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Viewing cable 08HANOI288, VIETNAM'S RAPID INTERNET AND IT GROWTH (C-AL8-00160)

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Reference ID Created Released Classification Origin
08HANOI288 2008-03-12 10:51 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Hanoi
VZCZCXRO2524
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHHI #0288/01 0721051
ZNR UUUUU ZZH
R 121051Z MAR 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 7385
INFO RUEHHM/AMCONSUL HO CHI MINH 4429
RUCNASE/ASEAN MEMBER COLLECTIVE
UNCLAS SECTION 01 OF 03 HANOI 000288 
 
SIPDIS 
 
STATE FOR EAP/MLS, DRL/AWH AND EEB/CIP 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECPS PINR EINT TINT ECON TSPL PGOV PHUM PREL SOCI
VM 
SUBJECT: VIETNAM'S RAPID INTERNET AND IT GROWTH (C-AL8-00160) 
 
REFS: A) STATE 12361; B) 07 HANOI 1749; C) 07 HANOI 2085 D) HO CHI 
MINH CITY 235 
 
HANOI 00000288  001.2 OF 003 
 
 
1. (SBU) Summary: The Internet is a growing source of news, 
entertainment, communication and political expression in Vietnam. 
Internet usage has grown at a rate of 36 percent per year over the 
past ten years, resulting in nearly 19 million Internet users in 
Vietnam today - roughly 22 percent of Vietnam's population.  The 
government has prioritized development of the Internet and 
information and communication technology (ICT) sectors, issuing a 
series of strategic targets in these fields aimed at achieving its 
economic and social development goals.  The growth and 
liberalization of Vietnam's ICT sector has changed the market 
dynamics - causing former monopoly Vietnam Posts and 
Telecommunications Group (VNPT) to reform and creating new 
opportunities for foreign firms.  Although the Internet and ICT 
sectors in Vietnam have a bright future, they will fail to meet 
their full growth potential until Vietnam addresses its lack of IT 
education and human resource skills, and until the GVN loosens its 
restrictions on Internet use and content.  End summary. 
 
PLUGGING IN 
----------- 
 
2. (SBU) Vietnamese are turning increasingly to the Internet as a 
source of news, entertainment, communication and political 
expression (Ref. D).  Since connecting to the global computer 
network in 1997, the number of Internet users in Vietnam has shot up 
an average of 36 percent per year.  According to the Ministry of 
Information and Communications' (MIC) Vietnam Internet Network 
Information Center (VNNIC), by the end of January 2008 more than 5.3 
million Vietnamese actively subscribed through one of 18 licensed 
Internet service providers (ISPs) - most of which are state-owned. 
Of the 5.3 million subscribers, 1.3 million connect via broadband. 
Those Vietnamese who are unable to afford their own computer or 
Internet subscription turn to the seemingly ubiquitous Internet 
cafes in large towns and cities to satisfy their digital thirsts. 
In total, MIC calculates that there are 18.9 million Internet users 
here, which equates to 22 percent of Vietnam's population. 
 
GVN WORKING TO KEEP UP WITH DEMAND... 
------------------------------------- 
 
3. (U) The GVN is working to stay in step with technological 
developments to ensure adequate infrastructure and services are 
available to meet the population's growing demands for connectivity. 
 VNNIC statistics show that Vietnam's international connection 
bandwidth nearly doubled between January 2007 and January 2008. 
Domestic connection bandwidth has likewise grown significantly over 
that time period.  MIC, the government's lead agency for the 
information technology and telecom sectors, continues to develop 
policies and regulations to support further growth in these areas. 
The GVN has also keyed in on the ICT sector as a growth industry 
(Ref. B), seeking both to develop the domestic industry and to 
attract technology and know-how from overseas. 
 
4. (U) In October 2005, then Prime Minister Phan Van Kai approved a 
national strategy on "Vietnam's Information and Communication 
Development until 2010 and Orientations Toward 2020."  The GVN later 
followed this with a second regulation providing more concrete and 
specific targets for the Internet and telecom sectors.  Some key 
targets for 2010 included in these strategies are: 
 
-- To provide modern telecom and Internet services at prices equal 
to or below regional (ASEAN) levels. 
 
-- To reach teledensity rates of 32-42 telephones per 100 people. 
(Note: MIC reports a teledensity rate of 55.2 per 100 people as of 
December 2007.  End note.) 
 
-- To reach Internet subscription rates of 8-12 per 100 people, of 
which 30 percent are broadband subscriptions; Internet users should 
account for 25-35 percent of the population.  (Note: VNNIC's 2007 
statistics equate to roughly 6.1 subscribers per 100 people, of 
which 25 percent are broadband subscribers, while Internet users 
accounted for 22 percent of the population.  End note.) 
 
-- To provide 100% of communes with public telephone access and 70% 
of communes with public Internet access points. 
 
-- To ensure that all ministries, branches, state administrative 
agencies and provincial and district-level administrations shall be 
connected via broadband Internet and the GVN's wide-area network. 
 
-- To provide broadband access to 100 percent of research 
institutes, universities, colleges, vocational schools and upper 
secondary schools; provide Internet access to more than 90 percent 
of secondary schools and hospitals. 
 
HANOI 00000288  002.2 OF 003 
 
 
 
-- For the information and communication technology (ICT) industry 
to reach 20 percent annual growth rates with total revenues reaching 
USD 15 billion.  The telecom and Internet sectors are targeted to 
reach USD 3.5 billion in revenues. 
 
...AND MEET ITS DEVELOPMENT TARGETS 
----------------------------------- 
 
5. (U) The GVN considers development of the ICT sector as 
strategically important to reach its economic and social development 
goals, including meeting the criteria of a middle-income country by 
2010 and of an industrialized country by 2020.  Article 1.1 of 
Vietnam's ICT Development Strategy states that information and 
communication technologies are, "the first and foremost important 
instrument for achieving the Millennium Goals, forming an 
information society and shortening the national industrialization 
and modernization processes." 
 
6. (U) Vietnam has undertaken a series of actions to meet its ICT 
development goals.  As reported in reftel C, Hanoi recently awarded 
a USD 20 million contract to state-owned Vietnam Posts and 
Telecommunications Group (VNPT) to build a high speed data 
transmission network to connect GVN and Communist Party offices 
nationwide .  On February 25, VNPT announced plans for a significant 
investment of USD one billion in 2008 to develop its broadband 
network, hoping to attract 1.5 million new broadband subscribers by 
the end of the year.  Separately, USAID has partnered with U.S. 
firms such as Intel and Vietnamese telecom firms to implement trials 
of advanced wireless broadband technology, bringing telecom and 
broadband services to underserved, remote areas of Vietnam.  In late 
2007, Prime Minister Nguyen Tan Dung also approved plans for the GVN 
to issue trial WiMAX licenses to begin the expansion of wireless 
infrastructure throughout Vietnam; seen as a way to overcome 
geographic challenges to connect Vietnam's rural communities. 
Weather permitting, Vietnam is expected to launch its first 
satellite, known as VINASAT-1 (built by Lockheed-Martin), on April 
10, 2008, which will also expand high-speed Internet capabilities 
here. 
 
VNPT - REFORMING A DOMESTIC GIANT 
--------------------------------- 
 
8. (SBU) Competition in Vietnam is growing among ISPs, value-added 
service providers and other IT companies, although former monopoly 
VNPT and its subsidiaries continue to occupy the dominant market 
position in most telecom and Internet categories.  During a recent 
meeting, VNPT Chairman Pham Long Tran described his organization's 
reform efforts to become more competitive domestically.  Tran 
explained that VNPT has over 90,000 employees and more than 100 
subsidiaries in diverse markets such as Internet services, post and 
telecom services, newspapers, tourism, construction, and health 
care.  He said that VNPT has submitted proposals to MIC to 
streamline and reform its operations to better compete with growing 
domestic and foreign competition.  One of the key proposals is to 
separate VNPT's telecom and Internet operations from its other lines 
of business. 
 
9. (U) Additionally, VNPT is seeking to "equitize" (the Vietnamese 
term for transforming 100 percent State-owned enterprises into joint 
stock or limited liability companies through the sale of shares) 
some of its subsidiaries.  Tran said that the entire VNPT Group will 
eventually be equitized and listed on international stock exchanges, 
although he provided no firm date.  Tran recently reported to local 
media that VNPT has asked its subsidiaries Vietnam Data 
Communication Company (VDC) and the Vietnam Software and Media 
Company (VASC) to submit plans for equitization this year. 
 
GROWING DOMESTIC AND INTERNATIONAL COMPETITION 
--------------------------------------------- - 
 
10. (SBU) Tran's concerns over reforming VNPT are likely a result of 
increasing competition from local companies - both state-owned and 
private - and the growing presence of foreign firms.  For example, 
the MIC has issued licenses to a growing number ISPs, including some 
major SOE competitors of VNPT such as Electricity of Vietnam and 
military-owned Viettel Corporation.  While thus far foreign-owned 
companies have largely been limited to providing equipment, 
technology and infrastructure (many of the major U.S. IT firms are 
active here, including Qualcomm, Motorola, Intel and Microsoft, 
among others), Vietnam's market is opening in certain sectors to 
foreign service providers.  VNNIC's Deputy Director Nam Trung told 
EconOff that aside from the United States, Vietnam's largest 
partners in the Internet and IT sectors are companies from Japan, 
Korea, China and Singapore.  Vietnamese news has carried a number of 
recent reports of growing investment by these countries in IT 
equipment production facilities, including several USD one billion 
plus computer manufacturing plants.  This liberalization stands to 
 
HANOI 00000288  003.2 OF 003 
 
 
change the IT market dynamics, and will likely accelerate the growth 
of the IT sector in Vietnam, Trung said. 
 
CHALLENGES FOR VIETNAM 
---------------------- 
 
11. (SBU) The GVN has its challenges cut out as it seeks to support 
further growth of the Internet and ICT sectors.  It is starting from 
a low base point, and is struggling to catch up with other countries 
in the world.  Despite Vietnam's efforts over the past several 
years, recent World Bank Institute, International Telecommunications 
Union (ITU), World Economic Forum and Economist Intelligence Unit 
(EIU) indexes all ranked Vietnam low on their varying scales of ICT 
development or "e-readiness."  For example, Vietnam ranked 126 of 
181 countries in the ITU's Digital Opportunity Index, and fared an 
even lower score of 65 out of 69 countries in the EIU's 2007 
E-Readiness Index.  One of the primary obstacles cited in each of 
these reports is the low level of education and training and lack of 
skilled human resources. 
 
12. (SBU) Another key challenge the GVN faces is balancing growth of 
the Internet while insisting on preserving its monitoring and 
control of Internet content and usage.  The MIC, Ministry of Public 
Security and Ministry of Culture, Sport and Tourism all play a role 
in monitoring and restricting Internet access and content.  Foreign 
ISPs are currently forbidden, and the owners of 
domestically-registered websites, including those operated by 
foreign entities, are required to register their websites and submit 
their content plans to the government for approval.  As reftel D 
indicates, the space for expression via the internet has widened 
recently; however, the government continues to monitor email and 
censor Internet content, maintaining that it must do so to protect 
its citizens from "antisocial and bad elements."  In addition to 
these policies resulting in the arrest and detention of individuals 
for "misuse" of the Internet or "conducting propaganda against the 
State," Vietnam's tight Internet restrictions hamper growth of this 
sector.  A number of foreign companies have told the Embassy that 
they will not create and register a website here in Vietnam due to 
the cumbersome reporting requirements imposed by the government and 
the fear of potential repercussions over website content - pointing 
to the 2007 case of Intellasia, an online news and business 
publication shut down by the GVN for "illegally posting reactionary 
content." 
 
COMMENT 
------- 
 
13. (SBU) With a young, enthusiastic and increasingly tech-savvy 
population, the Internet and IT sectors in Vietnam have a bright 
future.  These areas also present commercial opportunities for U.S. 
firms - both as an export market and as a destination for 
investment.  Vietnam will struggle to reach its full growth 
potential in the Internet and IT sectors, however, until it can 
address the lack of education and IT skills training, and until the 
GVN recognizes that restricting Internet use and content brings with 
it chilling economic effects resulting in significant costs through 
lost revenue and the stifling of the exchange of free ideas and 
innovation via electronic means.  This reality may become more 
evident to the government as it relies on the Internet and modern 
technologies to pursue its economic and social development targets. 
 
MICHALAK