The President of Vietnam visited Washington DC last week, which got me thinking about my visit there two years ago, and the impact of mobiles in Vietnam. Mobifone and Viettel were customers of mine, so here are my thoughts on the impending mobile explosion in Vietnam, and how mobile communications will lead Vietnam from the village to the villa.
Vietnam’s recent admission into the World Trade Organization (WTO) signifies a country that is poised for economic growth. Hosting the Asia Pacific Economic Summit gave world leaders a glimpse of the new promise of Vietnam. Macro-economic issues such as Foreign Direct Investments (FDI) and currency regulations are important to ensure that this former third-world country has the ability to follow its WTO partners in developing and sustaining a viable, vibrant economy. But I believe that Vietnam’s economic growth will actually revolve around a simple, everyday item – the mobile phone.
Based on studying the correlation between mobile phone usage and the rate of economic development in rapidly developing economies, it’s clear that mobile communications drives faster economic growth. In fact, The Centre for Economic Policy Research (CEPR) gauges that a 10% increase in mobile phone penetration leads to increased additional economic growth of 0.59%. This is twice the size of the growth impact of mobile phones in developed countries. Vietnam’s mobiles will play the same role as the spread of fixed-line telephony did in countries like the US, UK and France in the 1970s and 80s, but in half the time.
The reason there is such a clear connection between Vietnam’s economic growth and mobile phones is that having access to previously unavailable voice service, and increasingly, access to the Internet and data through mobile communications enables Vietnamese micro and macro businesses to operate more efficiently. The mobile phone brings them the same capabilities that computers bring to business in the west. Just for considerably less money.
Mobiles are a great enabler of developing economies in general but it is having an even greater impact in Vietnam because of a convergence of three factors. First, Vietnam’s government is measurably moving from a controlled communist economy and evolving to a market oriented one. Second, 54% of Vietnam’s population is under 30. Young mobile users spend a larger share of their consumer power on both voice and messaging than any other age group. Result: the largest slice of population becomes the largest mobile voice and data usage driver in Vietnam’s market, perpetuating the use of mobile communications into the future.
These young Vietnamese are also more supportive of market economies. In a World Values Survey of people’s views of market economies, young Vietnamese scored higher than their counterparts in other Asian countries. Roughly 2/3rds of Vietnam’s population were born after the 1975 re-unification, so the embracing of market economics will only continue to expand and grow stronger with continued use of mobile phone services.
Last, is Vietnam’s underlying embrace of micro-capitalism. The Asian Development bank reports that over 50% of Vietnam’s households run small businesses. Not surprising since the growth of mobile services and applications feeds micro-enterprising activities – from mobile banking that enables women entrepreneurs to start home businesses, to traffic jam information posted as SMS alerts, as well as daily crop prices texted to assist farmers balance their crops and create markets. Mobile phones make growth inclusive, providing a key commercial, and essential communications tool at the most individual level, with a clear association to higher living standards.
In the last three years, Vietnam’s mobile phone market has boomed, exceeding their economy’s eight percent average growth rate and posting one of the highest growth rates of mobile users in the world. This past year seven million people became new mobile subscribers, reaching 17 million of the 84 million Vietnamese, a 70% increase in one year. Market researchers expect Vietnam to have 46 million mobile phone users by 2010, growing 270 percent from today’s level. Based on the CEPR formula, Vietnam will benefit from additional GDP growth of 16% driven by the growing ubiquity of mobile communications over the next 4 years. Similarly sized Asian countries have had these contributing factors, but none as strong and simultaneous as Vietnam.
At the macro level, the blossoming Vietnamese phone companies – both state owned enterprises and privately held companies driven by investment – are becoming key government tax revenue sources, just as they have in other developing nations. As mobile phones become more of a platform for rich media such as mobile TV, which Vietnamese operators are launching this month, these mobile communications companies will morph into media companies creating and aggregating content for their subscribers.
The implications here are enormous whether commercial, sociological or political. Providing Vietnamese, whether it’s the trader, plant foreman, farmer or the smallest of entrepreneurial exporter, the path of mobile communications is unlocking individual opportunity and will help drive Vietnam’s economic growth. As Vietnam climbs from the village to the villa, mobile phones will lead the way.
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