Vietnam Internet Ecosystem

Vietnam is a country that I am extremely excited about, especially for its developments in technology and, in particular, FinTech (i.e. payments, lending, insurance). Most articles I have come across speak optimistically of the technology industry and what the future holds, albeit with the caveat that challenges like government support, the ability to attract talent, and competition for investor dollars from neighboring fast-growing countries (e.g. Indonesia) remain. Momo, Moca and VNG are some of the top-of-mind technology startups from the country, with VNG being the only unicorn.

Founded in 2004 as Vinagames, which the company is still frequently referred to as, VNG specializes in digital content and online entertainment, social networking, and eCommerce. They segment their products and services into 4 categories: Online games, Platforms (CSM, Zalo, Zing etc.), Finance and payments (ZaloPay), and Cloud services (IoT e.g. vCS, IoT HUB, vCloudStack).

As part of VNG’s efforts to connect with the expert community in Singapore, the company organized the Vietnam Internet Ecosystem, with the goal of gathering innovators, entrepreneurs, business leaders and tech experts to create a knowledge connection, support and linkage among enterprises and experts in the Internet industry. Specifically, this event was organized as a platform to discuss the Vietnam business landscape, with a highlight on cloud services.

It would have been awesome if Dzung Dang, Head of Zalopay, were there to speak more on the company’s strategy in building out its cashless offering, as well as his views on the adoption of cashless payments in Vietnam and Southeast Asia, as he probably would be sharing on, during VNG’s other event (also named “Viet Nam Internet Ecosystem”) scheduled later in the month in Santa Clara, with greater focus in payments, machine learning and AI.


  • Dr. Vu Minh Khuong, Associate Professor, Lee Kuan Yew School of Public Policy, NUS
  • Mr. Le Hong Minh, Co-founder, Chairman and CEO, VNG

Opening Speech

  • Dr. Vu Minh Khuong shared his view on the importance of the 6 S’s: smart choice, strategic positioning, synergy, speed, sustainability and surprise
    • He feels that Singapore has managed to execute on these 6 aspects and is optimistic that Vietnam will also do the same
  • Dr. Vu also shared key economic and industry indicators
  • The digital age as we are experiencing have evolved through the following stages: from the personal computer to the internet, then to mobile and subsequently to the smart age
  • We are currently in transition between mobile and the smart age, where access to technology and mobility, because of large scale acceptance, economies of cost and accessibility, results in connectivity which then can be amplified and be the basis on which Internet-of-things, AI and machine learning etc. can be build upon
  • Vietnam exports and imports grew 10%, while the portion external to ASEAN grew faster than that within, indicating greater diversification among trade partners and internationalization of Vietnamese trade
    • However, Vietnam cannot continue to rely heavily on export and trade for growth, as growth in these areas is slowing down, and there is a need to improve on quality of trade over quantity (i.e. towards higher skilled trade)
  • The Vietnamese economic model and growth engines are heavily dependent on trade, while the re-emerging protectionism worldwide offers both opportunities and challenges for the country
  • Cloud computing expenditure per capita is ~$1.4, which is low even compared to countries in the region – This has two implications:
    • That there is still a huge potential for growth of cloud computing in the country (vis-a-vis other countries, both in the region and internationally)
    • That the country’s businesses are not operating as efficiently as the could be, and so there might be competitive advantages not yet uncovered, including, and especially, those related to automation or advanced analytics, which could potentially drive the business landscape
  • Vietnam’s connectedness is low (according to a World Bank report)
    • Interestingly, the most recent DHL Global Connectedness Index 2018 showed that Vietnam is one of the top 5 countries for out performance in depth, which has been associated with faster economic growth
  • Greenfield investments are picking up in 2018, with FDI increasing despite protectionism (although exports are slowing down, FDI is not)
  • Key pillars of the economic reform of Vietnam are (ASIAN): Aspiration, Strategy, Institutions building, Acquisition of knowledge, Nurturing of human capital

Vietnam Business Landscape

  • Le Hong Minh, VNG CEO, shared about the strategy of VNG group and his view on the Vietnam business landscape
  • The anomaly of Vietnam is that, although it has below-average GDP, it is a leader in technology adoption and openness
  • There are >60M internet users in Vietnam (~65% penetration), which is much higher than the world average and countries that are developing at the same rate – he sees this penetration increasing to ~80% in the next 4 years
  • Minh gave the anecdote of how 1GB of mobile data in Singapore costs ~$5, while the same would cost 50c in Vietnam, which he feels is the cheapest rate in Southeast Asia
    • In addition to the relatively cheap cost of smartphones (~$150-200), this implies that the average Vietnamese will spend ~5% of the average per capita GDP in a year on mobile-connectivity
    • He feels that Vietnam is poised to continue growing in mobile-connectivity
  • Globally and especially in Vietnam, the internet is moving towards the end of the online phase
    • However, as it grows and as mobile devices become more accessible, it is moving into the offline stage (e.g. Grab) where the phone serves as a connection point
    • He thinks that Grab has ~5M users in Vietnam and that this will grow to ~20M / 50M in the next 5 / 10 years, implying that transportation and logistics etc. will have much larger impact on the country than Zalo can, which currently has a reach of ~50M users
    • Minh commented that Vietnam is a country which regions are very different in terms of stage of economic development and as a result of that, it is very hard for any company to reach all corners of the market (both in the geographic and socio-economic sense) – VNG’s focus, as opposed to Grab and to its advantage, is to serve the entire market, those who make <$5 a day, which it is able to because of its more readily-acceptable and used offerings (chat, pay and games)
  • There is a lot of interest in payments in Southeast Asia and Vietnam but 95% of transactions are still in cash
    • In Vietnam, the week before Tet (Lunar New Year) is the busiest period for banks and it is commonly anticipated that the banking system will go down because of the rush of Vietnamese to pay down debt or credit salaries
    • He thinks that the transaction limit at which the banking system goes down is 1M transactions and that, using the commonly referenced points of 2% of China transactions (i.e. ~2B a day), there are ~40M mobile payment transactions in Vietnam today, which is ~40x what is needed to bring down the banking system
  • Minh feels that there are plentiful opportunities in transportation, commerce and even harder to penetrate areas like healthcare and education
  • There are two challenges the Vietnam technology is facing
    • First challenge: People
      • This has manifested into many other areas – people are not very committed to change in technology in Vietnam
      • There is a large gap in talking vs. acting and producing results
      • The reason for this gap is the lack of resources – Minh estimates that there are probably ~50K people working in the technology industry and there is a human talent crunch that is more acute in Vietnam and developing markets than compared to the world
    • Second challenge: Vietnamese businesses are not strong at thinking long term and hence investing for future results
      • The average Vietnamese consumer is very technologically savvy – for example, they are the top in terms of gaming/fraud on google searches
      • Businesses are very much behind and slower than consumers in terms of technology adoption, which takes a longer investing time frame
  • There are three areas that VNG wants to tackle and help solve for Vietnam, while working towards playing an active role in getting people excited about the country’s technology industry and attractiveness to talent (with the aim of increasing the number of technology workers from 50K to 1M)
    • Payments
      • Minh thinks VNG is late going into the offline world and cannot compete with Grab on transport
      • VNG invests (in Tiki), but are not directly involved in eCommerce
      • Minh feels that VNG has an advantage in payments due to it being built on top of a popular chat platform (Zalo) and hope that it can scale to ~50M users
    • Cloud computing
      • The key challenge is to bring technology to businesses in Vietnam
      • VNG wants to work with partners because it feels that no singular company can solve the problem of technology adoption and VNG has the advantage of being localized
      • Vietnam has 500K SMEs, which is well below world average per capita (1 SME per 200 people) and should grow at least 5x, however it is handicapped by the lack of infrastructure (e.g. payments)
    • Artificial intelligence
      • The technology around AI is still quite scattered and there is an opportunity for a company to unify players in the field

Further reading