Vietnam information technology report q2 2013

Vendors have reported continued robust sales of ERP solutions, despite the uncertain economic situation.There is still a lot of potential for Vietnamese enterprises to increase spending

Q2 2013 www.businessmonitor.com

VIETNAM

INFORMATION TECHNOLOGY REPORT

INCLUDES 5-YEAR FORECASTS TO 2017

Report Q2 2013

INCLUDES 5-YEAR FORECASTS TO 2017

Part of BMI’s Industry Report & Forecasts Series

Published by: Business Monitor International

Copy deadline: April 2013

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BMI Industry View 7

SWOT 9

IT SWOT 9

Political 11

Economic 12

Business Environment 13

Industry Forecast 14

Table: Vietnam IT Industry - Historical Data And Forecasts (VNDbn) 14

Macroeconomic Forecasts 19

Economic Analysis - Q2 2013 19

Inflation Still A Manageable Risk 20

Expenditure Breakdown 21

Table: Vietnam - Economic Activity 22

Industry Risk Reward Ratings 23

Industry Risk/Reward Ratings 23

Table: Asia Pacific IT Risk/Reward Ratings - Q2 2013 26

Market Overview 27

Vietnam 27

Hardware 27

Software 32

Services 41

Industry Trends And Developments 47

Regulatory Development 50

Table: Government Authority 50

Regulatory News 52

Company Profile 54

FPT Software 54

Regional Overview 57

Asia Pacific Regional Market Overview 57

IT Penetration 57

IT Growth and Drivers 59

Sectors And Verticals 61

Demographic Forecast 65

Table: Vietnam's Population By Age Group, 1990-2020 ('000) 66

Table: Vietnam's Population By Age Group, 1990-2020 (% of total) 67

Table: Vietnam's Key Population Ratios, 1990-2020 68

Table: Vietnam's Rural And Urban Population, 1990-2020 68

Methodology 69

Methodology 69

IT Industry 69

IT Ratings - Methodology 70

Table: IT Business Environment Indicators 71

Weighting 72

Table: Weighting Of Components 72

Sources 72

BMI Industry View

BMI View: Vietnamese IT spending is expected to reach VND62,604bn (US$3.01bn) in 2013, up 18.6%

from 2012 The macroeconomic environment is supportive of faster growth, boosting trends within the IT sector Rising PC penetration, a range of government ICT initiatives and a campaign to develop Vietnam's domestic IT industry will help to sustain expansion Meanwhile, there is strong demand for ERP solutions and cloud computing revenues are expected to report at least 300% growth over the five-year forecast period to 2017 The outsourcing market is also expected to expand rapidly over the medium term as

enterprises, particularly in Japan, switch business away from China in search of cost savings.

Headline Expenditure Projections:

Computer Hardware Sales: VND38,261bn in 2012 to VND44,762bn in 2013, +17% in local currency

terms Influx of cheap tablets from Windows 8 tablets and notebooks are expected to provide a growth area

in 2012

Software Sales: VND4,630bn in 2012 to VND5,658nn in 2013, +22.2% in local currency terms Potential

for strong growth in licensed operating systems and business software, but will depend on the success inbringing down illegal software use

IT Services Sales: VND9,882bn in 2012 to VND12,185bn in 2013, +23.3% in local currency terms.

Growing demand for digital infrastructure projects in various sectors, such as banking, telecoms, energy andgovernment - as well as a potential boom in outsourcing from Japanese enterprises to drive outperformance

of services segment

Risk/Reward Ratings: Vietnam scores 34.2 out of 100 in our Asia Risk/Reward Ratings table This places

the country 11th, ahead of Sri Lanka The country ranks only 11th for its industry rewards score, with 38.1

Key Trends & Developments.

There have been several reports in early 2013 of lower-price Chinese tablets as Hipad, Ondan, Teclast andAmpe, entering the Vietnamese retail market These products are undercutting traditional notebooks onprice, even after local dealers benefitting from high mark-ups The margins available mean they are beingheavily promoted by local retailers This has reportedly resulted in declines in prices for notebooks, whichare nevertheless finding themselves unable to compete at the low end of the market

The outsourcing market in Vietnam is forecast for expansion from 2013 There has been increasing interest

in it as a business process and software developments outsourcing location, particularly from Japaneseenterprises Vietnam has a cost advantage over China, which accounts for the majority of Japanese

outsourcing by value This could see significant shifts as the trend gains momentum

Vendors have reported continued robust sales of ERP solutions, despite the uncertain economic situation.There is still a lot of potential for Vietnamese enterprises to increase spending on basic solutions A number

of Vietnamese companies embarked on large-scale ERP implementations, including Hoang Anh Gia Lai Group (HAGL), which launched a VND100bn ERP system However, while the ERP market is strong, it is

estimated that only about 10% of Vietnamese businesses have used CRM

The ambitious government IT plan for 2010-2020 will be a backdrop to all these developments in theVietnamese IT market, with the government pledging to invest VND2.4tn (US4,115mn) from the StateBudget in the ICT sector over this period Meanwhile a number of government ministries and organisations,including the Ministry of Education and Training, have started to promote the rollout of cloud

services Many of the government's ICT development plans and programmes are still in a nascent stage andtheir ultimate effectiveness is yet to be determined

IT SWOT

SWOT Analysis

Strengths ■ Government policies to expand ICT infrastructure and internet penetration are driving

demand for IT products and services

■ Vietnam's gradual integration into the global trade network via its accession into tradeorganisations such as ASEAN and WTO, as well as bilateral agreements with Japanand China

■ The domestic IT market is in a rapid growth phase, with trade liberalisation andgrowing affordability driving projected double-digit growth of notebook computers

Weaknesses ■ IT spend per capita much lower than in neighbouring Thailand, reflecting a much

lower GDP and GDP per capita

■ Low levels of access to credit and budgets restrain spending by SMEs

■ Highly cost-sensitive market, with 75% of software provided by lower-cost localsoftware vendors

■ High level of software piracy, although progress has been made in recent years

Opportunities ■ Vietnam is becoming a popular destination for outsourcing, with particularly strong

growth potential from Japanese enterprises

■ High PC market growth potential particular in rural areas

■ National IT Plan will drive spending on IT utilisation in areas such as government, taxation and education

e-■ SMEs have much potential to increase spending on basic solutions, includingcustomer relationship management and security

■ Government spending on open source software creates opportunities for local ITservices firms to implement projects

SWOT Analysis - Continued

■ Banking and finance, oil and gas, aviation and telecoms are projected to be some ofthe biggest opportunities for multinational vendors

■ The government's drive to create a significant IT services industry over the next 15-20years is expected to be a significant factor shaping the IT market through incentives

to create IT clusters

Threats ■ The implementation of the China-ASEAN free trade agreement means that

established multinationals will face a growing challenge from low-cost Chinesevendors in the Vietnamese market

■ Low cost tablets from own-brand Chinese vendors a particular threat to low- andmid-range notebook vendors

■ Falling prices may further undermine margins and profitability after steep discounting

SWOT Analysis

Strengths ■ The Communist Party of Vietnam remains committed to market-oriented reforms and

we do not expect major shifts in policy direction over the next five years The party system is generally conducive to short-term political stability

one-■ Relations with the US have witnessed a marked improvement, and Washington seesHanoi as a potential geopolitical ally in South East Asia

Weaknesses ■ Corruption among government officials poses a major threat to the legitimacy of the

ruling Communist Party

■ There is increasing (albeit still limited) public dissatisfaction with the leadership's tightcontrol over political dissent

Opportunities ■ The government recognises the threat corruption poses to its legitimacy, and has

acted to clamp down on graft among party officials

■ Vietnam has allowed legislators to become more vocal in criticising governmentpolicies This is opening up opportunities for more checks and balances within theone-party system

Threats ■ Macroeconomic instabilities in 2012 are likely to weigh on public acceptance of the

one-party system, and street demonstrations to protest economic conditions coulddevelop into a full-on challenge of undemocractic rule

■ Although strong domestic control will ensure little change to Vietnam's political scene

in the next few years, over the longer term, the one-party-state will probably beunsustainable

■ Relations with China have deteriorated over recent years due to Beijing's moreassertive stance over disputed islands in the South China Sea and domestic criticism

of a large Chinese investment into a bauxite mining project in the central highlands,which could potentially cause wide-scale environmental damage

SWOT Analysis

Strengths ■ Vietnam has been one of the fastest-growing economies in Asia in recent years, with

GDP growth averaging 7.1% annually between 2000 and 2012

■ The economic boom has lifted many Vietnamese out of poverty, with the officialpoverty rate in the country falling from 58% in 1993 to 14.0% in 2010

Weaknesses ■ Vietnam still suffers from substantial trade, current account and fiscal deficits, leaving

the economy vulnerable to global economic uncertainties in 2012 The fiscal deficit isdominated by substantial spending on social subsidies that could be difficult towithdraw

■ The heavily-managed and weak currency reduces incentives to improve quality ofexports, and also keeps import costs high, contributing to inflationary pressures

Opportunities ■ WTO membership has given Vietnam access to both foreign markets and capital,

while making Vietnamese enterprises stronger through increased competition

■ The government will in spite of the current macroeconomic woes, continue to moveforward with market reforms, including privatisation of state-owned enterprises, andliberalising the banking sector

■ Urbanisation will continue to be a long-term growth driver The UN forecasts theurban population rising from 29% of the population to more than 50% by the early2040s

Threats ■ Inflation and deficit concerns have caused some investors to re-assess their hitherto

upbeat view of Vietnam If the government focuses too much on stimulating growthand fails to root out inflationary pressure, it risks prolonging macroeconomicinstability, which could lead to a potential crisis

■ Prolonged macroeconomic instability could prompt the authorities to put reforms onhold as they struggle to stabilise the economy

Business Environment

SWOT Analysis

Strengths ■ Vietnam has a large, skilled and low-cost workforce, which has made the country

attractive to foreign investors

■ Vietnam's location - its proximity to China and South East Asia, and its good sea links

- makes it a good base for foreign companies to export to the rest of Asia, andbeyond

Weaknesses ■ Vietnam's infrastructure is still weak Roads, railways and ports are inadequate to

cope with the country's economic growth and links with the outside world

■ Vietnam remains one of the world's most corrupt countries According toTransparency International's 2012 Corruption Perceptions Index, Vietnam ranks 123out of 176 countries

Opportunities ■ Vietnam is increasingly attracting investment from key Asian economies, such as

Japan, South Korea and Taiwan This offers the possibility of the transfer of high-techskills and know-how

■ Vietnam is pressing ahead with the privatisation of state-owned enterprises and theliberalisation of the banking sector This should offer foreign investors new entrypoints

Threats ■ Ongoing trade disputes with the US, and the general threat of American

protectionism, which will remain a concern

■ Labour unrest remains a lingering threat A failure by the authorities to boost skillslevels could leave Vietnam a second-rate economy for an indefinite period

e/f = BMI estimate/forecast Source: BMI.

BMI forecasts the IT market in Vietnam will expand to VND62,605bn in 2013, an increase of 18.6% from

VND57,773bn in 2012 We expect strong growth to continue over the medium term with a compoundannual growth rate (CAGR) of 14.3% 2013 to 2017, with the value of the market reached VND102,985bn

in 2017 There will be double digit CAGR for all three segments of the market, however we expect softwareand services growth to outperform hardware and account for an increasing share of the total market over thefive years to 2017

The major trends driving this strong growth include increases in PC penetration - driven by the supply ofcheaper hardware from Chinese vendors and a new generation of devices running Windows 8 - underpinned

by improvements in network infrastructure and rising real incomes Government spending and policy willalso add to growth, through procurement initiatives, investments in hi-tech industrial parks and policiesdesigned to boost the sector such as improvements to IT education and security certification schemes forfirms Meanwhile, despite global economic headwinds presenting a risk, Vietnam's software and

outsourcing services firms are positioned to benefit from large foreign enterprises seeking lower costlocations over the medium term

In 2013 there is a solid macroeconomic backdrop for

BMI's forecast for growth to accelerate to 18.6%

from 16.2% in 2012 We forecast real GDP growth

will pick up to 7% in 2013 from 5.3% in 2012, while

real growth in private final consumption is also

forecast to rise, pushing up to 5.6% in 2013 from

4.9% in 2012 Government spending is expected to

increase by 5.4% in real terms, down slightly from

2012, but we do not expect IT spending to suffer as

the government pursues to procure IT hardware,

software and services as part of its development

plan Unemployment is forecast to dip slightly in

2013 to just 4.8%, with the only macro concern

being an uptick in inflation to 7%, but even this is

only expected to be temporary and is considered a

manageable risk

Despite a positive growth outlook Vietnam remains a low income market with GDP per capita expected toreach just US$1,758 in 2013 As such IT spending is out of the reach of a large part of the population.Furthermore, the economy is exposed to risks from global economic headwinds through the export market,swings in commodity prices and pressure on the value of Dong

BMI expects strong growth in retail PC sales in 2013 as new vendors enter the market and existing ones release new models, boosted by Microsoft Windows 8 based devices Dong weakness has been a limiting

factor for sales growth of imported IT hardware, while many businesses and individuals remain sensitive, however the influx of low-priced Chinese own-brand tablets has deepened the market and allowedgrowth momentum to be maintained Furthermore, vendors in the notebook category have been loweringprices to compete with this influx, which has helped make devices more affordable and boosted sales

price-The outsourcing services market is expected to see robust growth in 2013 with several pieces of researchindicating that Vietnam is now the first choice for Japanese enterprises The majority of Japan's corporateoutsourcing is still directed to China in terms of value, but software and business process outsourcing hassignificant cost advantages in Vietnam This could see rapid growth as firms shift from China to Vietnam,and the potential for international demand from elsewhere could sustain the boom

Industry Trends - IT Market

2010-2017

e/f - BMI estimate/forecast Source: BMI.

Government spending and PC subsidy programmes will be supportive of the PC market in 2013 as thegovernment continues to roll out IT modernisation programmes The government has been spending heavily

on IT, with around 50% of this going to hardware in recent years It has also spent heavily on licensingsoftware used by government agencies, but in 2013 the Ho Chi Minh City government is beginning a push

to increase the utilisation of open source software, which could be replicated elsewhere

to grow hi-tech parks, both for the construction of IT hardware, but increasingly software and IT services

Improvements in ICT infrastructure will also drive the development of the nation's IT market Telecomsoperators are investing in the expansion of both wireline and wireless broadband network infrastructure torural areas, as well as upgrading capacity of urban infrastructure and improving backbone networks As

elsewhere, telecoms operators such as Viettel are emerging as significant distribution channels for

notebooks as vendors seek tie-ups In a country where PC penetration remains low, particularly in ruralareas, government digital divide programmes to boost internet and digital utility in rural areas underpinaddressable market growth and open PC ownership to a growing number of rural inhabitants The

government's 2008-2013 programme for developing the internet in rural communities is one example, as arevarious policies to boost rural incomes

Vietnam's gradual integration into global trade networks, such as ASEAN and the WTO, has helped to bringdown tariff barriers and prices, as well as increase opportunities for importers In January 2009, duty onCBU electronic products from ASEAN countries was reduced to 0-5% Meanwhile, the Vietnam-Japaneconomic partnership agreement, which also came into effect at the start of 2009, lowered import taxes onelectronics goods from Japan by 2.5-4.5%

Tariff reductions, particularly the ASEAN ones, have contributed to lower prices and a boost to PC sales.However, the new China-ASEAN free trade agreement offers both opportunities and challenges to vendors,given the growing presence of low-cost Chinese vendors in the Vietnamese market Reports from Q113indicate that international vendors have suffered against the supply of cheap own-brand Chinese tablets

Local dealers are promoting the devices because of the margins available, but even with this mark-up theyare proving a big-hit and hurting sales of traditional notebooks.

The government's drive to create a significant IT services industry over the next 15-20 years is expected to

be a significant factor shaping the IT services market The cost of outsourcing in Vietnam was estimated in

2013 research to be as much as 30% lower than in China, a fact which Japanese firms were especially aware

of The momentum that could be garnered from Japanese enterprises shifting business process and softwaredevelopment outsourcing to Vietnam could see medium term increases from European and North Americandemand

However growth will depend on government progress on various business environment issues, includingcopyright protection Further progress in combating software piracy, which is still reported to be at higherlevels than in China, India and Thailand, despite some progress in recent years, is required The governmenthas indicated a willingness to improve through the implementation of stricter regulations It is also takingsteps to increase the penetration of information security certification by distributing funds to enterprises

Segments

Government remains a key IT spending segment and accounts for around 30% of total Vietnamese ITspending, with high levels of investment in hardware In 2010 the prime minister ordered all cabinetministers to use computers as part of a two-year plan to increase IT use in government Such initiatives aredriving IT spending by agencies at central, municipal and provincial government levels with PC penetration

in government agencies still increasing

The private sector comprises around 60% of IT spending Larger Vietnamese companies remain more likely

to buy higher-priced software from multinationals, which have only around 25% of the local softwaremarket In the large corporate sector, growing demand for digital infrastructure projects in segments such as

banking, telecoms and energy has attracted global IT services leaders, such as IBM, to invest in Vietnam.

Foreign investment, particularly by Japanese companies, in call centres and other areas will help to grow themarket

Smaller enterprises will be a vendor focus due to their growing awareness of the benefits of IT utilisation,but this segment is constrained by low budgets and lack of access to credit Companies are looking forsoftware that will help boost performance and operational efficiency Promising SME verticals includediscrete manufacturing and consumer packaged goods, as well as hotels and property management The

solution areas with most demand currently include security software and key applications such as CRM,ERP and HR management.

The banking and finance sector is a promising area for database software and one where foreign companieshave done well Spending opportunities in the finance segment will be driven by regulatory compliance, due

to regulations such as Basel II, HIPPA and the Sarbanes-Oxley Act, and quite likely by new regulationsintroduced in the wake of the global financial crisis

An increasing number of Vietnamese companies have shown an interest in and willingness to use cloudservices The government has also got involved in encouraging the development of this business model inVietnam and new cloud computing offerings and increased competition in this segment should fuel furtherdemand from end-users to utilise this technology

Summary

Overall, the hardware market is anticipated to grow from VND62,605bn in 2013 to VN102,985bn in 2017,with computer sales rising from VND37,063bn to VND57,697bn over the same period Software spendingshould rise from VND5,658bn to VND10,466n and IT services from VND12,185bn to VND23,004bn overthe forecast period

Macroeconomic Forecasts

Economic Analysis - Q2 2013

BMI View: The State Bank of Vietnam (SBV)'s surprise decision to cut its policy rate by 100 basis points

from 10.00% to 9.00% suggests that policymakers are under increasing pressure to stimulate economic growth in 2013 We believe that the latest move will help reinforce government efforts to boost private sector investment Given that money supply growth remains considerably low by historical standards, we believe that the risks of reigniting inflationary pressures remain manageable.

The State Bank of Vietnam (SBV) cut its policy rate (refinancing rate) by 100 basis points from 10.00% to9.00% on December 24, just days before the General Statistics Office published its preliminary estimate for

GDP growth to come in slightly weaker-than-expected at 5.0% for 2012 (compared to Bloomberg consensus

of 5.2%) The surprise rate cut came amid growing concerns that mounting bad debts across the bankingsector are deterring banks from issuing new loans to businesses, and that this could severely underminegovernment efforts to reignite economic growth in 2013 From our perspective, the move also suggests thatpolicymakers are under increasing pressure to adopt more aggressive measures to stimulate economicgrowth in an attempt to stem the growing number of bankruptcies among small-and-medium enterprises(SMEs) and rising unemployment This is closely in line with our view that the Vietnamese government'seconomic agenda will remain skewed towards boosting growth in 2013

Recovery On Track

Vietnam - Real GDP, VNDbn (LHS) & % chg y-o-y (RHS)

Source: BMI, General Statistics Office

We are seeing evidence that credit conditions are beginning to improve and we expect demand for privatesector credit to pick up gradually in H113 In addition to aggressive monetary policy easing by the SBV, thegovernment has also announced plans to slash corporate income tax rates by two percentage points to 23%

in 2013 We believe that lower lending rates and tax incentives will help reinforce government efforts toattract foreign direct investment and boost private sector investment over the coming quarters

Inflation Still A Manageable Risk

International organisations including the World Bank and International Monetary Fund have warned againsteasing monetary policy too aggressively, which risks reigniting inflationary pressures Although we

acknowledge these risks, we highlight that the recent rebound in money supply growth remains

considerably weak by historical standards As the accompanying chart shows, prior to periods in whichVietnam experienced very high inflation (2008 and 2011), M2 money supply was expanding at a rate of33.3% and 46.1% in 2007 and 2010, respectively This compares to M2 growth that came in at a record low

of just 6.0% in 2012 and our forecast for a mild pick-up towards 11.0% for 2013, suggesting that inflationshould remain manageable at under 7.0% in 2013

Credit Conditions To Improve In 2013

Vietnam - M2 Money Supply, VNDbn (LHS) & % chg y-o-y (RHS)

Source: BMI, State Bank of Vietnam

To be sure, we acknowledge that the risk of a potential surge in commodity prices in 2013 - especially foodprices, which make up around 40% of the CPI basket - could turn out to be a wildcard for policymakers Butfor now, we believe that overall conditions in Vietnam remain in favour of our forecast for real GDP growth

to come in relatively strong at 7.0% in 2013

Expenditure Breakdown

Private Consumption: We expect private consumption to grow at a robust pace of 5.6% in 2013 However,

we note that the risk of a sustained collapse in exports and further bankruptcies among SMEs, could

potentially lead to widespread job losses in export-driven sectors Uncertainties over the outlook for

employment could in turn, prompt households to cut back on spending

Gross Fixed Capital Formation: We foresee a significant pickup in private sector investment growth in

2013 We believe with lending rates will gradually ease over the coming months as the effect of recent ratecuts by the SBV begins to kick in We are also seeing evidence that credit conditions are improving.Accordingly, we expect gross fixed capital formation growth to accelerate from 4.3% in 2012 to 5.9% in2013

Public Spending: We expect total public spending to remain relatively resilient in 2013, expanding at arespectable pace of 5.4% However, there is limited room for the government to increase spending furtherdue to concerns over the need to finance a potential bailout of ailing state-owned commercial banks.

Net Exports: Net exports remain the biggest downside risk to our outlook for the Vietnamese economyalthough we expect external demand to pick up as we head into H113 Vietnam has been recording anaverage monthly trade surplus of US$172mn since June 2012 (resulting in a year-to-date surplus of US

$77mn) and see the case for a substantial pickup in external demand on the back of a rebound in regionalgrowth over the coming month However, we believe that China's structural imbalances will return in H213,becoming a drag on regional growth Accordingly, we still expect exports to expand at a moderate pace of6.5% in 2013

Table: Vietnam - Economic Activity

2008 2009 2010 2011e 2012e 2013f 2014f 2015f 2016f 2017f

Nominal

GDP,

VNDbn 2 1,485,038 1,658,389 1,980,914 2,536,631 2,950,684 3,361,036 3,813,158 4,301,043 4,832,660 5,422,488 Nominal

Notes: e BMI estimates f BMI forecasts 1 at 1994 prices Sources: 2 Asian Development Bank, General Statistics Office; 3

World Bank/UN/BMI; 4 General Statistics Office.

Industry Risk Reward Ratings

Industry Risk/Reward Ratings

BMI's Asia Pacific IT Risk/Reward Ratings (RRR) compares the potential of a selection of the region's

markets over our forecast period through to 2017 Our Q213 ratings reflect our consideration of the politicaland economic risks, as well as the risks associated specifically with IT intellectual property (IP) rightsprotection and the implementation of state spending projects

There was just one change to the countries' rankings in this quarter's update as Australia swapped positionwith Hong Kong This is due to a downgrade in Hong Kong's Country Risk score from 85.7 the previousquarter to 79.0 While the other countries covered remained in their respective positions, there were slightlychanges to the IT Rating scores as we have updated our macroeconomic data and forecasts

Singapore continued to outperform its regional peers due to a stable business environment and a proactiveregulator In addition to the Infocomm Development Authority (IDA)'s 10-year masterplan (IntelligentNation 2015), which seeks to coordinate developments within the public and private sectors, the regulatorhas undertaken initiatives such as the FutureSchoolds@Singapore programme (a collaboration between theIDA and the Ministry of Education to enhance the diversity of education offerings for the integration of IT)and implementing an interoperable near field communication (NFC) infrastructure, which paved the way forNFC-based mobile payment services

Australia moved to second position even though there were no changes to its Rewards and Risks scores.The country's National Broadband Network (NBN) project is well underway, although it still faces thethreat of being scaled back if the opposition Coalition party assumes power in the next federal election.However, a complete revamp of the project is unlikely given the hefty cost involved Australia is alsoeyeing to reduce its reliance on its mining industry by turning the country into a regional technology hubthat could compete with peers such as Japan, Singapore and South Korea Forming the foundation for theshift will be the NBN

Hong Kong is a well-established financial hub, and IT solutions present an opportunity for companies toreduce operating costs and improve operational efficiency when carrying out transactions, particularlycross-border trade In addition to affordable fibre broadband services, Hong Kong's relationship with China

provides companies access to a high-growth market For example, US-based VelaTel Global

Communications purchased a Hong Kong mobile virtual network operator in December 2012 to

complement its telecoms and IT businesses in China

South Korea saw its IT Rating score increase to 65.2 from 64.6 as the increase in its Country Rewards scoreoffset a decline in its Industry Rewards score There is growing interest from the public and private sectors

in cloud computing models such as Software-as-a-Service (SaaS) and Infrastructure-as-a-Service (IaaS).Additionally, South Korea is the region's leader in terms of LTE adoption, which reflects the country'stechnology savvy nature

Malaysia's remained in fifth position with an IT Rating score of 52.3, up from 51.2 the previous quarter.The upward revision was because of an improvement in the country's Industry Rewards component LikeSingapore, Malaysia has its Economic Transformation Programme (ETP), which has earmarked areas such

as cloud computing as one of its top 10 strategic technology priorities The government aims to propel thecountry into a regional services and outsourcing hub, and has provided initiatives to attract the participation

of the private sector Developments under the ETP include a 60,000 sq ft purpose-built data centre facility

in Petaling Jaya and the Malaysian Public Transport System (a web and smartphone application thatprovides real-time public transportation tracking)

China's IT Rating score remained unchanged over the quarter at 48.6 The country has the third-highestIndustry Rewards score in the region behind Australia and Singapore, which is a reflection of the potential

of the Chinese market in light of its sheer size In October 2012, India's Tata Consultancy Services (TCS)

announced its intention to increase its workforce in China from 3,000 as part of its Asia expansion strategy

The decision mirrors a move made by local rival Infosys in 2011 to add 4,000 employees in Shanghai and

build a new US$130mn office in the city TCS's decision to beef up its China presence fits nicely in linewith our long-term view that India will benefit from a reorientation of China's economy away from

infrastructure investment and towards consumer services

The Philippines' IT Rating score saw a slight upward revision from 43.7 the previous quarter to 43.8 in light

of a small improvement in the country's Country Risk score The Philippine IT market will continue to bedriven by the local IT and business process outsourcing (BPO) sectors The BPO industry, which accountsfor around 30% of IT spending, continues to grow, and it is in the midst of expanding operations outsideMetro Manila However, we are also noting a shift towards high-value services In October 2012, the

Philippine Long Distance Telephone Company announced that it may sell a majority stake in BPO unit to

fund investment in its nascent data centre business, accelerate deployment of advanced internet gatewaysand roll out fibre transmission solutions

There was no change to India's IT Rating score of 42.1 in this quarter's update While the country hasundeniable potential, the government and companies, particularly small and medium enterprises, have been

slow to integrate ICT solutions in their operations Additionally, major Indian IT providers are facing theproblem of rising wages of around 10-20% in recent years due to growing shortages of talents at home.Although the country is looking to implement widespread industry reforms to kick start the economy, theprocess is far from smooth, which has resulted in an investment slowdown in light of uncertainties.

Indonesia saw an upgrade in its Industry Rewards score, which led to a 0.2 percentage point increase in thecountry's IT Rating score to 41.2 One of the most populous country in the world, Indonesia is experiencingstrong IT developments in richer areas such as Java, where IT infrastructure is more established Growingurbanisation means that medium-tier cities are also becoming investment hotspots, which will lead todemand for IT services Both consumer- and business-facing solutions have strong growth opportunities,especially with the government keen to spur developments For example, the Indonesian government is

currently in negotiation with Foxconn Technology Group to set up a manufacturing facility.

Thailand's IT Rating score improved from 39.9 to 40.5 this quarter due to an upward revision in its IndustryRewards score The country has seen a number of positive developments in late 2012, most notably thesuccessfully conclusion of the much-delayed 3G auction Additionally, Thailand's call-centre industry is

experiencing growth with Indian customer interaction management firm Servion Global Solutions

announced a plan to set up an office in early 2013 According to the company, Thailand is the largestmarket in ASEAN for contact centres The launch of the ASEAN Economic Community in 2015 willfurther make the country more attractive to foreign investors

Like Thailand, Vietnam's IT Rating score increased due to an improvement in its Industry Rewards score.Vietnam also noted an upward revision in its Country Risk score from 47.2 to 49.9 Vietnam is trying tocatch up with regional peers, with the government pledging to invest US$8.5bn in the ICT sector in the next

10 years The government is also looking to attract US$5bn worth of foreign investments in the IT sector by

2015, according to Avaya Vietnam, along with Thailand, Indonesia and the Philippines, is also expected to

benefit from a new ICT training programme for small and medium enterprises, which is implemented by the

ASEAN Foundation and funded by a US$300,000 grant from Microsoft.

Sri Lanka remained in 12th position in our RRR with an IT Rating score of 27.7 In line with our consensus outlook on the Sri Lankan economy, the recently-released GDP figures for Q312 showed realGDP growth having slowed considerably to 4.8% year-on-year, down from the 6.4% expansion recorded inthe preceding quarter We do not see economic growth turning up until H213 at the very earliest, hence ourprojection for full-year real GDP growth to remain flat at 5.4% in 2013 While we expect Sri Lanka'seconomic outlook to remain gloomy for the foreseeable future, the IT industry remains a key focus for the

below-government due to its importance in enabling trade and empowering consumers For example, Sri Lanka'sInformation and Communications Technology Agency soft launched the Lanka Government Cloud facility

in August 2012, which has the goal of creating an enabling environment for better products and services byleveraging on ICT

Table: Asia Pacific IT Risk/Reward Ratings - Q2 2013

economic profile, based on BMI's proprietary Country Risk Ratings that could affect the realisation of anticipated returns Source: BMI

Market Overview

Vietnam

Hardware

BMI forecasts sales in Vietnam's computer hardware market will be worth around VND44,762bn (US

$2.152) in 2013, up from an estimated VND38,261bn in 2012 We forecast the growth rate in the hardwaremarket will accelerate from 14.6% in 2012 to 17% in 2013, buoyed by an improved economic environment.The main growth driver will be affordable tablets and notebooks There will continue to be a sizeable greymarket, but in 2012 the government has tightened up on this, introducing new restrictions on the import ofused PCs and tablets for 'R&D' purposes

The latest data on the Vietnamese hardware market

indicates growth continued in 2012 despite tight

credit conditions limiting consumer purchases and

economic uncertainty dampening business

confidence Research firm IDC estimated that PC

shipments reached 638,000 in Q412, up 20.5% q-o-q

and 3.4% y-o-y This was represents slower growth

compared to that reported by Vietnam's General

Statistics Office (GSO) for retail sales as across

economic sectors According to the GSO, the value

of retail sales rose by 16 percent in 2012 to VND

2.324trn (110.7 billion USD) Economic uncertainty

and income distribution means that big ticket PC

purchases are not growing as fast as other areas of

spending in Vietnam

Looking to 2013, migrations to Microsoft's

Windows 8 operating system have the potential to trigger a new cycle of hardware upgrades, although muchwill depend on business and consumer confidence We forecast stronger economic performance in Vietnam,which should be supportive of upgrade momentum; however investments in the enterprise segment willcontinue to be constrained by global economic conditions In 2012 retailers claimed that many businessesand consumers were waiting for the October 2012 release the new OS before investing in an upgrade The

final months of 2012 saw the release by of Windows 8 RT tablets from Acer, Asus and other vendors,

priced at around US$600 However these tablets are facing stiff competition from low priced Chinese tablet

Hardware Market (VNDbn)

2010-2017

e/f - BMI estimate/forecast Source: BMI.

imports, predominantly running Google's Android OS Local press reports have stated that the very low

price tablets are selling well, and being pushed by dealers who are able to secure high margins on thedevices and still undercut the international vendors

Government spending will be supportive of the IT hardware market, including initiatives in sectors such aseducation and healthcare It is also providing credit programs to raise household PC penetration in ruralareas, which is estimated to still be below 10%, compared to 50% in higher income urban areas Notebooksare owned by an estimated 7% of the Vietnamese population, which points to significant growth potentialfor the local PC market, with the most potential being in rural areas where penetration is lower, however forthe time-being Hanoi and Ho Chi Minh City are thought to account for around 85% of notebook sales Thespread of network infrastructure, including fixed and wireless broadband, is also helping to boost demand

for devices both as productivity and content consumption devices Telecoms operators such as Viettel are

also emerging as significant distribution channels for notebooks as vendors seek tie-ups

In 2013, sector procurements across a wide range of sectors will help maintain momentum However, anumber of factors could potentially act as a check on the PC market, including government cutbacks andcontinued caution in the business segment, despite growing awareness of the strategic value of IT

investments

Form Factors

As already noted, household PC penetration is still low in Vietnam, at around 20% for the country as awhole in 2012 This creates a sizeable opportunity for vendors in terms of the first time buyer market.However, with GDP per capita expected to be US$1,758 in 2013, and only reach US$2,874 by 2017, themass market is geared towards the value end of the spectrum Furthermore, with a large number of first timebuyers, consumer choice in terms of form factors is uncertain While productivity devices such as desktopsand notebooks will remain popular for education and enterprise purchasers, the availability of cheap tabletsfrom China could see large numbers of consumers move straight to tablets and have little or no experiencewith more traditional form factors

The main driver of sales is the mobile computer, for which the addressable market was estimated at around1.8mn units in 2012 Demand for PC mobility has grown very rapidly over the past few years, and in 2012the share of notebooks and tablets in overall PC sales was estimated to be around 70% Further double-digitgrowth in sales is anticipated over the five-year forecast period

Meanwhile, desktops have seen a corresponding

rapid decline in their PC market share, and were

estimated to have accounted for fewer than 30% of

units sold in 2012, down from above 70% five years

previously There could be a boost to the desktop

market from Windows upgrades 2013 to 2015 as

Microsoft support for Windows XP is withdrawn

from 2014 Windows XP still accounted for 48.8%

of browsing traffic in February 2012 according to

data from Statcounter, illustrating the size of the

potential upgrade market However, two factors limit

the potential boost to desktop sales First is the

competition from mobile computing, as consumers

and enterprises will likely shift towards greater

usage of notebooks and tablets when upgrading A

second factor is the prevalence of pirated software in

Vietnam, meaning the loss of Microsoft support is

less of a push factor

Although sales of desktops will only see minimal impact from Windows 8, the impact on the wider marketwill be more significant The release of the Windows 8 OS introduced touch functionality to a wide range ofvendors, deepening the tablet market by providing competition for Apple and vendors producing Android

devices Apple, unsurprisingly given its premium price orientation, has had limited impact in Vietnam.

However the proliferation of affordable tablets running Android, and the entry to the market of vendorsproducing Windows 8 devices is already seeing tablet sales increase rapidly in Vietnam In early 2013reports of an influx of own-brand Chinese made tablets indicate growth at the low value end, but we alsoexpect price competition between international vendors to boost sales of mid-range tablets in Vietnam

A casualty of the surge in tablet sales will be the notebook market - especially netbooks Netbooks saw asteep decline in popularity in 2011, with a number of leading vendors, such as former netbook segment

leader Sony, withdrawing models from the market Netbooks initially suffered under competition from

lower priced notebooks, however tablets are now squeezing them further

Windows Share Of PC Browsing

Traffic By OS (%)

February 2013

Source: Statcounter

With tablets making gains at the low end of the market the notebook category is becoming a primarily range device category in Vietnam as vendors are unable to compete against own brand Chinese tablets onprice Nonetheless the competition has resulted in price drops in the notebook category The release ofWindows 8 has spurred the creation of hybrid devices, which will have little impact in 2013 in Vietnam as

mid-early examples are priced as premium products, for instance Hewlett-Packard's (HP) Envy and Lenovo's

Helix and Yoga However price competition will reduce prices and hybrids could be an interesting growtharea over the medium term by offering value through a combination of productivity and media consumptionfunctionality

Another device category that is evolving is the ultrabook - a category of slim-line, high-spec devices with

long battery life that use Intel processors Initial uptake after launch in 2012 was slow due to the high price

of devices, meaning limited applicability in a low income market such as Vietnam In 2012 brands such as

HP, Asus, Acer, Sony, Lenovo and Samsung launched ultrabooks in Vietnam However they failed to see

success in terms of unit sales due to high prices Local press have reported that prices of low end ultrabookshave declined in early 2013, from around VND15mn in 2012 to VND10mn which could see unit sales

grow Local producer CMC has moved into the ultrabook market in November 2012 with low-end models.

Meanwhile mid-range ultrabooks are reported to be retailing for VND20-30mn while premium models arepriced over VND30mn The cheaper models are using lower power Intel i3 chips rather than i5 and i7 chips.Even after these price cuts ultrabooks will be significantly more expensive than low end tablets

Vendor Performance

The latest data from IDC show that multinational brands dominated the Vietnamese PC market in

Q412 Asus was reported to be the top vendor by unit market share, with 17.8% of sales, with its position

boosted by aggressive promotions and strong channel support Fellow Taiwanese vendor Acer was

estimated to be second with a share of 10.2%, ahead of HP on 9.1% and Lenovo with 6.2% However thesevendors have differing strategies For instance, Lenovo is expanding its range of low-end notebooks tobetter compete with Asus and Acer in the mass market, while HP has been successful in the enterprisemarket but is seeing its consumer share of sales decline

The Vietnamese PC market is surprisingly competitive, with most of the major laptop vendor players

having below a 10% local market share Other multinational vendors, including Dell, Toshiba and

Samsung, have enjoyed strong growth in the market Samsung is considered a threat as it aims to leverageits distribution network and strong brand recognition from the smartphone and TV market into a 10% share

of the Vietnamese notebook PC market

In 2013, vendors are hoping that upgrades to PC devices based on Microsoft's new Windows 8 operating

system will spur a new cycle of procurements The final quarter of 2012 saw the release of a number oftablets based on Windows 8 on the Vietnamese market Acer released two Windows 8 tablets, the InconiaTab W700 and W511, while fellow Taiwanese leader Asus introduced its Asus Vivo Tab The devices werenot cheap, with prices for the products being set at more than US$600

As already noted, Asus has benefited from efforts to strengthen its distribution channel In 2011 Asus

launched a new partnership with local company FTP Distribution, which has a nationwide network of 400 dealers FTP, a member of FTP Trading Group, will distribute Asus products, with Asus planning to

introduce the full range of its new products in Vietnam during Q211 FTP also distributes a portfolio ofother leading PC brands, including Dell, Lenovo and Acer Asus, which first entered the Vietnamese marketonly three years ago, is also focusing on service as a competitive differentiator FTP will provide warrantyservices for Asus laptops at its four new service centres in Hanoi, Ho Chi Minh City, Danang and Can Tho.Asus opened service centres across Vietnam in 2011

While foreign vendors dominate sales of notebook, local manufacturers have a strong position in the, albeitdeclining, desktop market Vietnam's top five computer companies, as selected by the Ho Chi Minh City

Computer Association in 2011, were FTP, CMS, Robo, Viettronics Tan Binh and the Khai Tri

Technology Trading Co The total turnover of these top five companies was around VND1tn in 2011 (US

$48.1mn), down 25% from the previous year

Vietnamese vendors have sought to compensate for declining desktop sales by an expansion into the laptopand tablet segments However, the tablet market remains controlled by major foreign brands, such as Apple,Samsung and Acer Tablets made by domestic vendors, such as FTP and CMS, have not proven a hit with

local distributors and have claimed less than 1% of the market However, Viettel Group has announced that

it plans to enter the tablet market with a device expected to retail at around US$190

In November 2012 local press reported dealers were pushing cheap tablets from China as a result of themargins they could generate on the devices It has been reported that wholesale dealers are able to sell thetablets for double the market price in China in Vietnam Examples include the Hipad Mid A13 and OndanV971, as well as other own-brand Chinese manufacturers such as Teclast and Ampe - as well as counterfeits

of foreign products

As in many other markets, telecoms carriers have also emerged as a significant channel option for PCvendors Dell has launched a partnership with Viettel, which will distribute Dell PCs Viettel has a

substantial presence in rural areas, which have big PC market growth potential, as PC penetration is

currently low Meanwhile, Dell has also partnered with local retail leader The Gioi Di Dong to sell both

online and through the company's 40 retail outlets

HP's Vietnam market sales have been boosted by government and education sector projects HP was ranked

by market research firm AC Nielsen as the leading laptop and PC market brand in Vietnam in 2010,

however its performance has declined as a result of underperformance in the consumer market HP was alsothe leader in the printer segment Vendors continued to roll out new models during the economic slowdown,with the popularity of the small form factor netbooks a significant focus

The reduction of import tariffs from January 2009 was a key moment in the evolution of the Vietnamese

market that encouraged multinational vendors to focus on more imports of high-end devices Sony

announced that it was starting to sell its VAIO notebook in Vietnam, as it started to shift to importing fordomestic sales Sony already has 180 distributors nationwide Meanwhile, working with its partner

DigiWorld Corp, Dell launched a campaign to target the local consumer segment, which is fuelling much

of the current growth

Software

BMI forecasts that software sales in Vietnam will increase to VND5,658bn in 2013, up 22.2% from 2012.

We expect strong growth to be maintained over the medium term with CAGR of 17.7% for 2013-2017 Weestimate software spending comprised 8.8% of total Vietnamese IT spending in 2012, a figure which willincrease to 10.2% by 2017 when total sales will reach VND10,466bn We expect steady growth in demandfor licensed software from government, enterprise and household segments

Migrations to the Windows 8 operating system have

the potential to make a positive impact on the

business software market in 2013 and in the next two

years Business caution and the fact that the

pre-launch publicity for Windows 8 was more low-key

than for its predecessor Windows 7 means initial

uptake will be limited An additional factor is the

greater longevity of hardware in recent years, and

the strength of Windows 7 meaning the push factor

for upgrades in the short term is limited However,

there will be a medium term impact through a

deepening of the tablet market and innovation in

form factors as Microsoft introduced touchscreen

capabilities to Windows 8 The final quarter of 2012

saw the release of a new wave of Windows 8 tablets

and notebooks

Another medium term factor that should drive upgrades is the fact that a large portion of the installedcomputer base still uses the Windows XP operating system, and, as support for Windows XP will bewithdrawn in 2014, this should provide an impetus to upgrade Microsoft has introduced a Vietnameseversion of Windows Live and has announced a list of Vietnamese software programmes that are compatiblewith Windows 7, including Vietnamese font programmes, dictionaries and accounts software There shouldalso be a boost from systems upgrades previously delayed as a result of the economic situation However,much will depend on confidence in the economic situation

The Vietnamese software market remains highly cost-sensitive, with around 75% of the market served bylower-cost local software vendors Local software dominates the market for government and SME

segments However, larger Vietnamese companies are more likely to buy higher-priced software frommultinationals, which have around 25% of the market Vietnamese customers are demanding a higher level

of support for software compared with a few years previously

Growing PC penetration, as well as new technologies and business models, including 3G mobile andWiMAX, and industry trends such as software-as-a-service (SaaS) and open source will provide areas ofVietnamese software market growth going forward Most demand remains for on-premises subscription

Software Market Value (VNDbn)

2010-2017

e/f - BMI estimate/forecast Source: BMI.

models, due to the greater perceived security and degree of control However, as internet infrastructureimproves in Vietnam, there should be more demand for alternative models such as SaaS and other cloudcomputing services.

The global economic downturn may have added to the forces driving interest in open-source software due toits perceived lower cost and access to codes The economic downturn has led businesses and customers tolook more closely at open-office-type open-source software, as well as free services such as Google Docs,which are funded by advertising Once again, a key issue and precondition for the more widespread

adoption of open source will be the development of a support infrastructure

Ho-Chi Minh City (HCMC) plans to spend VND31bn to use open source software in 2013, primarily for thecity's state agencies To put this figure in perspective HCMC will spend VND240bn on software licensesfor state agencies and VND800bn on licenses for business and social organisations in 2013 HoweverHCMC plans to continue shifting spending towards cheaper open source alternatives In order to rival majorinternational software firms, open source implementers in Vietnam are creating alliances to be able tocompete on scale in terms of finance and labour

Business Software

In 2012 vendors reported continued robust sales of ERP solutions, despite the uncertain economic situation.There is still a lot of potential for Vietnamese enterprises to increase spending on basic solutions, includingCRM and security A number of Vietnamese companies embarked on large-scale ERP implementations aspart of their long-term growth strategy In August 2012, Hoang Anh Gia Lai Group (HAGL) launched aVND100bn ERP system as it sought to unify corporate governance The solution was adopted for thecompany's four business sectors of minerals, energy, forestry and real estate, with over 400 staff members.HAGL said it would also consider applying the ERP solution at 20 affiliates Imexpharm Pharmaceuticals

Co spent US$41mn in August 2012 in installing an ERP system at its headquarters in Dong Thap, twofactories in Dong Thap and Binh Duong, as well as a distribution centre and sales branch in Ho Chi MinhCity Other Vietnamese enterprises spending big on ERP solutions in 2012 have included Binh MinhPlastics, which invested VND10bn in ERP, while Licogi 16 Co has spent US$800,000 on an SAP ERPsolution

Government support for ICT development should provide a framework for growing utilisation of software

in both public and private sectors However, while the ERP market is strong, the market for CRM softwareremains small, largely due to a lack of awareness about it among Vietnamese businesses It is estimated thatonly 10% of Vietnamese businesses have used CRM, which is far fewer than in other countries

Over BMI's five-year forecast period to 2017, the Vietnamese enterprise software market will offer

opportunities in many sectors While management software remains at less than 10% of the total softwaremarket, basic applications such as enterprise resource planning (ERP) and accounting are finding increasingpopularity with the business market There is a growing emphasis on cost efficiency as enterprises look toenhance productivity through automating these and other functions

Cloud services adoption is expected to accelerate over the next few years, after pilots scheme were deemed

to have been successful An increasing number of Vietnamese companies have shown an interest in andwillingness to use cloud services The government has also got involved in encouraging the development ofthis business model in Vietnam, and in 2010 reached an agreement with Microsoft to cooperate on research.Given the focus on many businesses of controlling costs, the pay-on-demand SaaS model should grow inpopularity and spread beyond the initial core application area of CRM

New cloud computing offerings and increased competition in this segment should fuel further demand fromend-users to utilise this technology In addition to cost savings, businesses will look to boost efficiency andimprove their response to customers in order to satisfy their needs Large businesses are most likely to put

IT applications such as mail, phone systems and document management into the cloud However, enterpriseapplications that require a high level of customisation, or those that are subject to regulatory or data-sensitivity constraints, are more likely to stay on premise

The economic slowdown, and the fall in demand for manufactured goods, represented a challenge forvendors as enterprises were tempted to focus more on the bottom line Many companies, particularly tradingcompanies, cut back on non-essential systems upgrades in the face of cash-flow shortages Smaller

enterprises will be a growth opportunity due to growing awareness Companies are looking for software thatwill help boost performance and operational efficiency Promising segments include discrete manufacturing,consumer packaged goods and hotels and property management

Security software such as anti-virus and internet security applications is one segment that should grow inline with increased awareness among Vietnamese organisations of the benefits Vendors should also look toareas such as CRM and business intelligence, where faster growth is possible, due to untapped potential inkey segments such as CRM, ERP and human resource management Data analytics and database software islikely to be a growing area and account for a larger portion of software budgets The banking and financesector is a promising area for database software and one where foreign companies have done well

The internet service provider (ISP) sector is a promising segment for software and services vendors, as agovernment campaign to boost internet usage is set to cause an increase in the number of ISPs To date,

only 17 ISPs have been licensed ISPs are also expected to move towards offering more IT services andhosted software themselves Web analytics is one promising area, as firms look to assess the effectiveness

of their online presence and advertising in more detail

The government is a significant software-purchasing segment in Vietnam and accounts for about 30% oftotal IT spending The 7,000 government agencies offer considerable opportunities at national provincialand municipal levels A particular area of opportunity is tax agencies of all administrative tiers as

governments look to increase the efficiency of tax collection The Vietnamese government's drive toimplement e-government will be another driver in this segment

Banking and finance, oil and gas, aviation and telecoms are forecast to be some of the biggest spendingsoftware segments over BMI's five-year forecast period and are among the best opportunities for foreignvendors These segments offer the most potential for customised solutions, as well as off-the-shelf packagedsoftware Banks are looking to take their services to the next level in response to the demands of a rapidlygrowing economy and are investing in more advanced and flexible platforms for core banking processes.The mid-sized Asia Commercial Bank was among those to implement a new core-banking solution inH110, having designated technology as a core pillar of its growth strategy

Spending opportunities in the finance segment will be driven by regulatory compliance, due to regulationssuch as Basel II, HIPPA and the Sarbanes-Oxley Act, as well as potential new regulations introduced in thewake of the global financial crisis Mobile operators are investing in new OSS (operating support systems)

to reduce costs and support delivery of new services

In March 2013 the Copyright Office of Vietnam reported that software piracy was continuing to decline, butremains a serious issue The software piracy rate has declined from 90% to 80% from 2004 to 2011, with a4pps decline from 2010 to 2011 alone The government states that it has signed copyright agreements with arange of software firms, but private enterprises remain copyright infringers, particularly computer tradingfirms In 2012, inspectors discovered 10 computer sales agents of leading brands such as HP, Dell, Lenovo