TURNING HCMC'S HIGH TECH DREAMS INTO REALITY

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000696

SENSITIVE
SIPDIS

STATE FOR EAP/MLS, USAID/ANE, EEB/TPP/BTA/ANA
USAID/ANE/EAA FOR FRANK DONOVAN
STATE PASS USTR FOR BISBEE
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO

E.O. 12958: N/A
TAGS: ECON ECPS EIND EINV EINT ETRD KIPR SOCI VM
SUBJECT: TURNING HCMC'S HIGH TECH DREAMS INTO REALITY

REF: HANOI 849

HO CHI MIN 00000696 001.2 OF 002



1. (U) Summary: Despite ongoing concerns about human resources,
Vietnam's ICT market, which is now among the fastest growing in
the world, is beginning to create opportunities for businesses
and investors alike. President Nguyen Minh Triet recently
presided over the groundbreaking ceremony for what Vietnam
expects will be ASEAN's biggest software park in Ho Chi Minh
City's Thu Thiem district. That same week the Asian Electronics
Industrial Associations met in HCMC and the International Data
Group (IDG) hosted its annual Vietnam Information and
Communication Technology (ICT) conference. Both noted the lure
of Vietnam's rapidly growing ICT market and opportunities to
invest in Vietnam, with IDG announcing a US$ 500 million Vietnam
ICT venture capital fund. End summary.

Top-level Support for ICT
--------------

2. (U) On July 19, the Saigon Telecommunication & Technologies
Group, its Singaporean joint-venture partner TA Associates
International and a group of Taiwanese investors broke ground on
the new US$ 1.2 billion Thu Thiem Software Park in Ho Chi Minh
City (HCMC). When it comes into operation in 2012, the park
will sprawl over 16 hectares and is expected to generate US$ 6
billion annually and provide jobs for 50,000 software
specialists -- making it the biggest in ASEAN. The
ground-breaking ceremony was attended by Vietnam's President
Nguyen Minh Triet and eight deputy ministers from a surprisingly
wide range of government agencies, including ministries of trade
and industry, planning and investment, communication and
information, construction, defense and public security. The
high level of representation seemed to convey the message that
the Hanoi leadership is committed to developing Vietnam's ICT
sector from its current low base.

Improving the Environment for High Tech Investment
-------------- --------------

3. (U) In percentage terms, Vietnam's ICT market is among the
fastest growing markets in the world, according to the reports
by various ICT industry key players speaking the July 15
"Vietnam ICT Outlook Conference" in Ho Chi Minh City. While the
level of technical development is still low, Vietnam's ICT is
seeing rapid improvement. A study by the World Bank in March
2008 scored Vietnam at 3.27 on the Knowledge Index, a ten-point
scale based measuring innovation, education and ICT, compared to
below 3.0 in 2007. Studies this year sponsored by the United
Nations (E-Government Index) and the World Economic Forum
(Networked Readiness Index) show improved ratings in Vietnam for
network readiness, e-readiness, e-government and copyright
infringement rate.

Growing Markets and Growing Industry
--------------

4. (U) At "ICT Outlook 2008", Mr. Truong Hoai Trang, head of
HCMC-based internet service provider Vietnam Data Communication
Two (which controls the lion's share of southern Vietnam
internet connections) said that his company's outlook is rosy,
with 23 percent of Vietnamese now using the internet, a big leap
from 16.9 percent early last year. The fastest growing ICT
sub-sector, however, lies in the digital content industry, which
boasted 55 percent growth last year alone with total revenue of
US$ 182 million. According to Mr. Nguyen Trong Duong, Deputy
Chief of the ICT Section, Ministry of Information and
Telecommunication, the main digital content earners are, in
order of revenue generation, mobile phone content, mobile phone
games, advertisement and internet content, and e-commerce. In
2007, Vietnam's 100 mobile phone content companies recorded a
59-per cent year-on-year turnover increase, at US$ 53.6 million,
while employing 6,400 employees.


5. (U) As the GVN promotes software engineering as a priority
field of development, software parks are beginning to fill up
and expand. According to Mr. Chu Tien Dung from the HCMC
Information Technology Association, investment to build
infrastructure for software parks throughout Vietnam has
quadrupled in the past three years to US$ 125 million. The
number of companies in HCMC software parks is now nearly 500, a
four-fold increase in the same period, and there are now five
times as many companies with more than 100 employees as there
were in 2005, according to Mr. Dung. In fact, at the Vietnam
ICT Outlook conference, the International Data Group (IDG) also
announced a new US$ 500-million venture capital fund for Vietnam
ICT sector.

Human Resources Remain an Obstacle

HO CHI MIN 00000696 002.2 OF 002


--------------

6. (U) A survey by the HCMC IT Association (representing 80 ICT
companies nationwide) revealed that about 80 percent of firms in
the industry would like to have more say in how Vietnam educates
IT professionals, including input into an updated curriculum for
those studying IT. Last year, Vietnam had 390 educational
institutions with IT or IT-related faculties and nearly 40,000
IT students. The country expects to enroll over 50,000 new
students this year, the survey noted. While these numbers look
good, ICT companies are concerned that their new recruits lack
English language ability and the practical experience and skills
to master new technologies.

Comment:
--------------

7. (U) Despite global economic turmoil, foreign investors in
Vietnam appear undeterred. Vietnam's population of 85 million,
the rapidly-expanding market and the demonstrated commercial
success of mobile digital content make this a market companies
want to be invested in. The surge in internet usage and the
utter lack of e-commerce services offer opportunities for future
investment and innovation. If high tech companies like Intel,
Applied Micro Circuits Company (AMCC) and Jabil Circuits are any
indication, Vietnam's growing market and improving investment
environment for high tech companies will attract more U.S.
interest in coming years. End comment.


8. (U) This cable was coordinated with Embassy Hanoi.
FAIRFAX