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Vietnam pledges to solve ‘pain points’ for tech start-ups and VCs

Easier regulations are on the horizon, Vietnam has told technology start-ups and investors, in contrast to the red tape that has grown amid the country’s widening crackdown on corruption.

Nguyen Duc Long, acting director of the country’s National Innovation Center (NIC), said in an interview that Vietnam would revise Decree 38, which legally defines start-ups and venture capital and lets the government invest in start-ups. But he told Nikkei Asia it would be “more difficult” to change other rules, such as those on cross-border transactions in Vietnam, which strictly controls money sent abroad, including for stock listings.

The NIC, under the Ministry of Planning and Investment, has had multiple meetings with businesses, including in October, when it listened on how to improve Decree 38.

“That will be a priority,” Long told Nikkei.

Suggestions included raising the cap on investors in a venture capital fund, letting them invest in more industries, and allowing for more borrowing options, the NIC said.

This article is from Nikkei Asia, a global publication with a uniquely Asian perspective on politics, the economy, business and international affairs. Our own correspondents and outside commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the biggest and fastest-growing listed companies from 11 economies outside Japan.

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Vietnam has sought to offer reassurance amid market volatility, both inside and outside the country. Internationally, headwinds have ranged from bank panics to tech lay-offs after tougher financing conditions pushed companies to cut costs.

“Investors globally are spooked,” said Golden Gate Ventures founding partner Vinnie Lauria at a Forbes tech summit in Ho Chi Minh City at the end of March. “They’re acting irrationally. They’re acting like teenagers. So that means fundraising is always going to be more difficult in this environment.”

Long was also a panellist at the summit, where he struck a congenial chord with entrepreneurs.

“Vietnam has been very open to dialogue between the government, the policymakers . . . the investment funds and the start-up community to identify the pain points of the market,” he said, adding that on the regulatory outlook, “I think we have narrowed down what we need to do.”

But regulations are just one issue. Execution is another. Businesses across a host of sectors are complaining of bureaucratic paralysis due to the ongoing campaign against graft. Permit approvals, for example, have slowed to a trickle as officials fear making mistakes. In this way, the anti-graft campaign is “heightening the risk aversion endemic in the country’s lower to upper tiers of government”, said To Minh Son, political research assistant at Nanyang Technological University in Singapore.

Decree 38 allows VCs to use gold or even land-use rights to finance their funds, though other capital constraints remain. With little clarity on stock options or convertible loans, for example, few start-ups choose to pursue initial public offerings in Vietnam. This limits investors’ ability to exit or sell their investments, as does the difficulty of transferring cash overseas, said Hong-jin Kim, managing director of South Korea-based Stic Investments.

“Because of some kinds of regulations, because of some kinds of size [of start-ups] . . . sometimes it’s quite hard to do the IPO,” he said.

A version of this article was first published by Nikkei Asia on April 6 2023. ©2023 Nikkei Inc. All rights reserved.

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