Q3 2013 www.businessmonitor.com VIETNAM INFORMATION TECHNOLOGY REPORT INCLUDES 5-YEAR FORECASTS TO 2017 ISSN 1749-3072 Published by:Business Monitor International Vietnam Information Technology Report Q3 2013 INCLUDES 5-YEAR FORECASTS TO 2017 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: July 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 Q3 2013 INCLUDES 5-YEAR FORECASTS TO 2017 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: July 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. All information contained in this publication is copyrighted in the name of Business Monitor International, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher. DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. 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 Q3 2013 CONTENTS BMI Industry View . SWOT IT SWOT Wireline . 11 Business Environment 13 Political . 14 Economic . 15 Industry Forecast 16 Table: Vietnam IT Industry - Historical Data And Forecasts (VNDbn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Broadband . 21 Table: Telecoms Sector - Broadband - Historical Data And Forecasts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Macroeconomic Forecasts . 23 Economic Analysis . 23 PMI Data Suggests Economic Recovery Remains On Track 23 Downward Revision To Reflect Weak Q113, But Growth Trajectory Intact 25 Table: VIETNAM - ECONOMIC ACTIVITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Industry Risk Reward Ratings 27 Industry Risk/Reward Ratings 27 Table: Asia Pacific IT Risk/Reward Ratings - Q3 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Market Overview . 31 Hardware . 31 Software . 38 Services 48 Industry Trends And Developments 53 Regulatory Development 57 Table: Government Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Regulatory News 59 Company Profile 62 FPT Software 62 Table: FPT Group Revenue By Segment (VNDbn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Table: Profit Before Tax Margin By Segment (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Regional Overview 66 Demographic Forecast . 71 © Business Monitor International Page Vietnam Information Technology Report Q3 2013 Table: Vietnam's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Table: Vietnam's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Table: Vietnam's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Table: Vietnam's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Methodology 75 Methodology . 75 IT Industry 75 IT Ratings - Methodology 76 Table: IT Business Environment Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Weighting . 78 Table: Weighting Of Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Sources 78 © Business Monitor International Page Vietnam Information Technology Report Q3 2013 BMI Industry View BMI View: We forecast IT spending will increase by 17.6% in 2013 to reach a total value of VND62,082bn (US$2.97bn). This is a slight downgrade from the Q213 update on the basis of a slightly weaker economic environment, however, the macroeconomic environment remains supportive of fast IT market growth over the medium term. Household PC penetration remains low, meaning an opportunity for vendors to record sales growth over the medium term as incomes rise. Meanwhile, a range of government ICT initiatives and a campaign to develop Vietnam's domestic IT industry will also boost growth. In the enterprise market there is strong demand for ERP and security solutions, as well as medium-term opportunities in cloud computing services as telecoms infrastructure improves. Finally, 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: VND44,389bn in 2013 to VND68,935bn in 2017, CAGR of +12.5% in local currency terms. Low PC penetration provides opportunities for sales to first time buyers while the influx of cheap tablets from Android and Windows vendors and notebooks are expected to provide a growth avenue over the medium term. Software Sales: VND5,610bn in 2013 to VND10,378nn in 2017, CAGR of +17.5% in local currency terms. Potential for strong growth in licensed operating systems, business software and security software however this outlook depends on the success in bringing down illegal software use. IT Services Sales: VND12,083bn in 2013 to VND22,812bn in 2017, CAGR of +18.2% in local currency terms. Services will be the outperforming segment of the IT market as demand grows in several verticals, including banking, telecoms, energy and government. Additionally, there is a potential boom in outsourcing from Japanese enterprises to drive outperformance of services segment. Risk/Reward Ratings: Vietnam scores 41.1 out of 100 in our Asia Risk/Reward Ratings table. This places the country 11th, ahead of Sri Lanka and behind Indonesia and Thailand. © Business Monitor International Page Vietnam Information Technology Report Q3 2013 Key Trends & Developments PC penetration remains low in Vietnam, although it has been rising in recent years as device prices have declined at the same time as Vietnamese incomes have risen and supporting infrastructure has improved. Low penetration gives PC vendors an opportunity to tap both the first time buyer and upgrade/replacement market to achieve strong growth in the coming years. However, the complexion of the hardware market is changing with competition to international vendors most notably coming from low-price Chinese tablets such as Hipad, Ondan, Teclast and Ampe in 2013. 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. The outsourcing market in Vietnam has the potential to be one of the fastest growing segments of the IT market, however there are challenges to continued growth. On the positive side, there has been increasing interest in Vietnam as a business process and software development 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. However, in 2013 there have been concerns raised about the availability of skilled labour, with IT university admission rates declining, which could ultimately lead to a bottleneck that stymies the development of Vietnam's outsourcing sector. © Business Monitor International Page Vietnam Information Technology Report Q3 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 Increased adoption among enterprises and consumers. 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. ■ Low PC penetration means there is scope for vendors to tap first time buyer market as well as the upgrade/replacement market. ■ Low-cost tablets are proving popular with consumers, with significant medium term sales growth potential. ■ Vietnam is becoming a popular destination for outsourcing, with particularly strong growth potential from Japanese enterprises. ■ National IT Plan will drive spending on IT utilisation in areas such as e-government, etaxation and education. © Business Monitor International Page Vietnam Information Technology Report Q3 2013 core business areas and trying to increase synergy among product and service introductions by FPT group companies. Developments In April 2013 Eon Technologies announced that FPT Software would e included in its BankFlex integration program. Eon's BankFlex platform is a multi-channel banking suite enabling new services such as internet banking, mobile banking, mobile wallet, SMS banking, telephone banking, ATM and Teller support and back-end monitoring. The platform is being rolled out to Vietnam and neighbouring markets as the banking sector develops. In March 2013 FPT formed a joint venture (JV) for business process outsourcing (BPO) with Japan's Agrex, which has been touted as the first BPO JV in ASEAN. Both companies invested in the creation of F-Agrex, which will begin operations in July 2013. F-Agrex will initially target the Japanese outsourcing market, before expanding globally. Staff at launch will number 100 but the JV is targeting growth to 500 staff by 2015. In 2012 FPT established an office in Germany to target the European market. It also launched its first application development on Amazon Web Services on a project with a Japanese electronics company. In 2011 FPT unveiled a major new restructuring plan, which will consolidate five technology subsidiaries in a search for higher growth. The company's five subsidiaries FPT Information System, FPT Telecom Corp, FPT Software, FPT Online and FPT Trading Group - will be merged, with the company either buying out minority shareholders or facilitating a share swap. Among major developments in 2010, FPT revealed that it had launched a US$2mn outsourcing contract to develop core retail and e-commerce software for Nissen Co. The company's US$12mn revenues in Q110 exceeded planned projections by 9%, while profits were 46% higher than initially projected. The fastest growth compared with 2009 came in Vietnam, where revenues were up 90% y-o-y, while Asia Pacific (excluding Japan) grew 47%; Europe, 75%; and the US, 69%. However, the Japanese market, which accounts for over half of FPT's revenues, grew by only 16%. Performance FPT recorded revenues of US$81.5mn in 2012, and is targeting revenue of US$100mn in 2013. It is also planning to expand its workforce by hiring an additional 1,500 engineers in 2013, to take its total to 5,600. Presence FPT is headquartered in Hanoi, and has offices in Ho Chi Minh City and Da Nang in Vietnam. The company is also present in some major global IT markets, including Japan (Tokyo, Osaka), Australia, Singapore, Malaysia, the US, France and Germany. In March 2013 FPT opened its first R&D centre in the US in Silicon Valley. The centre will focus on development and innovation in mobility, cloud and big data. © Business Monitor International Page 63 Vietnam Information Technology Report Q3 2013 Sectors FTP earns 56% of its revenues from Japan. The company focuses mainly on the largest IT-spending verticals including banking and finance, telecoms, manufacturing, government, retail, infrastructure and utilities. Major clients include Deutsche Bank, Schroders, SoftBank, Omron, Hitachi and Unisys. Table: FPT Group Revenue By Segment (VNDbn) Q112 Q212 Q312 Q412 Y-o-Y Change (%) Q113 Telecommunication 657.7 675 708.2 709.5 767.9 16.8 Digital Content 380.2 520 423.8 488.3 207.4 -45.4 Software Development 381.2 532.4 578.4 847.8 567.6 48.9 System Integration 488.4 524.2 453.6 1453.1 326.9 -33.1 Informatics services 119.6 190.5 166.4 203.5 151.4 26.6 Education 148.2 114.2 183 62.5 164.9 11.3 3460.2 3269.9 3638 3968.8 3496.2 1.0 Manufacture, distribution and retail Source: FPT, BMI Table: Profit Before Tax Margin By Segment (%) Q112 Q212 Q312 Q412 Q113 Telecommunication 28.3 26.1 24.0 22.5 26.7 Digital Content 15.8 11.2 13.4 5.7 15.4 Software Development 15.0 20.6 21.9 23.8 21.0 System Integration 11.6 8.1 9.1 12.5 2.4 Informatics services 13.0 21.2 17.9 6.1 15.8 Education 35.5 27.1 29.1 15.0 29.1 4.0 4.0 1.7 1.7 3.3 Manufacture, distribution and retail Source: FPT, BMI Financial Data Financial Data For FPT Group: ■ ■ ■ ■ Annual Revenue (2010): VND20.5bn Annual Revenue (2011): VND26.0bn Annual Revenue (2012): VND25.4bn EBITDA (2008): VND1.6bn © Business Monitor International Page 64 Vietnam Information Technology Report Q3 2013 ■ ■ ■ ■ ■ ■ ■ ■ ■ Company Details ■ ■ EBITDA (2009): VND2.1bn EBITDA (2010): VND2.6bn EBITDA (2011): VND3.1bn EBITDA (2012): VND3.0bn Net Profit (2008): VND1.1bn Net Profit (2009): VND1.4bn Net Profit (2010): VND1.7bn Net Profit (2011): VND2.1bn Net Profit (2012): VND2.0bn FPT Software FPT Building Duy Tan Street Cau Giay District Hanoi Vietnam ■ Tel: +84/(4) 768 9048 ■ Fax: (4) 768 9049 ■ fsoft.contact@fsoft.com.vn ■ www.fpt-software.com © Business Monitor International Page 65 Vietnam Information Technology Report Q3 2013 Regional Overview IT markets in the Asia Pacific region are incredibly IT Market As % Of GDP diverse in terms of the contribution to GDP, the 2012 extent of local production and innovation, and the reach of supporting infrastructure such as broadband penetration. For instance, PC penetration in the most developed markets such as Singapore is above 50%, while in the least developed markets such as Indonesia, it is below 5%. As a result of these different levels of development the growth rates forecast across the region vary, as the major market trends. Singapore, Thailand and Hong Kong are the only markets in the region where the IT market accounts for 2% or more of GDP. Meanwhile, in Indonesia Source: BMI. and Sri Lanka the IT market is far smaller, accounting for just 0.7% of GDP. The difference separating these markets is not only in terms of the spending of consumers and enterprises in the market, but also in the policies of government and the development of local IT production and research facilities. For instance, Thailand is a key part of the global semiconductor market, while IT software and services companies have chosen Singapore and Hong Kong as hubs for regional operations. Most recently, SAP opened a co-innovation lab in Singapore in March 2013, its fourth in Asia-Pacific and 21st globally. The Singapore innovation lab is part of SAP's Global Research and Business Incubation centre in Singapore, the research HQ for its Asia-Pacific operations. BMI expects the gap to narrow over the medium term as the less developed IT markets experience a period of catch-up on regional leaders. This will be the result of a wide range of factors, including the strong economic performance of the lower income catch-up group, the falling average price of PCs bringing them into line with the purchasing power of middle income consumers in emerging markets, improvements in the reach of wireless and wireline broadband infrastructure, and government policies to promote the development of local IT sectors and the adoption of IT systems by enterprises. © Business Monitor International Page 66 Vietnam Information Technology Report Q3 2013 The two most important catch-up markets in the region, and globally, are China and India. Taking these markets as a whole, they are relatively undeveloped, with for instance, computer ownership remaining the preserve of a minority. However, the sheer size of the markets in terms of population and the inequality between regions and within cities means they are, in a sense, representative of the variety across the whole region. In China, PC penetration was only around 30% in 2012 - although it is far higher in cities such as Shanghai and Beijing and urban PC penetration is projected to pass 60% by 2017. In India, less than 5% of people own a computer. However, about 45% of the population is under 25, which provides a promising demographic context for increased PC ownership. Another market worthy of specific mention is Vietnam, which has been developing rapidly and we expect to continue outperforming many of its peers as the outsourcing segment is well positioned to expand. In January 2013 the Information Technology Promotion Agency survey of 1,100 Japanese IT firms showed Vietnam was the first choice outsourcing destination, with 31.5% of firms choosing it, ahead of India (20.6%), China (16.7%), Thailand (9.7%) and Philippines (7.4%). However 75-80% of the outsourcing contract value still goes to Chinese firms, with Vietnam estimated to account for 5%. Vietnam has significant cost advantages, which we expect to result in a shift of outsourcing from China to Vietnam, which will gain momentum through 2013 and 2014 as local firms such as Global Cyber Soft, TMA Solutions and FPT Software continue to expand their operations. A key trend driving the development of IT markets in Asia Pacific is the increase in internet and broadband penetration. Like IT's contribution to APAC Broadband Penetration (%) 2010-2017 GDP and PC penetration, there is a broad range of penetration rates across the region and there is rising penetration forecast across the region over the medium term to 2017. Looking at the region as a whole, broadband penetration is forecast to rise from 8.6% at the end of 2012 to 11.3% at the end of 2017. However, this figure is for population penetration of subscriptions, with the figure for those with access to broadband services considerably higher, given the prevalence of shared subscriptions. Asia Pacific internet penetration is forecast to rise from 28.5% at the end of 2012 to 34.2% by the end of 2017. f - BMI forecast. Source: BMI. © Business Monitor International Page 67 Vietnam Information Technology Report Q3 2013 The development of broadband services will be uneven across the region, with implications for the demand of hardware, as well as the scope for the development of IT services such as data analytics and cloud computing. The higher income markets will lead in terms of internet and broadband penetration, including Australia, Hong Kong and Japan. There will, however, be substantial improvements in broadband penetration in other key markets, most notably China, but also Sri Lanka, Malaysia and the Philippines. The underperformer in terms of broadband development is expected to be India, which BMI forecasts to have the lowest broadband penetration in 2017 at 1.6%, up by just 0.4pps. The lack of broadband and internet infrastructure development in India will be a drag on the development of the hardware and services market. However, in addition to the sheer scale of the market, there are government initiatives in place we believe will catalyse the markets development over the medium term. In February 2013 the MCIT published its GI Cloud Adoption and Implementation Roadmap, with the aim of creating a government private cloud environment available for use by central and state government departments, districts and municipalities to accelerate ICT service improvements. The GI cloud will form the basis of adoption of e-government and cloud services in public administration including Infrastructureas-a-Service, Platform-as-a-Service and Software-as-a-Service. Another notable development is the Akash tablet, manufactured by UK company DataWind, that will be available to low-income Indian citizens to be used in the education system. In January 2013 it was reported the cost of the tablet could drop to US$20, with the Indian government subsidising half the total cost of the device to ensure widespread affordability. This initiative could be the foundation for a much wider utilisation of IT hardware in Indian society, where tablets and notebooks have previously been too expensive for large swathes of the population. © Business Monitor International Page 68 Vietnam Information Technology Report Q3 2013 APAC PC Browsing Traffic By OS (%) March 2012-March 2013 Source: Statcounter The Akash is at the bottom end of the market, and government support for the scheme has been critical. However, elsewhere in the region low-cost tablets are also beginning to have a major impact on the PC market. The OEM devices, predominantly running Google's Android operating system and produced in China, have been popular with consumers due to the demand for mobile computing devices and the low price points. For instance in Vietnam these cheap tablets have been popular and have gained traction after being promoted by local dealers, that are able to generate high margins on the product. The availability of low-cost Android tablets will be a major trend in lower income markets in future. While Microsoft Windows dominates the region in March 2013, with Microsoft's Windows 7, XP, Vista and combining to account for over 93% of PC browsing traffic, according to Statcounter data, Android has the potential to increase its share markedly in the coming years. This has implications for Microsoft and its partner vendors. Tablets have previously been above the price points for mass market adoption in much of Asia Pacific, for instance Apple's iPad and Samsung's Galaxy range. However, the arrival of OEM tablets, as well as competition in the branded segment for Apple and Samsung from lower cost alternatives such as Google's Nexus and Amazon's Kindle Fire range will place downward pressure on prices that will see tablets take a far larger share of the market. The tablet market will not be unchallenged, with reports from several markets © Business Monitor International Page 69 Vietnam Information Technology Report Q3 2013 that vendors of notebooks and ultrabooks have already moved to produce lower cost models and accept lower margins to remain price competitive. Rising incomes and expansion of broadband penetration underpins a bright outlook for hardware sales across the region as a whole. This outlook is not shared right across the region however, with recent developments in Australia focusing on lowering costs - which will reduce margins for IT vendors. In Q113 the Australian parliament summoned Apple, Microsoft and Adobe to challenge them over the high prices charged in the local market. Meanwhile, reform of the government's procurement procedures are targeting cost reductions via the consolidation of contracts and coordinated negotiation. The Asia Pacific region offers IT vendors huge rewards, given the potential arising from large populations and rising incomes. As households purchase PC hardware, enterprises modernise and public authorities move to IT systems there is scope for large increases in market value. However, the rewards will not be distributed evenly, with notebook and desktop manufacturers vulnerable to the rise in popularity of tablets. There is also downside risk posed by economic crisis and the potential for fiscal austerity drives hitting government spending. There are great opportunities, but vendors will still need to target their strategies in the region to succeed. © Business Monitor International Page 70 Vietnam Information Technology Report Q3 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 71 Vietnam Information Technology Report Q3 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 72 Vietnam Information Technology Report Q3 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 73 Vietnam Information Technology Report Q3 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 74 Vietnam Information Technology Report Q3 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 75 Vietnam Information Technology Report Q3 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 76 Vietnam Information Technology Report Q3 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 77 Vietnam Information Technology Report Q3 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 78 [...]... 34 Vietnam Information Technology Report Q3 2013 Vendor Performance APAC Household PC Penetration (%) 2011 Source: World Economic Forum Global Information Technology Report 2013 © Business Monitor International Page 35 Vietnam Information Technology Report Q3 2013 The latest data from IDC show that multinational brands dominated the Vietnamese PC market in Vietnam PC Installed Base Q412 Asus was reported... Page 14 Vietnam Information Technology Report Q3 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. .. despite global economic headwinds presenting a risk, Vietnam' s software and outsourcing services firms are positioned to benefit from large foreign enterprises seeking lower cost locations over the medium term © Business Monitor International Page 16 Vietnam Information Technology Report Q3 2013 2013 Outlook BMI has revised our macroeconomic outlook for 2013 downwards slightly, but it will still be supportive... 32.1mn internet subscribers in Vietnam at the end of 2013, a penetration rate of 35.4% We expect this number to increase to 34.7mn by end-2017, a 36.9% penetration rate © Business Monitor International Page 21 Vietnam Information Technology Report Q3 2013 Although the internet user penetration rate is expected to be approaching saturation in major cities and towns, rural Vietnam remains comparatively... of the Vietnamese broadband market to decline in the next few years as consumers opt for mobile alternatives That said, declining prices of products and services should help the sector to grow by an average of 2.0% between 2013 to 2017 to bring the total number of fixed broadband subscribers in Vietnam to 5.4mn © Business Monitor International Page 22 Vietnam Information Technology Report Q3 2013 Macroeconomic... Page 30 Vietnam Information Technology Report Q3 2013 Market Overview Hardware BMI expects Vietnam' s computer hardware market will be worth around VND44,389bn (US$2.124bn) in 2013, up 16% from VND38,261bn in 2012 The growth rate in the hardware market will accelerate from 14.6% in 2012, buoyed by an improved economic environment That said, there has been a minor downgrade to our forecast for Vietnam' s... 12 Vietnam Information Technology Report Q3 2013 Business Environment SWOT Analysis Strengths ■ Vietnam has a large, skilled and low-cost workforce, which has made the country attractive to foreign investors ■ Vietnam' s location - its proximity to China and South East Asia, and its good sea links - makes it a good base for foreign companies to export to the rest of Asia, and beyond Weaknesses ■ Vietnam' s... the response is favourable © Business Monitor International Page 24 Vietnam Information Technology Report Q3 2013 Recovery Remains On Track Vietnam - Purchasing Managers' Index Source: BMI, Markit/HSBC Downward Revision To Reflect Weak Q113, But Growth Trajectory Intact That said, we do not deny that it has been a wobbly start for the Vietnamese economy in Q113, and that progress on restructuring the... yearon-year from 4.8% in Q31 2, surpassing consensus expectations for a 5.5% expansion We are holding on to our core view for full-year real GDP growth to remain flat this year, implying a similar 6.4% economic expansion for 2013 (up from our previous forecast of 5.4%) We are likely to see renewed headline © Business Monitor International Page 29 Vietnam Information Technology Report Q3 2013 weakness through... Labour unrest remains a 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 Q3 2013 Political SWOT Analysis Strengths ■ The Communist Party of Vietnam remains committed to market-oriented reforms and we do not expect major shifts in policy direction . Q3 2013 www.businessmonitor.com VIETNAM INFORMATION TECHNOLOGY REPORT INCLUDES 5-YEAR FORECASTS TO 2017 ISSN 1749-3072 Published by:Business Monitor International Vietnam Information Technology Report. 66 Demographic Forecast 71 Vietnam Information Technology Report Q3 2013 © Business Monitor International Page 4 Table: Vietnam& apos;s Population By Age Group, 1990-2020 ('000) 72 Table: Vietnam& apos;s. completeness of any information hereto contained. Vietnam Information Technology Report Q3 2013 INCLUDES 5-YEAR FORECASTS TO 2017 Part of BMI’s Industry Report & Forecasts Series Published by: