Japan is making a major play to move an increasing amount of its offshore IT development to Vietnam. To date, most of Japan’s offshored IT outsourcing has been directed toward China, and in particular, around the northern cities of Shenyang and Dalian, which have a sizeable Japanese-speaking population. But recent concerns about China’s costs, and increasing anti-Japanese sentiment, have driven more and more Japanese companies to look further.
The moves began in 2004 with the establishment of Vietnam Japan Software Gate (Vijasgate), a joint venture between the governments of the two countries to foster cooperation between their software industries.
Recently, JETRO, Japan’s external trade organization, has seconded personnel to the Vietnam Software Association (Vinasa), to facilitate communication between the two countries. “We believe it’s possible that Vietnam can be responsible for 10% of Japan’s three-billion dollar software offshoring by 2010,” says Tran Doan Kim, Deputy General Secretary, Vinasa.
“There are many factors behind Japan’s increased interest in Vietnam,” says Kim. “There’s geographical proximity and cultural similarity. Perhaps Japan sees China as something of a rival, and so is looking at alternative sources,” he adds.
Kim says there are essentially two kinds of software companies in Vietnam. “There are those producing software for the domestic market and others that service companies in other countries.”
Technology investment in Vietnam is booming. Earlier this year, Intel announced the establishment of a $300 million microchip assembly and testing facility in Ho Chi Minh City, the largest technology development made by any company in Vietnam. It will employ 1,200 people, with an equal number to follow. The plant will be located in Saigon High Tech Park, a new technology city being built by the Vietnamese government. Canon has two giant printer factories near Hanoi, and is building a third, which will be its largest manufacturing facility in the world.
FPT Software, Vietnam’s largest software company, has opened a college to train programmers for the Japanese market. Vinasa estimates there are at least 600 software companies in Vietnam.
It is now nearly 20 years since Vietnam adopted its “doi moi” (change and newness) campaign to move away from a centrally planned economy and toward a free market. Little happened until 1994, when the U.S.A. lifted the trade embargo it had imposed on the country after the Vietnam War. However, things have changed since then, and growth rates have been very high.
