Authorities fret over foreign firms dominating sharing economy

Foreign firms have been buying controlling shares of companies in Vietnam’s sharing economy, with several willing to take on short-term losses to acquire greater market shares in the future, according to a recent report by the Ministry of Planning and Investment.

The ride-hailing market, for instance, is led by Singapore’s Grab with 200,000 driver partners and Indonesia’s Gojek with 150,000, with some domestic players like MyGo and Aber having disappeared from the market.

In the accommodation sector, the U.S.’s Airbnb had 18,200 hosts as of last year, and in the peer-to-peer lending market, most of the 100 active companies are from China, Russia, Singapore and Indonesia.

"Without an urgent strategy to support domestic businesses, Vietnam’s sharing economy could be completely dominated by foreign companies," the report said.

The expansion of these firms has meant intensified competition for domestic companies. Southern taxi giant Vinasun has seen the number of cars go down 25 percent between 2016 and 2019 as ride-hailing firms like Grab and Gojek expanded.

One taxi firm, Comfort Delgro Savico Taxi, had to dissolve, and other companies have had to merge together to try and compete.

Economist Do Hoa said one of the reasons Vietnamese companies were losing in their own backyard was the lack of large capital needed during the cash burning period to claim a market share.

While Singapore provides tax incentives and China pumps cash into these companies, Vietnam has not given specific financial support for them, which lowers their chances to mobilize funds, he told local media.

Another strength foreign companies have is a head start in technology, while the legal framework for digital development is still incomplete in Vietnam, creating more challenges for domestic firms, he said.

"If foreign companies continue to dominate the market, they will have the power to increase prices and consumers will be hurt."

However, if the government intervenes with the right strategies, Vietnam’s sharing economy has the potential to make greater contributions to economic growth, the ministry report said.

It noted that the dominant ride-hailing companies have created jobs for hundreds of thousands of drivers, while peer-to-peer lending firms have recorded millions of transactions.

As the legal framework for sharing economy is completed, new ecosystems will be formed between companies to boost this sector’s growth, it said.

Vietnam’s internet economy has grown 16 percent from last year to $14 billion this year, its growth rate among the highest in Southeast Asia, according to a Google report.