Vietnam a crouching tech tiger

On a motorbike, you feel firsthand the dizzying pace of change in Vietnam. Traffic is Pandemonium, flowing organically, and stop lights are few.

Zipping through packed city streets, you spot countless electronics stores and Internet cafes. You pass uniformed kids bicycling from school, food vendors pushing carts and cyclo-drivers touting tours.

But you must slow to give the right of way to cars, which increasingly choke roadways and lungs. Traffic and pollution have worsened since Vietnam joined the World Trade Organization in January, which made cars and motorcycles easier to import and buy.

Like much of the developing world, Vietnam is caught between one era of pushcarts and foot-pedals, and a generation growing accustomed to SUVs and mobile phones. As the one-party, communist state embraces capitalism and foreign trade, Vietnam's gross domestic product growth is poised to hit 8.5 percent this year--the fastest in Asia, next to China. Although progress since the doi moi free-market reforms in 1986 came in fits and starts, growth has exceeded 7 percent annually for the past decade.

Vietnam has come a long way since the "American War" more than three decades ago, when it was among the poorest nations in the world. Most Vietnamese were born after the former North and South Vietnam merged, with more than two-thirds of the population younger than 30, and half under 25.

Vietnam's 17 million Internet users make up 20 percent of its population, and surveys show more young people using the Internet than even tech-savvy India. Literacy is a strong 94 percent.

The following are glimpses at country's technology sectors that in most cases, like the crouching tiger, are readying to pounce.

Busy blogosphere
Vietnam is now home to 3 million blogs, most of which are personal journals. Young adults blog not only to express teen angst, gossip, date and plan parties, but to collaborate on projects to help poor people.

Yahoo 360 is the favorite platform. To expand its brand's dominance in Vietnam, Yahoo opened Internet cafes last month in Hanoi and Ho Chi Minh City.

The blog of teen actress Hoang Thuy Linh, 19, went dark last month after a mobile phone video appeared on YouTube of her apparently having sex with her boyfriend. The event, being called Vietnam's "Paris Hilton moment," led to the cancellation of her sitcom. Four college students allegedly responsible for posting the footage were arrested and charged with the crime of disseminating sexually explicit material. The scandal sparked a mix of outrage and shrugs in the blogosphere. Vietnamese newspapers were slow to pick up the story.

Headlines proclaiming a blog war between a singer and a journalist triggered state officials to announce plans to monitor blogs. Star Phuong Thanh threatened to sue writer Huong Tra with libel for describing her performance unfavorably. Blogger Tra uses taboo words such as "penis," and reportedly attracts a million readers each month.

Yet Prime Minister Nguyen Tan Dung seemed to invite transparency by holding an online public chat in August that attracted more than a million people. Personal thoughts and poems of his also appeared on a public blog--but that, like blogs by other heads of state, turned out to be the work of impersonators.

While many Vietnamese bloggers claim to express themselves freely online, they also hide their blogs from conservative parents and agree that it's only a matter of time before the state steps in.

Writers who criticize Vietnamese culture or government praise blogging as an alternative to state media. Reporters without Borders ranks Vietnam's press freedom as 162nd in the world, eight spots from the bottom. It's not uncommon for reporters to face threats of imprisonment after writing about government corruption.

A sense of censorship
The Vietnamese government blocks pornographic and political Web sites with a firewall. Attempting to search for sensitive subjects in English via search engines from Google, Yahoo and Microsoft, however, this writer didn't run into obvious dead ends. By law, cybercafes must log the identities of customers and the Web sites they visit, but the practice is lax.

The OpenNet Initiative found extensive online censorship, largely limited to sites written in Vietnamese. Many brush off such studies, however, pointing to easily-accessible pornographic sites.

And those who suspect finding seemingly-blocked pages say they can't pinpoint a slow connection or government filter as the culprit.

However, the state has been known to monitor e-mail. Human rights groups have campaigned for Vietnam to free several Internet dissidents who were imprisoned for e-mailing foreigners about controversial politics and translating pro-democracy Web sites. Under pressure from trading partners, within the past year the Vietnamese government has downgraded their sentences.

Video game mania
The state has tried to prevent children from overdosing on online games by setting time limits and demanding that cyber cafes be far from schools. Yet the will of the youth can be seen in scores of cafes packed past dark throughout big cities and small towns.

"People in the older generation will look at it as a time waster, but like everything it's changing, and people will understand that it's just another form of entertainment," said Le Hong Minh, chairman and founder of VinaGame, the nation's largest online gaming company. VinaGame is a start-up success story, having grown to three offices and a staff of 800 from a handful of employees several years ago.

Several weeks' worth of play can cost less than $5, which is cheaper than going to a few movies. (The first big cineplexes opened just two years ago.). Vietnam counts 2 million gamers, who will spend up to $83 million on games by 2010, according to the Vietnam Software Association. Kids use prepaid cards for the massively multiplayer online games. Popular titles include martial arts game Vo Lau and Super Dancer Online.

Growing up in the 1980s, Minh spent most of his free time playing games. He foresees Vietnam becoming the top Internet market in Southeast Asia. First, however, Web companies must figure out how to make money in a market where only one percent of consumers own credit cards.

Web commerce
To that end, IDG Ventures Vietnam has earmarked $100 million to help Web and software start-ups ripen. The first IT-focused venture capital fund in Vietnam, it has backed a dozen homegrown companies including VinaGame and equivalents to eBay, PayPal and YouTube.

"The entrepreneurial spirit in Vietnam is incredible," said Rachan Reddy, general partner of IDG Ventures Vietnam. "It's an intrinsic property here. The big names like Yahoo and Google are all here. A lot are choosing to buy rather than build, and it's a testament to the level of talent in Vietnam."

While bright entrepreneurs are emerging and most university graduates study science-related fields, business leaders complain that the search for COOs and CTOs for start-ups is still challenging, while bureaucratic red tape remains.

Programmers wish the government would invest more in information technology education. More English classes would also help, as the two competing Vietnamese-language keyboards can make coding difficult. On top of that, Microsoft introduced a third keyboard layout.

Web 3.0, on the go
Web-based services such as those supported by IDG boast growing numbers of users, but few in Vietnam are hip to the term Web 2.0.

"Here, it's Web 3.0," said Kevin Miller, an American expatriate who teaches English and started the Saigon Linux User Group. In other words, think mobile. Mobile penetration is 19 percent but there are 800,000 new users every month, according to the Asia Pacific Research Group.

The names of Nokia, Samsung and other big brands flash from storefront shops in seemingly underdeveloped rural provinces. You can buy an 8GB, unlocked iPhone for about $700 in some shops, or directly from people toting models from the United States.

Teenagers like to switch phone models monthly, and it's not uncommon for professionals to own two mobile phones. Vietnam residents personalize their handsets with jewelry and custom ringtones, and play pop songs out loud from built-in MP3 players. Some people craft paper cell phones to burn on altars as offerings to ancestors.

Infrastructure lacking
Wi-Fi cafes are ubiquitous in even the most remote of regions in Vietnam. That says a lot, considering the Internet first reached Vietnam only 10 years ago. But narrow bandwidth remains more than a speed bump for Web-based services. Access even in big cities often isn't speedy enough to upload videos and photo albums comfortably.

News reports circulated last spring that fishermen stole Vietnam's underwater fiber-optic cables, dramatically dragging Internet traffic.

However, some Web surfers--who experienced service hiccups only after the announcement came out--believed the government made up the story to mask upgrades to infrastructure or content firewalls. Traffic runs through a single port in Hanoi.

The state plans to spend more than $6 billion to increase Internet penetration. Efforts to leapfrog over the limitations of wired access include tests of high-speed WiMax service in Saigon and Hanoi next month, following a successful run in the isolated Lao Cai province.

Piracy rampant
But even if Vietnam broadens bandwidth, it will need to rein in rampant piracy if it's to gain support from the software industry. At least 90 percent of software copies in Vietnam are bootlegged.

On any big city block, you don't have to walk far to find Adobe Photoshop or Microsoft Office for a few dollars a disc. There are neighborhoods packed with shops and stands hawking pirated software, music and Hollywood movies not yet in American theaters. Fines for using bootleg software run up to $6,000 per copy, but are rarely enforced.

When Microsoft CEO Steve Ballmer visited Vietnam in May, the Vietnamese government pledged to run only licensed software. Last week, however, the Communist Party opted for free, open-source OpenOffice applications instead of Microsoft Office. Kevin Miller hopes his Saigon Linux User Group might further help open-source technology take root.

"If you switch to Linux, don't tell them," said Miller with a smile. "They won't be able to tell."

Electronics stores sell new laptops without Windows Vista for a discount of around $300. Given that Microsoft Office might cost more than someone's monthly income, expecting the majority of Vietnamese people to pay for bona fide licenses is an uphill battle.

Still, the Business Software Alliance reports that piracy declined by 2 percent in Vietnam in the past year. And Vietnam's homegrown software industry is expanding by about 40 percent each year.

Outsourcing hotbed
A vibrant workforce and low wages are luring many foreign corporations. Recruitment agency Harvey Nash predicts that within five years Vietnam will provide more outsourcing than both China and India.

Intel is spending $1 billion on its largest semiconductor factory on the outskirts of Saigon. Taiwanese components maker Foxcon is investing $1 billion in a manufacturing plant. Hon Hai, which assembles iPods, will pour $5 billion into its Vietnamese facilities within five years. Also made in Vietnam are gadgets from Japan's Sony, Toshiba and Fujitsu, as well as laser printers for Canon and HP.

Vietnam offers the world's highest potential returns for manufacturing companies, according to a PricewaterhouseCoopers study. Exports have jumped over the last decade from about $1 billion in the mid-1990s to close to $10 billion in 2006, according to the U.S. Census Bureau.

Standard & Poor's 500 ranks Vietnam's young stock market as the 24th fastest-growing in the world, just behind Norway and ahead of Austria. The Ho Chi Minh Index has risen by 43 percent in five years.

The economy's rising tide isn't lifting all as it shifts away from a focus on agriculture to manufacturing and information services. A middle class city dweller might make $10 a day, and the average salary is just $620 a year.

Although showing off wealth is considered vulgar traditionally, the gap between rich and poor is more visible as the Vietnamese develop an appetite for brands like BMW and Burberry.

Still, the poverty rate dropped to 18 percent last year, down from 58 percent in 1993 and beating United Nations goals. The Vietnamese government projects that another 2 percent of citizens will escape poverty by the end of the year.

Oceans, pollution levels rising
The majority of Vietnamese people live modest lifestyles with an ecological impact far gentler than American standards. But as incomes rise in Vietnam and more can afford glossy gadgets and cars, questions of sustainability loom.

Vietnam is among 10 nations most threatened by rising oceans caused by climate change, according to the Worldwatch Institute.

Vietnam has ratified the Kyoto Protocol, but its clean technology market remains fledgling, and ecological concerns aren't quite chic. For example, some Vietnamese teens favor electric bicycles--not out of a desire to pollute less, but because they aren't allowed to drive motorbikes to school.

Electricity now lights up in rural regions that relied on kerosene and were flattened by bombs a generation ago; demand is expected to double by 2010. A pioneering wind power plant is being built outside of Hanoi, but the government is investing more aggressively to expand polluting coal-fired power plants. The first nuclear power plant is targeted for 2020.

Although state leaders are making efforts to clean up natural resources and punish industrial polluters, the need for clean water and air remains pressing. Waterways in Ho Chi Minh City look less muddy than several years ago, but hundreds of tons of garbage are still dumped daily into canals.

There are three million motorcycles in Vietnam, up from a paltry few a decade ago. Add to that half a million cars, just the start of the coming auto boom. Environmental experts blame low-quality fuel for a spike in air pollution, higher than safe levels set by the World Health Organization.

Just jump on a motorbike; the thick exhaust fumes are an instant taste of the challenges ahead.

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