Why Vietnam’s ‘Silicon Valley’ Won’t Be Like California’s

Vietnam’s financial hub is setting aside land to develop what locals call a new “Silicon Valley,” a reference to the area of California where a lot of new technology is developed, but with not-so-California characteristics, such as state planning and a lack of venture capital. The Home Affairs Department of Ho Chi Minh City filed a plan this month to the city’s Communist Party committee for merging three districts into a single zone for development as a tech center, domestic media outlet VnExpress International says. The plan followed a meeting May 8 between city officials and Vietnam’s Prime Minister Nguyen Xuan Phuc, the news outlet says.   City leaders had begun in 2017 planning a 22,000-hectare (54,300-acre) zone to monetize scientific and technical research, the news outlet says. More than 1 million people already live along the flat swathe of land along the Saigon River. The zone will appeal foremost to internet and software developers, including an estimated 40 financial technology firms, as well as their employees who hope to live near work, analysts on the ground say. The zone is taking shape as tech-educated Vietnamese in their 20s start companies. “Vietnamese are very entrepreneurial,” said Jack Nguyen, a partner at the business advisory firm Mazars in Ho Chi Minh City. “They see something work in other countries, or in the U.S., they’ll give it a shot here in Vietnam.” Vietnamese entrepreneurs, some educated overseas, are taking advantage of a largely “mobile” culture in the Southeast Asian country as well as low-paid local engineers to build up their bases in Ho Chi Minh City, Nguyen added.   Ho Chi Minh City’s tech zone includes a slice of its financial center, modern apartment tracts and a nearby polytechnic university. Those perks should make the zone more attractive for techies, said Phuong Hong, a native of the city who lives in the zone.   “These three districts have the level of living, and transportation is also very, very convenient,” she said, referring to the three administrative tracts to be merged. Tech workers are likely to take advantage of that convenience, said Frederick Burke, Ho Chi Minh City-based partner with the law firm Baker McKenzie.    “The fact that they give extra incentives to locate there creates an ecosystem where some employees live in the neighborhood,” Burke said. “Therefore, an engineer can jump from one job to another more easily.”   Central government leaders have tried over the past decade to steer Vietnam’s export-led economy Electricity needs are rising as Vietnam’s economy grows, adding challenges for the state power utility, EVN, as it tries to balance free markets and central planning. (Ha Nguyen/VOA)National-level and city government planning will probably lead the tech zone’s formation – a key difference compared to the more organic development of Silicon Valley of California – analysts say. “What we’ll likely see as key differences between the two is the Ho Chi Minh City project will be a cluster that heavily recruits global and regional companies and (where) entrepreneurial behaviors are likely commissioned by the government, whereas Silicon Valley is more locally grown and has been driven by industry trends and technology innovations,” said Lam Nguyen, managing director with the tech market research firm IDC Indochina in Ho Chi Minh City.  State planning to date has offered internet bandwidth. Growth of the zone will require local officials to build out infrastructure, the IDC managing director said. The zone will need tax incentives, better business licensing processes and ideal locations to draw newcomers, he added.   Tech investors will favor Vietnam’s relatively lower costs, Lam Nguyen said. Vietnam’s tech zone will face a lack of venture capital, buyouts and failures followed by restarts, country observers say. A lot of startup founders have ideas but lack capital, Jack Nguyen said. They look overseas for funding, he said. The area south of San Francisco known as “Silicon Valley” first became a hub of technology development in the 1950s, when a dean of Stanford University’s engineering school encouraged faculty members to start their own companies. Silicon Valley output has been estimated at an unusually high $275 billion per year and it’s one of the most expensive parts of the United States. 

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