"Startups are mostly based in Ho Chi Minh City, but they have some operation in Hanoi. It's not the largest market for them. People in Ho Chi Minh City have very different spending power and habits compared to people who live in Hanoi. Hanoians are more conservative and are less likely to spend money in a new company, but once they trust somebody, they will spend a lot. So it's a very high lifetime value customer, but it's harder to acquire. So when you have a stronger base in Ho Chi Minh first, use that power and force to go up north. It's a bit harder for new players to enter Hanoi first." - Valerie Vu
"In terms of human capital, Vietnamese youth is very competitive, very aggressive. I'm struggling to retain and hire talents here in Vietnam because they're always going after the next better opportunity. So there's no guarantee. Like I can hire a really good talent right now, but the next day they might have a very attractive offer from MBB or another large IB investment-making firm because they are so hungry and so ambitious, they're always looking out for the next better opportunity." - Valerie Vu
“We still need a lot of infrastructure investment, still need to have a lot of like highway, road, and bridges, especially in the Southern region. Now, most of the infrastructure investments are focused in the Northern region because that's where the FDI is flowing into. I can only share that the Northern region, especially Hanoi and the surrounding provinces are being more favored in terms of asset and investment allocation. So when you land in Vietnam, if you are in Hanoi airport, like Noi Bai airport, the road is entirely different compared to when you land in Tan Son Nhat airport, going to Ho Chi Minh city center. ” - Valerie Vu
1. Intel $1B Investment Withdrawal: Valerie shared that Vietnam's power outages, real estate turmoil, and anti-corruption campaign have led to delays in construction permits and licensing, which influenced Intel's decision to withdraw investment. This also caused the Danish group Pandora to announce the delay in running its factory to 2026 instead of its initial plan to start in 2025. She also explained that the country's power supply is delivered by a single state-owned company called EVN, which has faced challenges in managing resources, resulting in inconsistent power supply.
2. Vietnam Edtech Trends: Valerie stressed that while K-12 education receives ample investment, higher education and adult learning opportunities are lacking. She shared her involvement in helping recruit for Marathon Education which aims to build a Vietnamese MIT university and the potential growth in post-K12 education, including university, post-grad, and adult learning sectors. We also discussed Vietnam's edtech space and both disagreed with the notion of Vietnamese youth disengagement or "lying flat" (tang ping), as seen in China and reported by SCMP. Valerie explained that Vietnam has the second highest PISA (Programme for International Student Assessment) scores among ASEAN countries, next to Singapore. She also shared the trend of young Vietnamese holding multiple jobs or side hustles, showcasing their drive, competitiveness, and ambition.
3. Regional FDI Flow & Expansion Strategies: Valerie noted that the northern region of Vietnam is attracting more foreign direct investment (FDI) due to its infrastructure and larger workforce availability. She compared spending habits in Ho Chi Minh City and Hanoi, pointing out Ho Chi Minh City's entrepreneurial and high-value customer base. We delved into Vietnamese companies’ expansion strategies such as their movement into neighboring countries like Cambodia and Laos. Valerie mentioned companies like VinFast expanding into markets like Indonesia and Europe, representing the first generation of Vietnamese entrepreneurs attempting global expansion. She expressed optimism about Vietnam's digital economy growth, targeting 20% of GDP by 2025, and stressed the importance of supportive government policies for this expansion.
They also talked about Vietnam’s infrastructure development, the top cities and provinces attracting FDI, and the availability of human capital.
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(02:09) Jeremy Au:
Hey Valerie, welcome to my humble studio.
(02:12) Valerie Vu:
Hi, Jeremy, and I'm so honored to be the first guest in your studio. And to be honest, this is not humble. I have a podcast and I don't have a studio set up this neat.
So yeah, it's not humble at all.
(02:24) Jeremy Au:
Well, thank you very much for some of the technical dry run that we did just now, but excited to have you in person with 100 percent fast internet. Effectively between both of us this time around. Yeah.
(02:34) Jeremy Au:
So I think what we want to talk about was follow up on our last conversation a month ago, we were very excited about a lot of the semiconductor investments that were happening from the US to Vietnam. I think you want to share an update on that.
(02:44) Valerie Vu:
So I sent you an article about how Intel is withdrawing further investment in Vietnam due to the unstable power supply chain and bureaucracy in terms of permissions and licensing and construction permits in Vietnam. So I think the plan is they are using that investment to maybe shift to other countries in the region, such as Malaysia, which already has a FAB in Penang, I believe. Yeah. So it's a bit hurting.
(03:15) Jeremy Au:
Yeah. I mean, I think they've always had. Plants and quite a good engineering base in Malaysia because Malaysia also actually has that institutional memory and educational chain of engineering for semiconductors because they've been around for decades now in Penang. So, but I think it's interesting because obviously it's a good fraction of that investment we talked about, but I guess. It's still a net inflow of capital anywhere. Is this a fraction of it?
(03:36) Valerie Vu:
Yeah, it's still a net inflow, but I think we got a step up in terms of policy support and make the ease of doing business in Vietnam much more fluid.
Recently, if you know of the Danish jewelry maker, Pandora group, committed to build a new factory in Binh Duong province, and the project would be 136 million. And the factory will bring like between 7,000 to 9, 000 new jobs. And this is what I've been mentioning with you about like new middle class emerging middle class, the, a lot of people's lives will be improved, but the Danish group Pandora also recently announced that the plan might be delayed. And initially they will start, they plan to officially run the factory in 2025, but now it might be delayed to like late 2026. And the biggest reason is also the delay in getting. construction permission from the government.
(04:29) Jeremy Au:
So what's up with the delays in some of this permitting or process from your perspective?
(04:34) Valerie Vu:
I think this is still the consequence of the real estate crackdown in Vietnam and the anti-corruption campaign last year. Even though it's getting out of the way, a lot of people in government are still being very conservative right now. granting new licenses or new permission, especially in the Ministry of Construction license, because they're still waiting for things to stabilize. And I think that's why this year we have seen so many policy challenges from the construction side and real estate side of business.
(05:04) Jeremy Au:
How else has the real estate kind of like pop? How has that changed? I think a lot of the aspects of life in
(05:09) Valerie Vu:
Vietnam. I think it's poised to recover and even prosper in the future, especially in industrial real estate beause you have like many FDI projects coming from Singapore, Hong Kong, Danish, I mean, Denmark, even Germany, US getting in line to invest in Vietnam. Even Koreans like Samsung LG, want to build further, build more factories and invest further in Vietnam. So the moment. For all of the real estate recovery is coming soon, but right now the market is still recovering from the crisis last year.
(05:43) Jeremy Au:
Now, I think what I was also surprised by the announcement about why they're withdrawing the investment was that they mentioned the power supply being a problem. Could you share more about that?
(05:51) Valerie Vu:
Yeah, so the power supply is, it's a issue for the past few years because Vietnam's power supply is owned by only one company, which is EVN. It's a state-owned company that controls the majority of like power supply in Vietnam. The company is not profitable, even though they have like pretty much a hundred percent market share for Vietnam's electric. Power supply. So I think because they have too big of a monopoly power, they did not manage resources well in, especially in the North, these, the North, Northern region suffer more of an inconsistent power supply.
(06:28) Jeremy Au:
Yeah. Yeah. I was really surprised by that because I think a lot of people think of Vietnam as being very good at infrastructure building, so roads and so forth. And then what's also interesting is that. Indonesia and other side of the ASEAN, they're doing well in terms of providing sufficient power, more than sufficient power, especially in the Jakarta and Bali kind of like dynamics there.
So I was just kind of curious about what you think about that.
(06:49) Valerie Vu:
I think we still need a lot of infrastructure investment, uh, still need to be a lot of like highway, road and bridges, especially in the Southern region, uh, right now, most of the infrastructure investment are focusing in Northern region because actually that's where the FDI is flowing into. So the Southern region is being kind of the less favored region in terms of infrastructure development. So you go to airport, it's for see like the biggest city in Vietnam, the airport is not up to its standard.
(07:19) Jeremy Au:
Interesting. Yeah. Yeah. Any other kind of interesting dynamics about how infrastructure is being spent or managed across Vietnam?
(07:26) Valerie Vu:
I can only share that the Northern region, especially Hanoi and the surrounding provinces are being more favored. Terms of asset and investment allocation. So when you live in Vietnam, if you are in Hanoi airport, like Noi Bai airport, the road is entirely different compared to when you land in Tan Son Nhat airport, going to Ho Chi Minh city center.
(07:47) Jeremy Au:
I think that's interesting because you said FDI, a lot of those, you know, investments are flowing to the North. Could you share a little bit more about what? Provinces they are and why they are flowing to those areas.
(07:56) Valerie Vu:
So the top 10 cities and provinces that attracting FDI this year, Quảng Ninh, which is a northern province, is very famous for mine and resources. One of the wealthiest provinces in Vietnam as well. Hai Phong, which is another northern province. It's the largest port province in Vietnam. So a lot of trading happening here for like generation. Hanoi, which is the capital also in the North. That's where I'm from. I was born and raised in Hanoi and Ho Chi Minh city that's in the South, followed by Bac Giang, which is also another northern city, two hours away from Hanoi. So Bac Giang has been really open with opening new industrial zone. So Singapore has a project in Bac Giang and the next one is Bình Dương. So Bình Dương is a southern province that Pandora committed to build a new factory.So in the previous provinces that I just mentioned, only two cities or province on the South.
(08:46) Jeremy Au:
Right. I think what's interesting is that you mentioned is that, yeah, Singapore has done these economic zones, right? Industrial parks in Vietnam. So when you think about these provinces, do they favor specific FDI types or specific clusters?
(08:57) Valerie Vu:
I think Singapore is one of the largest industrial investors in Binh Duong. province. And now they are also one of the earliest investors in the Bac Giang, the Northern area as, as well. So they, I think they have already a strong base in the Southern region of Binh Duong and now they are moving up
(09:15) Jeremy Au:
North. Gotcha. So if someone wanted to do a, I guess, large FDI investment, how should they think about it? Should they invest in the North, in the South, specific province? How should they think about where to invest?
(09:27) Valerie Vu:
I think have to look at the openness of the government or policy makers in that province. Secondly, looking at the demographic, right? I think the northern region has more human resources for now. You don't have to shackle as hard to recruit laborers into your company, so that's why they are more project being done in and off. And so I think two biggest factors, are government policy and human resources.
(09:53) Jeremy Au:
So I think what's been interesting is you mentioned human capital availability, right? So I think this is an interesting dynamic where unemployment is not high, it's low in Vietnam. But also there are so many jobs that seem to be created. We talk about upskilling and changing job types in the future as well.
(10:07) Jeremy Au:
There was an article by SCMP, the newspaper based up Hong Kong, saying that there's a trend in China called "tang ping", which is kind of like lying flat, which is the Chinese version of slacking or coasting. So this trend of supposedly you have like taking a step back from being productive citizens and choosing to kind of like really focus on themselves and kind of like the story of, you know, 1960s in America, like tune in and drop out dynamic. So they're saying that Vietnam now has this phenomenon, and I'm not sure how valid you think that is.
(10:37) Valerie Vu:
I strongly disagree with the article. If you look at the PISA score, which is the test that measures like math and English score of students. Actually, in ASEAN, Vietnam is the second-highest PISA score, just after Singapore. And all the country, if you look at the PISA score of the entire world, we are In a bubble of high Paisa score, but we have like lower GDP per capita compared to Singapore or like South Korea, China, Japan. They also have a high PISA score, but also high GDP per capita. So we are the only exception here.
And actually, the Vietnamese youth is very competitive, very aggressive. I'm struggling to retain and hire talents here in Vietnam because they always going after the next. and better opportunity. So there's no guarantee like I can, I can hire a really good talent right now. But the next day they might have very attractive offer from MBB or another large investment banking firm because they are so like hungry and so ambitious. They're always looking out for the next better opportunity. And a lot of Gen Z, like younger Vietnamese, are not happy with just one job. They have this day job working in corporate, but at night they are doing like two, or three more side hustles, like this shirt, for example, is made by a young lady. She's only 23 years old in her day job is working for a corporate Vietnamese corporate, her night job. She's working on two fashion brands. Like one fashion brand is this kind of office. Look. Yeah. And the second fashion brand is athleisure. Yeah. More mass-market look and she's 23 years old. So I disagree that we have that phenomenon. I don't know where the writer is coming from.
(12:21) Jeremy Au:
I think maybe what the writer was, I mean, 'cause I was also writing from China, in Hong Kong, was that I think they were implying that Vietnam and China have a very strong cultural linkage in terms of internet memes or stuff like that. So I think there's a saying that there's a trend is moving about like you, I kind of feel like it's not just about Vietnam, right? But I think in China, youth unemployment is almost effectively 50%. Based on the last statistics. So obviously if you're unemployed and there's not enough good jobs, then yeah, I think it's quite easy to have a fad that's called supposedly you're lying flat, you're not working, but you're not working because there's no jobs anyway.
So it's a bit of a circular loop, right? Where it's like, there are no good jobs. So you don't want to work and you don't want to work. And this, I mean, to me, it was feel like a way to, if I take a giant step back, it's like blaming you for wanting to lie down and tune on a dropout doesn't feel like a very solvable issue. I think having good jobs is the way to solve it because I think everybody wants to work. Everybody wants to make money. Everybody wants to build a family or everybody wants to buy a home. Right. So I just feel like it's a little bit like, I don't know what's the word. We're looking at the second or third-order effect of a youth unemployment crisis. And then we're saying like, Oh, these people are lazy. But you're like,
(13:23) Valerie Vu:
Yeah, look at a small fraction.
(13:27) Jeremy Au:
Yeah, exactly. A small fraction of all the people in this fraction of people are like justifiable in the sense that it's self-justifying why they're tuning out because the job availability is not great.
But I think what's interesting is that I think Vietnam is taking a lot from the Chinese model, right? Historically in terms of the education focus, but also some of the. Industrial value chain build out as well. Right. And of course, we see a lot of Chinese manufacturers also setting up shop in Vietnam as well as part of the global China's plus one.
So, so forth. So what do you think, are there any specific, I think, differences that you think Vietnam is doing that are different from the way China is approaching development in terms of talents
(13:58) Jeremy Au:
Yeah, in terms of talent or in terms of industrial choice.
(14:01) Valerie Vu: Yeah. I think in terms of talents, we are not as aggressive, like for China right now, right, they shut down the whole edtech industry.
Yeah. They don't even, I feel like they don't even encourage students to learn foreign language or exploring international culture or study abroad, but Vietnam is. Pretty much encouraging younger students to exchange with other universities, learning different like languages. I mean, I, my, my major back in high school was French.
So we still really promote learning about all the culture, all the languages. Yeah.
(14:36) Jeremy Au:
Yeah. I think it's a big shame, right? Because education tech is also, it's not just about tech, right? It's also a way. For parents who want the best for their children, they're kind of like voting with their dollars, but also voting with the child's time and their own time.
But what do you think the future is going to be? Right. So in terms of like languages, learning computer coding, so I think it's kind of weird to us. I mean, state education is at minimum designed to be lowest common denominator because you want everybody to be educated, but it's not designed to be personalized for every child, right?
Because that's bonkers and crazy expensive. You want to do it. So I don't know. It's kind of a weird thing. China did. Yeah. Yeah.
(15:10) Jeremy Au:
So talk about the Vietnam education tech market. I mean, obviously it's quite hot. A lot of people focus on building. I recently had a presentation from marathon education. They're looking to build a university, right.
As well in Vietnam and even regionally, they announced that at the Bali education tech conference. So love to hear your point of view.
(15:28) Valerie Vu:
Yeah. So actually I helped Marathon Education recruit for their first university hire. Right. Spencer. Did you meet with Spencer? I haven't met Spencer. Yeah. You maybe get him on the pod at some point.
Yeah. Uh, but I met Spencer when he was in Fulbright University. Yeah. He left and then I connect the dot and I took the founder of Marathon Education to. Convince Spencer to join force. Yeah. I'm really excited about what Duke is building, the university vision, because again, I shared last time, I think the K-12 is getting enough investment and instruction.
The, what's beyond K 12, university post grad upskilling and enrichment learning after graduation is missing. So I'm excited about that gap. I think this year, a lot of deals, activity this year in Vietnam are in edtech. Not so much of new company, pre seed seed. You probably know of those company before, but this year I'm sure edtech is the industry that received largest amount of funding in Vietnam.
(16:24) Jeremy Au:
Yeah. I think a lot of folks are interested in space because it feels good. That's a good social purpose. It helps society go along. It builds the economy over time. So, yeah, I think a lot of interesting in education tech, any specific trends or companies you're excited about in education tech? I know last time around that you were very bullish about adult learning and you promised to announce it eventually. I don't know if you can announce it yet.
(16:44) Valerie Vu:
I can't announce yet. I'm still working on it, but yeah, it's, it's an adult learning space.
(16:49) Jeremy Au:
Okay. All right. Any other trends that you like or in education tech?
(16:55) Valerie Vu:
I think just startups that improve productivity, the Vietnamese human workforce. Yeah. Yeah. So like HR tech.
(17:05) Jeremy Au:
We were looking at an article recently about the rise of pre seed and seed funds, kind of like a landscape view across globally, but also regionally as well. So do you want, do you have any thoughts about that?
(17:14) Valerie Vu:
I think globally pre-seed and seed fund. are rising. Yeah. Because it's getting harder and harder to raise a huge growth in late-stage fund because the returns are not being shown there. If you look at the recent Instacart IPO, for example, the only investor that makes money from the Instacart IPO is The seed and serial investor.
Yeah. So it's not about like it's a trend, but I think mainly because the late-stage fund right now are getting harder to raise. And if you read recently, Co2 just raised a new fund and they have to cut management fee or the existing LPs don't have to pay management fee for this new fund. Yeah. And that's why we see more pre-seed and seed because that's, that's where the opportunity is.
That's why you can show the return and it's less challenging to raise a pre-seed fund compared to a growth and late-stage fund. Yeah. Yeah.
(18:04) Jeremy Au:
I think about the Instacart. Yeah. I think Sequoia invested three times in the Instacart and the first check made a lot of money. Second, the check was like, yeah. And the third one, they lost money versus especially that of the S&P 500, right? If it was an index fund as well. So I think it was an interesting set of numbers to look at. What do you think about the context of seed and pre-seed in the context of Southeast Asia and maybe Vietnam?
(18:25) Valerie Vu:
Yeah. So pre-seed in Vietnam in particular is much, I think much needed because the past two years, one year and a half, most investment activity in Vietnam, I think are. VC funds investing in their existing portfolio companies. So they are helping their portfolio companies first before investing in newer companies. So there are very few of you pre-seeded funds who are willing to invest in very young, like less than one year-old company. This is why I enjoy quite a good quality of deal flows and also a very attractive valuation being one of the few pre-seed funds in Vietnam right now.
(19:04) Jeremy Au:
How do you cover both Hanoi and Ho Chi Minh City?
(19:08) Valerie Vu:
Actually, the startups are mostly based in Ho Chi Minh City, but they have some operations in Hanoi. It's not the largest market for them. Ho Chi Minh City is always the biggest. business and economy hub for Vietnam. So people in Ho Chi Minh City have very different spending power and habits comparing to people who live in Hanoi. So Hanoians are more conservative and they less, they are less likely to spend money in the new company. But once they trust somebody they will spend a lot. So very high lifetime value customer, but harder to acquire. So when you have a stronger base in Ho Chi Minh first, Then use that power and force to go up north, but yeah, it's a bit harder for new players to enter Hanoi first.
(19:56) Jeremy Au:
Yeah. I think in terms of market expansion, how do Vietnamese companies think about expansion? I know I was at a Cambodia conference recently in technology and they said that there's a lot of Vietnamese companies who move from Vietnam and expand to Cambodia, for example, that common corridor or what, how would you see Vietnamese companies?
So you said one is from Ho Chi Minh City from the south to north. How else do they expand?
(20:16) Valerie Vu:
Yeah. If you look at traditional company, like much larger established company, uh, Cambodia and Laos are the first market. And, and it's usually not that, not that challenging for them to enter because there are already a lot of Vietnamese business owners in Cambodia and Laos.
And for example, rubber industry, I, I'm pretty sure, and even agriculture, I'm pretty sure a lot of rubber plantation owners in Cambodia are actually Vietnamese.
(20:41) Jeremy Au:
Yeah. Yeah. I heard also the recycling industry in Cambodia also is very Vietnamese linked as well.
(20:46) Valerie Vu:
Yeah, very Vietnamese. I can go to Cambodia and Laos and find me and speak Vietnamese.
(20:52) Jeremy Au: Y
eah. That's the test to find out. Yeah. I think what's interesting is that I think there's a question which is like, how culturally fluent are the Vietnamese in expanding to the rest of Southeast Asia, right? So how comfortable are the Vietnamese expanding to Indonesia, to the Philippines, to Singapore, to Malaysia, to Thailand? How do you think about that?
(21:09) Valerie Vu:
Yeah, this is another kind of, I guess, like challenge because we only starting to expand regionally recently. And for example, the corporate like mobile world, they actually shut down the Cambodian expansion. They shut down the Cambodia store and now they're pivoting to Indonesia.
So they partner, partnering with an Indonesian local partner to open a new like a mobile world store in Jakarta. Well, there is. Succeed. I'm not sure they just partner like late last year, late 2022. And I think opening like this year. So too early to tell. This is going to be the first generation of entrepreneurs who are expanding globally.
And if you look at VinFast, the chairman mindset is pretty much like we, we will go. Hard or go home. So he committed to invest in Indonesia. So he want to sell it to India. I think he already have a country manager in Indonesia, India, Europe and US, of course.
(22:05) Jeremy Au:
Wrapping things up here. Any other differences that you see between the North and the South or within provinces that you think are important for people to think about?
(22:11) Valerie Vu:
I think most importantly is the behavior of the two. If you want to expand to Vietnam, then you should observe those differences.
(22:20) Jeremy Au:
Test it out. Yeah. Both sides. Yeah. But I think what I find most interesting is that the way you said is like the South is more entrepreneurial, more startups, but the FDI is moving to the North where there's better infrastructure, more human capital. So it's quite interesting.
(22:32) Valerie Vu:
So long term goal is we, the economic development will be even out. Yeah. Between the two. Right. I mean, though. Whole across region Vietnam. So if you look at the Bain report recently, the economy in South Asia, so right now digital economy of Vietnam is 30 billion, which is less than 10 percent of Vietnam GDP, but actually our government goal is to get it to 20 percent of our GDP by 2025 and even 30 percent in the next 10 years. Yeah. So there's huge opportunity for tech setups to tackle on and, but we need the government to, to be more open minded and have a friendlier policy as well. Yeah. On that note, thank you so much.
(23:13) Jeremy Au:
I'd love to summarize the three big takeaways. First of all, thank you so much for sharing, uh, about the recent update by Intel to withdraw its investment plan in Vietnam. I thought it was interesting to dissect a little bit about the reasons why. So we talk about policy differences, uh, that's there in terms of the slow down due to real estate bust, but also due to the power and infrastructure availability that's available. So I thought it was a very interesting case study about something that happened, but actually providing a lot more color from an insider's perspective and a local's perspective about why it happened.
Secondly, thank you so much for sharing about. Human capability, availability across different regions at a provincial level, but also talking about why FDI is flowing, where it's flowing more to the north, but also we talked about some of the regional differences, which I think even for myself is new. And lastly, thanks so much for sharing about what you're seeing in the education space about the next generation of youth.
We both don't believe in "tang ping" that's happening by SEMP. So I guess, uh, we're on a racket for disagreeing with them, but we believe that I think there's a lot of hunger by the youth to learn as that thing. That also shows up in the education tech sector as well. On that note, thank you so much, Valerie.
(24:20) Valerie Vu: