Vietnam: Putin Bamboo Strategy, Data Sovereignty & 49% Foreign Ownership Limit & Investment Landscape with Valerie Vu - E449

Valerie Vu, Founding Partner of Ansible Ventures, and Jeremy Au discussed three main themes:

1. Putin Bamboo Strategy: Vietnam’s “bamboo strategy” foreign policy involves maintaining strong roots while being flexible, which allows Vietnam to navigate relationships with global superpowers like the US, China, and Russia. Valerie highlighted that in less than a year, Vietnam hosted visits from Presidents Xi Jinping, Joe Biden, and Vladimir Putin. This balancing act is crucial for Vietnam given its historical ties with Russia for military supplies and Vietnam war support, and its growing economic connections with the US and China. Valerie also pointed out that while the US expressed disappointment over Putin’s visit, Vietnam’s neutral stance is essential for its strategic, political, and economic interests.

2. Data Sovereignty & 49% Foreign Ownership Limit: Vietnam's new data sovereignty laws require tech giants like Amazon and Google to store data locally, similar to China and USA. They also discussed the foreign ownership cap, which limits foreign entities to 49% ownership in sensitive sectors like banking to safeguard national interests. However, insufficient local data capacity has led Vietnam to now allow 100% foreign ownership in data centers to attract more data center operators.

3. Investment Landscape: Valerie shared insights into the sectors thriving in Vietnam despite global financial uncertainties. She mentioned that consumer goods, healthcare, and education are performing exceptionally well. She discussed the challenges faced by fintech startups in Vietnam, particularly due to the lack of an open regulatory sandbox and the dominance of well-established banks.

Jeremy and Valerie also discussed the impact of geopolitical tensions on FDI in Vietnam, the importance of infrastructure development for sustained economic growth, and the shift in educational trends.

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(01:40) Jeremy Au:

Hey, good morning.

(01:41) Valerie Vu:

Hi, Jeremy.

(01:42) Jeremy Au:

Good to have you in person again.

(01:43) Valerie Vu:

Yeah. Happy to be back here again.

(01:45) Jeremy Au:

Yeah. I think it's an interesting contrast between when we do it online versus doing it in person.

(01:50) Valerie Vu:

Yeah. Not much contrast.

(01:52) Jeremy Au:

Not much contrast to you? Yeah, yeah, yeah, yeah, Mix it up for people who are listening in, I guess. So I guess we want to talk about the big news, which is this month, which was, it was a crazy year because, you you had, Xi Jinping come to Vietnam, you had Biden come to Vietnam and now you have Putin.

(02:05) Valerie Vu:

Yeah, I think Vietnam is the only country in the world that welcomed three presidents of China, U. S. and Russia visit in less than a year. Probably less than six months. All three of them visited. Wow. So last week, Putin and his government, including ministry of trade, finance. So he put in, brought a big entourage to Vietnam and we hosted them. We had a big ceremony to host them, including our new president. So it was a big headline, some not so positive about the news and some are like, you know, this is Vietnam doing the right thing. So a lot of people ask me about this visit, actually. They're very confused.

(02:42) Jeremy Au:

Why are they confused?

(02:43) Valerie Vu:

Yeah. Because like I mentioned, no country in the past year hosted three presidents at the same time. So they don't know where Vietnam stand. U. S. has expressed some disappointment that we hosted Putin and his delegate, but essentially we have no choice.

Our foreign policy strategy is more like "bamboo strategy", meaning we are very flexible, but we have strong, resilient roots. That's where the bamboo analogy is coming from. We have to welcome all three parties because all three are very important strategically, politically, and logics. Yeah, also military wise, very important for us. If in the past, Russia was the largest and still the largest weapons supplier and exporter to Vietnam. That's why we have to welcome and greet Putin and his delegate. But as I mentioned, the U. S. government expressed some disappointment. And some of the business communities, investor, have expressed to me that if this visit result in further trade agreement between Vietnam and Russia, then it might cause a lot of stop in foreign direct investment from US, which has been increasing over the years.

(03:48) Jeremy Au:

It's actually interesting because, I'm a history buff, in the US-Vietnam war, the biggest supplier was Russia during that time frame as well so there's a lot of obviously arms industry links, even today, like you said, number one supplier of armaments today to Vietnam. And also during the Vietnam-China war, Russia was supporting Vietnam during the time frame, which happened after the Vietnam-US war. So I think it's quite understandable that the political elite, I would say, who have been around since that time should still have those connections with the Russian government.

(04:18) Valerie Vu:

Yeah. So back in that time most of, let's say elites, especially politicians were educated in Russia or former Soviet Union. Today, the number of students who study abroad, in Russia, is much less than Vietnamese student who study abroad in America. I was one of them. I studied abroad in the US, so there's definitely a shift in terms of like education choice, but in terms of like military, we still have close ties with Russia. And that's why we still remain neutral in the Ukraine and Russia stands. Yeah, but that kind of create a lot of question and concern from fellow investor community. The Koreans are asking, a few like Filipino investors are asking, asking me about what Vietnam stand and why are you guys doing this?

(05:01) Jeremy Au:

Yeah. I mean, I think it makes sense from a national security perspective again, because of the arms export industry, the political links, the communism, and some of the heritage, the shared interests and balancing. So I think, just me at least, I think the Russia, Vietnam is surprising and not really surprising based on the history but like you said, I think the future of Vietnam is very dependent on the investment flows, right? And we talked about it in past episodes. One, of course, like you say, is from, America. A lot of it's flowing to the south of Vietnam still, for tech, for investment, companies. Of course, you said from Chinese capitals also coming in for factories, for infrastructure as well.

(05:34) Valerie Vu:

Yeah. Our neutral stand, we keep our neutral stand, but the common, agreement is to attract further investment to Vietnam and in the side of US, a lot of corporates, not mostly tech right now, like NVIDIA, SpaceX, are engaging actively with Vietnam for further investment, including Apple as well. And yeah, as you mentioned, the Chinese side, we signed an agreement to start the high speed rail from Vietnam to China.

(05:59) Jeremy Au:

You mentioned about the bamboo strategy. Can you explain how do people talk about the bamboo strategy?

(06:04) Valerie Vu:

I think in the press community, people know that we have to use and implement bamboo strategy, meaning having a strong root, but very flexible. That's the press community, but I think the business community, most of them don't really understand. So most of them are more worried.

(06:19) Jeremy Au:

Yeah, I think the bamboo strategy is just that Vietnam is pro-Vietnam. Out of all true, then just like how Singapore is pro-Singapore, and Indonesia is pro-Indonesia. I think everybody cares about their own national interests first, and I think it makes sense because Vietnam, you have a shared border with China. In the past, your offshore balancer was, Russia and Soviet Union, and then now the US is another offshore balancer against China, but China provides a lot of the trade and commerce, and I think it's just stay neutral is the strategy for most of Southeast Asia countries right now.

(06:47) Valerie Vu:

Yeah, I understand their concern as well, because especially for the fund manager s, I think now politics plays such an important role for the entire fund performance. If the country doesn't handle geopolitical risk the investment can go to zero. So among the investment professionals, recently in my catch up, the first question is what's going on with Vietnam politics?

(07:08) Jeremy Au:

It's understandable because a lot of the US denominated funds, unfortunately had to pull out of China because of the geopolitics as well, which is, America basically said, Hey, we don't want our funds to go to China. We're kind of like decoupling a lot of the links here that allowed the money to flow in. So a lot of withdrawal of FDI or direct investment from China, which has obviously been a huge negative blow to the Chinese economy, but also like you said, for the VCs and startup founders that were dependent on US dollar funds.

(07:34) Valerie Vu:

That's why they like split and staying as like different independent entities, which is, I feel lucky that I'm a Vietnam focus fund. So my strategy aligned well with Vietnam politics, staying neutral and focus in Vietnam.

(07:47) Jeremy Au:

I mean, it's, it's focused on the fundamental GDP growth, the fundamental piece. So I think it's interesting because, from a GP perspective, I think it makes a lot of sense, I think regardless That was amazing. A neutral strategy across all three superpowers is key for Vietnam, like I said, for national security, for political stability, for attracting FDI. So it should translate into real growth, but of course, I think the question for LPs I can imagine would be like, am I allowed to keep my money in China? Am I allowed to keep my money in Russia? Am I allowed to keep my money in Vietnam?

(08:14) Valerie Vu:

A lot of people have that concern and questions, but I think for opposition and the neutral stand that Vietnam has, the new president is doing what he's supposed to do, maintain a good relationship with the three superpowers.

(08:26) Jeremy Au:

I mean, I think everybody in the world who is not a superpower wants to be friends with all the superpowers at some level, because nobody really wants them to go into a direct conflict, even though there's indirect conflict right now, because direct conflict is bad for everybody in terms of jobs, in terms of growth, in terms of trade. Even for Singapore as well, technically signed up as part of the sanctions on Russia due to the war, but if you look at the energy, the fuel mixing, I think there were accusations that Singapore is letting Russian oil come into Singapore, right?

(08:53) Valerie Vu: Directly or through India trade?

(08:55) Jeremy Au:

The reality is that, first of all, oil is oil, right? So oil can be mixed with other oil shipments. And so the provenance of oil is always something that can be moved around dependent on the ship, the tanker, they transfer to each other, they get mixed with each other. So the provenance is always something that has actually a lot, some legwork to do, but in general, like the reason why even there's Ukraine crisis, even though all that happened and technically Russia oil supposed to be off the market, none of us really saw a giant oil energy price shift. If you think about it, like we did see energy prices shift upwards in Europe because they have a lot of Russian gas that was blown up in the Nord Stream pipeline, so they couldn't get that, and they also had a sanction. So the energy prices went up, but now it's pretty much stabilized now in Europe, but if you look at Asia, energy prices didn't really go up. And the reason why it didn't go up is because Russian oil was still part of the market. And is this not being labeled as Russian oil, but at the end of the day, the total supply didn't shift for Asia because we saw about the Vietnam power crisis, which is, they want to buy, they need to burn more coal because it needs more energy. So everybody in Southeast Asia needs more energy. So there's very little interest in Southeast Asia to cut out Russian oil as a supply.

(10:01) Valerie Vu:

That's why Russia's economy is still relatively stronger, strong despite of all the sanctions and embargo.

(10:07) Jeremy Au:

Yeah. So there's a lot of Russian oil flowing through the Straits of Malacca, through Southeast Asia, into Indonesia, into India, into China. And then all those tankers go through Singapore as well. So it's still happening. To some extent, I think that a lot of Southeast Asian countries are all neutral, but might be a bit more one way, a bit more the other way, but still relatively neutral, I'd say.

And it's interesting as well because one of the big things that happened in Vietnam that was similar because of this superpower like decoupling is the data security laws. Vietnam requires like data, local data to be stored.

(10:36) Valerie Vu:

Yeah, still being in the decree phase, not the constitution yet, but most of Big Tech that have cloud presence in Vietnam, like the biggest two Amazon and Google cloud, they're all preparing to have a data storage center in Vietnam and their competitor, Alibaba, also announced that they're going to invest in open data cloud center in Vietnam.

(10:56) Jeremy Au:

Yeah. Yeah. I think it's interesting because, I think there's two parts, right? One is requiring data sovereignty, right? So requiring local data of local people to be in a local server, which I think is becoming more popular. I think China was the first to really do it, I would say because of the part of the China firewall strategy. And then after that, I think America is starting to replicate some of those requirements for sensitive data. And I think that's also boosted a lot of demand for local servers. And I think it just came out today that Vietnam is not going to allow a hundred percent foreign ownership in data centers because Vietnam normally has a 49% foreign ownership cap in businesses. But that's not, doesn't work for data centers because you need majority control of your data and also you need, the majority control of the sovereignty. So

(11:36) Valerie Vu:

I think that is a positive news. Yeah, it's a positive news welcoming big tech for the investment. And honestly, all of these companies are prepared. Amazon, when I asked them, they're already working on the new data centers. Google Cloud, when I asked them last year, they did not give me a specific answer, but something is coming on the way. So it's not like they don't have any preparation. And the Google team, most of the account manager, the cell team, being moved from Singapore to Vietnam. So Vietnam will have Google office end of this year in Ho Chi Minh City.

(12:04) Jeremy Au:

Yeah. I think it makes all the sense. The net effect is if you have some kind of like data sovereignty requirement, it's a bit of a soft border, then you create domestic substitution. So now you're allowing foreign direct investment to fulfill that domestic demand. Of course, I think the cost of data was to be, will rise for the average Vietnamese consumer, because it's always cheaper to run it large scale, larger facilities. But it does create jobs and it does create some data sovereignty for Vietnam. But, I think this goes back to the thing where every country is trying to become more sovereign on the data, more local data centers. It's going to be quite interesting to deal with.

(12:34) Valerie Vu:

And we have a local solution as well. VNG has like their own data cloud, data solutions, cloud other like domestic data center as well, like CMC, Viettel.

(12:44) Jeremy Au:

Yeah, I think Singapore has its own issues because Singapore actually was in a good position because years ago it was actually number one in data center storage, but there was a moratorium on data centers of building new capacity because of the power situation. So the issue is that Singapore, first of all, we have a certain power and actually power is relatively cheap in Singapore because so much oil and gas goes through Singapore, right? So they're actually cheap. But the problem is that there's also a requirement that to have a net zero pledge. Because Singapore is an island, so it wants to be a leader. And it's actually quite expensive to have net zero energy market. And basically, with the data center growth, it was basically impossible to hit it net zero with the current energy mix of Singapore.

As a result, they put a moratorium on new data centers, which is, I think, some people say it's to Singapore's loss, obviously, because Singapore has a lot of other benefits with running data centers because all the internet cables go through Singapore. You have a good quality of life for the engineers who are working at data centers. There's also a very good stack, but because of this power issue and also because to some extent the space issue as well. So Singapore doesn't have space for data centers then. So that Marta kicked in. So now a lot of them actually go into Johor now, actually. So data centers. So what's happening is your Johor is like building a lot of data center storage.

Malaysia also has relatively cheap energy because they have domestic oil production as well. They have a lot of land. And then a lot of the engineers are living in Singapore. And then they just commute to Johor to do the data center visits. So that's like the weird Singapore Malaysia Johor collaboration to get these data centers up.

(14:09) Valerie Vu:

Talk about net zero. Do you see any new setups or interesting companies tackling this issue from Singapore or Vietnam?

(14:15) Jeremy Au:

Mean, I think Singapore's, if you look at the energy mix, obviously there's no hydropower because there's no river.

(14:20) Valerie Vu:

That's Vietnam. Yeah. Maybe, yeah, Vietnam can still do.

(14:23) Jeremy Au:

There's no geothermal really in Singapore yet. mean, People talk about it, but not really. So ONI is really solar. Obviously the current mix of like oil and gas is very cheap for Singapore. Singapore doesn't really use coal. It's negligible from my understanding. If I'm wrong, I'm just going to put a giant like sticker to put it there. I think what's interesting is that Singapore is starting to set up a nuclear safety research arm. So several hundred scientists and engineers to work on nuclear safety. But, I think to me, what the writing on a wall from my perspective is, it's pretty hard for Singapore to hit net zero without nuclear power. I think it's doable if you believe certain things about solar cells and battery and that sort of stuff.

And, but I think the only way for Singapore to be able to use a lot more energy for all his requirements and hit net zero, I think would require potentially some nuclear power, which is why I think it's underreported that the Singapore setting up these. Research labs on what they call nuclear safety, but of course you don't need nuclear safety unless you don't know what to do nuclear eventually. So I think the government has previously, in the past, floated idea of a nuclear power plant on one of the offshore Singapore islands, a little bit further away. But I think the classic nuclear power plant, people are concerned about a safety profile, the radiation risk and so forth. Yeah. Of course, with the new modular reactors that are happening out there, they're supposed to be safer, they're supposed to automatically shut down, smaller, better safety profile, so supposedly those could fit.

So that's like the high level conversations that the government has speculated about through tank tanks and so forth, but for sure, the new labs have been created to hire hundreds of engineers to explore nuclear safety, so to me, I think it's a stepping stone. Yeah. I just think that the issue is fundamentally for Asia is that, everybody wants to burn 10 times more energy than they currently use today per capita.

You know what I mean? So net zero, I think you can go to net zero and say everybody is allowed to use the same amount of energy today. We cap it and then we switch it to green energy. I think it's more doable. But right now, all the green energy that goes up is not sufficient to fill up the requirements, right? And so you saw that for. Singapore, right? Like the moratorium of data centers. A lot of people are not happy about that because, yeah, we help fulfill a net zero pledge. But, now the data center capacity is going to other people, other jobs, other FDI,

(16:21) Valerie Vu:

Yeah, with a lot of FBI in the pipeline, I think we have to rely on traditional energy sources, because like you say, renewable energy. Still on the way.

(16:29) Jeremy Au:

I can't imagine because you put in a million dollars at FDI, obviously selling our factory or services,

industry or whatever, you still need energy anyway.

(16:36) Valerie Vu:

And actually energy is like the biggest factor, one of the biggest factor, of course, not the biggest, for them to stay or go to another country.

(16:44) Jeremy Au:

Exactly. Yeah. Yeah. Because cost of labor power and it's like land, but you know, it's pretty much all of it.

(16:50) Valerie Vu:

Yeah. We lost couple one to Malaysia and Indonesia, but those corporates are still pending on like conversation in Vietnam. But like in the immediate terms, we already see that these corporates are walking away to Malaysia and Indonesia due to more reliable energy and infrastructure.

(17:06) Jeremy Au:

Yeah. Yeah. I think if you don't deliver energy infrastructure to people are like, no matter how popular it is, people are just going to be like, let's diversify. So it's a shame. And yeah, I think Malaysia has been doing a good job. They don't have any power industry issues, in terms of the volatility because they have Petronas, which is the domestic oil production. And then domestic, domestic oil energy distribution is still okay. So they don't have the energy issue longer.

(17:26) Valerie Vu:

And they can also do refinement.

(17:28) Jeremy Au:

Yeah, correct. Yeah. And then also Singapore and Malaysia also have that joint capacity. So together, so that combination is stronger as well than just Malaysia alone or Singapore.

Yeah. So yeah, I think energy is a big piece for the war for FDI. Actually, circling back, actually, I was curious about this 49 percent ownership requirement. What's the history behind that?

(17:45) Valerie Vu:

I don't know exactly the history, but it's always the case. Yeah. Are you familiar with Chinese foreign ownership? Think it's, we, we just follow what the Chinese law saying. Yeah.

(17:55) Jeremy Au:

I think, doesn't that make it quite difficult for some FDI, I guess, because you can't own banks or telcos in Vietnam. I can imagine there's a lot of FDI that would be happy to come in.

(18:05) Valerie Vu:

But actually the ownership restriction only apply to certain industry, like bank is very sensitive. I think Korea, also had the same rules, same law. I was reading a deal, Korea financial bank got bought by American private equity, back in 1997, when they had the financial crisis, Asian financial crisis, but still the negotiation was painful. Korea did not want to sacrifice their pride bank, which has a lot of bad debt. I think we're also on the same boat. It's a lot of like national security, so industry like banking, financial service, are still highly protected by the government. But if you want to invest in consumption, economy, food and beverage, there's no such thing as foreign ownership, restriction.

(18:48) Jeremy Au:

Yeah, makes sense.

(18:49) Valerie Vu:

Education, yeah, there's none.

(18:51) Jeremy Au:

Yeah. I think the Saigon bank issue is resolved, right? I haven't heard any more news about it.

(18:55) Valerie Vu:

Yeah. No more news.

(18:56) Jeremy Au:

So it's done. Resolved.

(18:58) Valerie Vu:

I'm not sure it's exactly resolved, but there has been a lot of overseas banking community visit Vietnam recently. And I cannot tell exactly who, but they all agree that this is the best time to invest in Vietnam cause you know, older monopoly power is technically gone and the whole system is being cleaned up and valuation is most attractive than ever. So this foreign community, they have so much cash and they want to build a bigger presence in Vietnam. So they're all very excited. And it's not just banking that they want to buy and invest. They want to do electric vehicle, food and beverage, manufacturing.

(19:31) Jeremy Au:

Yeah. Interesting. I think it makes sense. I mean, if you are a foreign bank, you can get owned up to 40%, 49% of a domestic bank. If Vietnam continues growing as GDP grow for 7%, there's a lot of financing needs that we need to be done. Previously, all of this was bad debt that was hard to see how to account for, how to audit, how to transact with. So now it's all cleaned up, like you said. And also the government will be happy for you to provide some liquidity as well because otherwise the government can't print more money to support it.

(19:56) Valerie Vu:

Yeah. So split opinion from the foreign investor community. One group is very like concerned about the politics and policy among the three power parties and the other groups like so excited because now they can finally get in for cheap, cheaper.

(20:11) Jeremy Au:

Yeah, exactly. And then also everything's cleaned up, and then now they are helping the government because helping the government clean up. And also part of that, a policy will be like, we will modernize the practices, bring best practices, all this other stuff. Yeah.

(20:21) Valerie Vu:

But overall, all of them are, both of the groups are super bullish on the long term growth and potential.

(20:27) Jeremy Au:

Yeah. I think what's interesting in reflection is like, because we're always talking every month about what Vietnam is. Now, the stuff that happens every month is both good news and bad news, but underlying it is like 7% annual economic growth, right? And that's the target. So it was great to see that Vietnam is on track to beat the annual forecast. So how does that showing up in your portfolio?

(20:44) Valerie Vu:

Yeah. It's actually very interesting that most of my portfolio companies are still growing very consistently. The founders don't just over promise, they actually achieve the growth target. Some of them even exceeded it because they weren't some huge B2B contracts, and that lift off the growth. So I can see the economy, the growth of the whole country reflects in very small setups, but growing fastly despite of the unfavorable kind of market conditions in financial market. It's still quite illiquid in Vietnam right now.

(21:12) Jeremy Au:

When you think about all of that, which sectors do you think are performing better? So is the consumer performing better? Healthcare performing better? Is any differentiation in that growth rates?

(21:21) Valerie Vu:

Yeah. Consumer healthcare, education.

(21:23) Jeremy Au:

Those are top three. I mean, education continues to be popular in Vietnam.

(21:26) Valerie Vu:

Yeah, because like I mentioned, still continue to pay, invest in themselves now, not only parents invest in their family, but also employee employers invest in their employees.

(21:35) Jeremy Au:

Yeah. Makes a lot of sense.

(21:36) Valerie Vu:

I really reflect that in the performance of the company.

(21:39) Jeremy Au:

I think education continues to be a no brainer for Vietnam in terms of investment vertical and growth vertical intrinsically, then consumer, of course, makes sense as well, but let's double claim consumer. So you mean like consumer discretionary, like bubble tea and pizza, or do you mean like consumer luxury, like premium goods? How do you think about it?

(21:55) Valerie Vu:

Not so much in luxury. I don't really invest in luxury, premium segment, but more mass market or like affordable luxury. And I also encourage and have the conversation with the founders in Vietnam that, Hey, maybe it's time that we start going global. So we have this conversation for the past, like three, four months and now some of them are ready and some of them are getting there because looking back in the past two years, if we can have stable revenue from both domestic and international, we'll perform like better overall, comparing to other startups in the region. So yeah, some, some of my portfolios are already listed on the US. So consumer in the US can also buy their products.

(22:33) Jeremy Au:

Yeah. And then you mentioned healthcare. What's the story behind Vietnamese healthcare? What is the Vietnamese healthcare system anyway? So is it public, is it private? How does it work?

(22:41) Valerie Vu:

So traditionally, we rely on public healthcare system, but as the population grow and as the expectation and quality of life improve, the public infrastructure is not enough to meet the needs, demand for the population. So recently most of the investment coming from private equity is to expanding the private healthcare system, like mostly hospital. And VC has been active, but not as not as major as private equity. We have smaller ticket size. Doesn't make sense for us to buy a hospital, but private equity, pretty all the big names, all have one, at least one hospital investment in Vietnam. Because if you look at number of doctor per 100 people, I think Vietnam has a lower ratio comparing to neighboring countries. So we have lower than Singapore, of course, but we also have lower than like Thailand, Indonesia, Malaysia. So the public infrastructure is being overloaded because people have better quality of life and have higher expectations with their healthcare. So the private hospital and healthcare players are getting more and more investment and attention from the investor community.

(23:44) Jeremy Au:

I think when you say those three things, it makes very natural sense to me because I think that story is also replicated in many ways. Education is not consistent everywhere, actually. So I was gonna talk about Indonesia or Thailand or Philippines. And I wouldn't, I would say education is not necessarily as strong, but it's one of those categories as people spend more money and have more money, they want to invest in their kids. So obviously that's one. Obviously consumers doing well in Indonesia and Thailand, in the Philippines. And of course, healthcare is something that's also, I think, very subject to the local public policy, whether they allow that private investment. Are there any sectors that you're like, eh, not so hot these days? I mean, Vietnam used to be very hot for Web3, and, gaming, for example, and fintech as well. How do you see that happening?

(24:24) Valerie Vu:

In terms of Web3, I think a bit slower on the gaming activity, gaming investment activity but other founders are still building on like infrastructure or like exchange in Web3 but maybe they don't really pitch that they are a Vietnamese company.

(24:37) Jeremy Au:

Okay. So was this a global company?

(24:39) Valerie Vu:

Global company, but actually 90 percent of the team, including Debs, are in Vietnam and even the founders of Vietnamese. So that's the case for Axie Infinity. So Web3 activity are still very active, I would say, but they don't really necessarily brand that they are vietnamese company anymore. FinTech activity a bit. I think got a bit slower. For Vietnam.

(25:00) Jeremy Au:

I mean, it interacts with the things we talked about, the Saigon bank as well and everything, I feel like that issue created opportunity for large banks to come in, to recapitalize all the other banks, increase best practices. So I think there's opportunity at top end of the finance sector. It doesn't feel like there's for example, more open APIs, banking APIs, more opening of financial regulation for smaller fintechs. I don't know. Is that assessment?

(25:24) Valerie Vu:

Yeah. You, you are correct on that. So the established banks with like proper license, proper charter of capital are doing super well. And that reflect like how the health of the economy is because the top bank, VP Bank did bank, they have been achieving record breaking profit. I mean, the economy's like doing really well but the lower smaller guys like FinTech startups with no license, with no affordable cost of capital. No cash are a bit sh more struggling. And there's no open sandbox. I think that's the big important part.

(25:54) Jeremy Au:

It's there's no open sandbox, right? Politically or regulatory for the finance. So I think that's one of the big struggles is I think a lot of people who are in Southeast Asia doing fintech felt like America, fintech is great. Europe, fintech is great, because of a high GDP per capita and very stodgy incumbents. So they want to bring that to Asia but then I think Southeast Asia, I think the regulatory piece is one problem. And then the other piece is that the GDP per capita is small. So the amount of disposable income to deposit or invest is actually quite low, actually. Yeah. Yeah.

(26:22) Valerie Vu:

The biggest roadblock for Vietnam is the sandbox policy piece.

(26:25) Jeremy Au:

I mean, Singapore has a very strong sandbox piece, but the problem is that the domestic market is very competitive. That's one. And then two, of course, the market is not very large. There's only 6 million Singaporeans. So it's like a fraction of the size. I think Indonesia, Fintech still seems to be doing relatively well because I think they look at it as a 300 million people market and the market, the financial feels a little bit more open regulatory wise.

(26:46) Valerie Vu:

Yeah. So I would agree that Fintech in Vietnam a bit more struggling.

(26:50) Jeremy Au:

Struggling right now. I mean, things may be changed next year or new policies or whatever it is. I think it's interesting because, you asked me two years ago, I'll say everybody was very excited about Vietnamese FinTech, right? At the VC side. So we're looking so many startup founders, so much VC interest. And then now it's two years down the road, it's yeah.

(27:05) Valerie Vu:

Yeah.

(27:06) Jeremy Au:

The people benefiting the most are the big banks that can recapitalize properly.

(27:09) Valerie Vu:

They don't even have to be big bank. They can just be medium size or small cap, but have license.

(27:14) Jeremy Au:

Yeah. Actually that's an interesting one. I think one thing I've seen more in Southeast Asia over the past one year is startups that are trying to acquire small banks to get that license. So basically they're saying like, okay, we can't play in a sandbox, but we have to acquire a small bank to get a license. And then we will apply our tools not to, we won't sell our tools to banks, increase the productivity. We will sell the tools to ourselves to increase our own productivity, which is basically becoming a challenger banker.

(27:38) Valerie Vu:

Yeah, but that's only applied if you raise up to Series D, right? Vietnam, we don't have that many fintech players who raise up to Series D.

(27:44) Jeremy Au:

Yeah. So I think I've definitely seen a lot of decks in Southeast Asia where people are like, you want to raise a very large amount of money to buy out the bank. Obviously the founders are not fresh graduates, undergraduates who are putting together a UX.

These folks are normally like banking leaders already. They have some family support. They have some, the right people already. So that's another push I've seen happen.

(28:03) Valerie Vu:

Yeah. I guess like after the acquisition, how can you make sure that that license is actually going to be helpful?

(28:09) Jeremy Au:

Yeah. The problem is that you're just still competing with other banks, right? So now you're like, because you normally buy at the smallest possible bank and then you still have maybe like 1 percent market share and you still have to compete with everybody. So it doesn't really look like a VC outcome for that asset class, but you know, it's a good set of money for Private equity for family officers to invest.

(28:26) Valerie Vu:

Yeah. So I would say it's a, maybe sometimes it's a blessing in disguise that you didn't buy the license because maybe after you bought the license, the market went bad and nobody invests anymore and there's no liquidity volume trading in the market. So I bought the license and then the market crash. So if you didn't buy the the bank or license, maybe it's a good thing.

(28:45) Jeremy Au:

Yeah. Yeah.

(28:46) Valerie Vu:

At least for Vietnam market.

(28:47) Jeremy Au:

Yeah, I think so. I mean, we're talking about like the traditional, retail banking, your consumer, direct to consumer finance, maybe to some extent consumer loans as well. But of course I know everyone's very hot for unreached access these days. Still going strong?

(28:58) Valerie Vu:

I think so. I think there's still especially like farmer financing. That space is still there. Still getting some attention and investment.

(29:05) Jeremy Au:

I guess Unreach Access, I mean, the, the beauty of it supposedly is that it's secured financing, right? So we have a collateral, which is your next month's salary from the company that we lend it to you today. So it's supposed to be highly secure financing.

(29:16) Valerie Vu:

Not necessary. What if the company bankrupts next month. How do you know? How do you do due due diligence on the company? You are not the investor. You cannot ask for the full financial picture.

(29:28) Jeremy Au:

True.

(29:28) Valerie Vu:

You just come in to provide a financial wellness solution for their employees. You're not able to see their entire balance sheet.

(29:35) Jeremy Au:

Yeah. That's true. Maybe I drank too much EWA founder Kool Aid through all the pictures of, Oh, it's so secure. It's, it's not. I mean, there's a big part is that you look out for your non performing loans and net interest rate margin.

(29:46) Valerie Vu:

Yeah. Could be potential, but you have to see the balance sheet of the company.

(29:50) Jeremy Au:

Yeah. Okay. On that note, I'd love to summarize the three big takeaways. I think first of all, thanks so much for sharing Vietnam's bamboo strategy in the context of the Putin visit, the Xi Jinping visit, as well as the Biden visit. So balancing out the national security concerns versus the kind of territorial concerns versus the infrastructure and direct investment requirements.

Secondly, thanks for sharing about the data sovereignty requirements of Vietnam, as well as the foreign ownership requirements, which are tied to each other as well.

And lastly, thanks for sharing about your point of view on the Vietnamese investment landscape across all the consumer healthcare, FinTech, as well as education. Thank you.