Networked World and National ICT Development Strategies for Selected East Asian Countries

CONTENTS

1 Introduction

2 The Networked World
2.1 ICT Development
2.2 Benefits of The ICT

3 ICT Development in South Korea, China and Vietnam
3.1 Economic Dynamics and ICT Development in Vietnam
3.1.1 National Background of Vietnam
3.1.2 ICT Development in Vietnam
3.1.3 SWOT Analysis for Vietnam
3.2 Economic Dynamics and ICT Development in China
3.2.1 National Background of China
3.2.2 ICT Development in China
3.2.3 Drivers of Development and Market Challenges
3.3 Economic Dynamic and ICT Development in South Korea
3.3.1 Economic Dynamic of South Korea
3.3.2 ICT Infrastructure of South Korea
3.3.3 ICT Industry of South Korea
3.3.4 Policies in ICT development of South Korea
3.4 Comparison Between South Korea, China and Vietnam

4 ICT Performance Measurement Indexes
4.1 Digital Economy Rankings
4.1.1 Introduction to Digital Economy Rankings
4.1.2 Calculation Method
4.1.3 Digital Economy Index 2010
4.1.4 Critical Evaluation
4.2 Networked Readiness Index
4.2.1 Introduction to Networked Readiness Index
4.2.2 Networked Readiness Index 2010-2011
4.2.3 Critical Evaluation
4.3 ICT Development Index
4.3.1 Introduction to ICT Development Index
4.3.2 ICT Development Index 2010
4.3.3 Critical evaluation

5 ICT Development in Selected Asia Countries
5.1 Cluster Building
5.1.1 Countries Classification According to Southeast Asia Competitive Initiative
5.1.2 Countries Classification According to the World Bank
5.1.3 Countries Classification According to Author Based on ICT Development
5.2 Correlation Analysis

6 Political Options
6.1 Steps for Accelerating E-economy
6.2 General Lessons for Developing Countries
6.2.1 Computer and Internet User Penetration Discrepancy.
6.2.2 Networking of ASEAN
6.2.3 Learning from Successful Countries
6.3 Policy Recommendations for Vietnam
6.4 Policy Recommendations for China

7 Conclusion

References

Appendix 1. Vietnam

Appendix 2. China

Appendix 3. South Korea

Appendix 4. ICT data of 12 countries

LIST OF ACRONYMS

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LIST OF TABLES

Table 1: Global adoption trend forecast

Table 2: International Internet Bandwidth (bit/s per user), by region, 2005-2010

Table 3: Active mobile-broadband subscriptions per 100 inhabitants, 2007-2011

Table 4: Vietnam´s IT Industry revenue

Table 5: Vietnam´s Education Information

Table 6: Total score: Global Service Locations - comparing Asia

Table 7: Comparing Asia: People Skills and Availability Scores 2009

Table 8: China's ICT market 2010

Table 9: China´s ICT software industry structure

Table 10: China´s the regional software market performance in 2009

Table 11: Ease of doing business rankings

Table 12: South Korea´s ICT performance

Table 13: South Korea´s ICT export

Table 14: South Korea´s Information Technology Sector

Table 15: South Korea´s Informatization Master Plan 1996-2015

Table 16: Trend of R&D expenditure and R&D percentage of GDP (100 million won, %)

Table 17: Mobile broadband penetration 1998-2009 in %

Table 18: Vietnam, China and South Korea at glance

Table 19: An example of calculation E-readiness 2003

Table 20: ICI changes, 2008-2010

Table 21: Most dynamic countries (top 5)-changes between IDI 2010 and 2008

Table 22: Top economies with the greastes change 2008-2010 in the “Access sub-index”

Table 23: ICT in ASIA Cluster building of Southeast Asia Competitive Initiative (SACI)

Table 24: ICT Indexes of 12 countries

Table 25: Penetration range of 3 clusters

Table 26: Correlation between ICT indexes, ICT indicators and GNI per capita

Table 27: Correlation ICT indices and GDP growth rate

Table 28: DigiWorld markets by region

LIST OF FIGURES

Figure 1: Global ICT Developments, 2001-2011

Figure 2: Trends of Top 10 ICT firm´s revenues globally, 2000-2009 (Index 2000=100)

Figure 3: Active mobile-broadband subscriptions per 100 inhabitants, 2007-2011

Figure 4: Vietnam´s ICT Human Resource (2007)

Figure 5: SWOT analysis

Figure 6: Development of the mobile broadband market in South Korea

Figure 7: Vietnam, China, South Korea in Comparison

Figure 8: NRI Construction

Figure 9: ICT Development Index´s construction

Figure 10: IDI and GNI per capita, PPP, 2009

Figure 11: Comparison some ICT indicators of 12 countries 2010-2011

Figure 12: Internet users and fixed broadband internet subscription rate of 12 countries 2000- 2009

Figure 13: Affordability: Sub-basket /GNI per capita of 12 countries in comparison

Figure 14: Relative change % in 2010-2011 of fixed telephone sub-basket/GNI per ca

Figure 15: Broadband speed of 12 countries in comparison

Figure 16: ICT indexes and GNI per capita in Cluster analysis

Figure 17: GNI per capita, active mobile-broadband subscriptions per 100 inhabitants (2010)

1 Introduction

With the growing speed of internet, wide spread of smart phones, the gaining importance of wireless data transfer, all life areas and all industries are affected gravely by information and technology. Not just in economy, but also in other basic areas such as government and education, the using of computers, internet is no longer strange. The ICT development will not stop at where it is right now. Instead, it is improving faster than we have forecasted in the last decade. Considering the movement of the ICT industry particularly, we can observe a lot of milestones achieved in the computer science, broadband speed and wireless telephony. However, the developed countries are better and earlier equipped with technology than the developing countries or new-industrialized countries. Since the internet was first invented in USA, Canada and Europe followed and joined the growing process. After a decade, internet now reaches the Asian region as well as African countries intensively while USA, Canada and Europe are focusing newer inventions. Within the Asian region it exists considerably another technological gap among countries. The countries with higher income such as Japan, Singapore, South Korea has succeeded in implementing ICT in all social and economic areas. The rest of the countries, including China, Malaysia, Thailand, Indonesia, Philippines, Vietnam, Laos, Cambodia, are far behind in information technology. Nevertheless, it´s necessary for all nations, weather developed or developing, to keep on nurturing ICT development to be a part of connected world. The question is how a nation can successfully adopt ICT and benefit from all advantages at best. Unfortunately, there is no common guideline for all countries. Without identifying specific factors of each country and a lot of effort made by government, no country can achieve high ICT performance in the long run.

The purpose of this paper is three-fold:

To identify the characteristics and political options of a country, that would affect the success of its ICT adoption.

To identify clusters of nations upon the international ICT indices and GNI per capita

To provide an overall guideline that incorporates these nations toward developing higher ICT indices.

This paper shows income level and social background can play very important roles in country´s ICT development. Within Asian region, South Korea represents the developed group, China and Vietnam characterize the developing group. China and Vietnam have similar political structure but the first is much bigger than the latter. Therefore, ICT implementation is different between these 2 countries. This paper is organized as follow, first, short overviews of ICT development as well as the advantages of ICT. Second, 3 countries (South Korea, China and Vietnam) are described in details in both national characteristics and ICT performance. In this section, the ICT industry and development of each country are analyzed in terms of what they have done to adopt ICT as well as how much progress has been made. In section 4, the information about popular ICT ranking indices are given. The

three chosen indices are Networked Readiness Index, Digital Economy Ranking and ICT Development Index. The empirical research of cluster building for 12 selected countries is presented in Section 5. In the final section, the guidelines for better ICT adoption are presented. In particularly, Vietnam and China are discussed in more details and their political recommendation is drawn.

The data used in this paper are mostly from World Bank, Information Technology Union. The indicators and indexes provided are for 2010 or 2011. Because the crisis from 2007-2009 could affect negatively in the world economy and ICT particularly, GNI per capita and GDP growth rate of 2010 present relatively better research result.

2 The Networked World

The paper begins with global information of ICT development in different aspects such as history of internet, actual status of broadband penetration and internet users. In the next part, the advantages and importance of ICT in social, economy and culture will be described. The development of developing and developed countries will be generally compared.

2.1 ICT Development

The development of information and communication technology began just over 100 years ago in the 19th century. The first digital electronic computer appeared in 1946. In comparison with radio and TV, computer technology was invented later. The invention of high performance computer leads to the production of software for its operations and hardware for its basic structure. Later, database systems and services came. These four sections together created an ICT industry. Cellular mobile and the Internet were the biggest revolution in 1990s and also the most influential technologies in ICT even with a short history of just 30 years. Starting with a few subscribers in the western countries in 1985, the total number of cell phone subscribers worldwide by 2011 had reached 85.7 per 100 inhabitants. The Internet was originated in the U.S. for defense purpose. Now this technology is used for civilian purposes and it grows very fast.^[1] Figure 1 depicts the actual development of ICT in the world with rapidly increasing numbers of mobile cellular subscriptions and internet users.

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Source: ITU World Telecommunication/ ICT Indicators database

Figure 1: Global ICT Developments, 2001-2011

Total mobile-cellular subscriptions reached almost 6 billion by end 2011, corresponding to a global penetration of 86%. ^[2] The growth was driven by developing countries, which accounted for more than 80% of the 660 million new mobile cellular subscriptions added in 2011. In mobile broadband (MB), by end 2011, there were more than 1 billion mobile broadband subscription (MBS) worldwide and 2.3 billion people were online. MB has become the most dynamic ICT service, with 40% growth rate in 2011. By end 2011, there were 590 million fixed (wired) broadband subscriptions (FWBS) worldwide. The FWBS grew slower in developed countries, with 5% increase, than in developing countries, with 18% in 2011.

While 70% of the total households in the developed countries had internet access, the rate was only 20% of in the developing countries, with some exceptions such as Malaysia (61%) and Lebanon (62%).^[3]

The increasingly powerful ICTs have fundamentally changed the nature of global relationships, sources of competitive advantages and opportunities for economic and social development.^[4] Technologies such as the Internet, personal computer and wireless telephony have turned the globe into an interconnected network of individuals, organizations, institutions, firms. Communicating and interacting with each other can be done through a variety of channels, which have never existed before. It resulted in a world of virtual network, and every developed or developing country has the potential to join in this network.

To fully understand the adoption trends of ICT, it is important to assess two main factors that significantly impact the penetration rates of all the services. They are:

-the growing number of users
-the increasing number of devices and machine-to-machine (M2M) ^[5]

According to the Cisco forecasts for Service adoption over the period of 2011-2016, the total number of global devices and connections (12.9% CAGR) will grow faster than the global population (1.1% CAGR), with CARG is the Compound Annual Growth Rate. ^[6] Table 1 shows the current views of global network users and their devices and connections.

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Source: Cisco “Cisco VNI Service Adoption Forecast, 2011-2016”

Table 1: Global adoption trend forecast

The focus of ICT debate and discussion is no longer just on the mobile cellular and the internet revolution, but is moving to the need for broadband internet access. Policy makers are trying to make it widely available, affordable and especially as high-speed as possible. Nowadays the discussion is focused on an Internet connection that provides the user a minimum downstream speed of 256 Kbit/s. While second-generation (2G) mobile-cellular services have been identified as a major development enabler, the potential of broadband Internet (defined as a 265 Kbit/s connection to the Internet) could go further and achieve the

Millennium Development Goals (MDG).^[7] A high quality network is essential to the usage efficiency of the applications. The faster and more reliable the network, the more devices and services can be adopted by users. The trend nowadays is moving towards “the Internet of Things”, i.e. a wholly connected environment where cars, energy grids or home appliances are connected.^[8] This is starting to happen, with some 12.5 billion connected devices worldwide 2010, and a prediction of 25 billion by 2015. With the world population in 2010 of 6.8 billion, it means more connected devices than people.^[9]

However, in fact it remains a gap of speed and network quality among the users due to the differences in the available national and international backbone infrastructures. Not only among the regions does the broadband speed differ, but also the bandwidth varies within the regions.^[10]

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Source: ITU World Telecommunication/ICT Indicators database

Table 2: International Internet Bandwidth (bit/s per user), by region, 2005-2010 ^[11]

Europe leads the world in International Internet Bandwidth with an average of ca. 80,000 bit/s per user. The Asia region grows rapidly, nevertheless still under the world average until 2010. The broadband connection differs in terms of technology, speed, capacity, price and quality of service. In many developing countries, fixed-broadband services are limited to urban areas; unlimited and high-speed Internet access remains expensive. In developed countries, mostly mobile-broadband services are provided; in the case of highly intensive use data access limited or lower speeds are used.^[12]

The facts and figures about broadband speed, the growth rate of internet users and mobile telephones indicate the fast changes in the last decade of ICT development. The following section details the ICT industry particularly and the advantages of ICT for a country as a whole.

2.2 Benefits of The ICT

Based on the facts and changes made due to cellular mobile phones and the Internet as mentioned above, it is clear that ICT increasingly plays an important role in different areas: politics, culture and the economy.

The fundamental issue of politics is democratization. In the past, prior to ICT, it was hard to achieve the right to participate or the right to speak. Now with mass media, including web media, this problem is solved. The development of ICT serves the purpose of making the general public aware of what is happening. ICT opens the door for the public to be able to have their own voice.^[13] For example with the social network, electronic news or online platforms, that everyone can access from everywhere at any time, it is becoming difficult to control the information flows as well as the active bloggers.

There are two levels of meaning for ICT in the economy: 1.the development of the ICT industry itself and 2.the industrialization and the economic development at a new stage based on ICT. The ICT industry became more considerable in the first half of the 20th century, which includes two aspects: the ICT manufacturing industry and the ICT service industry.

- The manufacturing industry includes the manufacturing of communication and broadcasting equipment, computers and related equipment, consumer products and components. It is divided further into the software and hardware sectors. Now while the hardware is declining in significance, the software is becoming more important, and increasingly complicated due to its various performances of computer systems. ^[14]
- The service industry includes communication industry, networking industry, broadcast and TV industry. Nowadays people are getting online to obtain content, so all sectors from finance to communication industry must provide content online to fulfill the growing demands. Within this industry the chain is divided into the transportation provider, the content provider and the access provider.^[15]

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Source: OECD Information Technology Outlook 2010, www.oecd.org/sti/ito

Figure 2: Trends of Top 10 ICT firm´s revenues globally, 2000-2009 (Index 2000=100)^[16]

On the other side, ICT influences the general economics in all areas from administration, manufacturing, and customer services to research and development. Especially in terms of electronic commerce (E-commerce), the Internet created new markets. With E-commerce, resources are better utilized, business processes more efficient, which translates into higher productivity. The Information Technology and Innovation Foundation (ITIO) estimated that E-commerce delivers 15% savings over other forms of commerce. The networked effects increase marketplace diversity as well as market size and lead to greater economic benefits through increasing the variety that meets the diverse demands of the customer.^[17] The E- commerce is potentially transforming the business activities into an integrated marketplace for domestic as well as international trade actions. In Business-to-Business (B2B) alone, almost 80% of the transactions are undertaken in this new technology. In 2010, the U.S. B2B e-commerce revenue was closer to US$150 billion; this represents an explosion in revenue compared to that of US$43 billion in 1998. The U.S. accounts for about three-quarters of e- commerce activity worldwide, however the share is falling as Internet diffusion continues in Europe and Asia, followed by Latin America and Africa.^[18]

Mobile commerce particularly shows great potential. Mobile commerce ranks as the second- fastest-growing consumer mobile service with a 42.7% CAGR globally from 2011 to 2016. This impressive growth figure points to an increasing acceptance by consumers of the functionality of mobile commerce services. Indeed, a variety of services, ranging from mobile shopping and payments in banking to event ticketing, provide end users advantages by mobile commerce activities. ^[19]

The networked effect of ICT makes it possible for large companies around the world to become integrated and connected. For example in terms of the production value chain, the iPhone is produced in many countries, each are responsible for a part of the iPhone.^[20] Many different enterprises can connect with each other in the most efficient way through online meetings, voice conferencing and other data transfer for urgent problems or decisions. Information technologies for business activities such as ERP, SCM and CRM are used to harmonize the international production system and delivery processes. Modern logistics is also highly involved in information systems to guide material flow. For the financial sector ICT becomes a growing driver too, because modern financing is finance in terms of business operation and is an information process. In the management aspect, many management tasks including the management of people, materials and money require modern information technologies.^[21] In short, ICT changes the pattern of trade in the value chain. The nature of the production process (comprising both manufacturing and services) is becoming more and more an information process in which the ICT is an enabler.

According to observations in the McKinsey Report, the Internet in advanced economies over the past five years was contributing up to 21% to the growth in GDP. ^[22] According to the World Economic Forum, ICT will change societies and economies around the world, and thus enhance the quality of life. This applies not only to already developed economies, but also and especially to low-income and developing countries. ICT could be the basic principle of an information society, and therefore, policy makers in developing countries need to create and maintain social and environmental conditions aimed at adopting the ICT. Otherwise, they would miss the opportunities to join into this networked world.

From the cultural aspect, the Internet has created a new online world. The cellular mobile technology has changed the entire world into a new era of communication. Both internet and mobile phone revolutions invent the new kind of culture, a virtual cultural version. For example, people send and receive lots of mails and messages by cellphone each day. People hear music online, play games online, watch movies online, read online-newspapers and exchange documents by computer. The web-enabled applications can be seen in every area of life from fashion to entertain, and the social network platform.

Every user can benefit differently from the global information network. Students can learn more about the world and quickly acquire new knowledge. Business people can find new market opportunities. Governments can more effectively provide public services and improve better relationship with other states. Individuals can communicate at lower cost and become more informed in the network.^[23] Nevertheless, there are differences in the level of ICT development throughout the world. In the more developed nations, the ICT is more widespread and supported by better infrastructure and better education system. The developing world suffers from serious deficits of know-how and obstacles in government support. Therefore the ICT adoption in developing countries is not always comparable to that in the highly-developed countries.^[24]

Data shows that fixed-broadband subscriptions have more than doubled over the past 5 years. While fixed-broadband penetration in developed countries had climbed to almost 24% with slower growth rate by the end of 2010 suggesting that a saturation level is being reached. The developing countries share is increasing rapidly but attains only 4.2%. The proportion of households with access to the Internet is growing steadily. Especially in the developing countries, where around 16% of households had access to the Internet in the end of 2010, is against 66% in developed countries.^[25] Wireless-broadband internet access remains the strongest growth sector. In developing countries, internet users are progressively shifting from fixed to wireless connections and devices. The potential of mobile-broadband and dynamic ICT developments make policy makers aware of the need to facilitate this process. This is why the Broadband Commission for Digital Development was launched in 2010, with the

mission to promote the adoption of broadband-enabling policies, especially in developing countries. ^[26]

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Source: ITU World Telecommunication /ICT Indicators database

Figure 3: Active mobile-broadband subscriptions per 100 inhabitants, 2007-2011

ICT has been considered as a driver for economic growth for decades, not just to the first movers such as the United States, but also to late-comers. Despite this strong will, infrastructure constraints have made internet-driven gains slowly to materialize in developing countries. Rooted in USA, Internet also grew quickly in Europe. Asia, which was late in catching the Internet wave, has struggled to capitalize on the capabilities of the Internet. It is now improving its performance and increasing its global competitive advantage. The developing countries have always used a wait-and-see attitude as new technologies arrived on the scene, learning from the mistakes of the early adopters in Western Countries. But in the case of this technology, the strategy seems not to work as well as it used to be, because the late adopters will face an acceleration of the revolution itself and the competitors will become increasingly powerful to exploit the prime development.^[27]

Economies have different policy environments, patterns of domestic production and international engagement attitude. Since each country focuses on specified industries, their abilities to catch up with the ICT adoption process varies. A key question is: How can the policy environment help their countries to gain more from the networked world and the technologies, to reach higher living standard at the end of this task?

This paper proceeds with a short overview of the situation of the Internet, mobile technologies and other ICT indicators for selected countries in Asia. It includes ICT policies done by the governments. For a better comparison among countries, the measurements in term of different kinds of indexes will be explained. This review focuses on ICT Indexes, which are used mostly in the evaluation of the ICT status of countries in recent years. The cluster building of indices and the correlation analysis with GNI per capita and GDP growth rate show whether the countries reflect the same development in ICT rankings. This paper then considers the perspective of each individual country. Specific examples from three Asian countries (South Korea, China, and Vietnam) will show how these economies are improving their ICT transformation process.

3 ICT Development in South Korea, China and Vietnam

This chapter presents an analysis of Vietnam, China and South Korea´s macroeconomic indicators and the ICT indicators, which will be put together for an overviewed comparison among countries. Vietnam is a developing country in which the ICT is still not so strong exploited like in China and Korea. China is the biggest economy in the world, however because of its giant size the ICT adoption is constrained in some aspect. In other side, Korea has achieved an impressive ICT quality not only in Asia Region but also global perspective.

3.1 Economic Dynamics and ICT Development in Vietnam

This section starts with the general national background of Vietnam such as history, trade, economic growth and then describes the ICT development in this country with different indicators, ICT industry and political actions.

3.1.1 National Background of Vietnam

Vietnam is a Southeast Asian country with the population of 87.8 million inhabitants in 2011. It makes Vietnam one of the world´s most populous countries (13th). Vietnam suffered war before 1975. In early 1986, the government initiated a series of economic and political reforms. Since 2000 Vietnam had re-established diplomatic relations with most nations and joined the world economy. The joining of the World Trade Organization (WTO) in 2007

indicated the country has successfully achieved economic reforms. However, Vietnam still has some problems such as relatively high levels of income inequality, high corruption rate and lack of democracy.^[28]

The socialist Republic of Vietnam is a single-party state, named the Communist Party of Vietnam. Under the Communist Party of Vietnam, all aspects of government, politics and society are strictly controlled.^[29] But in foreign relationships, the government has an open policy and has established international relations of different kinds: bilateral, multi-lateral relationships with 172 countries (2007), including the U.S., Western Europe, China, Japan, Australia and the ASEAN countries.^[30] With this open status Vietnam´s imports and exports were jointly valued at around 160% of GDP in 2006, more than twice the contemporary ratio of China and over four times the ration of India.^[31]

Most of Vietnam´s provinces are dominated by agriculture in late 1980s. The Doi Moi reform (1986) brought changes in market as well as new private ownership in industries and commerce. GDP growth rate of Vietnam is around 8% annually since the reform until 2005. That makes Vietnam one of the world´s fastest growing economies. The global recession hurt

Vietnam's export-oriented economy, with GDP in 2009-12 growing less than the 7% per annum average achieved during the previous decade. ^[32] However Vietnam´s year-on-year inflation rate is very high and reached 11.8% in December 2010. The nominal GDP reached US$135.411 billion in 2012 and a nominal GDP per capita of $1.498 in 2012. According to the International Fund, Vietnam belongs to the “lower middle income group”. However in 2012, HSBC predicted that Vietnam´s total GDP would surpass that of Norway, Singapore or Portugal by 2050, because exports increased by more than 12%, year-on-year.^[33]

From these overall information about Vietnam, next part will continue with further details of Vietnam´s ICT development.

3.1.2 ICT Development in Vietnam

This section presents an analysis of the current situation of ICT in Vietnam and the position of Vietnam in the global ICT and software services industry. Vietnam’s entry in this increasingly competitive sector is built on investments from government and multilateral organizations. With its strength in a cost effective workforce, improving infrastructure, linkages with key markets and an ambitious national vision, the country has attracted investments from international investors. The local presence of industry leaders shows their interest in Vietnam´s market.^[34] Multinational firms initiated the ICT outsourcing trend in the early 1990s and since then it has grown steadily. More and more firms particularly in ICT intensive sectors such as financial services in developed economies are searching for the pools of talent in developing countries (e.g. India, Philippines). Vietnam, a socialist country with “China- like” aspirations, plays a follower-position as a newer entrant in the global ICT business.^[35]

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Source: Vietnam Ministry of Information and Communications

“Vietnam Information and Communication Technology. White Book 2011”

Table 3: Active mobile-broadband subscriptions per 100 inhabitants, 2007-2011

ICT industry

Within IT industry, the field software development and services in period 2006-2010 have achieved significant growth in both revenue and market and become the most promising economic sector of the country. IT industry ´s revenue grew at the average rate of over 30% a year and reached over 1 billion USD in 2010 (up four times as compared to 2005) with the export revenue account for about 35% (up five times as compared to 2005). ^[36] Vietnam is in

the top 10 of the most attractive destinations for global outsourcing exports. In “The A.T. Kearney Global Services Location Index”, Vietnam was ranked the 8th place with 6.69 point in 2011.^[37]

Digital content industry is the new emerging sector but rapidly grows by over 40% yearly. In 2010 the revenue of the digital content industry reached US$934 million, increasing 9 times compared to that in 2005.^[38]

In 2010, the revenue of hardware industry reached US$5.6 billion, increased 5 times as that in 2005. This industry is one of the five highest export revenue industries, with export turnover about US$3.5 billion in 2010, mostly from computer related products, electronics and components. Many MNCs on ICT are planning to expand their investments and operations in Vietnam, such as Intel, Samsung Electronics, HP, Nokia, etc.^[39]

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Source: Vietnam Ministry of Information and Communications

Table 4: Vietnam´s IT Industry revenue

The number of enterprises in software and IT services also increased rapidly, reaching over 1’000 firms in 2010. An increase of 2.5 times that of 2005, which was mainly located in big cities. IT reached over 70,000 workers in 2010. Average labor productivity in software and IT services reached 14,800-30,000 USD, per employee, per year (More information in Appendix 3.1).

Currently there are seven IT parks being operated around the country, which are quite successful and well known. These include Quang Trung Software Park, Da Nang Software Park, and the IT Park of the National University in Ho Chi Minh City. Vietnam´s Hardware and Electronic industry has developed rapidly in scale with the strong contribution of direct investments from Multinational Corporations (MNC) in this sector.

Governmental Policy in ICT

It is generally perceived that Vietnam´s media sector is controlled by the government. Since 1997, Vietnam has extensively regulated public Internet access, using both legal and technical means. The resulting lockdown is widely referred to as the “Bamboo Firewall”. This is the reason why the “Reporters without Borders” considers Vietnam to be one of 15 global internet enemies.^[40]

Nevertheless in the global trend of ICT adoption and outsourcing with the potential shift from western countries to less labor cost countries, Vietnam must change its attitude to benefit from the advantages. Some important national programs and ICT related strategies can be pointed out such as:^[41]

- In 2004: Program on IT human resource development to 2010
- In 2005: ICT strategy 2010 and vision 2020 € general ICT development
- In 2006: Plan of Telecom and Internet Development to 2010 € Internet development
- In 2007:
- The Development Program for Vietnam´s Software Industry to 2010
- The Development Program for Vietnam´s Digital Content Industry to 2010
- The Master Plan for Vietnam´s Electronics Industry to 2010 and vision to 2020

In terms of legal frameworks and policies for the IT industry development, many documents were issued:

- in 2005: Electric Transaction Law
- in 2006: Information Technology Law
- in 2006: Intellectual Property Law
- in 2006: High Technology Law

These documents created the basic legal framework to regulate and promote the IT industry and IT applications and enhance the informatization of the country. The Informatization is referred to a transformation of an economy and society through the effective deployment of information and communications technologies in business, social and public functions.^[42] However the piracy rate in Vietnam is still very high and the transaction-through-electronic system is unsecured for e-commerce or e-banking.^[43]

The International Telecommunication Union (ITU) has prepared a World Telecommunications Regulatory Database presenting the Level of Competition in telecommunication services for jurisdictions in the Asia-Pacific region. The review shows that the most developed countries, including Japan, Singapore and Korea, have full competition across the entire range of services. Mid-level developing countries, including Thailand, Indonesia, tend to have opened many services to competition, except basic facilities. Two

examples of mid-level developing countries that have opened to full competition are Vietnam and Pakistan. Vietnam is committed to liberalize most basic telecom services and some new services.^[44] Vietnam is more liberalized than China and other countries in ASEAN (except for Singapore). Vietnam will allow foreign investors to take part in Telecom Network infrastructure establishment on the condition that Vietnam´s enterprises hold the major capital and control. The foreign investors are, however, allowed to hold major capital and controls in some non-facilities based services. This openness brings more opportunities for Vietnam´s telecom enterprises: opportunities to approach a broader market, foreign experts and foreign companies’ acquirement, advanced training and education for domestic laborers and students.^[45]

Human resources and ICT education

According to an assessment by the International Telecommunication Alliance, in recent years Vietnam has one of the world’s highest national growth rates in telecommunications. Up to May 2008, there were about 6 million subscribers in the country. 19.5 million people can access the Internet, which accounts for 23% of the total population. However, internet use is unevenly distributed in Vietnam. Most users are concentrated in urban areas like Hanoi, Ho Chi Minh City, Da Nang and Can Tho. The rural and remote areas have a low quality or no access to the Internet, or the users do not know how to use it. In the worst cases these communities have not been aware of library and Internet services available to them.^[46]

Vietnam has a wide network of public libraries. Some libraries have provided internet access services for patrons (22 out of 65 public libraries have this service). Most users have used the Internet for emails, to chat, or for reading e-newspapers, and have not explored the research functions of the Internet for information useful to their daily lives and work. The Vietnamese librarians have weak skills in PC use and search engines. Therefore, they are unable to provide support and guidance for users. Library patrons have also changed their demands for e-information due to ICT development. Increasingly, users read e-books and documents online instead of reading printed books. However, the e-book databases as well as the inter- library networks are insufficient for the rising demands of students and researchers. So it is easy to forecast that one of the greatest challenges of Vietnam is: how to prepare the Vietnamese education system for e-learning. ^[47]

Vietnam has a state-controlled network of schools, colleges and universities, and a growing number of private institutions. The literacy rate stood at 90.3% in 2008. Universities and colleges which offered ICT courses grew from 192 in 2006 to 277 in 2010. Schools with ICT training increased from o in 2006 to 82 in 2010. There is an increasing number of schools that provided international ICT training programs, such as Aptech, Arena, NIIT, Kerox (India) , Raffes (Singapore) , Kent (Australia). Labor working in the IT sectors nearly doubled from 150,000 to 260,000 over 5 years with an annual growth rate of 13%-18%. In Vietnam, IT

remains one of the hottest educational subjects and offers top entry salaries for jobs. Average tuition fee was low. Tuition fees for four years of a full-time undergraduate was about $1000, less than six months of a graduate´s average starting salary.^[48]

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Source: Vietnam Ministry of Information and Communications

Table 5: Vietnam´s Education Information

Human resources in ICT sectors are divided unevenly among sub-sectors. Because Vietnam begun its ICT industry with outsourcing in hardware electronics from western countries (USA and Europe), the hardware industry takes the most part of ICT human resources, according to the Ministry of Information and Communication in 2007. However the software industry and digital content are growing fast in recent years, which create a hard competition for human resources.

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Source: Vietnam Ministry of Information and Communications

Figure 4: Vietnam´s ICT Human Resource (2007)

3.1.3 SWOT Analysis for Vietnam

The SWOT analysis provides an initial indicator of the most obvious issues and problems the country faces, as well as the key opportunities.

- Strength:

Vietnam was found to enjoy the key advantages of strong geopolitical stability, since assessment by WTO and was reinforced by national government commitment to ICT growth.^[49] The education system is successful in producing technically well-prepared and talented graduates in software development and other ICT areas.^[50] The labor market offers exceptional labor price advantages (averaging 30-50 % relatively to established offshore software exporting competitors. ^[51]

- Weaknesses:

Human resources: Vietnamese ICT graduates and professionals have relatively poor skills in English and other major international languages, in comparison with established outsourcing competitors e.g. India, Malaysia, Singapore, Indonesia. Training fails to offer “hands on” study or internship opportunities, in comparison with China where it is believed that success is based on the strategy of “improvement by doing”.^[52] ICT professionals also lack of project management, presentation, entrepreneurial and other business skills. With the average software engineer having only 13-15 years experience, it is difficult to compete in the global market where most engineers have at least 20 years experience. Limited human resources further hinder competitiveness as the average firm has only 30 employees. ^[53]

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Source: The 2009 A.T. Kearney Global Services Location Index (www.atkearney.com) ^[54]

Table 6: Total score: Global Service Locations - comparing Asia

[...]

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^[1] Zhu G. (2005)

^[2] ITU (2012)

^[3] ITU (2012)

^[4] Dutta S. , Benat B. (2012)

^[5] Cisco (2012) b

^[6] Cisco (2012) b

^[7] Dutta S. , Benat B. (2012)

^[8] Evans D. (2011); van Kranenburg R.; Erin A.; Alessandro B.; Dan C.; Dodson S. (2011)

^[9] Evans D. (2011); Cisco (2012) b

^[10] Dutta S. , Mia I. (2011)

^[11] ITU (2011) a

^[12] ITU (2011) a

^[13] Zhu G. (2005)

^[14] Zhu G. (2005)

^[15] Zhu G. (2005)

^[16] OECD (2012) b

^[17] Dada D. (2006)

^[18] Kirkman G.S., Cornelius P.K., Sachs J.D., Schwab K. (2002)

^[19] Cisco (2012) b

^[20] Simon J. P. (2011), P.99

^[21] Zhu G. (2005)

^[22] Rundfunk und Telekom Regulierungs-GmbH (2011)

^[23] Dutta S. D., Mia I. (2011)

^[24] IBM, Information Technologies Group Center for International Development at Harvard University

^[25] ITU (2011) a

^[26] ITU (2011) a

^[27] Kirkman G.S., Cornelius P.K., Sachs J.D., Schwab K. (2002)

^[28] Central Intelligence Agency (CIA) (2012) a

^[29] U.S. Department of State (2011)

^[30] Vietnamese Ministry of Foreign Affairs (2010)

^[31] Clay C.; Sheridan P. (2006)

^[32] Central Intelligence Agency (CIA) (2012) a

^[33] Central Intelligence Agency (CIA) (2012) a

^[34] Nguyen A.T. (2008)

^[35] Chidamber S.R. (2003)

^[36] Vietnamese Ministry of Information and Communications (MIC) (2011)

^[37] Kearney A.T. (2011)

^[38] Vietnamese Ministry of Information and Communications (MIC) (2011)

^[39] Vietnamese Ministry of Information and Communications (MIC) (2011)

^[40] Reporters without Borders (2004)

^[41] Vietnamese Ministry of Information and Communications (MIC) (2011)

^[42] IOS Press (2009) b

^[43] International Intellectual Property Alliance (IIPA) (2012)

^[44] IOS Press (2003)

^[45] Nguyen A.T. (2008)

^[46] The Asia Foundation (2009)

^[47] The Asia Foundation (2009); Rozinah Jamaludinm Mohammad Ranmanesh (2011)

^[48] Vietnamese Ministry of Information and Communications (MIC) (2011)

^[49] IOS Press (2003)

^[50] Nguyen A. T. (2008)

^[51] Vietnam Competitiveness Initiative (VNCI) (2003)

^[52] IOS NL Agency, Ministry of Foreign Affairs (2011)

^[53] IOS Press (2003)

^[54] Kearney A.T. (2011) 24