World Class Investor: Vietnam’s Future Is Bigger Than You Think | EP 373

Key Concepts

• FDI (Foreign Direct Investment): Investment made by a foreign company into business interests in another country. A key driver of Vietnam’s economic growth.
• Corporate Governance: The system of rules, practices, and processes by which a company is directed and controlled. Crucial for financial stability.
• Innovation vs. Imitation: The contrast between creating original ideas and adopting existing ones, particularly in the context of Southeast Asian startups.
• Subscription Model: A business model where customers pay a recurring fee for access to a product or service (e.g., Netflix, Costco).
• Market Volatility & Risk Management: The unpredictable nature of markets and the importance of preparing for economic downturns.
• Consumer Behavior & Local Preferences: Understanding that Asian consumers may have different purchasing habits than Western consumers.
• Storytelling & Branding: The power of creating a narrative around a product to enhance its value.
• Jackpot Moment: The rare opportunity to achieve a significant financial outcome, such as a successful sale of a company.

Vietnam’s Transformation (1990-2025)

Dr. Kongiat Opas Wong, founder and CEO of Asia Plus Group, describes a dramatic transformation of Vietnam over the past 35 years. In 1990, Vietnam was characterized by widespread poverty, with people selling small items on the streets and a lack of quality restaurants. He recalls dining in a chef’s home due to the absence of established dining options. Today, Vietnam has experienced significant growth fueled by FDI and the capabilities of its people, resulting in improved infrastructure, the emergence of large corporations, and a surge in land prices. However, this growth has also created a widening gap between the rich and the poor, raising concerns about the sustainability of prosperity for low-income earners. This disparity is observed even in advanced economies like Singapore, where cost of living concerns are prevalent.

Fifteen years ago, Dr. Wong was involved in lending Vietnamese government funds for highway construction in the north of Vietnam, noting the previously unacceptable state of the road system. Now, Vietnam boasts extensive highway networks and tourist destinations like Phu Quoc Island and Sapa, previously difficult to access. The development of professionally managed industrial estates, often through joint ventures with Singapore, Thailand, and South Korea, has further attracted FDI and contributed to national wealth.

Startup Ecosystems: Vietnam vs. Thailand

Dr. Wong highlights that neither Vietnam nor Thailand are leaders in innovation, attributing the origin of most groundbreaking ideas to countries like Israel, the US, Sweden, and Japan. He observes a common pattern in Southeast Asia: startups typically attempt to imitate successful Western models, hoping to scale and potentially be acquired by larger overseas companies or go public. He estimates a 95% failure rate for these ventures.

He notes a key difference: he’s yet to find a Vietnamese or Thai company comparable to Netflix or Costco, which thrive on a subscription model with annual price increases and remarkably low cancellation rates. This is attributed to a combination of factors, including a lack of willingness among Asian consumers to pay for locally-made products and the substantial investment required in software and content production (particularly the high cost of acquiring intellectual property from Hollywood).

Investment practices reveal a cautious approach. Asia Plus Group screens hundreds of startups in Thailand, investing in only one, and a similar ratio applies in Vietnam (investing in one or two out of 40-50 reviewed). Investment decisions are based on identifying a competitive advantage. For example, instead of investing directly in online shopping (a crowded market), they invested in logistics, recognizing the essential need for delivery services. He recounts rejecting a startup demanding a 50x revenue multiple for a company with minimal profits, preferring to invest in established US companies like Amazon.

Key Challenges for Vietnamese Startups

Several challenges hinder the success of Vietnamese startups:

• Lack of Competitive Advantage: Many startups enter saturated markets without a clear differentiator.
• Unrealistic Pricing: Founders often overvalue their companies, demanding prices that are not justified by their revenue or profitability. He cites an example of a company with $1 million in sales seeking a $50 million valuation.
• Limited Capabilities: Founders often excel in technology but lack expertise in marketing, sales, and navigating regulatory hurdles.
• Infrastructure Gaps: Issues like unreliable internet access in certain regions can impede online businesses.
• Consumer Preferences: Asian consumers are generally less willing to pay for locally-made products compared to their Western counterparts.

Lessons from Thailand’s Economic History

Dr. Wong draws lessons from Thailand’s economic experience, particularly the 1997 financial crisis. He emphasizes the importance of:

• Financial Discipline: Maintaining sufficient foreign reserves (currently around $300 billion in Thailand) to cover imports for 3-6 months.
• Strong Corporate Governance: Preventing lending to family members or cronies and ensuring robust supervision of financial institutions.
• Risk Management: Preparing for potential economic downturns and understanding the consequences of excessive risk-taking. He recounts a story of a steel magnate who refused to sell a securities license for $20 million before the crisis, only to see his company collapse in 1997.
• Infrastructure Development: Investing in infrastructure like airports to accommodate growth, acknowledging that this can also drive up land prices and exacerbate affordability issues.

The Importance of Consumer Focus & Continuous Improvement

Dr. Wong stresses the importance of understanding consumer needs and continuously improving products. He shares an example of a Thai green tea entrepreneur who initially distributed free samples to gather feedback before investing in a bottling plant. He advised the entrepreneur to improve the bottle cap design and the clarity of the tea itself. He emphasizes the need to “obsess” over customers, collect data, and relentlessly pursue improvements.

He also highlights the value of learning from failures rather than solely focusing on success stories.

Advice for Young Vietnamese Entrepreneurs

Dr. Wong advises young Vietnamese entrepreneurs to:

• Focus on Strengths: Concentrate on areas where they excel rather than trying to fix weaknesses.
• Learn from Mistakes: Study the failures of others to avoid repeating them.
• Be Realistic: Recognize the value of a good offer and be willing to sell when the opportunity arises, as “jackpot moments” are rare.
• Understand Market Dynamics: Be aware of global economic trends and their potential impact on Vietnam.

Conclusion

Dr. Kongiat Opas Wong paints a picture of Vietnam’s remarkable economic progress, while also cautioning against complacency. He emphasizes the need for sustainable growth, strong corporate governance, a focus on consumer needs, and a willingness to learn from both successes and failures. He underscores the importance of understanding the unique challenges and opportunities facing Vietnamese startups and the need for a pragmatic approach to innovation and investment. His insights offer valuable guidance for navigating the complexities of the Vietnamese market and building a more resilient and prosperous future.