Hanoi, the capital of Vietnam, is the national political and administrative center, the hub of culture, science, education, economy and international relations. Because of its geo-economic and political significance, it is regarded as a promising destination for both domestic and foreign investors. Hanoi and Ho Chi Minh City account for over 90 percent of the outsourcing revenues of Vietnam.
According to Hanoi Department of Planning and Investment, in the first nine months of 2010, the city’s GDP growth rate was estimated at 10.6 percent, about 1.86 times higher than the same period in 2009. Hanoi is expected to gain 2010 GDP growth rate of over 10.5 percent. Therefore, the city is trying to reach the economic growth rate of 11 percent–11.5 percent.
Figures by the General Statistics Office (GSO) of Vietnam showed that in the first nine months of 2010, Hanoi’s trade gap reached nearly $10M, a two-fold increase from the city’s export turnover. Specifically, over the first nine months of 2010, total export value of Hanoi businesses reached an estimated $5.59B, a 19.5 percent rise compared to the same period last year. The GSO stated that Hanoi’s export turnover of the whole year of 2010 will likely hit $ 7.644B, up 20.8 percent.
Pham Quang Nghi, secretary of the Ha Noi Party Committee, articulated that Hanoi would take the lead in luring foreign investment and that there have been more than 8,000 projects worth a total committed capital of $18B in the last few years.
Vietnam’s Ministry of Information and Communications has drafted a plan to develop the country’s IT industry. The plan envisages that Vietnam would be among countries with the most attractive outsourcing industry and Hanoi would be in a group of 10 emerging cities for outsourcing. The plan also aimed to attract over $5B in foreign investment for the information technology industry.
IBM, GEMALTO, Teleperformance, Deloitte, Siemens, and FPT Software are among the key companies based in Hanoi. FPT Software had announced in October 2010 that it would invest $57M in a software park at the Hoa Lac Hi-tech Zone in Hanoi. The project is expected to generate 8,000 jobs, mainly in the software sector. FPT Software said that within the next 4 years, 80 percent of its production will be conducted under outsourcing contracts and the remaining will focus on products, services and solutions for the domestic market.
The city of Hanoi has a population of 6.5M. Vietnam’s large population shows a developing and potential market. Besides, cheap production costs combined with the government’s support have been making Vietnam the most outstanding competitor in terms of price.
It is a center of abundant intellectual and talented human resources. Here, there are more than 80 percent of scientists and managers in the country. According to a recent report by Ministry of Science and Technology, Vietnam has about 3,000 to 4,000 new IT students every year, of which half are software developers. Known for their skills and diligence, Vietnamese IT students emphasize potential of the future software industry in Vietnam.
With its advantageous geographical position and because it is an intersection of many land roads, railways, and air routes -from and to many provinces and localities in Vietnam, as well as many other countries in the world- Hanoi is becoming a national transaction center and an important international transaction center.
Over the past 20 years, Foreign Direct Investment (FDI) in Hanoi has recorded enormous encouraging achievements, making fundamental changes in the city’s socio-economic life. Yet, a number of problems have also emerged in FDI attraction and realization, particularly the risk of unbalanced economic development, overloaded infrastructure, environmental pollution, unhealthy competition and business, conflicts between employers and employees.
In 2008, the registered FDI reached a record high of $5,091M, of which $1,456M was realized. In 2009, given the negative impacts of the global crisis, Hanoi, like many other cities and provinces, saw a sharp decrease in the amount of projects, committed and realized capital.
The first ones who recognized this potential and started outsourcing to Vietnam were small- and medium-sized software companies in the United States. Vietnam realized that to receive such attention and to build a dedicated core of IT experts, there many things have to be done to support IT education in Saigon, Hanoi, and other cities with potential in IT development. The famous universities in this destination (Hanoi University of Technology, Vietnam National University Hanoi, Post & Telecommunications Institute of Technology) have educational collaboration with well-known universities all over the world.
Vietnam has advantages over other countries in the region due to its low labor costs and good location for transporting products to other countries in Southeast Asia and other parts of the world.
The business environment in Vietnam has become more friendly. This has been affirmed by chairman and CEO of the Japan External Trade Promotion Organisation (JETRO), Yasuo Hayashi. After India and China, Vietnam is Japan's biggest outsourcing software partner. Hayashi stressed that more and more Japanese enterprises pay attention to Vietnam when they expand their operations overseas.
Vietnam now stands sixth among the economies Japanese businesses want to expand their sale activities in the next 3 years. It has also jumped two places to stand at fifth place among the markets where Japanese partners wants to expand research and development (R&D) activities. However, Hayashi said, that several Japanese enterprises are still concerned about business risks in Vietnam, especially risks from the country’s poor infrastructure and incomplete legal system.
Vietnam needs to create the most favorable conditions for foreign corporations so that they can produce and export hi-tech products here.
Vietnam faces some obstacles such as Internet connections, sometimes, can be painfully slow since there is no fiber-optic broadband network. Another drawback is the lack of fluent English speakers, though this problem can be tackled as most communication is via e-mail.
Helping balance out these deficiencies are the country's low wages -programmers earn about one-tenth what computer programmers make in the United States -, a young and highly motivated workforce and low staff turnover rates of about 5 percent.