Originally published in The San Francisco Chronicle.

Dot-Com Vietnam

The communist government is nurturing Internet entrepreneurs to catch the wave

Tuesday, March 13, 2001

Ho Chi Minh City, Vietnam — The steel railings and concrete walls of the Saigon Software Park give Truong Dinh Street, an avenue lined with trees and airy French colonial villas, an institutional look.

But the scene at Realtimedia on the fourth floor of this monolithic office building is anything but institutional.

Tran Van Tuan, the new firm’s 29-year-old owner, puffs on a cigarette while listening to heavy metal music. Nearby, a dozen computer programmers sip coffee while creating Web sites and software programs for clients in Vietnam, California, Ireland, Denmark and elsewhere.

“We work with the Internet because we love it,” said Tran. “And we have a flexible work environment.”

Fortunately for Tran, Vietnam’s communist government has finally embraced the Internet. When the Web first surfaced in Vietnam three years ago, many party cadres worried it would threaten their ability to control public information and protect national security. Police closed down Internet cafes and carted off computers.

But now the state envisions high technology as an economic boon that will create employment, and it is willing to give young entrepreneurs like Tran a chance to nurture dreams of Silicon Valley-style fortunes.

Last July, the government inaugurated its $1.8 million Saigon Software Park building with 25 high-tech companies. In December, officials announced several measures to encourage software development, including tax breaks and the introduction of e-commerce and wireless application protocol (WAP), which permits Internet connection without a computer.

In January, the state announced the “Ho Chi Minh Road of the 21st Century” program, which aims to have 1.6 million Internet users online by 2005. Currently, there are only 113,000 users in a nation of 78 million inhabitants, according to the General Department of Posts and Telecommunications.

INTERNET CAFES BOOMING

But Internet cafes are booming and Vo Viet Thanh, the mayor of Ho Chi Minh City, just finished another high-tech park with 30 companies called Quang Trung Software City. The complex will also include restaurants and nearby dormitories for workers.

Some observers say the key to the formation of these start-ups is the “enterprise law” introduced last year that makes it easier to obtain a business license. As a result, 12,000 new companies have been created.

“Red tape was really choking private enterprise here,” said Frederick Burke, a lawyer for the international law firm Baker & McKenzie who has an office in Ho Chi Minh City. “The enterprise law helped stimulate new businesses that don’t require much capital, like Internet cafes.”

A trade pact signed by former President Bill Clinton in November has aided Vietnam’s fledgling high-tech industry. U.S. companies such as Oracle Corp. and San Francisco’s MeetChina.com have formed partnerships with local companies. MeetChina.com and FTP, the Vietnamese Internet service provider, are creating Vietnam’s second business-to-business Web site. Mekong Sources launched the nation’s first B2B online site during Clinton’s visit.

NOTORIOUS SECURITY PROGRAM

To be sure, the government has not loosened many rigid business regulations that dampen growth, and censorship exists on Web links Hanoi finds objectionable, such as pornography and anti-government sites created by Vietnamese abroad. The Internet is monitored by a notoriously slow security program, or “firewall,” that can cause some computers to crash.

Moreover, Internet access is offered by just four licensed providers — the leader is the state-owned Vietnam Data Communication Company — that charge exorbitant prices. Foreign software firms, for example, pay about $2,500 a month for an Internet connection.

And with only nine computers for every 1,000 Vietnamese and few telephone lines countrywide, Vietnam is limited by its poor infrastructure.

Yet Ho Chi Minh City is fast becoming a popular spot for foreign firms that want to contract out such operations as software programming, Web site development and graphic design.

‘EMBRACING THE WEB’

“There is an embracing of the Web that wasn’t here five years ago,” said David Appleton, who employs a staff of 30 at his Silk Road Systems, a software company he launched two years ago.

Other foreign-owned companies have followed a similar path. “I see the potential of this place,” said Steve Paris, general director of Sutrix Media, an Internet and software development firm with offices in Switzerland and Singapore. “When I first came to Vietnam I saw the technical aptitude of the Vietnamese and their enthusiasm.”

Local entrepreneurs like Tran are excited about the announcement that Saigon Software Park will soon be given a direct satellite connection. If that happens, it would be the first step in relaxing control over the Internet and the first Vietnamese operation to have such access.

Tran studied law but chose to pursue his childhood computer hobby instead. Seed money came from friends since it was nearly impossible to get a government loan, he said. In 1998, he even tried to open an Internet cafe.

“I applied once and they told me to wait. I waited forever,” he said.

Tran, who has about 50 clients from Vietnam, the United States, Europe and Australia, hopes his company can continue to grow.

“I want a staff of 500,” he said.