Q2 2013 www.businessmonitor.com VIETNAM INFORMATION TECHNOLOGY REPORT INCLUDES 5-YEAR FORECASTS TO 2017 ISSN 2044-9631 Published by:Business Monitor International Vietnam Information Technology Report Q2 2013 INCLUDES 5-YEAR FORECASTS TO 2017 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: April 2013 Business Monitor International Senator House 85 Queen Victoria Street London EC4V 4AB United Kingdom Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: http://www.businessmonitor.com © 2013 Business Monitor International All rights reserved. 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All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained. Vietnam Information Technology Report Q2 2013 CONTENTS BMI Industry View . SWOT IT SWOT Political . 11 Economic . 12 Business Environment 13 Industry Forecast 14 Table: Vietnam IT Industry - Historical Data And Forecasts (VNDbn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Macroeconomic Forecasts . 19 Economic Analysis - Q2 2013 19 Inflation Still A Manageable Risk 20 Expenditure Breakdown 21 Table: Vietnam - Economic Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Industry Risk Reward Ratings 23 Industry Risk/Reward Ratings 23 Table: Asia Pacific IT Risk/Reward Ratings - Q2 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Market Overview . 27 Vietnam . Hardware . Software . Services 27 27 32 41 Industry Trends And Developments 47 Regulatory Development 50 Table: Government Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Regulatory News 52 Company Profile 54 FPT Software 54 Regional Overview 57 Asia Pacific Regional Market Overview . IT Penetration . IT Growth and Drivers Sectors And Verticals 57 57 59 61 Demographic Forecast . 65 © Business Monitor International Page Vietnam Information Technology Report Q2 2013 Table: Vietnam's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Table: Vietnam's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Table: Vietnam's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Table: Vietnam's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Methodology 69 Methodology . 69 IT Industry 69 IT Ratings - Methodology 70 Table: IT Business Environment Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Weighting . 72 Table: Weighting Of Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Sources 72 © Business Monitor International Page Vietnam Information Technology Report Q2 2013 BMI Industry View BMI View: Vietnamese IT spending is expected to reach VND62,604bn (US$3.01bn) in 2013, up 18.6% from 2012. The macroeconomic environment is supportive of faster growth, boosting trends within the IT sector. Rising PC penetration, a range of government ICT initiatives and a campaign to develop Vietnam's domestic IT industry will help to sustain expansion. Meanwhile, there is strong demand for ERP solutions and cloud computing revenues are expected to report at least 300% growth over the five-year forecast period to 2017. The outsourcing market is also expected to expand rapidly over the medium term as enterprises, particularly in Japan, switch business away from China in search of cost savings. Headline Expenditure Projections: Computer Hardware Sales: VND38,261bn in 2012 to VND44,762bn in 2013, +17% in local currency terms. Influx of cheap tablets from Windows tablets and notebooks are expected to provide a growth area in 2012. Software Sales: VND4,630bn in 2012 to VND5,658nn in 2013, +22.2% in local currency terms. Potential for strong growth in licensed operating systems and business software, but will depend on the success in bringing down illegal software use. IT Services Sales: VND9,882bn in 2012 to VND12,185bn in 2013, +23.3% in local currency terms. Growing demand for digital infrastructure projects in various sectors, such as banking, telecoms, energy and government - as well as a potential boom in outsourcing from Japanese enterprises to drive outperformance of services segment. Risk/Reward Ratings: Vietnam scores 34.2 out of 100 in our Asia Risk/Reward Ratings table. This places the country 11th, ahead of Sri Lanka. The country ranks only 11th for its industry rewards score, with 38.1. Key Trends & Developments. There have been several reports in early 2013 of lower-price Chinese tablets as Hipad, Ondan, Teclast and Ampe, entering the Vietnamese retail market. These products are undercutting traditional notebooks on price, even after local dealers benefitting from high mark-ups. The margins available mean they are being heavily promoted by local retailers. This has reportedly resulted in declines in prices for notebooks, which are nevertheless finding themselves unable to compete at the low end of the market. © Business Monitor International Page Vietnam Information Technology Report Q2 2013 The outsourcing market in Vietnam is forecast for expansion from 2013. There has been increasing interest in it as a business process and software developments outsourcing location, particularly from Japanese enterprises. Vietnam has a cost advantage over China, which accounts for the majority of Japanese outsourcing by value. This could see significant shifts as the trend gains momentum. Vendors have reported continued robust sales of ERP solutions, despite the uncertain economic situation. There is still a lot of potential for Vietnamese enterprises to increase spending on basic solutions. A number of Vietnamese companies embarked on large-scale ERP implementations, including Hoang Anh Gia Lai Group (HAGL), which launched a VND100bn ERP system. However, while the ERP market is strong, it is estimated that only about 10% of Vietnamese businesses have used CRM. The ambitious government IT plan for 2010-2020 will be a backdrop to all these developments in the Vietnamese IT market, with the government pledging to invest VND2.4tn (US4,115mn) from the State Budget in the ICT sector over this period. Meanwhile a number of government ministries and organisations, including the Ministry of Education and Training, have started to promote the rollout of cloud services. Many of the government's ICT development plans and programmes are still in a nascent stage and their ultimate effectiveness is yet to be determined. © Business Monitor International Page Vietnam Information Technology Report Q2 2013 SWOT IT SWOT SWOT Analysis Strengths ■ Government policies to expand ICT infrastructure and internet penetration are driving demand for IT products and services. ■ Vietnam's gradual integration into the global trade network via its accession into trade organisations such as ASEAN and WTO, as well as bilateral agreements with Japan and China. ■ The domestic IT market is in a rapid growth phase, with trade liberalisation and growing affordability driving projected double-digit growth of notebook computers. Weaknesses ■ IT spend per capita much lower than in neighbouring Thailand, reflecting a much lower GDP and GDP per capita. ■ Low levels of access to credit and budgets restrain spending by SMEs. ■ Highly cost-sensitive market, with 75% of software provided by lower-cost local software vendors. Opportunities ■ High level of software piracy, although progress has been made in recent years. ■ Vietnam is becoming a popular destination for outsourcing, with particularly strong growth potential from Japanese enterprises. ■ High PC market growth potential particular in rural areas. ■ National IT Plan will drive spending on IT utilisation in areas such as e-government, etaxation and education. ■ SMEs have much potential to increase spending on basic solutions, including customer relationship management and security. ■ Government spending on open source software creates opportunities for local IT services firms to implement projects. © Business Monitor International Page Vietnam Information Technology Report Q2 2013 SWOT Analysis - Continued ■ Banking and finance, oil and gas, aviation and telecoms are projected to be some of the biggest opportunities for multinational vendors. ■ The government's drive to create a significant IT services industry over the next 15-20 years is expected to be a significant factor shaping the IT market through incentives to create IT clusters. Threats ■ The implementation of the China-ASEAN free trade agreement means that established multinationals will face a growing challenge from low-cost Chinese vendors in the Vietnamese market. ■ Low cost tablets from own-brand Chinese vendors a particular threat to low- and mid-range notebook vendors. ■ Falling prices may further undermine margins and profitability after steep discounting. © Business Monitor International Page 10 Vietnam Information Technology Report Q2 2013 In Indonesia, PC penetration of around 3% could double by 2016 if government initiatives are followed through. The Indonesian government is also rolling out new e-learning initiatives, with a target of raising the current 1:3,200 ratio of PCs to students in public schools to 1:20. Meanwhile, the Vietnamese government has launched a programme entitled 'One Teacher-One Computer', which offers discounts on PCs for teachers and students. A similarly broad range is found with respect to internet penetration. The highest levels of internet penetration are found in South Korea, Hong Kong, Singapore, and Australia, with estimated 2012 penetration rates of 76.9%, 74.0%, 73.3% and 71.0%, respectively. Singapore has by far the highest rate of broadband penetration, which was estimated at 189.5% in 2012. Meanwhile, the Philippines has the lowest levels of internet usage, with just 8.3% narrowband and 7.4% broadband penetration estimated in 2012. The fastest growth is expected in Indonesia, where Broadband Penetration internet penetration is projected to leap from 45.4% in 2012 to 68.9% in 2016, and the Philippines, where Per 100 Population penetration is forecast to reach 12.6% by 2016. India is still at only 11.8% internet penetration despite an improvement in fixed-line infrastructure, and penetration is forecast to reach only 16.2% by 2016. Steady growth is also projected for Sri Lanka, where penetration is projected to increase from 18.8% to 25.4% by 2016. Some 56.4% of Malaysians have internet access in 2012. Dial-up technology is still the dominant access method in many states. However, even in developing f = BMI forecast. Source: BMI, Regulators markets, the number of broadband subscribers continues to gain ground steadily. Broadband penetration has been boosted by a growing number of mobile broadband users, as 3G mobile services are expanded across the region. In China, broadband penetration is on course to reach 20.9% by 2016. In India, penetration should increase more than double to reach 2.8% by 2016 from around 1.2% currently, although this remains below government targets. Sri Lanka will also see continued solid growth in broadband penetration, which is projected to reach 21.7% by 2016. © Business Monitor International Page 58 Vietnam Information Technology Report Q2 2013 Across the region, government programmes are an important driver of ICT penetration. The Chinese government has a five-year plan to make the internet available in every administrative village in central and eastern China and every township in the west. In Australia, the government's commitment to develop the National Broadband Network should further the development of Australia's digital economy. Meanwhile, the growth of Wi-Fi coverage will be one driver of notebook sales in places such as Hong Kong, where the government has committed another HKD200mn to the deployment of a Wi-Fi network covering more than 200 public venues. IT Growth and Drivers Across Asia in 2012, IT spending should benefit from improved economic circumstances and tenders 2012 IT Market Sizes US$mn, forecast previously deferred as a result of the economic situation, although a forecast slowdown in China could act as a drag on some markets. Strong fundamental demand drivers of IT spending meant that there will be continued opportunities. Key factors common to most markets include cheaper PCs and reform in sectors such as telecommunications and finance, as well as government initiatives. In some of the region's largest markets largest markets, such as China, lower-tier cities and towns f = BMI forecast. Source: BMI will be among the fastest growing segment of the IT market. BMI expects China's IT market growth to be driven by an expansion into western China and rural areas as well as growing demand from small and medium-sized enterprises (SMEs). Despite these drivers, BMI expects a moderation in Chinese consumer and business IT investment in 2012 owing to government economic cooling measures and uncertainty about the global economic situation. However, an expansion in consumer credit and a modernisation drive in sectors such as education, healthcare and manufacturing will sustain market growth. The long-term IT market potential of another Asian giant, India, is plain: less than 3% of people in India own a computer (about one-fifth of the level in China), meaning particular potential in the lower-end © Business Monitor International Page 59 Vietnam Information Technology Report Q2 2013 product range. Having postponed IT projects during the economic slowdown, many Indian private and public sector organisations are now investing again in upgrading their IT infrastructure. India's IT market appears to be positioned for strong growth thanks to an improving economy and consumer sentiment as well as government support IT Market Sizes As % Of National GDP for modernisation in lagging sectors. Meanwhile, India's business process outsourcing industry is growing at around 40% per annum and will continue to generate opportunities for vendors of IT products and services. In Thailand, demand will be bolstered by market expansion in the relatively underpenetrated rural areas. SIS estimates that market growth in upcountry areas should be 30% in 2011, double that it has forecast for the country as a whole. A similar situation pertains in India where in 2012 there are f = BMI forecast. Source: BMI expected to be strong growth opportunities in smaller cities. The Philippines is one of the countries currently benefiting from low-priced PC programmes (PC4ALL), which provide opportunities for vendors to penetrate the low-income segments. Other regional computer sale drivers over the forecast period include education, lower prices, IP telephony and cheaper processors as well as notebook entertainment and wireless networking features. Meanwhile, in Indonesia, the basic demographics of rising computer penetration and growing affordability should drive growth. SMEs represent a growth opportunity, as currently only around 20% of Indonesian SMEs are estimated to make use of IT. Compliance with government and international regulations will be a driver in financial, manufacturing and other sectors. © Business Monitor International Page 60 Vietnam Information Technology Report Q2 2013 In more developed markets, such as Hong Kong and Singapore, robust retail sales the led way in 2011, as IT Markets Compound Growth evidenced by the strong advance sales of Apple's 2012f-2016f (%) iPad2. In 2012 vendors hope that the iPad and ultrabooks will provide new growth areas. Economic expansion and improving business conditions are underpinning stronger business sector demand while a strong property market and lower unemployment have boosted confidence among consumers. However, a potential cooling of the Chinese economy as a result of monetary tightening would quickly spread to both markets. The largest IT market in the region is, unsurprisingly, China, estimated at US$124.4bn in f = BMI forecast. Source: BMI 2012, trailed distantly by Australia (US$22.0bn), India (US$20.7bn) and South Korea (US$18.5bn). Singapore's IT market (including communications) is the largest as a proportion of national GDP (2.4%), followed by Hong Kong (2.1%). Thailand's IT market has been affected by a number of exogenous events including floods, which in late 2011 disrupted its production of hard disk drives, but in 2012 it looks to be back on track. The fastest growing IT markets over the forecast period looks set to be India and Indonesia with 2012-2016 compound growth of 109% and 96% respectively, driven by increasing PC penetration. Sri Lanka is third with the IT market growing by an estimated 83% over BMI's five-year forecast period, while China's total growth is estimated at a still healthy 55%, slower than Vietnam at 69%. Sectors And Verticals Regional IT markets remain hardware-centric, with hardware accounting for 43-73% of total spending in all markets in 2012. However, spending on software and services will grow faster. Notebook sales are growing much faster than the PC market as a whole with growth driven by falling prices and more features. In mature markets such as Australia and Singapore, PC sales are dominated by replacement sales. In Australia, upgrades are estimated to account for at least 80% of business purchases and over 50% in the case of households. Over 90% of Australian households now have a PC, but consumers have appeared © Business Monitor International Page 61 Vietnam Information Technology Report Q2 2013 willing to spend on upgrading their notebook computers and it is also becoming more popular to purchase a second household PC. Around 30% of households have more than one PC. Tablet sales will provide a PC market growth area, with triple-digit growth projected in many markets. In China it is estimated that tablets accounted for around 6-7% of computer sales in 2011. The tariff on an imported iPad was previously set at around CNY1,000 and has now been reduced to CNY500. In 2012, tablets should be a growth area in India as well, with sales surpassing 1mn units, although much will depend on greater affordability. The arrival on the market of cheaper, locally produced tablets, retailing for as low as US$30, will help expand the market. However, partly thanks to the tablets surge, demand for netbooks has lost momentum in some markets. Sales, although initially promising, have sometimes fallen short of perhaps unrealistic expectations. Meanwhile, vendor expectations of a substantial boost from their promotion of high-tier ultrabooks may not be realised until prices come down closer to their US market level. In less developed markets, demand from under-penetrated rural areas, affordable computer programmes and growing broadband penetration should generally drive growth. In China, as in much of emerging Asia, demand from smaller towns and rural areas where PC penetration is relatively low will provide the main source of growth. In India, 2011 saw a wave of computer procurements by local governments. Another driver in emerging Asian markets will be replacement of desktops with notebooks. SMEs will be one of the strong growth segments over the forecast period, with SME demand for servers and networking equipment a significant growth opportunity. Falling prices is another major driver, placing pressure on margins. In India, the average price of a PC has nearly halved over the past few years, and rising incomes and greater credit availability will continue to bring computers within the reach of lower income demographics. In both emerging and more mature markets, the growing popularity of broadband will help to support computer sales. China Telecom is among regional telecoms companies to have rolled out PC bundling offers as part of its broadband packages. Meanwhile, broadband plans will also help to popularise tablets. Australia telecoms operators such as Telstra were competing to offer affordable tablets bundled with data services. Due in part to high levels of piracy, software's share of IT spending is relatively low, ranging from 11-36% among countries covered by BMI. Efforts are being made to tackle the issue of piracy, but, despite government crackdowns in China and the Philippines, software piracy remains above 70% in most of emerging Asia. © Business Monitor International Page 62 Vietnam Information Technology Report Q2 2013 Across the region there is a growing trend for smaller companies to seek greater efficiency by using IT to improve productivity and reduce costs (including labour costs). In 2012, growing numbers of SMEs are expected to invest in enterprise resource planning (ERP), while many of those that already have it will explore efficiencies through consolidation and virtualisation. As Asian companies have become more integrated into the global supply chain, their multinational business partners often encourage them to install back-office systems to meet requirements of efficiency. The growing global ambitions of many Asian companies, as well as often booming domestic markets, will fuel investments in software. In general, ERP and other e-business products still dominate the enterprise software market, but vendors are also looking to other areas such as customer relationship management (CRM) and business intelligence, where faster growth is possible. Although the market remains relatively small, more companies are looking at computing solutions such as Software-as-a-Service (SaaS). Cloud computing business models such as SaaS offer smaller businesses a cost-effective way to deliver applications such as payroll, tax-return processing and recruitment. Market Structure (% of IT Market) 2012f (LHS) & 2016f (RHS) f = BMI forecast. Source: BMI The hosted application model may already account for between one-fifth and one-quarter of China software revenues and SaaS has also enjoyed steady growth in the Hong Kong market over the past few years. Improved broadband infrastructure will assist the popularisation of the rented software model in markets © Business Monitor International Page 63 Vietnam Information Technology Report Q2 2013 such as Indonesia. Meanwhile, around one-third of Australian organisations already use some cloud computing. The cloud computing market in India is currently very small but is forecast to expand rapidly. New platforms and services in the telecoms field is a driver for that key IT spending segment, where an industry restructuring with the advent of 3G mobile services has led to more competition. Meanwhile, expanding technology adoption in the logistics industry and public transport will be a source of IT services projects. Sectors such as hospitals and real estate will also provide opportunities. The IT services segment accounts for 17-41% of spending in the Asian markets covered by BMI. The global economic slowdown and credit tightening had an impact on projects in some verticals, but in 2012 a brightening business climate should mean more opportunities in key IT spending verticals such as financial services, telecoms, government, healthcare and logistics. Government spending will account for a larger share of spending in many markets. In China, government stimulus packages have helped to drive IT-related investments, while, in Singapore, government ICT projects such as SOE2 provide significant opportunities. Meanwhile, the Hong Kong government's Digital 21 initiative will continue to generate spending. Regionally, hardware deployment services remain the largest IT services category, with other fundamental services including system integration, support systems, training, professional services, outsourcing and internet services. Main spenders across the region include banks and financial institutions as well as governments. Even in emerging markets such as India, IT vendors are having to pay more attention to value-added services such as technical support and product troubleshooting, or basic IT and hardware consulting. In many countries, the number and size of local outsourcing deals are increasing. Outsourcing could account for as much as 30% of China's IT services spending by 2013, while in India there have been some large contracts such as that awarded by Idea Cellular to IBM. Singapore and Hong Kong have both seen a trend towards larger outsourcing projects in the public and private sectors. Meanwhile, growing interest in cloud computing will be further stimulated by government programmes. In China, government cloud pilots are under way in at least five cities. The Hong Kong government announced plans in 2011 for an escalation of its cloud strategy over the next few years. In 2012 more leading Australian private and public sector organisations are expected to launched cloud initiatives and the government has adopted a six-year cloud computing strategy. © Business Monitor International Page 64 Vietnam Information Technology Report Q2 2013 Demographic Forecast Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model. Not only is the total population of a country a key variable in consumer demand, but an understanding of the demographic profile is key to understanding issues ranging from future population trends to productivity growth and government spending requirements. The accompanying charts detail Vietnam's population pyramid for 2011, the change in the structure of the population between 2011 and 2050 and the total population between 1990 and 2050, as well as life expectancy. The tables show key datapoints from all of these charts, in addition to important metrics including the dependency ratio and the urban/rural split. Source: World Bank, UN, BMI © Business Monitor International Page 65 Vietnam Information Technology Report Q2 2013 Table: Vietnam's Population By Age Group, 1990-2020 ('000) 1990 1995 2000 2005 2010 2012e 2015f 2020f 67,102 74,008 78,758 83,161 87,848 89,730 92,443 96,355 0-4 years 9,340 9,212 7,002 6,776 7,186 7,186 7,026 6,529 5-9 years 8,685 9,193 9,124 6,921 6,703 6,885 7,143 6,982 10-14 years 7,504 8,604 9,142 9,038 6,844 6,539 6,668 7,104 15-19 years 7,127 7,408 8,535 9,064 8,963 8,161 6,806 6,628 20-24 years 6,492 7,003 7,305 8,420 8,954 9,115 8,892 6,745 25-29 years 5,893 6,361 6,879 7,167 8,284 8,602 8,862 8,803 30-34 years 4,884 5,779 6,250 6,765 7,058 7,475 8,202 8,779 35-39 years 3,965 4,794 5,688 6,163 6,677 6,770 6,991 8,131 40-44 years 2,420 3,884 4,710 5,614 6,086 6,304 6,609 6,925 45-49 years 2,039 2,358 3,802 4,653 5,548 5,761 6,012 6,536 50-54 years 1,933 1,968 2,287 3,739 4,580 4,936 5,449 5,914 55-59 years 1,946 1,843 1,887 2,201 3,617 4,001 4,446 5,305 60-64 years 1,544 1,822 1,737 1,767 2,076 2,573 3,455 4,268 65-69 years 1,283 1,391 1,659 1,582 1,621 1,649 1,927 3,233 70-74 years 919 1,084 1,194 1,439 1,389 1,384 1,438 1,729 1,127 1,305 1,559 1,852 2,264 2,388 2,516 2,743 Total 75+ years f = BMI forecast. Source: World Bank, UN, BMI © Business Monitor International Page 66 Vietnam Information Technology Report Q2 2013 Table: Vietnam's Population By Age Group, 1990-2020 (% of total) 1990 1995 2000 2005 2010 2012 2015f 2020f 0-4 years 13.92 12.45 8.89 8.15 8.18 8.01 7.60 6.78 5-9 years 12.94 12.42 11.58 8.32 7.63 7.67 7.73 7.25 10-14 years 11.18 11.63 11.61 10.87 7.79 7.29 7.21 7.37 15-19 years 10.62 10.01 10.84 10.90 10.20 9.10 7.36 6.88 20-24 years 9.68 9.46 9.27 10.13 10.19 10.16 9.62 7.00 25-29 years 8.78 8.60 8.73 8.62 9.43 9.59 9.59 9.14 30-34 years 7.28 7.81 7.94 8.14 8.03 8.33 8.87 9.11 35-39 years 5.91 6.48 7.22 7.41 7.60 7.55 7.56 8.44 40-44 years 3.61 5.25 5.98 6.75 6.93 7.03 7.15 7.19 45-49 years 3.04 3.19 4.83 5.59 6.32 6.42 6.50 6.78 50-54 years 2.88 2.66 2.90 4.50 5.21 5.50 5.89 6.14 55-59 years 2.90 2.49 2.40 2.65 4.12 4.46 4.81 5.51 60-64 years 2.30 2.46 2.21 2.12 2.36 2.87 3.74 4.43 65-69 years 1.91 1.88 2.11 1.90 1.85 1.84 2.08 3.36 70-74 years 1.37 1.46 1.52 1.73 1.58 1.54 1.56 1.79 75+ years 1.68 1.76 1.98 2.23 2.58 2.66 2.72 2.85 f = BMI forecast. Source: World Bank, UN, BMI © Business Monitor International Page 67 Vietnam Information Technology Report Q2 2013 Table: Vietnam's Key Population Ratios, 1990-2020 Dependent ratio, % of total working age Dependent population, total, '000 Active population, % of total Active population, total, '000 Youth population, % of total working age Youth population, total, '000 1990 1995 2000 2005 2010 2012 2015f 2020f 75.5 71.2 60.5 49.7 42.1 40.9 40.6 41.6 28,859 30,790 29,679 27,609 26,006 26,031 26,717 28,321 57.0 58.4 62.3 66.8 70.4 71.0 71.1 70.6 38,243 43,218 49,079 55,552 61,842 63,699 65,725 68,034 66.8 62.5 51.5 40.9 33.5 32.4 31.7 30.3 25,529 27,009 25,268 22,735 20,732 20,610 20,837 20,615 8.7 8.7 9.0 8.8 8.5 8.5 8.9 11.3 3,330 3,780 4,411 4,874 5,274 5,421 5,881 7,706 Pensionable population, % of total working age Pensionable population, '000 f = BMI forecast; 0>15 plus 65+, as % of total working age population; 0>15 plus 65+; 15-64, as % of total population; 15-64; 0>15, % of total working age population; 0>15; 65+, % of total working age population; 65+. Source: World Bank, UN, BMI Table: Vietnam's Rural And Urban Population, 1990-2020 1990 1995 2000 2005 2010 2012 2015f 2020f Urban population, % of total 20.3 22.2 24.3 26.4 28.7 29.7 31.2 33.9 Rural population, % of total 79.7 77.8 75.7 73.6 71.3 70.3 68.8 66.1 Urban population, '000 13,438.6 16,201.6 18,865.4 21,940.1 25,212.5 26,649.9 28,842.1 32,664.4 Rural population, '000 52,761.4 56,778.4 58,770.0 61,166.2 62,635.9 63,080.4 63,600.5 63,690.7 f = BMI forecast. Source: World Bank, UN, BMI © Business Monitor International Page 68 Vietnam Information Technology Report Q2 2013 Methodology Methodology BMI's industry forecasts are generated using the best-practice techniques of time-series modelling. The precise form of time-series model we use varies from industry to industry, in each case being determined, as per standard practice, by the prevailing features of the industry data being examined. For example, data for some industries may be particularly prone to seasonality, i.e. seasonal trends. In other industries, there may be pronounced non-linearity, whereby large recessions, for example, may occur more frequently than cyclical booms. Our approach varies from industry to industry. Common to our analysis of every industry, however, is the use of vector autoregressions. Vector autoregressions allow us to forecast a variable using more than the variable's own history as explanatory information. For example, when forecasting oil prices, we can include information about oil consumption, supply and capacity. When forecasting for some of our industry sub-component variables, however, using a variable's own history is often the most desirable method of analysis. Such single-variable analysis is called univariate modelling. We use the most common and versatile form of univariate models: the autoregressive moving average model (ARMA). In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting. It must be remembered that human intervention plays a necessary and desirable part in all of our industry forecasting techniques. Intimate knowledge of the data and industry ensures we spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not. IT Industry Forecasts There are a number of criteria that drive our forecasts for each IT variable. IT forecasting is complicated due to the fragmented nature of the market, with little transparency of vendor data and low apparent agreement between many sets of figures in terms of market definition, base and © Business Monitor International Page 69 Vietnam Information Technology Report Q2 2013 methodology. In addition, forecasts are naturally affected by consideration of a variety of internal and external political and economic factors. Within best-practice techniques of time-series modelling, BMI's quarterly updated forecasts are improved substantially by intimate knowledge of the prevailing features of each local market. Individual variables taken into account in creating each forecast include: ■ Overall economic context, and GDP and demographic trends; ■ Underlying 'information society' trends; ■ Projected GDP share of industry; ■ Maturity of market structure; ■ Regulatory developments and government policies; ■ Developments in key client sectors such as telecommunications, banking and e-government; ■ Technological developments, and diffusion rates; ■ Exogenous events. Estimates are calculated using BMI's own macroeconomic and demographic forecasts. IT Ratings - Methodology Our approach in BMI's IT Business Environment Ratings is threefold. First, we seek accurately to capture the operational dangers to companies operating in this industry globally. Second, we attempt, where possible, to identify objective indicators that may serve as proxies for indicators that were traditionally evaluated on a subjective basis. Finally, we include aspects of BMI's proprietary Country Risk Ratings (CRR) that are relevant to the IT industry. Overall, the ratings system, which integrates with those of all 16 industries covered by BMI, offers an industry-leading insight into the prospects/risks for companies across the globe. Ratings System Conceptually, the ratings system divides into two distinct areas:Limits of potential returns: Evaluation of sector's size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development. Risks to realisation of those returns: Evaluation of industry-specific dangers and those emanating from the state's political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period. © Business Monitor International Page 70 Vietnam Information Technology Report Q2 2013 Indicators The following indicators have been used. Overall, the rating uses three subjectively measured indicators, and 41 separate indicators/datasets. Table: IT Business Environment Indicators Indicator Rationale Limits to potential returns Market structure IT market value, US$bn Denotes breadth of IT market. Large markets score higher than smaller ones Sector value growth, % year-on-year Denotes sector dynamism. Scores based on annual average growth over five-year (y-o-y) forecast period Denotes spending boost provided by public sector, which can be a crucial Government initiatives and spending determinant of sector development Hardware, % of total sales Denotes maturity of market. A high proportion of hardware sales - compared to services/software - indicates that the overall IT market is immature Country structure Urban-rural split Urbanisation is used as a proxy for development. Predominantly rural states therefore score lower GDP per capita, US$ A high GDP per capita supports long-term industry prospects. Overall score for country structure is also affected by the coverage of the power transmission network across the state Risks to potential returns Market risks Intellectual property (IP) laws Markets with fair and enforced IP regulations score higher than those with endemic counterfeiting ICT policy Subjective evaluation of official policy towards IT development, as enshrined in statute and tax code Country risk Short-term external risk Rating from CRR evaluates the vulnerability to external shock, which is the principal cause of economic crises. Such a crisis would cut investment Short-term financial risk Rating from BMI's CRR, to denote risk of currency crisis and stability of banking sector. The former would hit revenues in hard currency, while the latter would curtail investment funding Trade bureaucracy Rating from CRR to denote ease of trading with the state Legal framework Rating from CRR denotes the strength of legal institutions in each state - security of investment can be a key risk in some emerging markets Bureaucracy Rating from CRR denotes ease of conducting business in the state © Business Monitor International Page 71 Vietnam Information Technology Report Q2 2013 IT Business Environment Indicators - Continued Indicator Rationale Corruption Rating from CRR denotes the risk of additional illegal costs/possibility of opacity in tendering/business operations affecting companies' ability to compete Source: BMI Weighting Given the number of indicators/datasets used, it would be wholly inappropriate to give all sub-components equal weight. Consequently, the following weight has been adopted. Table: Weighting Of Components Component Weighting Limits of potential returns 70% - IT market 65% - Country structure 35% Risks to realisation of potential returns 30% - Industry risks 40% - Country risk 60% Source: BMI Sources Additional sources used in IT reports include national ministries and ICT regulatory bodies, national industry associations, and international industry organisations such as the International Telecommunication Union (ITU), officially released company results and figures, and international and national industry news agencies. © Business Monitor International Page 72 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... Business Monitor International Page 26 Vietnam Information Technology Report Q2 2013 Market Overview Vietnam Hardware BMI forecasts sales in Vietnam' s computer hardware market will be worth around VND44,762bn (US $2.152) in 2013, up from an estimated VND38,261bn in 2012 We forecast the growth rate in the hardware market will accelerate from 14.6% in 2012 to 17% in 2013, buoyed by an improved economic... lingering threat A failure by the authorities to boost skills levels could leave Vietnam a second-rate economy for an indefinite period © Business Monitor International Page 13 Vietnam Information Technology Report Q2 2013 Industry Forecast Table: Vietnam IT Industry - Historical Data And Forecasts (VNDbn) 2010 2011 2012e 2013f 2014f 2015f 2016f 2017f IT Market Value 36,898 45,404 52,773 62,605 71,432... VND62,605bn in 2013 to VN102,985bn in 2017, with computer sales rising from VND37,063bn to VND57,697bn over the same period Software spending should rise from VND5,658bn to VND10,466n and IT services from VND12,185bn to VND23,004bn over the forecast period © Business Monitor International Page 18 Vietnam Information Technology Report Q2 2013 Macroeconomic Forecasts Economic Analysis - Q2 2013 BMI View:... manageable at under 7.0% in 2013 © Business Monitor International Page 20 Vietnam Information Technology Report Q2 2013 Credit Conditions To Improve In 2013 Vietnam - M2 Money Supply, VNDbn (LHS) & % chg y-o-y (RHS) Source: BMI, State Bank of Vietnam To be sure, we acknowledge that the risk of a potential surge in commodity prices in 2013 - especially food prices, which make up around 40% of the CPI basket... remain flat at 5.4% in 2013 While we expect Sri Lanka's economic outlook to remain gloomy for the foreseeable future, the IT industry remains a key focus for the © Business Monitor International Page 25 Vietnam Information Technology Report Q2 2013 government due to its importance in enabling trade and empowering consumers For example, Sri Lanka's Information and Communications Technology Agency soft... Page 11 Vietnam Information Technology Report Q2 2013 Economic SWOT Analysis Strengths ■ Vietnam has been one of the fastest-growing economies in Asia in recent years, with GDP growth averaging 7.1% annually between 2000 and 2012 ■ The economic boom has lifted many Vietnamese out of poverty, with the official poverty rate in the country falling from 58% in 1993 to 14.0% in 2010 Weaknesses ■ Vietnam. .. into a 10% share of the Vietnamese notebook PC market © Business Monitor International Page 30 Vietnam Information Technology Report Q2 2013 In 2013, vendors are hoping that upgrades to PC devices based on Microsoft's new Windows 8 operating system will spur a new cycle of procurements The final quarter of 2012 saw the release of a number of tablets based on Windows 8 on the Vietnamese market Acer released... remains small, largely due to a lack of awareness about it among Vietnamese businesses It is estimated that only 10% of Vietnamese businesses have used CRM, which is far fewer than in other countries © Business Monitor International Page 34 Vietnam Information Technology Report Q2 2013 Over BMI's five-year forecast period to 2017, the Vietnamese enterprise software market will offer opportunities in... in 2013 We believe with lending rates will gradually ease over the coming months as the effect of recent rate cuts by the SBV begins to kick in We are also seeing evidence that credit conditions are improving Accordingly, we expect gross fixed capital formation growth to accelerate from 4.3% in 2012 to 5.9% in 2013 © Business Monitor International Page 21 Vietnam Information Technology Report Q2 2013. .. and challenges to vendors, given the growing presence of low-cost Chinese vendors in the Vietnamese market Reports from Q113 indicate that international vendors have suffered against the supply of cheap own-brand Chinese tablets © Business Monitor International Page 16 Vietnam Information Technology Report Q2 2013 Local dealers are promoting the devices because of the margins available, but even with . Q2 2013 www.businessmonitor.com VIETNAM INFORMATION TECHNOLOGY REPORT INCLUDES 5-YEAR FORECASTS TO 2017 ISSN 2044-9631 Published by:Business Monitor International Vietnam Information Technology Report. forecast period. Vietnam Information Technology Report Q2 2013 © Business Monitor International Page 18 Macroeconomic Forecasts Economic Analysis - Q2 2013 BMI View: The State Bank of Vietnam (SBV)'s. 72 Vietnam Information Technology Report Q2 2013 © Business Monitor International Page 5 BMI Industry View BMI View: Vietnamese IT spending is expected to reach VND62,604bn (US$3.01bn) in 2013,