We recommend that Vietnam establish
a regulatory body dedicated to dealing with violations of privacy and data protection.
Furthermore, we suggest a data protection commissioner be nominated.
Potential gains/concerns for Vietnam
The lack of proper implementation of data privacy and protection rules might discourage
investors from entering Vietnam. Currently trust towards the organisations saving private
data is low due to the sudden public awareness of the cooperation between such organisations
and Government security agencies in other countries. Transparency and strong enforcement
of existing legislation would be a proactive step towards gaining trust into the Vietnamese IT
market and it would therefore encourage foreign investment into Vietnam and potentially
provide a boost to economic growth, innovation and job creation. In addition it would
enhance the reputation of Vietnamese companies, allowing them to better compete on a
global scale.
ASEAN member countries have agreed to develop 'best practices/guidelines' (though not
legislation) on data protection by 2015, as part of their commitment to establish an integrated
ASEAN Economic Community. As concerns about data protection are not only an issue in
Vietnam but in the whole of Southeast Asia, a strong enforcement of current legislation
provides Vietnam with an opportunity to become a regional expert and an example of good
practice, leading the way for implementation of modern standards on data protection.
Recommendations
We would like to suggest the following recommendations:
• Establish a governmental agency responsible for investigating and resolving
complaints related to data protection violations;
• Nominate a data protection commissioner who will advise drafting teams with regards
to the impact of legislation on data protection;

5. • Make imprint-clauses mandatory for web services, stating how the data will be used
(and who might have access to it);
• Raise public awareness on the importance of the protection of privacy and personal
data;
• Avoid the stating of full names of individuals in governmental newspapers or press
releases, unless consent is given by the individuals themselves.
The ICT Sector Committee would welcome further opportunities to work with the
Vietnamese Government on this issue to share experience and best practice from our
members. The Vietnamese authorities could refer to the European Data Protection Act that is
recognised as setting the international standard in this area.
IT Education and Training
Relevant Ministries: Ministry of Information and Communications (MIC), Ministry of
Education and Training (MOET), Ministry of Labour, Invalids and Social Affairs (MOLISA)
Issue description
With IT being a key growth industry in Vietnam, the Government has highlighted the
objective of having 1 million employees meeting international skills and education standards,
in the ICT sector by 2020, according to the Decision No 1755/QD-TTg. However, the
availability of skilled and trained labour remains an imminent obstacle to the industry's
growth. Currently, Vietnam already faces a severe shortage of skilled and highly skilled
experienced IT engineers and therefore Vietnam risks not only failing to meet its objectives
for 2020 but also further potential growth and the development of the entire ICT industry.
According to the MIC, there are about 290 universities and colleges offering IT training in
Vietnam and the admissions quota have been increasing steadily over recent years. But
currently, Vietnam has no standardised IT education skill sets and curricula, based on
international criteria, which would meet the requirements of local and foreign technology
companies in compliance with the objectives set in the above mentioned Decision of the
Prime Minister to develop the ICT industry.
Nowadays, IT companies in Vietnam have to make substantial investments when hiring fresh
graduates from universities and vocational training schools to develop their technical, soft
and English language skills. Such training may take a year, on average, to prepare the
workforce for the professional requirements of their roles. In a recent (July 2013) master-
thesis study by Mr. Roland Polzhofer for the Vietnam-German University1141, the
discrepancies and gaps between the views of the managers of Universities and managers of
IT companies have been well researched and documented in detail.
Potential gains/concerns for Vietnam
Developing a highly skilled workforce will help to support Vietnam’s objectives as set out in
its National IT Strategy of 2010. This is a key requirement if Vietnam wants to continue the

6. development and growth of its IT industry, as well as foster local innovation and
entrepreneurship. A well-trained labour force would also help the country transition to an
advanced, knowledge-based economy.
The Vietnam Software and IT Services Association also revealed that there are currently
about 250.0 people working in the ICT industry in Vietnam. Of this figure, approximately
50,000 people are working in the software and digital technology development industry .
According to the Ministry of Information and Communication the average yearly increase in
demand for human resources in IT stands at 13%. In five years, enterprises will need 411,000
people specialising in the field. Such a large demand is difficult to fulfil as each year the
country is only producing 60.0 workers in the field according to the Centre of Forecasting
Manpower Needs and Labour Market Information in Ho Chi Minh City.
However, a recent survey by the National Institute of Information and Communications
shows that 70% of graduates in IT need to be re-trained to meet the requirements of firms.
The majority of IT students are not even aware of their field of practice, and 72% lack
practical experience while 42% show poor teamwork. Among fresh graduates, only 15%
meet the requirements of companies, while 80% of fresh graduate computer programmers
need re-training.
Recommendations
We would like to make the following specific recommendations:
• Development of a national technical skills and exam standard for the IT industry, in
close cooperation with national and foreign industry associations; and
• The MIC, in cooperation with the MOET and the MOLISA, should make it a
compulsory requirement for students from IT universities and specialised IT
vocational training institutions, to complete a practical internship. This should be
carried out at IT companies of their choice during a period of minimum six and
maximum twelve months, as part of their official curriculum.
• A longer mandatory internship at IT companies would allow students to acquire
sufficient first-hand, practical experience and apply their technical and soft skills in an
international environment. Simultaneously, IT companies would have the chance to
identify and recruit talent for future vacancies; and therefore potentially reduce
overhead costs that would stem from training new employees.
Current Draft Decree on IT Services
Relevant Ministries: Ministry of Information and Communications (MIC)
Issue description
Despite the fact that the Decree on IT Services has already experienced several drafts, we
believe further consultation is required to ensure that the final Decree both contributes
to the growth and competitiveness of the ICT industry in Vietnam, and helps Vietnam

7. ascend into a knowledge services economy rather than placing it at a severe
competitive disadvantage to its regional and global peers, and potentially stalling
economic growth of this nascent sector. As a general concern, there are multiple
requirements in the current draft Decree that are a cause for concern for both
Vietnamese and foreign businesses. For example:
Article 11 - Licensing a service to refurbish: The scope of this provision is unclear and is
likely to deter large, prestigious multinational technology companies that have
extensive internal refurbishing certification systems to make investments into
Vietnam. Many leading technology companies already have very rigorous internal
refurbishing standards, which require refurbished products to meet the same quality
requirements as new products before they can be sold to consumers.
Article 12 - Condition for IT consultation service practice: The requirement that every
individual involved in IT services needs a practicing certificate and a university
degree or other suitable certificate related to the specific IT service is unique in the
industry and impractical given that many of the latest technologies are not even taught
in universities yet, and some vendors and authors of such technology do not even
have any certification. Under these requirements, even Bill Gates would not be able to
practice in Vietnam. Furthermore, such requirements would severely slow down the
growth and size of Vietnamese organisations and disadvantage them when competing
in the global IT services market as other countries do not have such requirements.
Article 14 - Supply of cross-border IT services: The requirement that cross-border service
providers 'shall have a legitimate representing organisation or individual in Vietnam
to resolve, on its behalf, relevant issues and to be responsible for fulfilling obligations
such as tax, fees, charges and other related duties’ is unique among ASEAN countries
and has created concern for companies due to the lack of detail on the expectations
and requirements for local legal representatives. We assume that the key interest is to
have local representatives present to serve as local contact points only, to ensure
effective communication between Vietnamese authorities and companies
headquartered outside Vietnam.
Article 19 - IT service provision to state bodies: This creates an uneven playing field between
foreign companies and Vietnamese organisations or individuals, as only Vietnamese
organisations and individuals can provide IT services to State bodies. This would also
limit the technology that State bodies could take advantage of as there would be an
inevitable time delay, potentially for many years, whilst Vietnamese organisations and
individuals acquire the requisite knowledge and expertise.
Potential gains/concerns for Vietnam
The IT services economy is essential for general economic development, driving
productivity, employment, foreign direct investment and regional and global
competitiveness. Vietnam has established its position in this nascent sector and by
avoiding unduly burdensome and impractical regulation on IT services, Vietnam will

8. be in a better position to compete internationally and drive higher productivity in the
domestic market. The draft as it currently stands potentially violates Vietnams WTO
commitments and is a cause of concern for the EU-Vietnam Free Trade Agreement
(EU-VN FTA] and the Trans-Pacific Partnership (TPP).
Recommendations
We would like to make the following specific recommendations:
• The refurbishment services requirements shall not apply to manufacturers who
refurbish/ recycle their own products according to their own internal technical
standards as long as these products after being refurbished meet the same standard as
their new products;
• Cross-border service providers shall have a local contact point in Vietnam solely to
facilitate companies’ communications with competent authorities in solving relevant
issues such as tax, fees, charges and other related duties; and
• Remove the burdensome requirement to have a practicing certificate.
State bodies procurement procedures should be open and non-discriminatory and be aligned
with the WTO Agreement on Government Procurement [GPA) (to which Vietnam
became an observer in 2012).
Please contact Oliver Massmann under Uomassmann@duanemorris.comU if you have any
questions.