Vietnam: $24B Bank Bailout & Legislature Chairman Resignation, FPT $6B Tech Conglomerate Growth and Apple Investment & China High-Speed Rail - E416

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“We are Vietnamese. We don't fight with anyone. We just protect our country like we protect our independence and our freedom if necessary, but we don't fight. Also, I want to emphasize, that the first day we went to school as a six-year-old child, the first thing we were taught was that nothing is as important as our country's independence and freedom.” - Valerie Vu

“One of the key lessons I learned from my Harvard MBA was that the more immobile your asset is, the more important that you are to do CSR because it’s a good way to build local partnerships and get credit with the local political system. So if you have an oil well or a giant factory, it's very hard to move it if the people don't like you and change their mind about supporting you. You want to do that early and regularly, versus if you're an asset that's in and out, it's very mobile, then there's not much requirement to do a local CSR.” - Jeremy Au

“This year, it's still going to be quite volatile for internal politics but again, this is very short-term volatility and not necessarily a long-term pain. It clears up for long-term transparency. The former Chief Parliament just visited China, then shook hands with Xi Jinping and granted a new high-speed railway with China from Vietnam. The construction will be done before 2030, so there's a lot of renovation in infrastructure in Vietnam. There's also a lot of new development in terms of American companies coming into Vietnam and promising to invest in the country. I don't have the crystal ball for telling the future but there's no reason to be gloomy and be negative about the country just because there's a hiccup in the internal politics.” - Valerie Vu

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

1. Vietnam $24B Bank Bailout & Legislature Chairman Resignation: Jeremy and Valerie discussed the $12B fraud at Saigon Bank, the death penalty verdict, the appeals process and the closure of 50+ bank branches. The Vietnamese central bank injected $24B of "special loans" to prevent a banking crisis, which reduced the liquidity of their foreign exchange by one quarter. They touched on new political resignations due to the "blazing furnace" anti-corruption campaign, including the Chairman of the National Assembly - one of the country's top 4 leadership positions.

2. Apple Investment & China High-Speed Rail: International investors continue to move capital into the country despite these political shifts, exemplified by Apple's $16B of spending through the local supply chain since 2019, 200,000+ jobs created and increasing their CSR commitments. China is collaborating on cross-border high-speed railways, connecting Vietnam's port cities of Haiphong and Quang Ninh through Hanoi to Lao Cai province, which borders China's Yunnan province, and from Hanoi to Lang Son province, bordering China's Guangxi region.

3. FPT $6B Tech Conglomerate Growth: FPT was founded in 1988 as "Food Processing Technology" and has now become the country's leading software tech conglomerate valued at $6.4B on the Vietnam stock exchange with $1.7B+ of annual revenue operating across 50+ countries. FPT announced its strategic partnership with Nvidia to build a $200M AI R&D factory leveraging multiple Nvidia chips and technology frameworks.

Jeremy and Valerie also talked about why people haven't heard of FPT, why companies actually invest in corporate social responsibility (CSR), and whether they would take the local train from Hanoi to Ho Chi Minh City.

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(01:24) Jeremy Au:

Hey, Valerie. Good to have you back on the show.

(01:26) Valerie Vu:

Hi Jeremy, how are you doing?

(01:27) Jeremy Au:

Good. Your last episode was very popular talking about the 12 billion fraud case for the Saigon Bank and death penalty. So, figured we'll do some sequel updates since there have been some developments since that conversation.

(01:40) Valerie Vu:

Yeah, so the most recent update is she has a death penalty sentence and the banks are now forced to close a lot of branches. So recently, there are more than 50 branch of Saigon SCP bank being shut down, but at the same time, the State Bank of Vietnam, which is the central bank of Vietnam guarantees that they will not allow a bank run happening in Vietnam. So they guarantee that they will have a bailout package to save SCB. So that's the latest update. There's not much of new updates from the death sentence announcement.

(02:14) Jeremy Au:

Yeah. So let's talk about the death sentence first and after we'll talk about a bailout. So on the first part of the death sentence, I heard that there is an appeals process that's undergoing but, I don't think be a very long appeals process. How long does that roughly take?

(02:25) Valerie Vu:

I'm not a lawyer myself, but yeah, she can appeal and she's allowing her daughters to start selling the asset to foreign investors, mainly real estate and especially very valuable commercial real estate pieces in the city, both Hanoi and Ho Chi Minh city, and there are actually a lot of buyer interest in those properties. So yeah, all of that for assisting her in the appeal and the bailout process as well.

(02:52) Jeremy Au:

So yeah, what'd be interesting is just how much those assets are because obviously, as property is very illiquid, it takes a long time to sell. And then some of them were half-constructed. Some of them are up and running. So let's see what the total value of that return is going to be as well. So assuming that the appeal doesn't succeed, a dark question, but is the Vietnamese death penalty by hanging or, shooting or what, how does that work in Vietnam, in Singapore, it's hanging?

(03:18) Valerie Vu:

Jeremy, this is a tough question. I don't know myself.

(03:21) Jeremy Au:

Okay, we're going to have to flash this up on the screen to figure out what are the approaches. And what's interesting is that there's a big rescue as well, It was about 12 to 13 billion dollars of fraud, but the recent bailout was about $24 billion. And what's interesting is that the Vietnamese forex reserves in the central bank were about 100 billion dollars. So this is about a quarter of the forex reserves going to the current rescue effort which is a lot actually if you think about it. I mean, a quarter of your forex reserves is a lot, but it's also interesting because you're saying that they are not necessarily promising that they'll do the next rescue if it gets worse.

(03:52) Valerie Vu:

Yeah, but fundamentally, financial stability is the most important factor for the State Bank of Vietnam and they have been really communicating with the financial professionals that they are doing everything to save Vietnam from a bank failure. It has a large effect on the entire economy. So we are watching for what's coming next.

(04:12) Jeremy Au:

Yeah. No easy answer because I the lessons from America pretty much is, the one thing worse than bailing a bank out and obviously all the moral hazard it causes and the headlines and everybody hating you for saving a bank, the one thing worse than that is having to save multiple banks because you let the first one go, because you let one collapse, then other people are linked to it, and there'll be more bankruptcy. So it's a tough situation. Is this the first time that this has ever happened in Vietnamese history?

(04:37) Valerie Vu:

Nope. It's definitely not the first time. There were very similar stories in the past. And the State Bank of Vietnam always steps in to protect the financial stability of the country. So it's not the first event in the banking history of Vietnam. Most of the previous scenarios or events happened quite recently in the past 15, or 10 years because as you know, Vietnam was only open to the world financial system still really quite young compared to other neighboring countries or compared to the global financial system. So we did have a similar incident in the past. Either the bank would merge with another bank or were rescued by the State Bank of Vietnam.

(05:17) Jeremy Au:

Yeah, interesting. So not the first wave and probably not the last, unfortunately. I mean, bags have this habit of becoming too liquid or coming to a leverage and end up having to be rescued.

(05:26) Valerie Vu:


(05:26) Jeremy Au:

Yeah. Interesting to see some of that turmoil. And we also previously discussed that one of the ripple effects of that has been the Blazing Furnace corruption campaign and how there have been multiple political departures. And you wanted to share that there was a new development here.

(05:39) Valerie Vu:

Yeah. If you remember in the past episode, I mentioned that the president resigned back in March. Recently, a few days ago, our Chairman of the National Assembly also resigned. These positions are the top four most important politicians in the political bureau in Vietnam, and usually or normally, they would be the untouched position, but recently, we learned in the past few months that there's nothing as untouched. So recently, his name is Vuong Dinh Hue and he recently resigned following his resignation, the National Assembly just made another emergency meeting which is very unusual, to talk about what side the future leadership will be for the communist party of Vietnam because right now, two most important position in the political bureau just resigned in a span of two months.

(06:26) Jeremy Au:

Yeah, the tricky part for these types of political systems is that the succession is very much a milestone negotiation internally, so quite opaque from the outside. So hopefully that gets sorted out.

(06:36) Valerie Vu:


(06:36) Jeremy Au:

What's interesting is that we continue to see news of investments flowing into Vietnam doesn't seem to have slowed or stopped down. Maybe we'll see that change in time to come but, Apple just recently announced its expansion in Vietnam.

(06:47) Valerie Vu:

Yeah. I want to emphasize the change in the political leadership does not affect the overall policy of welcoming foreign direct investment and foreign investors to come into Vietnam. And that's why, Tim Cook, last April, he actually visited Vietnam. It's a South Asia trip that he was doing. He also visited Indonesia and met with leadership in Indonesia, but when he visited Vietnam, he ensured that Apple would invest further and even more into Vietnam. And I was quite surprised to find out that from 2019 to today, Apple actually invested 19 billion US dollars into Vietnam alone because now, Vietnam is, it's the manufacturing hub airpods and iPad for Apple. And there will be more, you know, for the future, like Apple products made in Vietnam as well, following this Tim Cook visit. It was pretty amazing.

(07:40) Jeremy Au:

Yeah, and what's interesting is that they also shared that they are supporting effectively directly, indirectly 200,000 jobs in Vietnam through the factories, but also the supply chain, the suppliers and it also sounds like they're also really focused on the CSR side as well. Just reading out here, they are supporting a lot of water installation services to more than 42,000 students in Vietnam, as well as putting up to get a 50 million fund to help train employees in the supply chain or vocational training. So quite a lot of CSR deployment as well, which I think is always important because one of the key lessons I learned from my Harvard MBA was that the more fixed your asset is, the more immobile your asset is, the more important that you are to do CSR because CSR is a good way to build local partnerships and honestly get credit with the local political system, right?

So if you have an oil well or a giant factory, it's very hard to move it if the people don't like you and change their mind about supporting you. So you want to do that early and regularly versus if you're an asset that's in and out. So it's very mobile, like crypto or some kind of very liquid asset, then there's not much requirement to do a local CSR. So to me, the signaling here is like, Hey, Apple's really doubling down not just via the CSR, but also on investment that you shared.

(08:47) Valerie Vu:

Yeah. Tim Cook also visited Singapore and promised to hire even more talent from Singapore as well.

(08:53) Jeremy Au:

Yeah, they promised to put in another $250 million in the Singapore fund as well. Singapore does serve as a regional headquarters for the region. So I think it's understandable in terms of that. Also, a lot of your key sensitive information is also being held in Singapore but yeah, it's an interesting dynamic where everyone in Southeast Asia is getting more Apple investment, effectively, the way he was touring Southeast Asia. He was also in China before that and he was also very well-received. He opened up a new store and now the Chinese employees and customers are very happy for him, but it does feel like he's diversifying out of China into the China Plus One supply chain because of the decoupling aspect as well. Interesting times.

(09:27) Valerie Vu:


(09:28) Jeremy Au:

So what's interesting is that there was also more Nvidia news. Obviously, Nvidia is a media darling for AI chips but I heard that they were involved in Vietnam again. Could you share a little bit more?

(09:37) Valerie Vu:

Yeah. Before talking about Nvidia, maybe we start with the story about FPT because recently I just came back to Vietnam from South Korea. FPT, they have a presence in 50 different countries in the world and globally, they have about 30,000 employees. They have many small business lines, but their largest revenue comes from equity software. So essentially, they are like the power outsourcing house starting from Vietnam. So when you think about how can a Southeast Asian company or Vietnamese company go abroad, I think FPT is like the idol or the first example of how to do it, how to achieve a global scale from Vietnam presence.

Last year alone from the FPT software, they made about 1 billion in revenue, and group level combined because they also have FPT retail, and other service line, semiconductors as well. I think group level combined, they must be getting about 2 billion but the software alone is 1 billion. So FPT Korea, they sponsored a career conference for Vietnamese students in Korea. I was quite impressed with how many Vietnamese students are actually studying in Korea. And together they hosted this career conference sponsored by FPT Korea. So I was one of the speakers and then shared about how I started my career in VC and why they should consider PNVC as a career.

I also met with the country manager of software Korea in Seoul but essentially, the biggest news for FPT is they are a partnership, but they are partnering with Nvidia FPT will build a $200-million factory in Vietnam and they are getting the technology form Nvidia chip which is pretty surprising because there are a lot of demand for Nvidia chips, and even if you have money, it's not guaranteed that you are able to buy from Nvidia, but FPT got the agreement to partner with NVIDIA. And if you look at the past few months or few years, FPT also invested a lot in AI companies in Silicon Valley. They invested strategically in Landing AI an AI startup founded by Andrew Ng, which is another very famous AI researcher in the Bay area. So just the fact that FPT got the approval to partner with Nvidia and build a factory in Vietnam alone is quite impressive already. And I think not a lot of people outside of Vietnam know about FPT. So that was pretty insightful to hear from the executive of FPT Korea and share about what they are doing globally and also for Vietnam.

(12:01) Jeremy Au:

Yeah. I took the opportunity to research FPT as well before the call and there were a few fun facts about FPT. So it was founded in 1988 and the real original meaning of FPT was food processing technology company. And so I guess they're no longer doing food processing.

(12:21) Valerie Vu:

Jeremy, you know, Vingroup?

(12:22) Jeremy Au:


(12:22) Valerie Vu:

Vingroup also originated from selling noodles.

(12:25) Jeremy Au:


(12:26) Valerie Vu:

Yeah, so the founders of this corporation are like the first generation of Vietnamese entrepreneurs. They all studied abroad in Russia or the USSR former countries and while studying abroad, they made a living by selling food, selling instant noodles in Ukraine, in Russia, that's how they made their first fortune to come back to Vietnam and founded FPT or Vingroup. Yeah. So that's why the name comes from food processing technology.

(12:52) Jeremy Au:

That's so great. Awesome. Maybe we should do a history story type of you know, discuss the story of each company as well. Yeah, so it was amazing to see that. And so it's a few other facts because I've honestly never heard of FPT until you mentioned it. So FPT, like you said, is making about $2 billion of revenue per year. It's currently only traded on the Ho Chi Minh Stock Exchange, which is why I never heard of it. Its current valuation is around 6 billion USD. And 49% is owned by foreign investors. And the chairman and founder hold about 7%. So to be honest, I never heard of FPT but it sounds very much like the Infosys for Vietnam. Could you share a little bit more about the services they provide?

(13:27) Valerie Vu:

The most obvious is also software development but they also have more services offering such as trying to build their own semiconductor as well. In Vietnam, they are building the largest pharmacy chain, which is very interesting. So they know technology and they know retail. They also have FPT retail. So under FPT, there's FPT retail, FPT software, and FPT university, which has their own university and many other subsidiaries, but the biggest two are FPT software, which is their main service is outsourcing. And the second one is FPT retail. So they own the largest pharmacy chain in Vietnam. And they own the largest electronic retail chain in Vietnam. For example, if I want to buy a new MacBook or a new iPhone, I would go to FPT Retail. Yeah. I think a lot of foreigners don't know about them.

(14:14) Jeremy Au:

Yeah, I mean, myself, to be honest.

(14:16) Valerie Vu:


(14:17) Jeremy Au:

I'm a foreigner.

(14:18) Valerie Vu:


(14:18) Jeremy Au:

So I think it's interesting because you have a lot of conglomerates, in Southeast Asia that have this dynamic. And Bain recently did a report this year saying that most conglomerates don't perform as well on the stock market as pure competitors, but it is what it is. It just feels like historically, companies had figured out what to build and then they wanted to do something else. And turns out nobody else was going to build it with venture capital, external capital. So they had to find their own capital. And it turns out the capital comes from their first business. And they use that money to invest in a second business. And it gets up to scale, then they use the money from two businesses, a bit of a third. So almost every business has a conglomerate in Southeast Asia and they're actually relatively fewer pure play unless you are a next second-gen or third-gen founder.

(14:59) Valerie Vu:

But it is really the best example of how a Vietnamese company can expand globally because they have a presence in 50 different countries.

(15:07) Jeremy Au:

Is that like a business wisdom book of FPT or something?

(15:10) Valerie Vu:

I think there is, I will try to find it. And interestingly, when I talked to the country manager in Korea, he was also doing new business development in Mongolia. So they don't have a presence in Mongolia, but they are going there to understand the market and enter the market in the near future. So if there's a playbook, I will let you know, but it's amazing how not many foreigners know about FPT, but they all know about Vingroup.

(15:35) Jeremy Au:

Yeah, that reminds me of my recent trip because I was in Bangkok for the Huawei APAC Congress. So quite a lot of similarities, a conglomerate, but also very much in tech. It does feel like one difference is that Huawei is much more focused on the manufacturing side. And this very much feels a little bit less on the hardware side. So yeah, lots of fun companies in Southeast Asia.

(15:52) Valerie Vu:

Yeah. Right now, FPT is mostly focusing on software because software is, like I mentioned, 50% of their group revenue but I can see in the future, the partnership with Nvidia will open up a lot of doors to their future hardware business. That's just my guess.

(16:08) Jeremy Au:

Oh, you're going to say that the Vietnamese and Chinese are going to fight.

(16:10) Valerie Vu:

No, no, no. We don't. We are Vietnamese. We don't fight with anyone.

(16:14) Jeremy Au:

That was the French, the Americans and the Chinese multiple times.

(16:17) Valerie Vu:

We just protect our country like we protect our independence and our freedom if necessary, but we don't fight.

(16:23) Jeremy Au:

Oh, I like that. I like that. We should write this on a banner somewhere.

(16:27) Valerie Vu:

Yeah. We just do everything to protect our freedom and independence.

(16:31) Jeremy Au:

Very nice. I like that. I heard that in Vietnam, every student has to learn how to assemble and disassemble an AK47.

(16:37) Valerie Vu:

Yeah. Correct. I did that.

(16:39) Jeremy Au:

You did that?

(16:39) Valerie Vu:


(16:40) Jeremy Au:

So what was that like?

(16:41) Valerie Vu:

Oh, it's fun because you don't have to do academics for a week straight, and for a week straight, you just learn how to assemble the AK47 and kind of act like you are in the military. So regardless of whether you are a guy or a girl, you get to skip all the academics and just have fun for a week. Also, I want to emphasize, that the first day we go to school as a six-year-old child, the first thing we were taught is nothing is as important as our country's independence and freedom. That's the first thing that we were taught so that's why we have this one-week long of military training even though we are still in high school.

(17:17) Jeremy Au:

Wow. Amazing. It's definitely true. I mean, if I had gone through what Vietnam had gone through as a country, I would definitely have every kid learn how to go through that one week of class. Singapore has that as well I mean, with, Total Defense day. So it's on the day that Singapore fell to the Japanese, even though the British Empire was supposedly defending its crown colony. So Singapore marks that anniversary with a total defense day. So every child, every student has to go through this whole process where they learn about all the different pillars. Maybe not assembling and disassembling an AK47, but yeah, a lot of them will go to an army base or see a bunch of stuff and all those things. The wars were not that long ago, to be honest, so it's honestly only one generation ago.

(17:54) Valerie Vu:

And actually, we just celebrated our reunification day. And we have a long holiday for that. So his story was really recent.

(18:00) Jeremy Au:

Yeah. I think an interesting fact is that the Vietnam war was a huge boost to Singapore's GDP back then because of the whole Vietnam War, so Singapore was part of the whole supply chain for the, I would say the British and the US side. So a lot of trade was going through Singapore and pushing a lot of advancement up the semiconductor and the manufacturing value chain for Singapore which is quite interesting. So when you think about Vietnam and obviously there's a lot of this investment and all these trends, anything that's around the radar for the next month or quarter from your perspective? I remember you're talking about there's a Congress coming up, and were there events?

(18:32) Valerie Vu:

Yeah. This year, it's still going to be quite volatile for internal politics but again, this is very short-term volatility not necessarily long-term pain, if anything. It clears up for long-term transparency. And yeah, the former Chief Parliament, just visited China and then kind of shook hands with Xi Jinping and granted a new high-speed railway with China from Vietnam. And the construction will be done before 2030. So there's a lot of renovation in infrastructure in Vietnam. And there's also a lot of new development in terms of American companies coming into Vietnam and promising to invest in the country. So I don't have a crystal ball for telling the future but there's no reason to be gloomy and negative about the country just because there's some hiccup in the internal politics.

(19:20) Jeremy Au:

Yeah, definitely two aspects. One of course is the Belt and Road initiative as well as the short-term hiccups. For the hiccup side, at the end of the day, all the problems over the past 10, 20 years, right? I mean, like the fraud on the bank side was happening for quite some time. So I think the real issue was then, and now that it's come to light, it's good as getting cleaned up and the message is being sent. So yeah, like you said, people are very gloomy now, but it's almost inverted, which is everybody kind of knew this was happening in the past but everyone's letting it slide. And then now, people should be happy that it's getting fixed, because it's worse if we let it continue, but definitely some short-term pain.

(19:54) Valerie Vu:

Correct. Yeah. I would be looking at what effort shaking hands with Nvidia. I would be looking at Apple, even lifting up further investment into Vietnam. I would look at Vietnam-China collaboration rather than negative movement in internal politics.

(20:09) Jeremy Au:

Let's just see, I mean, the thing is, I think what people hope is that it settles down so let's see how after the extraordinary general meeting, let's see what happens and hopefully, it stabilizes from there. It's quite interesting for the highway thing because China continues to make investments in infrastructure, right? So we discussed the Funan Techno Canal for the Cambodia side. They're also doing a China-Thailand infrastructure investment as well. And now, they're also doing the Vietnam side as well. And they also did the high-speed rail for Indonesia as well.

(20:32) Valerie Vu:

They did. Yeah, I didn't know that, but for Vietnam, there will be two new railways from Hanoi to Yunnan province and from Hanoi to Guangxi province. There's also talk of a high-speed railway from Hanoi to Ho Chi Minh City because currently there's one, but the railway was built by the French a hundred years ago. I think it would take a week from Hanoi to Ho Chi Minh City if I take the current system. So with the new technology and the railway from China, maybe it would only take few hours. That would be ideal.

(21:05) Jeremy Au:

Yeah. It only feels like a few hours because it is a distance. The high speed rail is pretty fast but yeah, I didn't know it would take a week for the current train.

(21:11) Valerie Vu:

Yes because they make a lot of stops in between and it's an old infrastructure from the French colonization time.

(21:17) Jeremy Au:

Yeah. That'd be a fun railway. You know what? That would be fun to do. We should do a railway right on the old approach and then you should do it again at a high speed. The high-speed one, wouldn't be very romantic. Now, that’s the whole idea of this.

(21:28) Valerie Vu:

I don't want to do the old railway.

(21:30) Jeremy Au:

It's all the other, only all the hippie California backpackers want to do it.

(21:34) Valerie Vu:

Yeah, Jeremy, you're welcome to take it. I'm good.

(21:37) Jeremy Au:

You're good. I will take my Instagram photos and put it on my Instagram story.

(21:41) Valerie Vu:

I will pass.

(21:42) Jeremy Au:

It'll be fast. Yeah, there you go. On that note thank you so much for sharing Valerie.

(21:46) Valerie Vu:

Thank you, Jeremy. happy to catch up on what's happening in Vietnam in the past month.