Vietnam’s Prime Minister, Nguyen Xuan Phuc made headlines last week when he addressed more than 300 entrepreneurs at the Youth Startups Forum 2018 in Hanoi and said that “The Vietnamese government is willing to make changes in regulations to facilitate the timely funding of startups.”
Business experts and individuals working in Vietnam’s start-up scene applauded the prime ministers statement and said that government support could spur a new generation of start-ups to begin their operations.
The Prime Minister acknowledged the challenges that Vietnamese startups have and said that it is the task of the government is to find breakthrough solutions for entrepreneurs that will help them to start, run and expand their businesses.
The prime minister said that he has asked the Ministries of Finance; Planning and Investment; Science and Technology; and the State Bank of Vietnam to recommend and make changes in the legal framework that will create better conditions for startup companies. These organizations have been asked to report in detail in January on the problems that industry insiders have highlighted and the solutions to these issues.
Prime Minister Nguyen told the forum that "We need a breakthrough innovation in policies from government bodies to help startups succeed with their ideas.” The prime minister said that the government is willing to share a part of the risks with startups.
Vietnam’s startup scene ranks third among ASEAN member countries and there have been an increased number of startups in recent years. While procedures to start a company are fairly transparent, many companies are hesitant to start operations in Vietnam.
A key problem is that regulatory hurdles hinder their ability to attract the investment and expansion capital they need to establish new companies. Thach Le Anh, Founder of Vietnam Silicon Valley, a government-backed organization created to stimulate startup growth, said that angel investors are reluctant to invest due to a lack of incentives in tax and policies.
Many Vietnamese startups look to fund their initial operations from angel investors and venture capital firms and this early financial support is crucial for most startups to succeed. However, because of the complicated nature of capital, banks, and regulators, when companies are successful at attracting capital it can be 6 ~ 12 months before they can receive the investment funds, and by that time, many startups have died.
Nguyen Manh Dung, from CyberAgent Vietnam said that many investors want to invest in Vietnam’s startups, but that investors are reluctant about later stage investments and the issue of when profits can be extracted from the country. According to Dung, divestment is one the main concerns that investors have and that this issue "takes opportunities away from startups."
A representative of one of Vietnam’s largest banks said that many banks and large-scale Vietnamese companies are open to the idea of investing in startups but that short corporate history, long financial checks and tight bidding procedures limit many companies. Additionally, many technologies like blockchain, that have applications across many industries are difficult for companies to invest in since the investor company doesn’t have staff who can evaluate or determine the value of the technologies that the startup is developing.
Members of Vietnam’s expatriate community are waiting to see what the definition of startups will be. Many expats living in Vietnam have started their own companies, and like the companies owned by Vietnamese, they hope that they will also be eligible to be in new government programs. They note that being able to plug into Vietnamese government supply chains and vendor networks could be a boom to their businesses and they hope that the government will remember that their companies and their Vietnamese employees are also part of the startup community.