Tech Cities: How Much Potential Does Viet Nam Have?

The fourth industrial revolution is transforming business and industry, driving the growth of new tech sectors and demand for property to support them. Savills Tech Cities are vibrant urban centres that attract and retain the best tech workers. Given that tech permeates everything and is transforming our lives and tackling some of the world’s greatest challenges, the question is, where does Viet Nam stand on Savills Tech Cities index? Major cities like Ha Noi, Ho Chi Minh City (HCMC), and Da Nang could emerge, however, do they deliver the full package that established tech cities do?

What Makes a Tech City?

Savills Tech Cities ranking measures a city’s business environment, tech environment, city buzz and wellness, talent pool, and its strength and depth across different tech sub sectors:

Savills Global Tech Cities

Established tech hubs with diverse bases include New York, San Francisco, and Silicon Valley. Of the top 30 Tech Cities, six are Chinese. Beijing placed fourth and Shanghai seventh. Despite tighter controls China put on its big tech companies, its major tech centres remain important, supported by a vast home market, established domestic tech ecosystems, and continued global demand for its manufactured products. Attracting by far the most venture capital in Europe across diverse tech sectors, London ranks fifth globally, ahead of Paris in ninth and Berlin in 19th.

Where Does Viet Nam Stand?

While no Vietnamese cities were in Savills Tech Cities top 30, several cities have notable tech and innovation potential. Ha Noi and Ho Chi Minh City have attracted significant tech investments from leading international firms, and Da Nang is also a notable contender.

In the 2022 Global Innovation Index (GII) Viet Nam ranked 48th of 132 countries. It ranked second after India within the lower middle-income category. It continues to score above the lower middle-income group average in all pillars, and even scores above average for the upper middle-income group in every pillar, apart from human capital and research. The report also states that the proficiency with which middle-income countries can absorb existing technologies and innovations has improved significantly in recent years, which could be seen as an opportunity for the country to capitalise on.

Read more on innovation in Viet Nam here.

International firms are keen on entering Viet Nam, including those in the tech space. At the end of March 2023, Viet Nam will host the “largest ever” US business mission. The event will welcome more than 50 companies, including defence, pharmaceutical and tech firms like SpaceX, Netflix and Boeing.

Ho Chi Minh City has a healthy SME and startup environment and is home to tech giants such as Grab, VNG, and FPT Software. Saigon Hi-Tech Park in District 9 is a government initiative that promotes the development of high-tech industries, research, and innovation. The park has attracted over 100 companies, including Intel, Samsung, and Schneider Electric.

In Ha Noi, Samsung has just launched its US$220 million R&D centre in Starlake, which is its largest R&D facility in Southeast Asia. The conglomerate is the largest foreign investor in Viet Nam and has recently committed to increasing its investment in the country to US$20 billion. According to the CEO, Samsung will invest in developing new, young human resources, and promote research in artificial intelligence (AI) and big data. Globally, the rate of venture capital investment into AI in the last five years has grown much faster than that in traditional fields like e-commerce. Samsung’s commitments are expected to draw skilled foreign and local workers to Ha Noi as well as foreign investment.

See how Samsung’s R&D project will impact serviced apartments and residential demand.

On the Savills Tech Cities ranking, several smaller cities made it into the top 30. While they might not present the same economic edge, they deliver quality business and education environments and better quality of life, with access to amenities and greater work/life balance, but with all the ‘buzz’ of larger urban centres. This is where Da Nang could have the edge over Ha Noi and HCMC. It has been named ‘Viet Nam’s most liveable city’ and the ‘Silicon Valley of Southeast Asia’. It offers a high quality of life but also a prime business environment. Da Nang ranked fourth on the Provincial Competitiveness Index (PCI) in 2021, outranking Ha Noi (10th) and HCMC (14th). In 2021, it also topped the Digital Transformation Index, again higher than HCMC (3rd).

For further insights into the potential of these cities, Savills Advisory Services teams utilise their international, regional, and local expertise and databases to deliver the latest performance metrics and informed forecasts. For tech businesses or developers looking to better understand the tech potential of Ho Chi Minh City, Ha Noi, Da Nang or other Vietnamese cities, contact Savills Advisory services.

Tech Cities Sub Sector Rankings

While Viet Nam does not have any existing tech cities, there are several fields in which it could capitalise to promote innovation and tech adoption. These include Agtech and FoodTech, Fintech, and MediaTech.

AgTech & FoodTech

This relates to using technology to improve agriculture, horticulture, food production and distribution. Typically, AgTech and FoodTech cities have sought to develop urban farming and alternative protein production to offset their reliance on imports, such as Singapore, and those that historically had agricultural industries and have used technology to advance them, such as St Louis.

The National Digital Transformation Program approved by the Prime Minister in June 2020 identified agriculture as one of eight priority sectors and fields for digital transformation. Agriculture is a leading sector and contributed 11.8% of GDP in 2022. The Ministry of Agriculture and Rural Development (MARD) aims to boost the contribution of science, technology, and innovation to agricultural growth by over 50% by 2030. By 2030, 85% of businesses in the sector will engage in innovation. The sector will also develop 200 hi-tech agricultural enterprises and as many as 100 high-tech agricultural zones in agroecological areas. In Ho Chi Minh City, high-tech agricultural products deliver 48% of the city's total agricultural production value; in Ha Noi, the city aims for high-tech farm produce to deliver 70% of its total agricultural products by 2025.

Apart from the digitisation of traditional agriculture, Viet Nam has been the destination of choice for several international companies producing insects as a protein alternative, both for human consumption and animal feed. Entobel raised US$30 million from Dragon Capital and Mekong Capital, and FlyFood has mobilised €3 million for an insect farm in Dong Thap. However, with limited land banks in Ho Chi Minh and Ha Noi, alternative protein farms such as these are likely to position themselves in outlying areas.

FinTech

This broad area of tech ranges from payment technologies and insurance tech to blockchain and cryptocurrency. New York and London are the global leaders in financial services and top the list. Finance hubs like Singapore, Tokyo and Chicago also score highly. Emerging centres in this space include Cape Town, Nairobi, and Lagos as the African market leapfrogs traditional banking.

Fintech app MoMo is one of Viet Nam’s startup unicorns and is valued at more than US$2 billion. The smartphone e-wallet first emerged in 2009 and is now a super app with more than 30 million users, which facilitates money transfers, savings deposits, quick loans, travel bookings, buying movie tickets, donations, payments, and online shopping. E-wallet apps like MoMo are driving Viet Nam’s transition to a cashless society and the future is bright.

Read about MoMo’s 7,000 m2 office in Ho Chi Minh City.

MediaTech

MediaTech includes video on demand, streaming, esports and gaming, and advertising, among others. New York and Los Angeles are leading cities, but the ‘technologisation’ of media is propelling cities such as Austin, Seattle, and San Diego up the rankings. Chinese cities including Beijing and Shanghai also feature as China spearheads gaming, livestreaming and video sharing platforms.

VNG is another of Viet Nam’s startup unicorns, and since its establishment in 2004, it has had exponential growth. Some of its achievements include revenue of VND 5,178 billion in 2019 and over 100 million users in Viet Nam and abroad for Zalo. It has also entered the fintech space with ZaloPay, a finance and payment application. It has a tech campus in Ho Chi Minh City with coffee shops, convenience stores, a gym, and an auditorium.

Netflix is also rumoured to open offices in Viet Nam in 2023, and TikTok has an established presence in Ho Chi Minh City. While physical offices of leading tech firms are promising for Viet Nam’s potential tech cities, are these brands establishing themselves because of the great potential and appeal of the location, or simply to comply with Viet Nam’s 2018 cybersecurity laws?

Tech Cities and ESG

The pandemic put a renewed focus on environmental, social and governance (ESG) issues. As corporates adopt ESG strategies, they can dictate location and expansion plans. Tech companies must acknowledge that talent wants to live and work in places that are vibrant, healthy, fair, and well governed.

Environment

Air quality is a factor in Savills tech city ranking, and in general, the better the quality of the air, the higher ranked a city is in the Tech Cities index. Cleaner, greener cities are more appealing places to build and grow a business. Locations in emerging economies such as Viet Nam, China and India tend to have poorer air quality than those in more developed locations.

In 2022, Viet Nam ranked 30th on IQAir’s worst air quality index with a PM2.5 concentration 5.4 times the WHO annual air quality guideline value, and Ha Noi took the title of the most polluted city. The need for change is obvious and the government is implementing green strategies for sustainable development. In November 2022, the US Agency for International Development (USAID) and the Ministry of Natural Resources and Environment (MONRE), launched the Reducing Pollution campaign, which aims to reduce plastic pollution and improve environmental markers like air quality.

Social – Gender

Equality in the workforce is another key indicator of a city’s ESG performance. A more inclusive working environment is better for talent acquisition and productivity; firms can access a larger pool of labour, and happier staff can also boost output. This is particularly significant in a time of intense competition for skills and future demographic trends that will see working-age populations shrink in advanced economies in the coming years.

In 2021, women comprised 47% of Viet Nam’s workforce and the country has implemented the National Strategy on Gender Equality between 2021 to 2030. The female workforce participation is high and so is the proportion of women in senior leadership positions. This bodes well for urban areas like Ha Noi, HCMC, and Da Nang in their abilities to become tech cities.

Governance

In many cities, the tech industry developed in fringe locations where working and living space was affordable. In more developed nations, tech startups would base themselves in Shoreditch in London, Kreuzberg in Berlin, or Brooklyn in New York City to take advantage of the comparatively lower costs in what was once a fringe location. However, the meteoric rise of the tech sector has driven up costs in such locations as early movers attracted investment and development in these areas, resulting in price rises and ultimately becoming too expensive for people and companies that originally put these neighbourhoods on the map.

Affordability is where Ho Chi Minh, Ha Noi, and Da Nang have the edge over regional competitors like Singapore. In Internations Expat Insider 2022, Viet Nam ranked first in the Personal Finance Index, and 75% of respondents stated that their disposable income is more than sufficient to support a comfortable life, compared to only 45% globally. According to Numbeo, in New York, it would cost VND 212,819,401 to maintain the same standard of life that VND 57,000,000 could afford one in Ho Chi Minh City, and rent in London is 615.9% higher than in Da Nang.

Conclusion

Do cities in Viet Nam have the potential to be tech cities? While there is certainly potential, it is not necessarily clear if Vietnamese cities can deliver the full package that tech companies and workers want, including environment, buzz, wellness, talent, and strength in tech sub sectors. Continued investment and improvements in technology and digitisation but also environmental protection and improved governance could push Vietnamese cities up the Tech Cities Index. While they are unlikely to rival London or San Francisco soon, Vietnamese cities could stand a chance against rising cities like Cairo or Jakarta.

Are you a developer keen to support tech businesses, or a tech business looking to expand in Viet Nam? Reach out for the latest data, which is available from national down to neighbourhood levels. Contact Savills Advisory Services

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