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VIETNAM - INFORMATION TECHNOLOGY – THE SKY IS THE LIMIT – WHAT YOU MUST KNOW:

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VIETNAM - INFORMATION TECHNOLOGY – THE SKY IS THE LIMIT – WHAT YOU MUST KNOW:

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VIETNAM - INFORMATION TECHNOLOGY – THE SKY IS THE LIMIT – WHAT YOU MUST KNOW:

  1. 1. VIETNAM - INFORMATION TECHNOLOGY – THE SKY IS THE LIMIT – WHAT YOU MUST KNOW: OVERVIEW Coupled with Vietnam's upward economic trend, the Information Technology (IT) industry has become an important economic sector in Vietnam. In September 2010, the Prime Minister of Vietnam signed Decision 1755/QD-TTg approving the national strategy on 'Transforming Vietnam into an Advanced Information and Communications Technology (ICT) country'.[1] In April 2015, the Prime Minister issued Resolution 26/NQ-CP2 instructing all Ministries and local government to promote the application and development of IT to serve the purpose of successfully developing the economy sustainably and integrating internationally. The EuroCham ICT Sector Committee welcomes these commitments, as we believe the sector could be a significant driver of future economic growth. Vietnam's IT sector has enjoyed an annual growth of 20% since 2000, accounting for 7.5% of the country's GDP in 2015[2] The IT hardware and software market is projected to grow at an estimated 11% between 2015 and 2019 thanks to the rise of domestic incomes, business modernisation and Government procurement[3] Vietnam has shown significant potential in the outsourced and offshore services sectors. Demand for outsourcing on the Vietnamese market is forecasted to grow faster than in other countries in the region in the coming period. ICT usage has grown again in 2016, according to a report from an international marketing company, Vietnam now has about 52 million Internet users, accounting for 54% of the population, ranks 5"' in Asia-Pacific in the proportion of the population having an Internet connection after China, India, Japan and Indonesia.[4] Furthermore, Vietnam is increasingly becoming a worldwide provider or ICT services. Such a growth needs to be managed and structured to make sure that Vietnam's ICT sector is ready for the next steps and will be a competitive player in the global market.[5] To make Vietnam a stronger and more reliable contestant in the global ICT market and also within the Association of South East Asian Nations (ASEAN) region, we believe that the laws that involve this sector should be updated to a more international and open standard. More specifically, we think that privacy and security regulations should be created in cooperation with relevant stakeholders to promote a safer and trustworthy online economy. I. OUTSOURCING ICT STAFF Relevant Ministries: Ministry of Information and Communications (MIC), Ministry of Labour, Invalids, and Social Affairs (MOLISA)
  2. 2. Issue description The concept of 'subleasing' was introduced in the Labour Code of Vietnam on 18"' June 2012 and is further governed by Decree 55/2013/ND-CP detailing the implementation of Clause 3, Article 54 of the Labour Code regarding the supply of hired labour, payment of deposits and the list of jobs permitted for hired workers', as amended in 2014 Decree 55. We welcome the introduction of this form of work. However, from ICT's perspective, we are also of the view that there are a number of shortcomings that remain to be addressed, not only in the list of jobs for which Labour sublease is permitted but also in sublease term. Specifically, Clause 2, Article 53 of the Labour Code further indicates that labour sublease may only be carried out in respect to a number of specified jobs. Clause 1, Article 25 of Decree 55 provides a list of jobs for which labour sublease is permitted. According to the list, there are no regulations for outsourcing ICT staff by local or foreign companies. In other words, ICT related jobs are not entitled to implement the outsourcing. With regard to sublease term, under Clause 2, Article 54 of the Labour Code, the term of any labour sublease must not exceed 12 months. Upon the expiration of the term, the staffing company may not continue to sublease such subleased employee to the subleasing company[6]. Normally, according to experience by ICT SC members, after 1 year, someone is finally up to speed and starts producing and being effective. This regulation means that when the worker is finding his way, the business has to start training a new worker. This is problematic for the ICT business since the change of contracts is time consuming. We also see an issue with the regulations that are stipulated in Article 6, Decree 55. Here it is mentioned that an outsourcing company should have VND 2.000.000.000 in their deposit and charter capital at all times. We see that this does not contribute to a competitive and healthy outsourcing market where new companies can deliver a limited amount of resources that are high value in quality but not in quantity. Next to that, foreign companies in a joint venture have to comply to a lot of extra regulations before they can start. The conditions for heads of the outsourcers, branches and representative offices as regulated in Article 8 of Decree 55 will not help the market develop to its real potential. Potential gains/ concerns for Vietnam We feel like the law seems to discourage outsourcing, while we believe that this is a perfectly good way for companies to minimise the risk of having their own employees and a flexible workforce. Moreover, since the workers have contracts with their outsourcing company, they will enjoy the same legal protection as any other worker. If we compare it with the ASEAN region, Vietnam is missing a huge opportunity. By allowing ICT companies to outsource and have more flexibility regarding the sublease terms, the workforce would easily be manageable and companies would have more ways to earn money.
  3. 3. This will create jobs as well as income for the Government. In order to stay competitive in the ASEAN region, these constrains of the Vietnamese labour market have to be looked at and changed. From our point of view the following recommendations will help Vietnam grow. Recommendations > Increase the job categories listed for ICT and also other sectors and jobs. > Remove the imposed maximum term of the labour sublease agreement which requires enterprises to change workers every twelve months as it will release a significant training burden for Vietnam's ICT workforce. > Remove the conditions of legal capital for the outsourcing services. Also, we would recommend harmonising rules between local, foreign and joint venture companies. > I' the owner/ shareholder is the head, the conditions provioing in Article 8 of Decree 55 shall not apply. II. EDUCATION AND TRAINING Relevant Ministries: Ministry of Information and Communications (MIC), Ministry of Education and Training (MOET) With IT being a key growth industry in Vietnam, the Government has highlighted the objective to have 1 million employees meet international skills and education standards in the ICT sector by 2020, according to the Decision 1755/QDTTg from 22nd September, 2010 of the Prime Minister of Vietnam. However; the availability of skilled and trained labour remains an imminent obstacle to the industry's growth.[7] According to statistics released by the MIC, there are about 290 universities and colleges offering training in IT in Vietnam and the admissions quota has been increasing steadily over recent years[8] But currently, Vietnam has no standardised IT education skills set and curricula, based on international criteria, which would meet the requirements of local and foreign technology companies in compliance with the objectives set in the abovementioned Decision of the Prime Minister to develop the ICT industry. IT companies in Vietnam nowadays have to substantially invest when hiring fresh graduates from universities and vocational training schools to develop their technical, soft and English language skills. This training can take a year on average, to prepare the workforce for the professional requirements of their roles. Roland Polzhofer's recent master-thesis study (July 2013) for the Vietnam-German University (VGU),[9] highlights that there are discrepancies and gaps between the views of the University managers and the managers of IT companies. Potential gains/concerns for Vietnam
  4. 4. Developing a highly-skilled workforce will help support Vietnam's objectives as set out in the plan on development of IT human resources up to 2015, and orientations toward 2020.[10] This is a key requirement if Vietnam wants to continue the development and growth of its IT industry, as well as foster local innovation and entrepreneurship. A well-trained labour force would also help the country transition to an advanced, knowledge-based economy. The Vietnam Software and IT Services Association also revealed that there is currently a total of about 250,000 people working in the ICT industry in Vietnam.[11] Of this figure, approximately 50,000 people are working in the software and digital technology development industry According to MIC, the average yearly increase in deman for human resources in IT stands at 13%. Moreover, according to the report conducted by VietnamWorks, for the last three years, the annual supply for IT human resources has grown at 8% on average, outstripped by the average 47% yearly growth rate of demand in IT jobs.[12] Such a large demand is difficult to fulfill and if supply growth remains low, Vietnam will face a shortage of 78,000 IT workers each year. By 2020, there will be a shortage of over 500,000 people, accounting for over 78% of total IT manpower that the market needs. However, a recent survey by the National Institute of Information and Communications shows that 70% of graduates in IT need to be re-trained to meet firm requirements. The majority of IT students are not even aware of their field of practice, 72% lack practical experience while 42% show poor teamwork. Among fresh graduates, only 15% meet requirements of companies, while 80% of fresh graduate computer programmers need re-training.[13] Recommendations > We would like to make the following specific recommendations: > The Government should create cooperation with foreign high performing universities, learn from the best practice to create an international relevant curriculum. > Development of a national technical skills exam standard for the IT industry, in close cooperation with national and foreign industry associations. > To design a minimum qualification course to enforce soft skills and strengthen English communication. > MIC, in cooperation with the Ministry of Education and Training (MOET) and MOLISA, should make it a requirement for students from IT universities and specialised IT vocational training institutions to complete a practical internship. This should be carried out at any IT company of their choice during a period of minimum 6 and maximum 12 months, as part of their curriculum. > Universities should collaborate closely with the industry to understand technological trends, and understand the needs / Expectations needed after the completion of the degree. For example, offering inter-disciplinary courses (like Computer Engineering with Embedded System) and adding Engineering Processes / Methods (like Problem solving Skills, Failure Mode
  5. 5. Analysis, etc') in addition to Engineering Subjects would be a desirable change from the Industry. > A longer mandatory internship at IT companies would allow students to acquire sufficient first-hand, practical experience and apply their technical and soft skills in an international environment. Simultaneously, IT companies would have the chance to identify and recruit talent for future vacancies and therefore potentially reduce overhead costs that would stem from training new employees. III. INTERNATIONAL INTERNET BANDWIDTH (MBPS) IN VIETNAM Relevant Ministries: Ministry of Information and Communications (MIC) Issue description International Internet bandwidth is the contracted capacity of International connections between countries for transmitting Internet traffic. The Vietnamese may be one of the most globally- connected people (the number of Internet users is expected to reach 60 million by 2018) but they still need a faster International Internet connection. It has the second slowest Internet speed in Asia and globally ranks 117th, behind Thailand, Indonesia and Philippines. The average Internet connection speed in Vietnam is 2 Mbps while the global average Internet speeds have reached 3.9Mbps, and the highest average peak connection speed was 21.2Mbps. The country's Internet has repeatedly been affected by breaks in the submarine cable system that connects it with the U.S. (especially with tne Asia-America Gateway (AAG) cable system). The connection is one of only five pipes (AAG Cable System, Tata TGN-lntra Asia (TGN-IA), Asia Africa Europe-1 (AAE-1), SeaMeWe-3 and Asia Pacific Gateway (APG)) and is the network entry point for local providers. The AAG project was completed in 2009, and is a central pivot in plans for new global business trading and cooperation between the west and Asia, but has been subject to numerous breaks since its completion. Most of the outages are located at the intra-Asia segments between Hong Kong and Singapore. The inter-Asia undersea cable route was broken and it was repaired from 15th to 24th July, 2016.[14] During that time, Internet in Vietnam was affected. This incident occurred shortly after the maintenance of the AAG submarine cable route. Also network availability and quality of service (QoS) is one of the most important factors for a corporation in ceciding where to locate a new corporate facility. Every hour a network is not performing as intended, there is a loss of productivity at a corporate site and thus a loss of revenue for Vietnam overall. Potential gains/concerns for Vietnam
  6. 6. For Vietnam, the forces that are changing the global ICT (including International Internet Bandwidth) market context and, the openness, create visible and possible opportunities to a potential competitor. Improving this International Internet Bandwidth provide opportunities to Vietnam to attract foreign companies in a sustainable and long-term growth plan. Recommendations We would like to make the following specific recommendations: > Vietnam should develop a more comprehensive technology and service neutral National ICT Strategy and in the process create a public private dialogue to help in drafting the strategy. Some companies are focused on network solutions instead of 'Internet' which will help companies to improve the speed, the stability, the security and the capacity contracted of the International bandwidth. > Vietnam should create a public-private working group that facilitates public-private sector dialogue that focuses on ICT issues. > In the spirit of transparency, Vietnam should allow a public comment session for everyone to comment on existing or upcoming ICT regulations, especially as industry is very keen in seeing the draft telecom law. Please do not hesitate to contact Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC. Thank you!

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