Exclusive-Netflix Making Preparations To Open Vietnam Office - Sources

U.S streaming giant Netflix Inc is making preparations to open an office in Vietnam after years of negotiations with authorities and completing a risk assessment, two sources with knowledge of the matter said.

A local office would make Netflix the first major U.S tech firm with a direct presence in the fast-growing Southeast Asian country of 100 million, increasingly seen as too lucrative to ignore despite wariness over its stringent internet rules.

Netflix declined to comment in response to Reuters questions about its plans and its current operations in Vietnam.

The company is in the early stage of planning for a local entity in Vietnam after completing an assessment in late 2022 that evaluated security and political risks of operating an office in Vietnam and the handling of user data and sensitive content, the sources said.

The people declined to be identified because the preparations are confidential.

The office could open as early as late 2023 but will require a lengthy regulatory process that could take longer, according to one of the sources.

Authorities announced a new decree, effective from January, requiring video-on-demand service providers to seek licences from the Vietnamese government to operate, which would in turn require establishing a local office, although details of implementation remain unclear.

Vietnam has proven complex for tech firms to navigate, due in part to a lack of clarity on specific requirements and enforcement mechanisms for its often strict regulations, foreign executives familiar with operations in the country have said.

Although Vietnam's cybersecurity law of 2018 requires all foreign businesses earning income from online activities in Vietnam to open a local office, only TikTok owner ByteDance has so far complied, even though several other social media providers count Vietnam as one of their top-10 global markets.

As Vietnamese officials grow more confident in the country's rising consumer power, however, they have begun ramping up pressure on tech firms to abide by the rules.

They threatened to shut down Facebook in 2020 over political content on the platform, and in 2022 introduced new regulations requiring that tech firms store user data locally and that social media firms remove within 24 hours what the authorities deem to be false content.

NETFLIX MEETING

Netflix told senior Vietnamese government officials it was studying the possibility of opening a local representative office during a December 2022 meeting with the firm's Asia business strategy vice president, according to a statement posted on the Ministry of Planning and Investment's website.

Nguyen Van Doan, a senior official at the ministry, "expressed his wish that Netflix soon establish a legal entity in Vietnam and contribute to the development of the Vietnamese economy," the statement said.

Vietnam's information ministry did not respond to a request for comment.

With the fastest growing middle class in Southeast Asia, Vietnam has become a key market for tech giants.

Its digital economy including fintech, e-commerce and online entertainment is on track to grow to nearly $50 billion in total transactions per year by 2025, more than double last year's figure, according to a report by Google, Temasek Holdings and Bain & Company.

Vietnam's ruling Communist Party maintains tight media censorship and tolerates little dissent, with strict rules over online content, while the government is keeping increasingly close tabs on foreign players in the sector.

The authorities announced last month that they had collected 1.8 trillion dong ($78 million) in taxes from Google, Meta, Netflix and TikTok in 2022.

The Vietnamese government had for years been demanding tax payments by tech giants, including Netflix, that were operating without local offices, according to sources familiar with the matter.

Companies had said they lacked a proper mechanism to pay tax in Vietnam, although this was addressed last year with the creation of an online portal for that purpose.

Social media companies have faced particular pressure over content, including pending rules over the posting of news-related content on social media accounts, although Netflix has also on occasion been the target of public orders by the government to block domestic access to content judged "offensive to the Vietnamese people".

This included in 2022 the Hollywood film "Uncharted", which referenced Chinese claims in the South China Sea, and the South Korean drama "Little Women", which contained scenes of the Vietnam War.