Vietnam: New President Tô Lâm, Immediate China State Visit & USA Rejection "Non-Market Economy"- E467

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

1. New President Tô Lâm: The death and state-mandated mourning period for Vietnam's former Communist Party General Secretary Nguyen Phu Trong culminated in the swift elevation of Tô Lâm from the Ministry of Public Defense to President. This transition exhibited the controlled and planned nature of political leadership where political changes are orchestrated to ensure continuity and stability within the government.

2. Immediate China State Visit: Tô Lâm's chose his first official international visit to be China, where he and his delegation signed 16 key agreements spanning commerce and logistics. Vietnam's strategic "bamboo" diplomatic posture aims to strengthen ties with China amidst regional geopolitical tensions. The agreements also reflect a deepening of ties in areas critical to Vietnam’s economic and infrastructural development.

3. USA Rejection "Non-Market Economy": The U.S. Commerce Department disappointed Hanoi by continuing to classify Vietnam as a non-market economy country subject to punitive anti-dumping duties. Only 12 other economies are labeled as non-market by Washington, including China, Russia, North Korea and Azerbaijan. This status hampers Vietnam’s ability to absorb foreign direct investment and engage fully in international trade, especially with its largest trading partner, the U.S.

They also discussed local cultural influences on business practices, regional infrastructure developments and the relocation of manufacturing from China and other countries to Vietnam.

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(01:41) Jeremy Au:

Hey, good to see you.

(01:43) Valerie Vu:

Hi, Jeremy. Good to see you again.

(01:44) Jeremy Au:

I know, this time, we got a fancy background.

(01:47) Valerie Vu:

Yeah. I'm excited. Amazing view.

(01:48) Jeremy Au:

I know instead of like home studio or zoom, Zooml have to play a poker party for VCs in Singapore that we organized at Brave. And now we just happened to have this view in the background. So.

(01:59) Valerie Vu:

Yeah, I'm surprised you mentioned like poker party pretty naturally.

(02:08) Jeremy Au:

Oh really? It's like communism is not a fan of, like gambling and, poker.

(02:12) Valerie Vu:

We're actually not allowed to gamble. Like casino for Vietnamese. We are not allowed to enter casino.

(02:18) Jeremy Au:

Anywhere in the world?

(02:19) Valerie Vu:

In Vietnam, in Vietnam, yeah. So, you need to bring foreign passport if you want to enter a casino in Vietnam. So it was a bit weird for me to see you say it out loud.

(02:36) Jeremy Au:

It was like, oh, we are degenerate gamblers. I mean, I think the fun part is obviously that Marina Bay Sands, that's a casino, right? I mean, the hotel, the casino, so Singapore, gambling is legal for both locals. Obviously, there's a small tax, I guess.

(02:51) Valerie Vu:

For locals, right?

(02:53) Jeremy Au:

Correct. And obviously I think, I guess VC is quite Americanized culture as well, right? It's an American LP, it's American flow. So obviously All In, the technology podcast is all about a poker reference. So Silicon Valley is actually quite common to play poker in those tech circles. Yeah.

Oh well, so today we want to talk about Vietnam. A lot of things happened. So first of all, RIP. Could you share a little bit more about the transition?

(03:14) Valerie Vu:

Yeah. So, about three weeks ago, our former party chief or General Secretary of the Communist Party passed away at 80 years old. So, we have two host a state funeral cause a lot of mourning and sadness among the entire country. So we had the state funeral for three days. Pretty much everywhere you go, the flag has to be tied in a black tissue. And some of the business actually even stopped, like, posting story. Instead they post, like, a story to pay respect to the general who passed away. Yeah, so it was a pretty sad time for the country. But briefly after he passed away, the government quickly moved on to the succession and elected the new general secretary who we have been discussed. His name is Tô Lâm. So he stepped up from ministry of public defense to now general secretary of Vietnam.

(04:06) Jeremy Au:

Yeah, so I think the first thing that struck me was that when he passed away, nobody was surprised. All my Vietnamese friends were not surprised. Now everyone else felt like they didn't know or they were surprised that was happening. So it sounds like people knew for a while?

(04:19) Valerie Vu:

Yeah, I think people, especially Vietnamese, knew for a while. But as freedom of speech and freedom of press is not as popular among like Vietnamese. So they try to limit a lot of news about rumor about his death but actually everyone knew that he has a stroke and he wasn't able to really show up in a lot of important meetings so the power planning and succession has been planned out for a couple years now. That's why I see a lot of anti-corruption campaign and Tô Lâm, the current party chief was the general behind all of this entire "burning furnace" campaign.

(04:52) Jeremy Au:

Yeah, I think the big surprise and I think something I realized was that we had ascribed the burning furnace, at least for myself, to the predecessor, but actually it turns out that Tô Lâm has been like pushing this for the past few years because he's the successor and the next in line. So I think that was something that was maybe less clear to me one or two months ago compared to today.

(05:10) Valerie Vu:

Yeah. It's because we cannot announce publicly when it's, hasn't happened. So yeah, we have to wait for the country to finish mourning and pay respect to our former party chief first, then move on to announcing like, Hey, we have a new party chief and he's most likely going to be also the general secretary in 2026, which is when we have the most important like general meeting for the Communist Party.

(05:35) Jeremy Au:

What's interesting is that, he seems to be making quite a lot of big moves recently. So I think the first thing he did was he flew to China as his first official visit. And last time, we were discussing the bamboo strategy, right? We're just trying to be neutral between the U. S., between Russia, between China because of historical ties, but it was interesting that his first visit was to China, and then Xi Jinping called him a friend. And so, it was interesting to hear that. And it was also about 16 deals were signed. So, commercial and logistics.

(05:59) Valerie Vu:

So it was really sudden and fast change. So, as soon as he was elected, the Russian government and Putin flew in to visit Vietnam. So that's the first kind of big move, big visit. And secondly, he's now, Mr. Tô Lâm, he's now in China. And that is his first official foreign visit. And he chose China. That means a lot. That means we are re-emphasizing that relationship between Vietnam and China is still at most important. And they, we choose to still respect this Vietnam and China foreign policy. And that's why the two countries just signed about 14 agreements among investment, public infrastructures, education exchange. So, the Vietnamese government actually brought a big entourage alongside with Tô Lâm in this visit. He also visited Guangzhou beside Beijing. It's because the infrastructure planning it's connecting supposed to be connecting like Cantonese region to Vietnam. And in the future, the two region will be linked by a high speed train which only take like a couple of hours. Yeah.

(07:01) Jeremy Au:

Yeah, and I think, it's interesting because this builds on the previous podcast we talked about, which is that the primary relationship between Vietnam and China, obviously, is one of the logistics and infrastructure upgrade is one angle. And second, of course, is that Vietnam and China has gone to war multiple times in the past and one was right after the US-Vietnam War. So, obviously, maintaining peace and security is a big topic, right? So I think I mean, honestly, from my perspective, it makes sense. Like Vietnam and China, you're literally neighbors on the border with each other. It does feel like the natural first country to talk to. I'm not sure who else they could really have gone to as their first visit. I think going to the U. S. For the first visit so far away. We have been honestly seen as an insult, I think, by the China government.

(07:40) Valerie Vu:

I would guess so, but I think we also got punished by the U. S. So few days ago, the U. S. rejected our request to upgrade it to be market economy. So we are now still classified as non-market economy. And I think the whole world, they only listed about like 10 to 12 country that don't have the status of market economy. So, North Korea, Russia, China. So I think in a way, by not visiting U. S. first, we were punished by the U. S. that, like, we, we are not recognized as a market economy.

(08:12) Jeremy Au:

And what does getting recognized as a market economy get you or why is it important?

(08:16) Valerie Vu:

Yeah, it's important because it's going eliminate a lot of import duties and tariffs, especially because U. S. is our biggest exporting partner. So net trading, like, surplus of Vietnam to U. S. is about a hundred million last year. So if we can reduce the tax, the imports duties and tariff, Both sides can make a lot more profit. So the biggest advantage of being a market, being recognized as a market economy is to eliminate all the tariff and all the duties and being recognized as a open open business democracy like environment. Yeah. Yeah. So it's, it's very yeah, I think in the world, they're only like about 10 country that are not recognized as market economy.

(08:59) Jeremy Au:

It's interesting because, if you look at the US elections right now, obviously, there's a big push by the Democrat Republicans. And what's interesting is that the Republicans, especially Trump not fans of Vietnam as a trading partner. So I think they're looking at that trading surplus that you just mentioned as a sign that is imbalanced in the trading relationship. That's one. And I think that's one angle. And then the second angle, of course, is that Trump has singled out and said that a lot of Chinese companies manufacturing in Vietnam and like routing through Vietnam still into america. I think the part that both sides are okay with, of course, is a Western manufacturer moving out of China and relocating to Vietnam. That feels like they're okay, but I think they're not okay with the Chinese manufacturers like manufacturing in Vietnam.

(09:41) Valerie Vu:

Yeah, so I think they, by not recognizing our economy as non market, I think they are, discouraging the Western factory to move to Vietnam. So it's a, not a win win situation. But on the Chinese manufacturing diversity thing out to Vietnam, it has already happened. So the most kind of frequent conversation I have recently in Vietnam are with the Chinese investor and Chinese factoring owners. Yeah. All of them have already made the decision and some already made the investment to expand and build our factory in Vietnam, including like BYD, consumer good, I can name of like media Miniso Tsingtao, the beer, beer group.

Yeah, they already have made like extreme investment and they, they're not like making a profit in Vietnam right now because they just entered the market or about to enter the market. But Talking to the country manager of this company, they all have a kind of plan and firm commitment to invest in Vietnam.

(10:36) Jeremy Au:

Yeah, I think it makes sense that, it's easy for a lot of the Chinese companies in the south, for example, to move into the North of Vietnam, a lot of cultural similarity, infrastructure build out. And I think the south of Vietnam, from what I've heard is a little bit more like receptive to American, like cultural heritage or people flows. And then on a parallel track, I've also heard from my Indonesian folks that a lot of Western MNCs were looking at Vietnam, but now they're looking more towards Indonesia don't know, China plus one or China plus two, whatever you want to call it. But like you said, I think, at first I think Vietnam was a clear number one for them. And then now they're like, okay, maybe we still do something in Vietnam, but we need to do something in Indonesia.

(11:11) Valerie Vu:

I think there are more reason in addition to that. So for example, NVIDIA, they were clearly wanted to do more than just a partnership with FBT. But the problem is our government did not respond fast enough and did not say like, "yes, we welcome you" fast enough. So they have to, and including Apple as well shift some of the new investment to Indonesia. So policy. Also in terms of workforce labor we have about a hundred million compared to almost 300 million people in Indonesia. And if you talk about like Nvidia in the chip sector, we still like a lot of hardware engineers. Yeah. I'm mentioning like particularly hardware. 'cause over the past 30 years we've over-focused our education to software. That's why FBT became so big. But now we realize we have this gap in hardware, so we don't have enough of hardware engineers to prepare for the NVIDIA investment. And also the third reason is the power supply. Yeah. Yeah. That's, that's still, we, we haven't solved for that yet.

(12:09) Jeremy Au:

Well, you you solved it this year. You didn't have any blackouts. You use a lot of coal. So you know, too bad for carbon emissions, but but you know, I mean, last year, there were actually we discussed it. There were like literally brownouts and blackouts in Vietnam last year. And then this year, the government at least solved it by saying let's burn as much coal and import as much as it. But I think what's interesting is that actually, you reminded me that, I think Gita Sjahrir who is also the Indonesia co host of Brave, we're discussing about the Indonesia reaction. And I think, like MNCs, there's an interesting contrast for the policies, right?

So, I mean, Vietnam, like you said very focused high on education, 100 million, very to foreign direct investments, and actually very few protectionist measures from what I can tell. But, for Indonesia, it's enacting more protectionist measures. They impose a 1200 percent import tariff on Chinese made goods. Obviously, education is not as high investments compared to Vietnam. Obviously, it's separated into multiple islands, so it's not like a contiguous landmass, right? So there's, I think, some interesting contrasts, I would say, between Indonesian policy at a government level and the Vietnamese government also to some extent the directions where they're going, right? China, Indonesia is a little bit more like protectionist versus Chinese imports versus Vietnam is taking in both Chinese imports and foreign direct investment.

(13:17) Valerie Vu:

Yeah. Maybe that's why To Lam has to visit China first thing when he was crowned cause ideally, if we want more investment from China, we should also welcome their businesses such as BYD, Miniso or media coming to Vietnam without tariff. But I would say in terms of pricing the BYD car, for example, is still a bit more expensive than VinFast per se. So I think they're like an open competition for now. Yeah.

(13:41) Jeremy Au:

I mean, in Singapore, the BYD car is very affordable compared to the other electric cars like Tesla, Tesla and everything. Because of, the less of the import taxes that America imposed on BYD and other Chinese manufacturers. So it allows the Tesla to have that price differentiation while also having the features, but actually in Singapore, I was just looking at a BYD car and I was like, Whoa, let's just say that I looked at it and then I was just like, should we switch to electric and blah, blah, blah. I don't think the answer is not yet because I think I also for electric cars, like every year to get better quite significantly. So actually the longer you wait, there's some software upgrades and all the other stuff but yeah, I think it was really quite the gap. It's very price-competitive and I think you see a lot of BYD cars in Singapore these days as well.

(14:22) Valerie Vu:

Yeah. So that's, that's why I'm also surprised to see like Vietnam kind of welcomes Chinese competitors. You can see now like BYD advertisement everywhere. They're just about to open a huge showroom in Hanoi. I didn't see the showroom in Ho Chi Minh city yet but I saw a big one in Hanoi. My friend in the car industry also working with BYD, quite aggressively now.

(14:43) Jeremy Au:

Yeah, I think VinFast would have a tough time competing with BYD. I mean, BYD obviously has a huge advantage in terms of scale, right? Obviously the China domestic market but also I think the Chinese EV supplier base is so strong, so for example, is looking at the lidar, which is the laser detection, hardware manufacturer, right? It's a module and literally it's like most of it is manufactured in America, in China. So, you know, actually, to install that in a car vehicles. You know, yeah.

(15:08) Valerie Vu:

Talking about car ,there's an interesting story to show, like Mr. To Lam is also pretty good, pro business, even though he's coming from a public defense background and more like national security background. So Mercedes Benz in Vietnam has joint venture with a local firm in Vietnam. And they lease for the land, for the assembling land, or they expire and they couldn't get the authority, local authority to renew the contract. And he was really, like, publicly criticized the local government that, they are not being business friendly and move fast moving enough. And this joint venture should be renewed. So he's like talking openly that even though the anti corruption is ongoing, we still have to push for economic growth and yeah, pro business. So that could be a good side on the story because a lot of Investor also asked me what his policy is going to be. And is he a bit like too protectionism coming from a public defense background?

(16:05) Jeremy Au:

Yeah, I think at the end of the day, if you don't have a fast growing GDP per capita, the way China has done in terms of investments, then, you can do all kinds of short term moves, but over a 10 to 20 year timeframe, then China can out compete over that timeframe. So from our perspective, I think if you are a neighbor of China and you're not growing as fast as China industrially, then, I think it's just falling behind, and that's very hard to keep that space. So I think to me, economic growth of Vietnam is not just for economic growth and standard of living. It's actually a national security requirement because if you don't grow how do you keep up? I think what's interesting is that when we see this new phase, what do you think potentially some policy or administration differences or similarities?

(16:43) Valerie Vu:

Just he's still very newly in position. So I agree. Don't really know what exactly on his agenda. But I think for the near future term, it's still about power consolidation. He's learning what Xi Jinping has done in China. So he's consolidated and make sure to remove the former power. I think he's still authoritarian style.

(17:03) Jeremy Au:

Yeah, I think it makes sense. I mean, I always remember this interesting thing, which is people are like, hey, democracy has multiple parties competing for power, right? And then they're like, a communist party is only as one party. And I'm like, no, no, no. Within the communist party, there are multiple factions and multiple parties within a communist party is just under that banner. So I think the tricky part is just like, how do people sort out those differences as well?

(17:23) Valerie Vu:

And yeah. One of the first few days his policy was, pro business, while the anti corruption is ongoing. So how can he manage both at the same time? I think it would be a very challenging task.

(17:34) Jeremy Au:

Yeah. I think it's interesting because, I've reflected on this is like, 15 years ago, like if you were in China, you knew that and the word on the street was that officials were taking bribes, right? I mean, there's literally people discuss it. And so, international students would discuss it. Locals would discuss it. It was like a known norm. And I just think that, no matter how much growth that you get, supposedly because you can incentivize officials using, These backdoor channels, I think it's just not sustainable for our country over the medium long term because like, at the end of the day, no matter what for a government, you want a government to represent you, right? And if you feel like the government is representing you because of somebody else paid more to a red packet, I don't think the government can stay strong.

(18:13) Valerie Vu:

Yeah. I hope he's more pragmatic, especially about economic development given that his cabinet is very defense-focused. Not none of them came from ministry of finance or ministry of investment. They all came from very public defense and army type of background. So I do understand like why the international investor have their concern, but based on the encouragement of the Mercedes joint ventures and like his rarely saying, we have to keep the economic growth going. I do think that he's very pragmatic about the importance of business and economic growth.

(18:46) Jeremy Au:

When we think about this new administration, obviously there's all sorts of relationships, not just with China, but also the neighbors, right? So Cambodia, Thailand, Singapore, Philippines, Malaysia, and Indonesia. So I'm just curious, do you think there's any, is it too early to tell? Do you think there's any contours?

(19:00) Valerie Vu:

I think it's too early to tell, and also it's not his first in the agenda.

(19:04) Jeremy Au:

It is true. His number one agenda is China visit, right?

(19:07) Valerie Vu:

Russia visit first. Yeah. Like Russia went to Vietnam. And then he went to China. And I think it'll be US.

(19:12) Jeremy Au:

Yes, true. So yeah, so it's gotta be like.

(19:15) Valerie Vu:

I gotta balance the big superpower first.

(19:18) Jeremy Au:

Just like the Korean drama again. Yeah, yeah, yeah.

(19:20) Valerie Vu:

And then, yeah, yeah,

(19:21) Jeremy Au:

Wait. No, actually it's true. I mean, you're right. So number one is China and Russia. And then number two is the U. S.

(19:26) Valerie Vu: Yeah, I would say one, two should still be U. S. China. Yeah. Russia, they came to us.

(19:32) Jeremy Au:

So it's because of travel in. And technically, also, they came in during that that time period. Technically, all the moves hadn't happened and all the other stuff as well. So, yeah, I think it's interesting time. Yeah. I guess, I'm curious, but, obviously now it's August and then, now it's this time period. We'll hit it towards December. Do the Vietnamese have holidays in November, December?

(19:52) Valerie Vu:

Actually we follow the same holiday with China. So we celebrate Chinese New Year. So the slow month would be January. That way we're heading to Chinese New Year, or we call Lunar New Year. So December will still be a busy month. January and February is the, was when things are more quiet.

(20:08) Jeremy Au:

Gotcha. Because yeah, Singapore as well. Singapore celebrates both Christmas and Chinese New Year. So sometimes they joke like December to February, nothing gets done.

(20:16) Valerie Vu:

Yeah. I would say January or like the month of the lunar new year is where nothing get done in Vietnam but also interesting like culture. So right now in, lunar New Year, lunar calendar is the ghost month. So more like B2B contracts are not getting done because they don't want to sign in this month. Yeah, yeah, yeah, yeah.

(20:35) Jeremy Au:

Cause right now is the mid-autumn festival.

(20:37) Valerie Vu:

Before, before. So the month before. Yeah.

(20:40) Jeremy Au:

Yeah. People are burning the paper money.

(20:41) Valerie Vu:

Yes. Yeah. So this, this month is where like the ghost and the dead people are like co living with the, with us. So it's a taboo to do a new business or new contract this month.

(20:51) Jeremy Au:

I did not know that. Singapore does do a lot of like, the hungry ghost festival, at least in terms of like, burning the paper money. So, yeah. People are like busy. It's like government approved, buckets to burn your staff and everything and paper money and everything.

(21:06) Valerie Vu:

So it is it lasts about like 10 more days. The mid autumn festival should be fun. Moon cakes, moon cake. But we don't have a day off.

(21:12) Jeremy Au:

You don't have a day off? Yeah. Singapore doesn't have one either. So, but you know, we're going to have mooncakes everywhere. People are going to give it to one another as gifts. And coming up also is like the upcoming is the SuperReturms, the F1. Are you going to be here?

(21:23) Valerie Vu:

Yeah, I will be here again.

(21:24) Jeremy Au:

We could do it again here instead of like running around for all the SuperReturn VC meetings, everything. So what are you going to be here for the F1? I think F1 is like early September. There are four hosts, there's also Token 2049.

(21:35) Valerie Vu:

Yeah, so I think I'll be here the week of Token2049. SuperReturn, I think this year is a bit later.

(21:40) Jeremy Au:

Yeah, it's a bit later, yeah.

(21:41) Valerie Vu:

I'm not sure if I'm coming.

(21:42) Jeremy Au:

Yeah. On that note we'll see you next month.

(21:44) Valerie Vu:

Thanks. Thanks, Jeremy.