Category Archives: Tech

Blockchain Explained: Hashes and Hexadecimals

For cryptocurrency miners, the aim of the game is to calculate the correct hash of each block. Each hash calculated by a miner has the same chance of being successful in this. In this article, we use the example of Bitcoin to explain aspects of how hashes work in practice.


When a block is generated, its block header contains a 256-bit hash of the previous block header in the blockchain, and another 256-bit hash of the Merkle Root of the block itself.

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The 256-bit hash is often expressed as a number in hexadecimal format. Rather than using base 10 decimals, hexadecimals use 0-9 followed by a-f. Each hex digit expresses a 4-bit binary string. An example of a hash expressed as a hexadecimal string is:
9a1f3a322ff119def6f220fe2bb37297b4d87e09fb93905d70dc0cf049684789

Public and Private Keys

Hashes are also used in derivation of public and private keys.

The public key can be shared safely with others, and the private key can be used to verify ownership of a particular address. Think of the pair as a public account number, and a private PIN. Sample public and private key pairs for Bitcoin can be generated online, and in Bitcoin clients.

The private key is an unsigned 256-bit (32 byte) number, and the public key is usually expressed as a 33 byte number comprising of a 256-bit number and a prefix. These pairs are derived from hashes of the Eliptic Curve Digital Signature Algorithm (ECDSA) in the process shown below.

PubKeyToAddr

If you have downloaded a wallet client, the public/private keypair is stored in the wallet data file, usually identifiable by its file name “wallet.dat”.

Base58Check

Base58Check is used to create more widely shared Bitcoin addresses. For example, the address which received the reward for mining the Bitcoin genesis block can be noted as: 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa

The original Bitcoin client justifies using Base58 due to its exclusion of sometimes identical-looking characters 0, O, I and l. Use of this method was justified by Bitcoin’s creator due to ease of alphanumeric characters to be accepted as account numbers, ease of users to select an alphanumeric address by double clicking, and ability to express such addresses clearly in communications.

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Blockchain Explained: Block Headers

In this article, we examine the contents of the block header in Bitcoin’s blockchain, including the previous block hash, Merkle Root, and other details.


Each block in Bitcoin’s blockchain public ledger has an 80 byte block header, which contains metadata about the block. The position of each block in the blockchain is identifiable by a hash of its block header and its number, known as its “height”. For the purpose of this example, we will look at Block 398765. The hash of our example is:
000000000000000004fb5c6a6285e983e49eec2b74078b5b0495a3cfe1bc7d25

Previous Block Hash

Every block other than the first genesis block contains a hash of the previous block in the block header’s 32-byte previous block hash field. The previous block in the chain is known as the parent, and a block can only have one parent.

In our example, the previous block hash is:
000000000000000006e070aceb085c3ffb1cfb714d86958c62f7cdbe98bf5132

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As a block’s header contains a hash of the previous block, changes in a parent block cause subsequent changes in the more recent “child” block next along in the chain, which in turn changes the next block. It becomes more difficult for rewritten transaction history to be accepted by nodes on the network when such an action would require changes to multiple blocks in the chain. This acts as a significant obstacle to manipulation of transaction information in the blockchain, particularly for older blocks.

Merkle Root

The block header also contains a 32-byte hash of a summary of the Merkle Tree of the block’s transactions, known as the Merkle Root. The Merkle Tree contains summaries of all transactions recorded within a block, and can be used to verify records of transactions in a block.

The Merkle Root for block 398765 is:
866cfa8c0a49fc9c2f462a8a32630ebcec2fb0c446163afa135922af2e616acb

Other Details in the Block Header

The block header also contains 4 bytes each of information on the version of software used, a timestamp (measured in seconds from Unix time) the nonce and difficulty target.

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The difficulty target is a representation of how difficult it is to mine a block, based on a periodic review of the network’s hashing power. The target is set according to the proof of work mechanism.

The header also contains the value of the nonce, a number which results in a block header hash under that expressed in the difficulty target.

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Blockchain Explained: Merkle Trees

In this article, we examine how Merkle Trees are used to verify authenticity of the blockchain public ledger used in Bitcoin, allowing the network to agree on transaction records.


In blockchain networks, each node verifies the authenticity of each block in the chain. To ensure that public records of transactions stored within the blocks are recognised as valid, blockchain technology makes use of the Merkle Tree. Each block in the chain contains its own Merkle Root.

This data structure makes use of the SHA-256 cryptographic hash function to create a Merkle Root from the records of all transactions recorded in the block.

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Each transaction in the block is hashed using SHA-256, and the result of each hash is paired and concatenated with the result of another hashed transactions in the block. The results of these hashes are paired and hashed again until we eventually reach the root.

Make a Hash of the Leaves to Reach the Root

Consider a block in which three transactions are recorded, a, b and c.

As the Merkle Tree is binary, when the number of transactions in a block is odd, one of the transactions if repeated to facilitate pairing. In the example below, transaction c is double hashed twice. These are represented in the “leaves” in the bottom row of the below diagram.

D5 and D6 are hashes of concatenated pairs of double hashed transactions, and the double hash of this pair becomes our block’s Merkle Root.

Merkle Tree Upright

Merkle Paths to Blockchain Verification

In developed blockchain networks including Bitcoin, there could be thousands of transactions per block. No matter how many transactions, each block will have only one root. This root is a 32-byte hash, and is a summary of all transactions in each block.

In order to verify that a transaction has been recorded in a block, a Merkle Path authenticates that the transaction is connected to the root. The path to the record of a single transaction is traced through a binary logarithm, allowing nodes to identify paths to verify a transaction which are a mere fraction of the size of a whole block.

Identification of a transaction is still possible when a node downloads only the block headers, rather than the entire blockchain. As it can take days to download the blockchains of many popular cryptocurrencies, this is a significant plus. This method is used widely by Simplified Payment Verification (SPV) client nodes.

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One drawback to using SPV to verify a transaction is that an SPV client can be misled by dishonest nodes on the network which omit transactions from the blockchain. Connecting the SPV to multiple nodes does not remove this risk.

A second risk stems from inability to mask public addresses of users of the SPV client. If the client aims to reduce bandwidth by not downloading all blocks, requesting details of specific transactions from other nodes grants those nodes a view of all public addresses associated with the user. Bloom filters address this issue by requesting only matching transactions and partial Merkle Trees from other nodes.

See the Wood for the Trees

For blockchain technology to take hold globally, it needs to be able to operate efficiently in low bandwidth environments. Using Merkle Trees can be an effective way to facilitate this. The clear benefits of streamlining the verification process by reducing bandwidth should be kept in mind.

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Blockchain: Does it Scale?

Charles Small has managed multiple market research projects for companies considering establishing high-tech projects, including in-depth analysis of payment habits in the Asia-Pacific. For a free consultation, email Charles at: charles@csmall.co.uk


Scalability is the most integral part of building a successful enterprise. For a business to be scalable, it must be able to expand with minimal incremental cost.

For example, translation services are far less scalable than software services. While the cost in each professional translation project accounts for established expertise and human input, the cost of goods sold of a software product reduce dramatically following development of the first copy.

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For Blockchain, the issue now is whether the network itself has the capacity to support its user base. The distributed ledger in each block contains a record of the transactions which have taken place in the time the block was generated, and there is a limit to how much data each block can contain.

A team of researchers have released a paper addressing this issue, predicting from current trends that the blockchain will reach maximum capacity of transactions per block by 2017.

To Confirm, How Limited is the Blockchain?

For cryptocurrency standards, Bitcoin is slow-paced. It takes around 10 minutes for each confirmation of a transaction. Due to the risk of double spending, those accepting Bitcoin payments  often wait for two or more confirmations before the payment is processed. Other cryptocurrencies offer shorter block generation time, but risks associated with lower numbers of users mean that those accepting payments wait for many more confirmed blocks from the network before accepting the payment. This is far from instant.

The number of transactions which the blockchain can handle does not compare favorably to established payment providers. While Bitcoin can confirm up to only seven transactions per second, Visa’s network can confirm 2,000 on average.

The team of researchers state that “fundamental protocol redesign is needed for blockchains to scale significantly while retaining their decentralization“.

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The team suggests several techniques to support scalability of blockchain technology, including both incremental changes and radical redesigns. The researchers take on the issue of consensus in the network, and inefficiencies in the current system.

Bitcoin’s Network Plane is identified as the bottleneck in processing transactions due to a combination of local validation of each transaction by each node, and repeated propagation of transactions by nodes in both the validation and block generation phases. Simply put, each node in the network confirms that a transaction happens, broadcasts this to other nodes, then validates it in a block.

The problem of consensus has been addressed by some proof of stake cryptocurrencies, whereby those with a stake in the cryptocurrency have the right of block generation. However, the likelihood of successfully changing the nature of Bitcoin from a proof of work cryptocurrency is minimal.

The community is working hard to solve the problem of blockchain scalability, but it will be a gradual process. Expect more on this issue as we approach the transactions per block limit. Considering the high impact of negative news on cryptocurrency prices, this will come hand in hand with market volatility.

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Blockchain Voting: Direct & Indirect Democracy

Charles Small has managed multiple market research projects for companies considering establishing high-tech projects, including in-depth analysis of payment habits in the Asia-Pacific. For a free consultation, email Charles at: charles@csmall.co.uk


Many are familiar with the use of blockchain technology in Bitcoin and related cryptocurrencies, but its applications in voting systems are still largely unknown. Here, we explain how blockchain technology can facilitate simultaneous direct and indirect democracy.

Voting with Your Wallet

The traditional concept of voting in a representative democracy is straightforward. Voters physically travel to a particular place at a set time to cast a ballot, choosing their representative to stand up for them in government.

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Voting on the blockchain offers many more possibilities. When using this technology, an individual’s votes can be stored in and transferred from their personal wallet. All blockchain transactions are also publicly verifiable through the distributed ledger, meaning that all users can see which votes are cast. Lengthy vote recounts at the eleventh hour would no longer be necessary.

Additionally, it allows for a combination of political systems to exist simultaneously.

Simultaneous Direct and Indirect Democracy

Some traditional voting systems make use of direct democracy, whereby constituents vote on issues themselves in referenda or cantons. Most national governments use indirect or representative democracy, involving the delegation of power by the electorate to representatives in government. Several use a combination of the two.

Blockchain voting presents an opportunity for both systems to live side by side, and for members of the electorate to change between the two.

Imagine a situation whereby you choose a representative by assigning them your vote online. On the blockchain, this is recorded as a transaction, and the number of votes the representative receives from you and others is traceable and quantifiable. The representative can then use this legitimacy conferred on them by the electorate to vote on individual issues.

But what if you are unsatisfied with the way the representative votes?

In the U.S., the right to recall allows the electorate to remove a representative from office and prevent them from exercising votes. However, this system does not guarantee that the next representative will vote in the way the electorate wishes.

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By ensuring that blockchain voting transactions are reversible, the electorate could recall votes delegated to a representative immediately. These could then be used by individual voters directly to vote as they wish.

Simply put, this allows voters to be as engaged in the political process as they wish to be. Too busy to get involved in politics? Delegate your vote to a representative. Your views don’t align with representatives’? Vote on issues the way you want.

This raises the possibility that voting behaviour of representatives would change following implementation of such a voting system. It is likely that representatives could become more responsive to the wishes of the electorate who choose them.

For now, the inadequacies of the recall system mean that despite the democratic nature of many of the world’s political systems, the electorate’s views are inadequately represented. As the gap between the desire of the electorate and the actions of the government is the fundamental reason for political unrest, this new technology presents an opportunity to reduce political instability by bridging the gap.

Several groups have attempted to incorporate blockchain tech into voting systems, including 2014’s Project Votecoin, and Australia’s Flux. The potential for this disruptive technology to change the way political systems work should not be underestimated.

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Why Apple, Google, Samsung, and Facebook are Launching Payment Services

Charles Small has managed multiple market research projects for companies considering establishing high-tech projects, including in-depth analysis of payment habits in the Asia-Pacific. For a free consultation, email Charles at: charles@csmall.co.uk


Opportunities for payment service providers are phenomenal. There were an estimated 358 billion non-cash global transactions in 2013, and the World Bank predicts the global value of remittance payments alone will reach US$681bn in 2016.

Just as inadequate internet infrastructure incentivised the mobile payments revolution in East Africa, high-cost payments to intermediaries in traditional transfers encourage use of new payment methods. In the developing world, leapfrogging could leave traditional service providers behind; in Vietnam only one in three people have access to a bank account, as many as who use the internet on smartphones.

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Many new providers make use of contactless near field communication (NFC) technology, already used widely in card payments, including at 250,000 UK retail outlets. In mobile payments, MasterCard Digital Enablement Service (MDES) and others provide an added layer of security above standard two-factor authentication (2FA).

appleApple is integrating its hardware and software business lines with Apple Pay. iPad and iPhone 6 owners can use the service to pay within apps. Apple Watch and iPhone 6s use MDS and are compatible with NFC in-store purchases using AmEx, MasterCard, and Visa. Within weeks of launching, Apple Pay had a 2% share of US digital payments. Over one billion iOS devices have been sold globally, giving Apple a unique advantage in market share.

googleGoogle is integrating Android Pay with its existing Google Wallet, released in 2011 in the US. Both use NFC. Android Pay works on Android 4.4 and over, and supports AmEx, Discover, MasterCard and Visa, and allows in-app purchases. Fingerprint verification is optional. Google Wallet uses coupons, credit and debit cards. It focuses on peer-peer transactions, including via Gmail.

samsungSamsung provides a unique offering through its 2015 acquisition of LoopPay. Compatible phones will first try paying with NFC. If that fails, devices emulate a magnetic strip to mimic traditional cards. Like Apple Pay, Samsung has integrated with MDES. It works in the US with AmEx, MasterCard and Visa. Samsung Pay is currently available in South Korea and the US.

facebookFree friend-friend Facebook Payments are supported for US debits cards in Facebook Chat. Facebook is rolling out in-site buy buttons and shops, and event page ticket purchases. CEO Mark Zuckerberg is open to partnering with other payment services, including Apple Pay. While not intending to become a payment business, it aims to keep users on-site to increase ad revenue.

Overcome payment challenges to amplify social network presence

Regulatory regimes are an obstacle. Alibaba and Tencent’s attempts to provide digital credit cards to shoppers were blocked by the Chinese authorities. Globally, differing regimes alter incentives. Due to interchange fee caps in the European Economic Area, Apple reportedly receives a significantly lower cut of Apple Pay payments in the UK than its 0.15% US cut.

Providers also need to adjust for lag in adoption. Although the UK raised the contactless transaction limit from £20 to £30, payment devices rolled out earlier have not all been adjusted.

Related: Tax Incentives in High-Tech Vietnam

Of the four companies, Apple most promotes its various security measures, claiming that it doesn’t track payments between banks, customers and vendors. Other measures currently include 2FA, fingerprint scanning, and not storing card numbers on devices using the technology. As Facebook currently offers only pin or password protection for its peer-peer transactions, the company should promote the use of mobile devices’ fingerprint scanners to take the place of traditional passwords.

Further leveraging social networks should be the target of service providers. Apps including Venmo already allow users to share financial transactions on social media, granting retailers and payment providers additional exposure. As mobile devices bridge the gap between in-store purchases and online presences, it is clear to see why we should keenly follow integration of payment services with Facebook’s network of over 1.5 billion reported users, who generate over a billion Facebook Page views a month.

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High-Tech Vietnam: Tax Incentives

Charles Small has worked in Vietnam since 2012, and has managed multiple market research projects for companies considering establishing high-tech projects in the country. For a free consultation, email Charles at: charles@csmall.co.uk


Tax Incentives for High-Tech Investment in Vietnam

When considering a presence on the ground, potential tax liabilities must always be considered. In Vietnam, the government promotes high-tech activities by granting foreign investors tax incentives to operate in the country.

Instead of paying the 20% corporate income tax (CIT) rate, those investing in high-tech operations in Vietnam could benefit from reduced CIT rates of 10% for 15 years, and 17% for a further 10 years. Incomes of certain high-tech enterprises may be exempt from taxation for up to four years, and benefit from a 50% tax reduction for a further nine years.

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High-tech enterprises in Vietnam are defined according to several criteria. They must derive at least 70% of annual revenue from high-tech products, and allocate certain proportions of resources to research and development (R&D).

For enterprises with capital of under VND100 billion (US$4.47 million) to be classified as high-tech, a minimum of 1% of capital should be allocated to R&D, with at least 5% of the workforce involved in R&D educated to bachelor level or higher.

Related: Vietnam’s Cyber Security Framework

For those with capital of VND100 billion or higher seeking high-tech classification, at least 0.5% of capital would need to be allocated to R&D, with at least 2.5% of a minimum of 300 employees involved in R&D educated to bachelors degree or higher.

High-Tech Not All Low-Tax

Not all foreign investors have benefited from the incentives. Microsoft Mobile Vietnam, formerly Nokia Vietnam, recently paid VND191 billion (US$8.53 million) in CIT arrears and late payment fines to the Bac Ninh Department of Taxation for 2013 and 2014.

If the Ministry of Science and Technology had granted the relevant high-tech enterprises certificate, the company would have benefited from the 0% CIT rate for 2013-2016, as well as a 50% reduction in the CIT rate for a further nine years.

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However, after acquiring Nokia’s operations in 2015, Microsoft Mobile Vietnam reportedly only applied for the same incentives granted to projects in industrial parks in the same year. As such, the company only benefits from a 50% CIT reduction for the four years 2015-2018, and is paying arrears for the preceding period.

The issue here appears to be related to the Bac Ninh factory not submitting reports on nine criteria arranged with the Ministry of Planning and Investment, following Microsoft’s acquisition. Criteria were reportedly related to local content in products, and sales to the domestic market.

If you are considering setting up a high-tech enterprise in Vietnam, it pays to know which incentives your business could benefit from. Tax incentives are of course only one part of the picture. Investors in Vietnam also benefit from a computer-literate and low-cost workforce, government sector development programs, and a stable political environment.

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$15bn for Telecoms Companies in Vietnam

Vietnam’s telecoms sector saw total revenue of an estimated VND340 trillion (US$15.1 billion) in 2015, with total sector profits of VND56 trillion (US$2.5 billion). The sector contributed VND47 trillion (US$2.1 billion) to Vietnam’s state budget. However, overall subscription numbers declined to 122 million, 20 million lower than in 2014.

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Viet Nam Posts and Telecommunications Group (VNPT), owner of VinaPhone, saw expected revenue of VND89 trillion (US$4 billion), a 7.5 increase from 2014. Profit of VNPT’s telecoms and IT sectors increased 21.7 percent from 2014 to reach VND3.1 trillion (US$136 million). By the end of the year, the majority of VNPT’s 33.7 million telephone subscribers were the 29.7 million VinaPhone subscribers, up 3.3 million from 2014.

MobiFone Going Alone

Rival MobiFone acquired 15 million new subscribers, a growth of 54 percent from 2014. Despite the large increase in subscriptions, the firm’s profit increased by only 1.1 percent to VND7.4 trillion (US$329 million).

MobiFone became an independent corporation following restructuring of VNPT in 2014-15 under Prime Minister Dung’s Decision 888/QD-TTg. During the process, VNPT also divested from Bao Minh Insurance Corporation, along with a commercial joint stock bank, four funds, four limited liability companies, and 53 joint stock companies. Three new corporations were established under the state-owned VNPT, being VNPT-Media, VNPT-Net, and VNPT-VinaPhone.

Meanwhile, Viettel Group added six million subscribers to its Viettel network, and Hanoi Telecom’s Vietnammobile reached an estimated 11 million subscriptions.

National Telecommunication Development Plan Until 2020

Vietnam is currently pursuing telecoms sector development under a national development plan. The plan targets mobile phone network coverage for 95% of the country’s population by 2020, and aims for 60% of the population to be internet users by that year.

The plan sets out telecommunications sector restructuring through mergers and acquisitions, aiming to form three to four large groups. State-owned enterprises are the key focus due to perceived inefficiencies in use of infrastructure and resources.

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Vietnam’s Cyber Security Framework

Vietnam’s Law on Network Information Safety, coming into effect on 1 July 2016, provides a framework for cyber security in the country. Stated aims of the legislation include stepping up surveillance and risk prevention, ensuring effective state management, and improving the quality of life of citizens through socioeconomic development. Its eight chapters delineate the rights and responsibilities of relevant agencies, organisations and individuals, and cover technical standards, human resources, and network security, including civil ciphers.

The law encourages state agencies, enterprises and other organisations to outsource to specialist security service providers. While security services are restricted from foreign investment in Vietnam, IT consulting services are permitted.

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Within Vietnam’s developing legal system, the full picture is not always immediately apparent. Vietnam’s Deputy Minister of Information and Communications has requested clarity from the Department of Information Security on the law, and the Department’s Director has announced that finalising two decrees to support implementation of the new law is a priority.

Related: Vietnam IT Workforce Capacity Shortfall by 2020

The Deputy Minister has also warned of threats to Vietnam’s critical infrastructure, at a time when Vietnam gradually move towards the e-governance model. This model is supported by Resolution 36a/NQ-CP, which aims to simplify processes in the provision of online government services, and reduce time and cost of administrative procedures.

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Vietnam: IT Workforce Capacity Shortfall by 2020

Vietnam is to face a shortage of half a million IT professionals by 2020, According to a new report by recruitment company VietnamWorks.

The figure is projected to be 78 percent of market demand by the end of the decade, as demand for IT professionals continues to outstrip the supply of new entrants to the job market. Vietnam has seen an annual 47 percent growth in demand for IT jobs, compared to only an eight percent growth in labour supply.

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Web and Java development are projected to be the highest demanded skills. The highest growth in the past year has been in positions for those with expertise in NET, C/C++, Java, PHP and Web development.

The report elaborates that over the last four years, the number of software firms in Vietnam has risen by 124 percent, and the number of IT companies by 69 percent.

The country had over 170,000 university students enrolled in IT-related courses in 2012.

Outsourcing IT to Vietnam

Hanoi and Ho Chi Minh City have become top destinations for outsourcing; Tholons’ 2015 Top 100 Outsourcing Destinations report put Ho Chi Minh City in 18th and Hanoi in 20th place globally.

Key factors driving choice of Vietnam as an outsourcing destination include the relatively low cost of skilled workers, existing government-backed training programmes, and its strategic location in the heart of the Asia-Pacific region.

Related: Vietnam: Long-Awaited Investment Law Guidelines Promulgated

Tax incentives also exist for those investing in hi-tech industries in the country.

As well as software development, a big draw of Vietnam’s talent is to computer hardware manufacturing. Companies have not always found the local labour market to have relevant skill sets, and employers often invest in extensive training for employees.

Interested in IT in Vietnam? Our consultants have a wealth of expertise writing market entry reports for companies considering Vietnam as a location for an IT hub.

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