In Asia, three trends are driving digitalisation: mobile commerce, business intelligence and smart infrastructures. These will have a significant short- to midterm impact on companies and customers, and ways of doing business. See how digital transformation is shaping the future business landscape in Singapore, Vietnam and Philippines. Areas covered: Fintech: New lending models, mobile payments, blockchain.

1. DIGITAL ASIA:
ASEAN IN ASCENDENCE

2. Contact information
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Ross O’Brien, Principal ITC analyst and Managing Director
Intercedent Asia
9a Hilltop Plaza 49 Hollywood Road
Central, Hong Kong
ross@intercedent-asia.com @obrienross
Founded in 1992, Intercedent Asia provides research based consulting for market
entry and market development strategy in the Asia Pacific region, including demand management,
strategic market assessment, competitive intelligence, partner selection, site selection, and strategic
planning assistance. Intercedent Asia has offices in Singapore, Beijing, Hong Kong and Sydney.
Tekes – the Finnish Funding Agency for Innovation
Tekes is the main public funding organisation for research, development and innovation in Finland.
Tekes funds wide-ranging innovation activities in research communities, industry and service sectors
and especially promotes cooperative and risk-intensive projects. Tekes’ current strategy puts strong
emphasis on growth seeking SMEs.

3. 2
Executive
summary
Digital communications, Internet applications and technologies have long been
essential to economic and social development across Asia, and have been fostered
by their governments in two unique ways:
 By tightly coordination activity between regulators, telecom network operators
and technology manufacturers.
 By benchmarking the progress of other leading digital economies.
Singapore seeks to stay ahead of the digital economic curve, by investing in leading-
edge technologies and applications to increase their national competitiveness in
global industries. Singapore is definitely ASEAN’s digital leader. The Philippines
and Vietnam are digital leapfroggers. Both suffer from infrastructure deficits, so
digital technology deployment is focused mobile commerce, data analytics or ‘shared
economy’ applications to sidestep infrastructure hurdles.
Financial technologies—particularly around new lending models, mobile payments
and blockchain—generates significant attention and investment in the three South-
east Asian countries surveyed in this report. Beyond fintech, each of these countries
has other distinct sectors from which digital industries are being built:
 Singapore’s government’s well-managed and comprehensive civil
bureacracy has been a catalyst for smart city and transportation
technologies and applications,
 The Philippines has an incredibly vibrant IT-enabled Business Process and
Knowledge Process Outsourcing (BPO & KPO) industry, which dovetails with
a healthcare competency, in turn generating innovation around telemedicine
and ehealth device development.
 Vietnam’s digital economy is centered around manufacturing, but there is an
increasing amount of innovation and entrepreunerialism around
communications and security applications development.
The ASEAN Economic Community (AEC) will likely create some digital infrastructure
initiatives at a cross-governmental level, but progress will be slow. More important for
regional digital development will be two other factors: rapid expansion of South-east
Asia’s venture capital industry (largely headquartered in Singapore) and the
digital knock-on effects of China’s “Belt and Road” transportation infrastructure
investments in the region.
There is strong commitment to build digital capabilities in each of the three ASEAN
countries surveyed in this report. Moreover, each has fast-growing technology
entreprenuer sectors, particularly around Fintech. Those seeking to invest in the
region, or use it as a platform for international expansion, however, should also be
aware of potential limitations in each market:
 Singapore’s government support, in terms of planning, regulation and direct
investment, is strong—perhaps too strong. There is a danger that too much
incubation may smother innovation.
 Vietnam has successfully transformed its export manufacturing sector
through an industrial zone development strategy. Relying on this model is not
as useful for software and applications development. Vietnam’s government
has also created ASEAN’s most restrictive Internet content environment.
 The Philippines, due to its touchy relations with China, will probably not
enjoy much of a “Belt and Road” boost. Its IT development policies are
heavily weighted towards job creation, and this may stunt digital
innovation in an ecosystem which seeks efficiency and process automation.

4. 3
Digital industry
development has
always been a
priority for South-
east Asian
governments
1. Leaders and leapfroggers
Singapore, Vietnam and the Philippines, and their
paths to digital transformation
1.1.National Information Infrastructure Initiatives
Digital communications, Internet applications and technologies have long been seen
as essential to economic and social development across Asia. (This report will
commonly refer to the sector collectively as ITC—Information Technology and
Communications.) Perhaps more so than in any other emerging market economies,
nearly all governments in Asia have been conscious of the need to invest in
telecommunications infrastructure (particularly, but not exclusively, mobile cellular
networks) in a coordinated fashion since the late 1980s. Moreover Asia (somewhat
late to global liberalisation trends) has steadily deregulated communications markets
over the last 25 years, to allow competitive services to spur more industry
development, and lessen the state’s direct role in voice and data service provision.
This was done to speed up the pace of development, and increase penetration of
communications services in consumer and enterprise markets.
Policy frameworks and precise goal-setting
around ITC—commonly referred to as
National Information Infrastructure Initiatives,
or NIII—guide these efforts. The results have
been tremendous in South-east Asia. In its
2015 report on ASEAN infrastructure
development, the ASEAN Sectretariat and
UNCTAD report that mobile penetration of the
region’s population has grown from 26% in
2005 to over 115% today (Figure 1). 43% of
ASEAN’s population has access to mobile
broadband Internet connectivity, and South-
east Asia’s Internet bandwidth capacity has
grown over 165% in the last 10 years.
UNCTAD reckons that in the Philippines, the
communications sector contributed nearly 5%
of value-add to its GDP (Figure 2).
There are two unique aspects of the ways emerging Asian economies leverage ITC
to sustain and promote growth:
 The first is that, despite attempts to liberalise and deregulate, Asian
government bodies have always closely managed digital industry
development through tight coordination between regulators, telecom network
operators and technology manufacturers. In other words, Asian governments
have never let ITC industries grow through market forces alone. For
decades, governments actively channel state funds to strategic digital
industries, support R&D facilities and direct their state-owned telcos to
purchase from domestic manufacturing facilities.
 The second aspect is the way Asian governments plan for the future of their
digital industries. Most Asian governments devote considerable effort in
understanding ITC trends and industry direction, taking particular heed to
benchmark the progress of other leading digital economies, in North America,
Europe, and across Asia. This,in turn, informs decisions around how foreign
investment is channelled into their economies.

5. 4
Singapore seeks to
be a globally
competitive digital
leader, while The
Philippines and
Vietnam use
digital tools and
processes to
leapfrog
infrastructure
hurdles
Singapore invests in
Fintech to maintain
its position as a
global finance
center
The Philippines and
Vietnam see
Fintech as a tool to
boost financial
inclusion
Singapore’s vision
This manifests itself in South-east Asian
countries in different ways, depending on their
level of economic development. Advanced
economies—primarily Singapore and
Malaysia—seek to stay ahead of the digital
economic curve, by investing in leading-edge
technologies and applications that allow them
to increase their national competitiveness in
global industries. Singapore is definitely
ASEAN’s digital leader. Most of the rest of
South-east Asia is poorer, and suffers from
critical infrastructure deficits, despite well-
coordinated NIIIs. For such countries, digital
technology deployment is focused on such
solutions as mobile commerce, data analytics
or ‘shared economy’ applications to sidestep
infrastructure hurdles, or speed the pace of
economic development. The Philippines and
Vietnam fall into this second category: digital leapfroggers.
1.2.Digital leverage: transforming economies, stepping up competitiveness—and
stepping over hurdles
Financial technologies—particularly around new lending models, mobile payments
and blockchain—are a digital sector that generates significant attention and
investment in the three South-east Asian countries surveyed in this report. Singapore
has the region’s most developed financial infrasture, and the government intends to
use digital technology to maintain its position as a globally competitive finance hub.
Ensuring Singapore’s Fintech sector is also world class is regarded as a key part of
maintaining that competitiveness. But Philippines and Vietnam have very large
unbanked populations, and their big Fintech opportunities to expand credit and
lending to these sectors, particularly among women and the poor, according to a
2015 report by the Finance and Private Sector Development Team of the World
Banks’ Development Research Group.
Singapore is a major centre for foreign exchange trading, and algorithmic (machine-
to-machine) trading is expanding as well. Crowdfunding (peer-to-peer) lending is also
developing. The government’s central bank, the Monetary Authority of Singapore
(MAS) has indicated that it will only formaly regulate its Fintech sector when it
matures, and participating companies are large enough to impact outcomesin the
wider financial system. Government funding supports a start-up ecosystem, although
there is a fear that government support stifles real risk-taking entrepreunerialism.
Vietnam and the Phillipines each have populations over 90m, and both have
extremely fast-growing middle classes. Yet both countries are horribly underbanked
(only 30% of adults have a bank account and 26.5% a debit card in Vietnam; see
Figure 3). Mobile payments and peer-to-peer transfers have become a vast industry,
as they give underbanked poorer populations tools to borrow and lend that they
desperately need (Figure 4). Remittance businesses are another driver of Fintech
development in both markets: more than 10m Filipino overseas workers who send
more than US$2bn home monthly, largely via smartphones.

6. 5
Domestic
competencies in IT
BPO and healthcare
could turn the
Philippines into an
e-health
innovation hub
Beyond Fintech, the three countries surveyed in this report each has other distinct
sectors from which digital industries are being built:
 Singapore again is the bright spot here, in terms of infrastructure and
organisation. The government’s well-managed and comprehensive civil
bureacracy has been a catalyst for smart city and transportation
technologies and applications, largely defined around the country’s forward-
looking attempt to manage the challenges of its increasing urbanisation.
 The Philippines has an incredibly vibrant IT-enabled Business Process and
Knowledge Process Outsourcing (BPO & KPO) industry, which generated
over US$25bn in annual service exports last year. This industry dovetails
with two other service industry competencies: legal services and healthcare,
the latter in particular has begun to foment innovation and start-ups around
telemedicine and ehealth device development.
 Vietnam’s digital economy has largely been centered around its growth as a
manufacturing center for consumer electronics, microprocessors and other
digital infrastructure. There are an estimated 14,000 ITC-oriented
manufacturing ventures in the country, employing in excess of 200,000
professionals. While many of these ventures are large multinationals or their
subcontractors, there is an increasing amount of innovation and
entrepreunerialism around communications and security applications
development and mobile applications.

7. 6
China’s ‘Belt and
Road’ investments
in ASEAN will play a
significant role in
defining the region’s
digital direction
The AEC will not do
much for South-east
Asia’s digital
agenda
1.3.Regionalization as a digital driver: within ASEAN, and without
December 31 2015 saw the formal launch of the ASEAN Economic Community, an
agreement between the 10 ASEAN member states to create a unified, competitive
production base which is optimally integrated into the global economy. The AEC’s
higher order goals are to promote a single market with equitable economic
development across South-east Asia.
The AEC will likely create some momemtum behind digital infrastructure initiatives at
a cross-governmental level, particularly around security and biometric technologies
used to facilitate faster, safer movement of people and goods within South-east Asia.
However, coordination and implementation to date has been slow, for while most
ASEAN states are broadly aligned with AEC objectives, certain key initiatives, such
as efforts to increase mobility of skilled labour, are still contentious issues amongst
member states.
There will be more effective digital cross-polination in ASEAN at an M&A level.
Singapore’s venture capital community is already quite active in investments in e-
commerce ventures in the region: NSI, a technology-focused division of the
Singapore-based Northstar private equity firm, has nearly a dozen investments in
South-east Asian B2B and B2C ventures, including Singaporean online grocer
Redmart, inventory management software firm Tradegekko and the fast-expanding
Indonesian ride and delivery booking service Go-Jek. Singapore’s government-linked
companies, such as SingTel and Singapore Technologies Telemedia (STT), have
had decades of experience investing in neighboring mobile communications markets.
Earlier this year saw Vietnam’s largest mobile company, the military-owned Viettel,
acquire a license to operate Myanmar’s fourth mobile network, adding to nine other
markets and over 250m customers on its networks globally (including Myanmar,
Viettel has stakes in carriers in Cambodia, Laos and Timor Leste in the region, as
well as Africa, Latin America and the Caribbean).
China’s influence on digital technology industries and innovation in South-east Asia
can be understood through three interconnected trade and investment trends
unfolding:
 China continues to pivot the growth drivers of its economy away from lower-
value export manufacturing and towards domestic consumption. As a result,
China’s fast-growing wages and increasingly serving oriented economy
has seen some of its manufacturing industry migrate to South-east
Asia—and particularly Vietnam.
 China’s “Belt and Road” initative, which is a massive global program of
(primarily) transport infrastructure development, has resulted in more than
US$20bn in high-speed rail and port projects throughout South-east Asia.
 Outbound investment of Chinese digital technology and Internet firms
into ASEAN’s communications and e-commerce markets.
China will, as a result, play a significant role in defining the digital direction of South-
east Asia. High-speed rail infrastructure will likely link to Singapore’s smart city
initiatives, and Chinese investment in e-commerce and Internet businesses will
increasingly leverage Singapore’s role as South-east Asia’s finance hub. Vietnam’s
growing role as an extension of China’s supply chain will see investment from China,
both in terms of port and land transport infrastructure investment, and potentially in
supply chain management and logistics technologies and solutions. The Philippines,
however, will be less of a beneficiary of China’s regional investment, in part due to
geopolitical tensions between the two countries.

8. 7
Government
support of
technology start-ups
in Singapore is
huge—but does it
coddle more than
it encourages?
2. Singapore: the smart nation
Singapore’s nationalist-interventionist approach to
digital innovation will ensure its position as the pivot
point for tech start-ups in ASEAN
2.1.Technology development policy: government priorities
Singapore’s government arguably has Asia’s clearest and most comprehensive
vision for leveraging digital technologies for economic development and regional (if
not global) competitive advantage. The Infocomm Development Authority of
Singapore (iDA) is a unique ITC regulator, in that it also serves as trade and industry
promotion agency as well. As will be discussed, the Monetary Authority of Singapore
(MAS) is also actively promoting development in the Fintech space. There are two
over-arching national initiatives that largely inform the government’s digital
development objectives:
 iN2015, an initiative launched a decade ago to increase the density of
infocomm infrastructure across Singapore,and promote the development of
digital-intensive industries in the country, and
 Smart Nation, a coordinated effort to use digital solutions to manage five
upcoming challenges for the country: increasing urbanisation, its aging
population, healthcare, sustainable power generation, and transport/mobility
management. The initiative has its own programme office, reporting to the
Prime Minister’s office.
The iN2015 programme largely met its goals. A comprehensive ‘next generation’
broadband infrastructure, with an emphasis on cloud computing, has been
developed. Singapore stresses government-sponsored experimentation with new
digital applications and solutions. In December 2015 and January 2016, trials of
driverless transportation were initiated with 6km of public road, reportedly outfitted
with some 1,000 sensors, under the Smart Nation initiative. The Singapore
government boasts some 55,000 (largely technology-oriented) start-ups created over
the decade to 2014, some specifically funded by the iDA’s own venture capital
subsidiary, Infocomm Investments Pte Ltd (IIPL). Last February, IIPL started an
incubator facility called Build Amazing Startups Here (BASH), which has turned into
an ‘accelerator of accelerators’, with an emphasis on hosting initiatives from other
digitally-forward countries. Tenants include the Danish-founded Fintech/IoT
accelerator Startupbootcamp, Amsterdam-based Rockstart (specialising in mobile
app development) and Dubai Silicon Oasis Authority. BASH reports that some 65
ventures assisted in its first year, with a 50% success rate.
Singapore’s government is highly conscious of the need to give technology start-ups
room to breathe, in both a regulatory sense and in its role as a facilitator. MAS, for
instance, has indicated that it will not strictly regulate the Fintech sector until solutions
and applications start to gain critical mass in the country. Yet the government is also
often perceived as micromanaging the sector. The government’s copious promotional
activities, funding and facilities are seen by some in the investment community as
coddling start-ups, rather than accelerating their progress. Moreover, Singapore is
also not always keen to allow digitially-enabled business models to unleash their full
potential: in late 2014, the Land Transport Authority issued regulations significantly
restricting car-booking apps such as Uber and GrabTaxi to use only licensed taxi and
not offer discounts to regulated flag-fall rates.
(Local restrictions has perhaps been a boon to local efforts: Singapore-based
GrabTaxi is now South-east Asia’s largest car-booking service, with over 200,000

9. 8
Singapore puts its
money—billions in
government and
private venture
capital—where its
digital vision is
drivers across the region, a valuation in excess of $1bn and a potential IPO in the
works).
2.2.Technology-intensive industrial sectors and ecosystem
The iDA estimates that the value
of Singapore’s infocomm
industry rose from S$45bn in
2006 to S$167bn in 2014.
Exports still take up nearly 70%
of that total however,
underscoring the country’s
decades-long dependency on
hardware exports, largely in
computer equipment and
peripherials. In fact, Hardware
as a percentage of Singapore’s
industry has shown a marked
increase over the years; iDA
survey data shows that in 2006,
some 46% of industry value was
in software and services, but by
2014 that had dropped to 31%
(Figure 5).
Singapore’s accelerator ecosystem, for all
the concerns about government over-
intervention, leads Asia by a wide margin in
terms of invested capital. The industry
observers Tech in Asia estimate that
Singapore’s accelerators have invested
close to US$7.5bn in some 55 deals
(Figure 6), far above the next largest source
India (which has generated US$5bn
invested in 174 deals). In addition to private
equity funds like NSI and large
government-linked venture capital
organisations like IIPL, the government’s
own sovereign wealth funds GIC and
Temasek are both incredibly active in the
digital investment space.
The Asian Venture Capital Journal reported
in 2013 that Singapore had some US$24bn
in available funding for digitally-oriented early stage firms. There are also many
grants and subsidy programmes for new ventures, such as reimbursement
programmes implemented by International Enterprise Singapore, the country’s
external market promotion agency. Local firms seeking to expand internationally can
receive up to 70% of development expenses (if they working through ‘approved’
incubators) through the Market Access Incubation and Market Readiness Assistance
Programmes.
2.3.Financial technology initiatives and firms
Both the iDA and MAS have made Fintech a particular industry promotion priority. As
mentioned, MAS has been very open about its ‘sandbox’ approach, allowing Fintech
firms to experiment without fear of getting hemmed in by regulatory activity. That
said, neither does MAS want to fall behind in its policy development: in August 2015,
MAS started a FinTech & Innovation Group (FTIG) to ensure financial regulation kept

10. 9
Singapore’s smart
city agenda is
preparing for an
aging, crowded
future
pace with industry development. The FTIG has three pillars which will track
developments in payment technologies, infrastructure-related solutions (such as big
data), and new innovations. MAS also has a correlary Smart Nation programme to
track Fintech industry developments known as ‘Smart Financial Centre’.
There is a groundswell of industry-sponsored activity around Fintech: Singapore’s
largest bank, DBS, recently conducted a bitcoin-centric ‘hackathon’ with
Startupbootcamp; one solution produced focused on virtual ledger solutions for
unbanked consumers in the Philippines. The iDA, which has sponsored a
“code::XtremeApps” hackathon for nearly a decade, is also using its annual event this
year to promote Fintech solutions. However, these events have also come under
criticism in Singapore’s development community, as they often attract more media
attention than coders, and because sponsors have on occasion claimed IPR rights
for solutions developed during the event.
Multiple Fintech start-ups, many with regional (if not global) aspirations, have been
gaining traction in Singapore:
 Mobile commerce and Mobile POS firms: SoftPay Mobile is a Singapore-
based MPOS firm with operations in in Vietnam, Indonesia and Malaysia,
and claims a 300% increase in processing volume since it launched in early
2015, thanks to strong demand among merchants in rural communities.
GoSwiff is another Singapore-based MPOS firm operating across South-
east Asia (particularly in the Philippines), looking into developing tokenisation
technology and payment platforms for mobile operators. Fastacash and
Kashmi blend social media, mobile apps and MPOS capabilities to facilitate
mobile cash transfers. CreateApp is an SME-oriented mobile app
development firm in Singapore which is also developing mobile commerce
capabilities; the company is rapidly expanding its distribution network in
India, Indonesia and other South-east Asian markets.
 Crowdfunding platforms with focus on specific Singaporean market
segments. This include Ethis (Ethical Investments Southeast Asia), a real
estate investment platform, currently focused on Sharia (Islamic financing)-
compliant developments in Indonesia and Malaysia, and Funding Societies,
a “Peer-to-SME” lending platform which allows individual lenders to
contribute to small businesss loans using an escrow account.
 Algorithmic trading and forex trading technology are also areas
attracting entrepreunerial attention. London-based emerging market currency
trading technology firm R5 was given MAS authority to launch in Singapore
earlier this year.
2.4.Smart Cities, Security and IoT
Smart city definition and development in Singapore is coordinated under the
aforementioned Smart Nation initiative. In these efforts, however, the country relies
heavily on its robust urban planning civil infrastructure, particularly the incredibly
successful Housing Development Board (HBD), the nearly 50-year-old public housing
authority in which over three-quarters of Singapore’s population live. The HBD kicked
off a Smart HDB Town Framework in 2014, aimed at leveraging several technologies,
but primarily Big Data Analytics and sensors, to incorporate intelligence into four
‘dimensions’ of Singapore’s public housing environment:
 Planning, incorporating housing and traffic data into programmes to manage
HDB development and incorporate sustainable design and management
elements into construction of housing and related facilities (such as car
parks);
 Environment, including sensor technology to build responsive systems for
climate management;
 Estate, which aims at doing the same for facilities maintenance and public
utility consumption, and

11. 10
Surprisingly,
Singapore’s e-
health priorities
are somewhat
basic, focused on
IT infrastructure
developed and
training
Cyber security is
increasing priority
as Singapore has a
lot of ‘digitally
dependent’
industries at stake
 Living, which is focused on ‘smart home’ for individual resident applications
such as appliance and energy management, and healthcare connectivity
The Singaporean government is making inroads into Internet of Things (IoT)
technology development—and, naturally, invesment—as a key component in its
Smart Nation objectives. In January of this year Irvine, California-based Greenwaves
Systems, which develops mobile connection and management solutions for
machine-to-machine (M2M) communications, received a combined US$60m in
Series C and mezzanine financing from Singapore’s Economic Development Board
and STT. Greenwaves promptly announced the opening of an IoT R&D facility in
Singapore’s Science Park II. The iDA has also been anticipating the operational
challenges that IoT brings to existing digital infrastructure: this January, it announced
a programme to develop an Over-the-Air Subscription Management standard that will
allow for M2M communications which switch between mobile network environments
without the need to switch or add additional SIM cards to IoT devices.
The iDA is supremely concerned about cybersecurity, as it is at the heart of several
key industry sectors. Not only does it affect the country’s strategically important
financial services industry, security impacts its role as a logistics and distribution hub
as well as a thriving data centre colocation industry with around 50 providers
operating over 40 facilities, which will generate an estimated US$1.2bn in revenues
in 2016 by industry analysts Structure Research.
There is a small but specialised business ecosystem around security solutions in
Singapore. Many have military or identity management applications, such as
Biometronic, an Indian biometric identification technology firm managed out of
Singapore. One Singapore-based firm, i-Sprint, which specialises in identity
management solutions, was ranked number 50 in ‘Cybersecurity Ventures’ first
quarter 2016 list of 500 global security firms.
Like many other core segments in Singapore’s digital economy, its Cyber Security
Agency (CSA), established in 2015, reports directly to the Prime Minister’s office.
Deputy Prime Minister Teo Chan also serves as the Coordinating Minister for
National Security. In March this year, it opened a Cyber Forensics Laboratory during
a cross-agency cybersecurity incident exercise, which coordinated and analysed
responses to a cybersecurity event affecting finance, government, power and
communications infrastructure.
2.5.Healthcare
The Smart Nation initiatve has identified healthcare, particularly as it relates to the
needs of Singapore’s aging population. Currently more than 11% of the population is
over 65 years old, and the government forecasts that this will grow to over 25% of the
population—some 900,000 citizens—by 2030. Digital innovation initiatives in
healthcare are also connected to Singapore’s biomedical sciences industry cluster,
which the government has been promoting for well over a decade.
Suprisingly, however, much of the iDA’s digital healthcare efforts are centered on
fairly basic IT training and ‘informationalisation’ of healthcare providers and facilities.
These include a GP IT Enablement Programme, and a Health IT Professional
Development initiative. While basic, Singapore feels this is a necessary remedial
effort to raise the usage of digital solutions in the sector in order to then take
advantage of longer-term innovations. Such forward-looking areas include:
 Integrated Clinic Management System (CMS) Programme, an ongoing
effort to create a single repository for medial records, established in 2006,

12. 11
and managed by the Singapore-based e-government solutions provider
CrimsonLogic;
 Healthcare Innovation Program, an iDA-sponsored incubation effort
established in collaboration with Motorola Solutions (acquired by US-based
Zebra in 2014), largely focused on mobile devices and applications in patient
care and facilities management

13. 12
Vietnam is
redeploying a
successful
manufacturing
industry park
strategy to boost IT
solutions and
software
development—but
will it work?
3. Vietnam: China +1…and then some
Vietnam’s fast-growing manufacturing export sector
has created wealth and opportunity, and with it
investment in digital innovations
3
3.1.Technology development policy: government priorities
As discussed in Chapter 1, much of Vietnam’s digital economy development policy
has focused on its rapidly-expanding export manufacturing sector, rather than
services and applications. Vietnam is, in a sense, the most ‘China-like’ of ASEAN
countries—a centrally-planned economy guided by a communist government which
uses global trade to accelerate its industrialisation. The country has the world’s
fastest export growth after China itself. Vietnam exported US$2.5bn a month in 2004,
and over US$14bn monthly in 2015. And, similar to China, Vietnam’s role as a
manufacturing giant has quickly evolved. No longer just a producer of labour-
intensive clothing and accessories, Vietnam is a major supply node for global digital
components and consumer electronics firms.
China provides not only a template for Vietnam’s manufacturing aspirations, it drives
them. China’s manufacturing is its shedding lower-value, labour-intensive production,
and Vietnam (among others) has thus become an extension of China’s supply chain,
taking components from China and assembling finished products with cheaper
labour. Chinese exports to Vietnam are now 35% of Vietnam’s exports. In other
words, China is not handing over production to Vietnam so much as the supply chain
of these two countries have become intertwined.
Much of Vietnam’s increasingly electronics-oriented manufacturing is produced in
clusters of industrial parks, where producers enjoy tax breaks, investment incentives
and preferred access to logistics facilities. As of mid-2015, there were 212 such parks
across the country, which generated over US$110bn in revenue last year, according
to the Ministry of Planning and Investment. Vietnam’s Ministry of Information and
Communications (MIC) is looking to emulating this success: a decree in November
2013 (No. 154/2013/ND-CP) established provisions for the development of IT and
software parks with a similarly attractive set of tax breaks (capped at 10% over 30
years of operations).
Yet few have emerged. Quang Trung Software City (QTSC) in Ho Chi Minh City, is
reasonably successful, and last year the Hanoi People’s Committee has earmarked
over US$43bn for a software park with local software developer Hanel as an anchor
tenant. However, colocating multiple software firms does not produce the same
synergies as it does for manufacturing firms. The MIC may need to update its
development and promotional strategies.
Vietnam consumers enjoy extremely high mobile Internet penetration, and are
voracious consumers of social media and online content (see 3.2, below). This
broadly is in line with the objectives of the government’s digital master plan. That
said, Vietnam’s government has a complicated and contradictory relationship with the
Internet. The government routinely cracks down on bloggers (a 2014 decree
criminalising online content critical of the government), and politically motivated
cyberattacks are frequent. The advocacy organisation Freedom House gives Vietnam
an Internet freedom score of 76 (100 being the worst score), lowest in South-east
Asia and second-worst in Asia after China. The government also seeks to restrict
non-political Internet activity: this January decree 124/2015/ND-CP imposes stiff fines

14. 13
High Internet and
smartphone
penetration coupled
with low banking
rates creates a
perfect Fintech
storm in Vietnam
for e-commerce and mobile commerce retailers who fail to register with the Ministry
of Industry and Trade, in an attempt to clamp down on Vietnam’s informal digital retail
sector.
3.2.Technology-intensive industrial sectors
Vietnam is ranked 12
th
globally for electronics manufacturing. Two of the world’s
leading smartphone manufacturers, Korea’s Samsung and LG, each have a
collection of factories in Vietnam; their estimated investments in these facilities is
more than US$5bn and US$1bn respectively. Intel has also invested over US$1bn, in
its largest semiconductor testing centre outside of the US. Each of these giants has
pulled an increasing number of sub-contractors and parellel process manufacturers
into their Vietnamese orbit.
The software and IT outsourcing industry is a slightly different story. The numbers are
impressive: there are an estimated 3,000 companies employing over 200,000 people
(Figure 7), and the Vietnam Software Association (VINASA) estimates the sector’s
revenue have grown 10% annually over the last decade, to US$3bn in 2015, While is
is decent, it is not on par with Vietnam’s manufacturing industry successs. The
government has recently been encouraging software sector participants to expand
faster.
Telecom services in
Vietnam are a particular
success story. UNCTAD
estimates that, Vietnam
has 1.5 subscriptions for
every citizen, the highest
mobile service penetration
in ASEAN. Vietnam also
has South-east Asia’s
highest broadband
penetration levels after
‘rich ASEAN’ (Singapore,
Malaysia and Brunei), and
the highest smartphones
penetration in emerging
ASEAN. 16% of the
country is between the
ages of 15 and 25—and,
according to consultancy
Moore Corporation, over
95% of them are online.
91% of Vietnamese access video content over the Internet, the highest in ASEAN.
Use of international Internet and social media sites is also intense; over 70% of
Internet advertising revenue in Vietnam is generated by Google and FaceBook.
Vietnam’s mobile operators companies have not only been domestically successful,
one in particular—Vietnam military-owned Viettel—now earns over 15% of its
US$10bn in 2015 service revenue from its shares in 10 mobile licenses in 10 different
countries.
3.3.Financial technology initiatives
Vietnam’s indigenous Fintech ecosystem is growing rapidly, driven by a confluence of
two factors: its high Internet and smartphone penetration,and its low bank account
percentage of its population with formal bank account penetration. Remittances from
overseas Vietnamese into the country exceeded US$12.5bn in 2015, and, similar to
the Philippines much of that money was transmitted through mobile payment and
social media apps. Singapore-based Fintech News estimates that there are over 30

15. 14
The government’s
conflicted
relationship with
Internet content
ironically is creating
a cyber security
industry
local Fintech start-ups in Vietnam—more than half of them focused on mobile
payment applications. Apart from a few payment solutions firms which sprung up
over the course of the remittance boom, most Vietnamese Fintech start-ups were
created in the last three years.
In recent months Vietnam’s Fintech sector has attracted significant international
investor attention. Momo, an e-wallet, peer-to-peer transfer and mobile payments
app firm started in 2014 claims 2.5m unique users. In March, Momo took in US$28m
in series B funding from Standard Chartered Private Equity and one of Momo’s
original backers Goldman Sachs. A US-based early-stage venture capital firm, 500
Startups, also launched a US$10m ‘micro-fund’ in March, aimed at Vietnamese
Fintech and e-commerce firms. In April, Singapore’s SoftPay Mobile, acquired
another mobile payment provider, MPOS Technology JSC, which works with one of
Vietnam’s largest taxi groups, as well as leading South-east Asian e-commerce
platform (and now Alibaba subsidiary) Lazada.
Vietnam’s remittance economy and growing IT outsourcing space is also creating
traction in the cryptocurrency space. Three firms—Cash2vn, VBTC and Bitcoin
Vietnam—have started up over recently, all aimed at facilitating remittances and
peer-to-peer transfers for unbanked and/or overseas communities.
3.4.Smart Cities, Security and IoT
Vietnam’s government, as been discussed, manages its technology industry
development centrally, although the central government does rely on municipal and
provincial People’s Committees to implement its (primarily infrastructure-based)
vision. The central government, as also discussed, is keen to build up digitally-
oriented manufacturing parks and economic zones, which local governments use to
compete for FDI.
This has both positive and negative connotations for smart city technology
development in Vietnam. Negative, in that the central government lacks overarching
smart city vision, and without top-down guidance, smart city application development
will be sporadic and slow. Positive, in that smart city applications are considered a
value-add to municipalities and provinces building technology parks, and the
residential zones adjacent to them. Binh Duong New City, an urban development to
the north of Ho Chi Minh City, recently held a Smart City Summit to solicit
discussions around integrated facility management and design. The local government
is collaborating with the Dutch technology region Brainport Eindhoven. This is largely
seen as a competitive bid to attract invement away from neighboring schemes. The
Saigon Hi-Tech Park Incubator Center is also attempting to build up competency
around IoT applications and is organising competitions (in a ‘hackathon’ vein) to
attract IoT start-ups.
Vietnam’s cybersecurity solution industry is gaining international prominence,
ironically thanks to the severity with which its government cracks down on the
Internet. Government restrictions have created a cyberwar with digital political
dissidents, many of whom developed their skills in Vietnam’s thriving IT industry.
Vietnam Computer Emergency Response Team reported attacks on over 18,000
websites in the country in the first nine months of 2015—among them government
sites, including some 2.5m attacks on the Ho Chi Minh City portal along last year.
Much like Russia, another emerging market cyber-conflict, Vietnam has developed
an IT security service firms in parallel to its politically-motivated hacker ecosystem.
Vietnam lacks a central cybersecurity agency, but the government has passed
extensive Internet security regulations, which will come into effect this July.

16. 15
3.5.Healthcare
Like Singapore, Vietnam’s healthcare IT priorities are centered on basic IT
infrastructure development, and training for healthcare officials. Vietnam’s
Department of Science and Training has been tasked with increasing technology
literacy skills in hospitals and clinics. Vietnam’s Ministry of Health has a number of
ongoing initiatives in conjunction with the Asian eHealth Information Network, largely
around standardised healthcare data and unique patient IDs. Rural telemedicine
initiatives are also in development.

17. 16
Will the Philippines
be the first country
to completely
digitalise money?
Double 10%:
Philippines’ IT-BPO
industry is
 10% of its
GDP
 10% of global
BPO revenues
4. The Philippines: a nation of global citizens
The Philippines has seen its exports of labour and
skills both fuel an economic boom, and drive digital
technology innovation
4
4.1.Technology development policy: government priorities
The digital development policies of the Philippines’ Department of Transportation and
Communications (DOTC) and the Commission on Information and Communication
Technology (CICT) are closely tied to strategically important national industries. In
2011, the CICT outlined its Philippines Digital Strategy (PDS), a five-year programme
with four pillars—Transformational Leadership, Education, Jobs Creation and
Economic Growth and, somewhat incongruently, Environment Protection—much of
which is centered on fostering and expanding the country’s IT-enabled service sector.
Increasing Internet connectivity is also a government priority: there is currently a plan
under way to provide effectively ubiquitous WiFi connectivity in public facilities
nationwide by the end of 2016, with estimated operational costs of US$32m.
The government has seized upon the country’s mobile payment affinity to launch a
programme called e-peso, partially funded and developed in cooperation with USAID,
through its Microenterprise Access to Banking (MABS) initiative, and in collaboration
with the poverty reduction aid organisation Chemonics.
4.2.Technology-intensive industrial sectors
The Information Technology Business
Processing Association of the Philippines
(IBPAP) claims that there more than
1.2m people working in the BPO and
KPO space. The vast majority of these
workers are call center operators, who
are low down on the IT skills ladder.
There are close to 20,000 businesses in
the sector across the country, which
CBRE estimates collectively occupy 7m
square meters of office space in dozens
of cities. Total service revenues in the
sector were US$18bn in 2014, and are
on track to exceed US$25bn this year
(Figure 8)—roughly 10% of the nation’s
GDP, and 10% of the global revenue the
industry generates.
The Philippines has more BPO workers
than does India, which has population more than 10 times its size. The industry is
forecasted to double in size by 2020, to US$48bn. Nearly three-quarters of the
industry’s revenue comes from the US, serving a vast variety of industries,
particularly in financial services, healthcare, and legal services. This has in turn
spurred automation and application developments in these industries, such as
remote diagnosis software and telemedicine services, or research software for credit
firms and law firms.

18. 17
The Philippines
leveraged its huge
remittance
industry to become
an early mobile
money innovator.
Will local Fintech
players help the
Philippines leapfrog
into the smartphone
era?
The Philippines’ IT-BPO industry is well-managed and well-supported, yet it owes its
origins and fast growth to a happy, and somewhat contradictory, coincidence.
Roughly 10% of the country works overseas, and has been doing so for decades.
Mobile phone companies, in turn facilitates remittances and phone calls from
overseas workers and have seen their revenues grow—and as will be discussed in
section 4.3, become major Fintech players in the process. These carriers in turn have
invested in international telecommunications capacity to continue serving the
overseas worker community and the growing social media and Internet appetites of
Filipinos at home. All that extra connectivity, and the high skills of the country’s
workers, have served as the core ingredients of the BPO sector. In other words, the
Philippines’ labour drain created the conditions for the country’s fastest growing job
creation sector. BPO revenue is expected to surpass remittances in the next year.
4.3.Financial technology initiatives
The Philippines remittance industry is globally recognised for having produced
sophisticated mobile peer-to-peer transfer and payment solutions. This has created
regional global interest in developing payment and mobile money applications.
Traditional banks have been looking into the space, as a way of extending their
reach: it is estimated that over 37% of the country’s 1,637 municipalities do not have
a single bank branch.
The most established domestic players in Philippines Fintech are, perhaps
unsurprisingly, the country’s celcos, led by the country’s leading carrier SMART,
largely owned by the incumbent national operator PLD. SMART launched a mobile
money transfer service, SMART Money in 2001; the country’s second-largest carrier,
Global Telecom, launched a similar offering, GCash, in 2004. This has been
transformational for unbanked consumers, and is an important lever for financial
inclusion: USAID reckones that between 2006 and 2012, some 3m mobile banking
transactions with collective value of US$400m were registered. Mobile money is also
commonly used as an e-commerce currency, and is widely accepted as for payments
over such portals as Lazada.
The mobile operators have given way to a host of other Fintech app developers in the
Philippines—in fact, as mobile money swiftly evolves from text messaging-based
services and prepaid top-ups to the smartphone app world, these traditional players
are in danger of being disintermediated. So too are pawn shops, which control
significant amounts of the ‘last mile’ of the remittance dispursement supply chain.
Government attention in this space, particularly the e-peso programme which is
aimed at creating a ‘carrier neutral’ digital currency, could also accelerate these
efforts. Significant Fintech players on the rise include:
 Rebit and Coins.ph are Bitcoin-based remitters (colloquially known as
‘rebittance’ providers) for Filipino communities domestically and globally.
Coins.ph has a direct deposit relationship with the convienience store chain
7-eleven, which has 1,600 stores in the Philippines, and boasts a total of
10,000 ‘cash-in, cash-out’ retailer relationships nationwide.
 Ayannah, a Philippines-based Fintech start-up funded by multiple Silicon
Valley firms (including 500 Startups) which has developed peer-to-peer
remittance Software as a Service platforms for peer-to-peer transfers and
top-ups.
 LoanSolutions, a crowdfuning lender.
 Online pawnshop and micro-lender PawnHero.ph.
The Philippines’ growing regional leadership in Fintech solutions is having knock-on
effects for Big Data Analytics. Big Data is seen as a platform for increasing financial
inclusion, and dovetails well with the country’s thriving IT outsourcing industry.
Ayannah is seeking to leverage the half a billion transaction records and social
media information has generated in its digital payment services to develop credit

19. 18
The Philippines
knows IT
outsourcing and
healthcare. It is
leveraging these
assets to drive e-
health applications
and device
development
Jump-starting
smart city efforts:
GrabTaxi provides
the Phillippines’
Transport
Department traffic
congestion analysis
scoring services. Indian e-commerce start-up LendingKart is looking to do something
similar with Philippines’ digital lender Lenddo. PLDT is looking to invest over
US$100m in big data service development, again off the back of its extensive
payment and mobile service transaction records and existing data centre
infrastructure.
4.4.Smart Cities, Security and IoT
Start-ups in adjacent technology sectors are beginning to jump-start the Philippines’
smart city efforts. Recently, the Singapore-based GrabTaxi ride-booking service
announced a partnership with the World Bank to assist the DOTC in managing traffic
congestion, by gathering and analysing traffic data generated by GrabTaxi’s
participating drivers in Manila and Cebu.
Much like Vietnam, the Philippines lacks a nation-wide initiative on smart city
development. Various municipalities leverage their cornerstone digital industries to
jump-start their intelligent infrastructure plans—or, in many cases, leverage smart city
investments as a selling point to attract investors. Davao City, which credits the BPO
industry with creating some 34,000 jobs in 2015, in 2013 earmarked US$3m to
commission IBM to build an intelligent city programme largely focused on public
safety monitoring and management.
There are a handful of firms focused on smart city-centric access management
technologies with an IoT spin—the aptly-named IoT Philippines, Inc. being one of
them.
4.5.Healthcare
As discussed in Chapter 1, digital healthcare solutions are a particular competency in
the Philippines. Again, this is due to a convergence of factors: high Internet
penetration, a long-term focus on training healthcare professionals (there are half a
million licensed nurses in the Philippines, a penetration five times higher than the
ASEAN average), and its considerable depth as a BPO provider to the global health
and insurance sector.
Against this backdrop, it is understandable that the Philippines’ Department of Health
(DoH) has arguably South-east Asia’s most comprehensive strategies for the
implementation of eHealth. A rolling five-year eHealth Strategic Framework details
objectives for standardising IT infrastructure and practices, and (similar to the other
South-east Asian countries surveyed) enhancing human resource capabilities. Many
of these targets focus on ‘electrifying’ patient records and services. At the end of
2014, all 70 DoH hospitals were running an e-claim system under the country’s
national healthcare system Philhealth, and the government plans to have 85m
citizens—effectively the entire country—registered under the Philhealth e-claim
scheme.
Unifying data centres and record management is another goal, as is the development
and distribution of digital devices for remote medical services. The DoH e-Health
framework targeted the provision of 1,000 telemedicine devices known as RxBoxes
in Rural Health Units across the country by the end of 2015. RxBox is a multi-
purpose medical sensor developed by the National Telemedicine Center, which
allows remote professionals to measure and diagnose medical issues, and store and
manage data.