Can Vietnam Create the Next Silicon Valley?

The Communist Party's multimillion-dollar plan to develop the world’s next tech hub.
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HANOI, Vietnam — “Let me explain how a startup works,” said Csaba Bundik, executive director of the European Chamber of Commerce in Vietnam. In an unheated room in the unfinished part of a shopping mall, about 70 young Vietnamese in puffy winter coats took notes on smartphones. “You start with an idea. But you have to show that it’s not just a brilliant idea—it’s a brilliant business.”

I’d come to Indochina Plaza, one of the newest malls in Hanoi, on a Saturday morning to attend Vietnam’s first startup fair. Despite the lack of heating and bare ceiling pipes, the room was filled with aspiring entrepreneurs hoping to connect with investors. The woman next to me carried a stack of papers: her business plan, she explained, eyes anxiously scanning my scribbled notes. “What’s your idea?” she asked me.

When it comes to high-tech breakthroughs, Silicon Valley has long been the dominant model for the rest of the world. But as the pace of American innovation slows, Asia is ramping up its own tech industry. Following the lead of China, Japan, and the “Asian tigers,” Vietnam recently launched the ambitious Silicon Valley Project: a comprehensive plan to transform the country from a top producer of electronic components to a major player in the global digital economy. Sponsored by the Ministry of Science and Technology, the project aims to launch internationally competitive technology firms and eventually turn one of the country’s major cities—either Hanoi, Ho Chi Minh City, or Da Nang—into a tech hub.

“The big goal would be to have tech startups that can IPO in the U.S.,” Han Linh, the project’s executive coordinator, told me. “But that’s in maybe seven or eight years, best case.”

Flappy Bird, the mobile game developed by Hanoi programmer Nguyen Ha Dong that recently catapulted to fame as one of the most-downloaded apps in the world, illustrates the untapped potential of Vietnamese tech startups as well as the challenges they face. Dong has since yanked the game from app store because it was too “addictive.” But his fellow entrepreneurs view his runaway success as an encouraging sign—and a valuable lesson.

“It encourages Vietnamese developers that they can make a good product even with only one guy and very simple design,” said Quan Dinh, the founder of Digi-GPS, which produces products like SmartBike, a theft-prevention device for motorbikes that lets you text your motorbike to turn it off and track the bike via GPS. “It also teaches young entrepreneurs that they need to prepare for copyright and tax issues and communication to the press when [their products] become successful.”

For Vietnam, cultivating a startup scene where products like Flappy Bird can succeed represents a potential step up from being an offshore manufacturing hub for foreign companies like GE, which has a $61-million wind turbine parts factory in Hai Phong, and Intel, which has invested $1 billion in its Ho Chi Minh City chip plant. As Le Dinh Tinh, deputy director general of the Diplomatic Academy of Vietnam’s Institute for Foreign Policy and Strategic Studies, argued in a recent article, the country needs to “overcome the middle-income trap” by boosting its competitiveness in both agriculture and information technology. The Silicon Valley Project’s mission statement frames the stakes more starkly: “This is the time for Vietnam to join in the technology race. Countries which fail to change with this technology-driven world will fall into a vicious cycle of backwardness and poverty.”

Vietnam’s competitors in the “technology race” had a significant head start. When Linh started working on the project two years ago, he recalled, “the government had no idea what venture capital was.” Under increasing pressure to modernize the economy, however, Vietnam’s Communist government has adopted a series of reforms, including allowing foreign investors to own larger shares in local banks and privatizing state-owned enterprises. At its sixth plenum in 2012, the Central Committee of the Communist Party resolved to “encourage the private sector, in collaboration with state-sponsored sources, to set up new VC funds.”

The Silicon Valley Project takes a methodical approach to building a startup ecosystem—one that includes offering programs to help entrepreneurs develop their ideas and starting a business accelerator. “We want to create something like [the American seed accelerator] Y Combinator,” Linh said. “Even in America, that’s quite new. We’re not so far behind.” According to Linh, the Ministry of Science and Technology has earmarked $3 million for the project, as well as $50 million per year for “the application of technology through startups” and $100 million to develop the tech industry through a joint project with the World Bank.

Starthub.vn describes itself as the “heart of Vietnam’s startup ecosystem.” Its database lists hundreds of tech startups, from the Amazon-like Tiki.vn to the Yelp-like Foody.vn. Founder Anh-Minh Do expects to feature at least 1,000 homegrown firms on his portal by the middle of 2014. “Vietnam has seen quite a few startup successes. We’re kind of in the third generation now,” he said.

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Elisabeth Rosen is the Hanoi editor at Word Vietnam.

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