Starting up a movement

Vietnam is mulling possible incentives to boost its startup ecosystem, with special emphasis put on establishing private investment funds involving local and foreign investors.

The National Assembly is scrutinising a draft law on supporting small- and medium-sized enterprises, which includes a separate section highlighting the country’s first-ever programme for establishing and supporting startups, also known as innovative firms.

The programme covers a wide range of incentives for startups to access the markets. For example, high-tech experts working at startups will have preferential personal income tax. They will also be supported by the government in technology transfer, piloting products, and participation in corporate incubators.

According to the Ministry of Planning and Investment (MPI), startups will also be supported in training, governance, legal consultancy, investment attraction, brand promotion, and intellectual property protection.

Notably, the new law will facilitate the establishment of private investment funds to provide loans for startups. These funds will be created by capital contributions from local and foreign investors, organisations, and individuals.

According to the draft law, the government will “detail the establishment, organisation, and management of private investment funds for innovative companies, as well as instruct the procedures for capital and profit transfer by these investors in and out of Vietnam”.

MPI Deputy Minister Dang Huy Dong said the incentives for startups will help develop Vietnam’s private firms, whose number is estimated to reach one million by 2020. This will also help improve the competitiveness of the economy.

Dong said that though the details of incentives have yet to be revealed, “the incentives are expected to create a wave of startups in Vietnam”.

According to MPI, many localities and investors have established investment funds for young businesses, from which they see great development potential.

For example, Ho Chi Minh City will launch a VND1 trillion ($45.5 million) support package for young businesses, including tech startups. This fund is expected to be launched in November 2016.

Eligible projects will be granted VND2 billion ($91,000) each to operate a prototype. The long list of eligible projects include mechanics, electronics, chemicals, food production, finance, banking, insurance, commerce, transport, tourism, logistics, communication, real estate, healthcare, education, and technology.

The city will also launch a programme to connect startups with investment funds.

In March 2016, local giant FPT and investment group Dragon Capital inked a co-operation deal on the establishment of a fund named Vietnam Innovative Startup Accelerator (VIISA) to finance startups in Vietnam.

VIISA is an open-ended fund with the participation of many large firms. It trains and invests in startups in the sectors of information technology, mobile, internet, and finance.

Currently, over 20 foreign venture capital firms have expanded to Vietnam, where 1,800 startups are in operation. Funding into Vietnamese startups has come from many regional venture corporations, such as Golden Gate Ventures, Gobi Partners, and Expara Ventures, while IDG Ventures and VinaCapital DFJ are seeking exits for their portfolios. VinaCapital DFJ is also mulling over a second fund next year.

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