The reality was brought up at a business development forum organized by the Ministry of Planning and Investment in Hanoi on Tuesday.

According to Nguyen Quan, former Vietnamese Minister of Science and Technology, more and more startups in Vietnam are receiving funding from foreign investment funds, which is proof of their potential for growth and innovation.

However, as these funds are based in countries and territories like Singapore, Malaysia, Thailand or Hong Kong, Vietnamese startups dependent on foreign funding tend to register their business in those countries instead of in Vietnam due to more favorable conditions.

This shows Vietnam lacks a good startup ecosystem where new startups can connect with local investment funds and feel their business can benefit from being based in the country.

By the end of 2017, there were around 40 investment funds operating in Vietnam, most of which are from foreign countries, Quan pointed out.

Citing examples from countries with a developed startup ecosystem such as the U.S. and Israel, Quan said in order for Vietnamese startups to really thrive, government policies are crucially needed as a means of ensuring stability and creating an environment where innovation is valued and supported.

There are currently 600,000 active businesses in Vietnam, and the country is welcoming around 120,000 new companies every year, said economic expert Vo Tri Thanh at Tuesday’s forum.

This growth rate may doom Vietnam’s goal of having one million enterprises in 2020, especially after factoring in a large number of businesses being closed down each year, Thanh said.

In 2016, financial powerhouses Goldman Sachs and Standard Chartered PLC raised their investment in the operator of e-wallet MoMo, a Vietnamese mobile wallet app, by $28 million, while Silicon Valley-based venture capitalist 500 Startups announced a $10 million Vietnam-focused fund.

The startup boom is the latest chapter of Vietnam's growing presence in the global tech industry, as the country reported even higher concentration of startup companies per capita in 2016 than Indonesia, China or India, according to Reuters.

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