Software Industry Joining Hands for Mutual Development

The software industry development programme (under decision No 51 ratified by the government) has several parts relating to the Ministry of Posts and Telecom, such as building legal documents, enhancing software industry management competence, aiding investment projects and promoting the software industry. The workload is huge but competent units only have three years left. At the working meeting, the Ministry of Posts and Telecom wanted to work with the participation of concerned enterprises to carry out the programme, for example, building legal documents, especially those related to software VAT collection and tax on IT services. At the same time, the government also allows the use of software value added tax to set up software industry development funds.

 

At the meeting, some strong software enterprises, including Quang Trung Software City, TMA, PSV, Sang Tao, HPT and AZ, put forward suggestions. According to these enterprises, to implement Decision 51 Vietnam has to solve existing shortcomings such as the personal income tax law for direct labourers, while it is difficult to differentiate direct labour from indirect in software enterprises. For software enterprises, software import tax is zero but customs collects taxes on CDs containing the ‘import tax free’ software, so the VAT exemption is no use for software companies. Leaders of the Posts and Telecom Ministry asked software companies to report difficulties with tax collectors to send to the Ministry of Finance for consideration. However, Phi Anh Tuan, AZ Solutions company manager, said tax authorities always give a variety of instructions on taxes and enterprises only know to obey. Therefore, the Ministry of Posts and Telecom should have an updated information channel on preferential regimes and policies for software companies.

 

The meeting between the ministry and software companies demonstrated reforms, in Ministry of Post and Telecom’s obedience to the tasks assigned by the Prime Minister. The ministry also proposed tasks to carry out Decision 15 and gathered ideas from software companies at the meeting. Software enterprises believe that the works are achievable, but have to wait the meeting’s result. That is when Deputy Minister Nguyen Minh Hong promised to release instructions for article 71 (issued on May 03, 2007 to implement laws on information technology), that will clearly define who are direct labours in software production, or enterprises ensuring sales or expanding production can ask the Ministry of Posts and Telecom for assistance. Based on the committed enterprises’ proposals, the Ministry will consider and assist in WTO commitments and state policies. Besides, the Ministry of Post and Telecom also came to an agreement on different criteria for software enterprise classification.

 

According to Mr Nguyen Trong Duong of the Information Technology Department under the Ministry of Posts and Telecom, Vietnam’s software revenue in 2006 reached US$350 million, in which the domestic market accounted for US$240 million and exports contributed US$110 million. In 2006 software grew 41 per cent, in which the outsourcing industry rose 57 per cent. Vietnam is now home of 150 software outsourcers an with an average workforce of 100-150 employees; some enterprises have 1,000 workers or more. The Department of IT Industry plans to focus on software outsourcing and services. However, to fulfil the target, Vietnam’s software enterprises have to associate to form the same industry enterprise groups to share big contract. Besides, software companies need to actively work with each other and not pursue cheap services, or abuse the market, develop small-medium business and found venture investment fund to invest in software companies.

 

A typical company that makes full use of market demand is NCS Company. The company took part early in business process outsourcing (BPO) services. “BPO transfers part of a repeated process in an organisation to outside providers in order to reduce expenditures and enhance service quality,” explained Dao Xuan Anh, managing director of NCS. At present, NCS specialises in processing goods for Japanese customers. The company is performing an application map data import project that enables car riders to drive safely on the road. Some successful software exporting process enterprises such as TMA, FCG and Sang Tao also shared the following experience: inviting experienced overseas Vietnamese experts to cooperate, making an impression from the first contract, concentrating on the Japanese market and successful Japanese language training.

 

Several main targets in Decision No 51 for the software industry until 2010 include average annual growth of 35-40 per cent, and software and software service revenue over US$800 million a year, including 40 per cent from export sales. The software industry workforce is around 55-60,000 people, each annually generating US$15,000 on average. 10 software firms will have more than 1,000 workers, 200 companies have more than 100 workers, and the software industry, particularly software outsourcing services, will make Vietnam one of the world’s most attractive destinations for foreign software investors. Total expenditure for software industry development is US$70 million; 30 per cent from the central budget, 30 per cent from local budgets, and 40 per cent from businesses, organisations, ODA capital and other sources.