Challenges facing Vietnam’s innovation ecosystem

Vietnam’s Innovation Ecosystem 2019 report

Startups in Vietnam have great potential to grow, however, the community also faces a number of challenges. Most local startups are small in scale, at seed stage, have limited ability to make a breakthrough, and are in need of further incubation. Some of the prominent challenges currently faced by startups in Vietnam are:

Ability to access finance: In 2016, the major financial sources of domestic investors came from three major venture capital firms: IDG Ventures Vietnam, Cyber Agent, and DFJ VinaCapital. Altogether, they invested over US$120 million in funding and consulting for several brands.

However, it is hard to convince local investors to take risks and invest in early-stage startups. More often than not, those startups have to bootstrap at the beginning. While early-stage startups may rely heavily on funding from angel investors, this type of investor is new to the scene and has not had much impact in the community to date

Talent and entrepreneurship skills: Most qualified and talented entrepreneurs are foreign-educated, often in Western countries. These entrepreneurs are usually Vietnamese who have returned to their home country to establish a business. However, those who stay in Vietnam are often not given enough quality training in business, making it more difficult for them to start and run a successful company

While local startups create very good technologies, there is a lack of skills in business and entrepreneurship. Although Vietnam is in the top three in Southeast Asia in terms of number of startups, not many of these enterprises are equipped with the necessary skills to develop a sustainable business model, or to pitch for projects. As a result, many local startups have limited opportunities to connect with the regional ecosystem.

Fragmented ecosystem: Despite increasing support from the Government, the ecosystem still operates in a silo. To increase efficiency, there needs to be more cooperation among different stakeholders, broader institutional capacity building, and support from the Government in terms of incentives, access to financial resources and simplified Government administration

R&D capabilities: Significant improvement is needed in the current science, technology and innovation capabilities of Vietnam. The national innovation system is in a nascent, fragmented state, and R&D is still a peripheral activity both in business and the public sector. Stronger innovation capabilities are essential for enterprises to better position themselves, and the Government needs to invest more and support the development of advanced technological capabilities, including R&D.

ntellectual Property (IP) issues: The country also needs to enhance its legal framework around protecting IP. Vietnam is a member of the World Trade Organization and World Intellectual Property Organization, and the country’s IP legislation covers most aspects of IP protection required by the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement).

However, Vietnam needs to strictly enforce the provisions of these agreements, and the Government should do more to raise awareness of the importance of IP issues to Vietnamese startups. Vietnam has been on the ‘IP’ Watch List in the United States Trade Representative’s Special 301 Report for over a decade, and remains so in 2018.

 

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