After years of negotiation, Vietnam now looks set to join the WTO no later than December. This step should turn the telecom and IT sectors into growth engines, connecting them and the country more tightly to the rest of the world.
The telecom sector is currently protected. But once Vietnam joins the WTO, foreign investors will be able to hold 49% of joint-venture companies and will have a strong say in how they are managed. The capital infusion will turbo charge the sector. By 2010, teledensity is targeted to double. In the first four months of this year, mobile phone ownership increased from 8.7 million to 11 million. With currently only 14% penetration, the upside is immense. China, by comparison, has 73% penetration.
The country now has six mobile phone network operators - VinaPhone, MobileFone, Viettel Mobile, S-Fone, EVN Telecom and Hanoi Telecom. But with the help of foreign capital, they are likely to look not just domestically but internationally for growth opportunities. Already, that is starting to happen. In May, Viettel got a license to operate in Cambodia. The company is now also looking at Laos.
The IT sector is equally poised for growth. Intel's decision to build a $300 million chip assembly and testing factory near Ho Chi Minh is the largest US investment in Vietnam so far. 'We consider this to be one small step in a long journey of involvement with Vietnam,' Intel chairman Craig Barrett said.
'For the Vietnamese IT community, this is a big day - probably the biggest day because Intel's investment in Vietnam is the most promising signal for the development of the industry,' said Truong Gia Binh, CEO and president of FPT, Vietnam's leading software and computer manufacturer.
Intel is fully aware of its role as a growth catalyst for this sector. 'When a major corporation like Intel chooses to relocate, the other corporations will follow,' Barrett said.
The software industry is still very small. But with the increased bandwidth and connectivity promised by the opening of the telecom sector as well as the focus brought by the Intel investment, its future is very bright. Vietnam can then compete better to be an outsourcing center, especially as the costs of using India, the key regional competitor, have risen dramatically.
There are about 2,000 local programmers in Vietnam. The industry earned approximately $100 million last year, about half of the $200 million goal set by the government. FPT Software, the largest of the local companies, earned only $1.9 million.
3D support
Perhaps the most intriguing development in Vietnam's nascent IT industry is the development of animation outsourcing companies. These companies provide the massive international gaming industry with 3D animation at a competitive cost. One of the most prominent of these companies is Ho Chi Minh-based Glass Egg.
In the past, a few guys in a basement somewhere could produce great games. But, given the size, complexity and market demands of today's industry that, of course, is no longer possible. Great images at a reasonable development price gives gaming companies an edge. And Vietnam, increasingly, is where they get that edge. As with all things IT, the main competitor is India. But with the greater connectivity, bandwidth, not to mention lower prices, promised by the country's WTO entrance, this sector is set to expand rapidly.
In many countries in Asia, the telecom and IT sectors are considered strategically vital.