Welcome to Kobe Time, a podcast series on Markets and Economies from Devious Group Research. I'm Tamir, be chief economist. Welcoming you to our 112th episode.

Welcome to Kobe Time, a podcast series on Markets and Economies from Devious Group Research. I'm Tamir, be chief economist. Welcoming you to our 112th episode.

There is so much negativity in the news these days. So you really need, you know, to protect a constructive picture, deep experience, deep insights that allows you to sort of rise above the short term noise. So today's guest is one such person,

There is so much negativity in the news these days. So you really need, you know, to protect a constructive picture, deep experience, deep insights that allows you to sort of rise above the short term noise. So today's guest is one such person,

Charles Armon founded ran and grew in Southeast Asia from 1993 to 2007. He is presently the chair of the Sana Council, a Singapore based think tank backed by venture capital for MS Hill Ventures. It is focused on growth potential of Southeast Asia. Something that we really want to talk about today. Charles. Welcome to Kobe Time.

Charles Armon founded ran and grew in Southeast Asia from 1993 to 2007. He is presently the chair of the Sana Council, a Singapore based think tank backed by venture capital for MS Hill Ventures. It is focused on growth potential of Southeast Asia. Something that we really want to talk about today. Charles. Welcome to Kobe Time.

Thank you very much,

Thank you very much,

great to have you Charles. Um a couple of months ago you wrote in Nikkei,

great to have you Charles. Um a couple of months ago you wrote in Nikkei,

uh government and business leaders these days frequently speculate on which side will win the face of between the US and China as if it were a boxing match between Ali and Frazier and we end up with one lifting his arms. Victoria while the other lies chastened on the mat. What these leaders are missing is that in fact, both China and the US will be winners from this confrontation. Love that intro Charles. I mean that Dr into the piece, but I want you to expand on what you were meaning in that section.

uh government and business leaders these days frequently speculate on which side will win the face of between the US and China as if it were a boxing match between Ali and Frazier and we end up with one lifting his arms. Victoria while the other lies chastened on the mat. What these leaders are missing is that in fact, both China and the US will be winners from this confrontation. Love that intro Charles. I mean that Dr into the piece, but I want you to expand on what you were meaning in that section.

Thanks Jer. Um It was an interesting uh piece of work we did. It was based on a simple observation that

Thanks Jer. Um It was an interesting uh piece of work we did. It was based on a simple observation that

both the Chinese and US economies

both the Chinese and US economies

have emerged as the clear innovation leaders in the world.

have emerged as the clear innovation leaders in the world.

And you know, you ask, why is that? Uh if, if you ask what drives innovation, it's one of the most complex um questions. But a good way to illustrate is to think about the relationship between universities and research houses, the business community and the people who provide capital.

And you know, you ask, why is that? Uh if, if you ask what drives innovation, it's one of the most complex um questions. But a good way to illustrate is to think about the relationship between universities and research houses, the business community and the people who provide capital.

And what's extraordinary is the way that system works in China and the US are so dramatically different that in fact, it gives them advantages in different ways that make the contest more interesting. But in addition, the sheer scale of both countries, both in terms of their domestic market and their ability to, to raise funding for their priorities

And what's extraordinary is the way that system works in China and the US are so dramatically different that in fact, it gives them advantages in different ways that make the contest more interesting. But in addition, the sheer scale of both countries, both in terms of their domestic market and their ability to, to raise funding for their priorities

is well in excess of any other community or maybe the Eastern Europe. But that's a much more diverse and, and uh probably with, with less consistent policies than the US or China. And so you have these two giants that are now committed to beating each other on a whole range of technology and business ventures. And one of the, the articles I cited or research reports I cited in the study was by

is well in excess of any other community or maybe the Eastern Europe. But that's a much more diverse and, and uh probably with, with less consistent policies than the US or China. And so you have these two giants that are now committed to beating each other on a whole range of technology and business ventures. And one of the, the articles I cited or research reports I cited in the study was by

the Australian Strategic Policy Institute A ASP I and they looked at 44 very important technologies going forward. Now, III I did a lot of research on this. Some people have a list of 20 some people have a list of 75 but it was a well thought out study and it looked at which of which of the most cited papers are authored by which country.

the Australian Strategic Policy Institute A ASP I and they looked at 44 very important technologies going forward. Now, III I did a lot of research on this. Some people have a list of 20 some people have a list of 75 but it was a well thought out study and it looked at which of which of the most cited papers are authored by which country.

So it wasn't all papers, it was the most cited and of the 44 technologies, the US and China led in 41 generally, China was in the lead

So it wasn't all papers, it was the most cited and of the 44 technologies, the US and China led in 41 generally, China was in the lead

and in three, the US was not a leader. Uh I think one was Korea and two were India. But you look at the, the, the the scale of that leadership and recognize they really are pointing ahead and, and I have the, the report in front of me. It's things like, you know, advanced composite materials or mineral extraction and processing, uh photo thetas electric batteries.

and in three, the US was not a leader. Uh I think one was Korea and two were India. But you look at the, the, the the scale of that leadership and recognize they really are pointing ahead and, and I have the, the report in front of me. It's things like, you know, advanced composite materials or mineral extraction and processing, uh photo thetas electric batteries.

It, it's extraordinary to see the foresight with which China recognized what were going to be the important priorities and was able to direct an enormous amount of capital to those priorities. The second thing that I think a lot of people miss is they assume that cooper operation and planning are the key to winning.

It, it's extraordinary to see the foresight with which China recognized what were going to be the important priorities and was able to direct an enormous amount of capital to those priorities. The second thing that I think a lot of people miss is they assume that cooper operation and planning are the key to winning.

And, and so they often try to direct a lot of the resources to one or two single enterprises. For example, in the case of Europe, Ari on space for, for space.

And, and so they often try to direct a lot of the resources to one or two single enterprises. For example, in the case of Europe, Ari on space for, for space.

But actually the China model is very different. Once they have identified a priority, the scale and scope of that investment vastly exceeds even that of the US. And I I did a quick search on, for example, who are the major Chinese auto companies. And there are nine

But actually the China model is very different. Once they have identified a priority, the scale and scope of that investment vastly exceeds even that of the US. And I I did a quick search on, for example, who are the major Chinese auto companies. And there are nine

US has only three of which one is owned by a foreigner. What? Um Europe? But nine, now one could argue that that's quite wasteful and in some ways it might be, you know, the socialist was that we should only have one company and direct all the resources at that. But instead China has pursued a model of hyper competition. Now, the the backers of these competitors are often different cities or provinces

US has only three of which one is owned by a foreigner. What? Um Europe? But nine, now one could argue that that's quite wasteful and in some ways it might be, you know, the socialist was that we should only have one company and direct all the resources at that. But instead China has pursued a model of hyper competition. Now, the the backers of these competitors are often different cities or provinces

and what they're doing to back a ventures, they're providing capital, they're providing subsidized land, they're finding access to research, they're facilitating building infrastructure, they're providing training to workers. There's a whole host of ways

and what they're doing to back a ventures, they're providing capital, they're providing subsidized land, they're finding access to research, they're facilitating building infrastructure, they're providing training to workers. There's a whole host of ways

that they can help their, who they're backing. But there's no guarantee that the, the company they back will win and they will definitely be losers. But in the end across everything, batteries, electric vehicles, n you see China moving ahead in terms of technology, not because they are state directed, but because they are state backed with heavy competition between firms US has a very different system. One that I illustrated in the article which I think

that they can help their, who they're backing. But there's no guarantee that the, the company they back will win and they will definitely be losers. But in the end across everything, batteries, electric vehicles, n you see China moving ahead in terms of technology, not because they are state directed, but because they are state backed with heavy competition between firms US has a very different system. One that I illustrated in the article which I think

quite interesting is the space sector where originally NASA was allocating its capital to two or three large established defense contractors, Boeing and Lockheed were the main ones. And over time, they effectively became noncompetitive. Lockheed had three straight failures of rockets, one of which was carrying a very expensive spy satellite and it, it was almost becoming impossible to ensure a US launch. They had, they had failed so fast.

quite interesting is the space sector where originally NASA was allocating its capital to two or three large established defense contractors, Boeing and Lockheed were the main ones. And over time, they effectively became noncompetitive. Lockheed had three straight failures of rockets, one of which was carrying a very expensive spy satellite and it, it was almost becoming impossible to ensure a US launch. They had, they had failed so fast.

And so NASA changed strategy and started backing firms like Blue Origin, which is backed by Bezos and SpaceX, which is passed by Elon Musk. And, and it's extraordinary how quickly they leapfrog the capabilities of the existing players and now are the leaders both in terms of number of launches, the cost of those launch and also a lot of the technologies involved in making the launch more successful.

And so NASA changed strategy and started backing firms like Blue Origin, which is backed by Bezos and SpaceX, which is passed by Elon Musk. And, and it's extraordinary how quickly they leapfrog the capabilities of the existing players and now are the leaders both in terms of number of launches, the cost of those launch and also a lot of the technologies involved in making the launch more successful.

So these are two different innovation models, one requiring relying more on private capital, but with some state involvement and the other state backing, but a heavy degree of competition and it's hard for Japan and Europe and Southeast Asia, let alone the rest of the world to keep up. And so that is the basis of the statement that the winners will be China and the US and the ones who have trouble keeping up is everybody else because of this rivalry.

So these are two different innovation models, one requiring relying more on private capital, but with some state involvement and the other state backing, but a heavy degree of competition and it's hard for Japan and Europe and Southeast Asia, let alone the rest of the world to keep up. And so that is the basis of the statement that the winners will be China and the US and the ones who have trouble keeping up is everybody else because of this rivalry.

Uh Fantastic inside Charles, I I think you mentioned this in your article in the context of green finance and climate change, that if the Indians are not going to buy solar cells and wind turbines from the Chinese and build on their own or get support from the West. So be it, we'll just have the, you know, two large economies driving down the cost of energy transition by subsidies that and then the rest of the world sort of benefits out of it.

Uh Fantastic inside Charles, I I think you mentioned this in your article in the context of green finance and climate change, that if the Indians are not going to buy solar cells and wind turbines from the Chinese and build on their own or get support from the West. So be it, we'll just have the, you know, two large economies driving down the cost of energy transition by subsidies that and then the rest of the world sort of benefits out of it.

Um But Charles, I want to do like a mild pushback on that thesis which I absolutely like. But one area which is advanced semiconductors, uh I had Chris Miller on my podcast a few episodes ago. And his point was that it is impossible for the entire extremely complex advanced semiconductor supply chain to be absorbed into one country.

Um But Charles, I want to do like a mild pushback on that thesis which I absolutely like. But one area which is advanced semiconductors, uh I had Chris Miller on my podcast a few episodes ago. And his point was that it is impossible for the entire extremely complex advanced semiconductor supply chain to be absorbed into one country.

Uh The US cannot do it, the Taiwanese can't do it and the Chinese definitely can't do it. So that area, the competition or rivalry between the US and China China is sort of destined for failure or am I going too far?

Uh The US cannot do it, the Taiwanese can't do it and the Chinese definitely can't do it. So that area, the competition or rivalry between the US and China China is sort of destined for failure or am I going too far?

It's, it's funny, I have his book here. It's, it's, it's, it's, it's a fascinating book and certainly one of the great

It's, it's funny, I have his book here. It's, it's, it's, it's, it's a fascinating book and certainly one of the great

overviews of how a sector has developed and how competition between the different um countries has worked out. The one I would definitely add to your list is Korea. Korea is the leader in memory chips, which is, is

overviews of how a sector has developed and how competition between the different um countries has worked out. The one I would definitely add to your list is Korea. Korea is the leader in memory chips, which is, is

just slightly behind TS MC in terms of the um the node that it's producing on and the scale of their investments are equivalent, if not greater than TS MC. It's just that with a little bit more certainty as to the demand. So Korea is definitely a big player in this game, the semiconductor industry, maybe other industries will go this way. But there's a uh

just slightly behind TS MC in terms of the um the node that it's producing on and the scale of their investments are equivalent, if not greater than TS MC. It's just that with a little bit more certainty as to the demand. So Korea is definitely a big player in this game, the semiconductor industry, maybe other industries will go this way. But there's a uh

a staggering level of complexity. I happened to have worked in the industry for about eight years. I was working for a, a foundry that was competing with TS MC. And it was one of the first times when I did what a, a consultant does do, which is I went and talked to all of the customers of both my client as well as TSM CS customers and II, I visited a long list of both respective customers. There was some overlap between the two and it was one of the first times in my life that

a staggering level of complexity. I happened to have worked in the industry for about eight years. I was working for a, a foundry that was competing with TS MC. And it was one of the first times when I did what a, a consultant does do, which is I went and talked to all of the customers of both my client as well as TSM CS customers and II, I visited a long list of both respective customers. There was some overlap between the two and it was one of the first times in my life that

I consistently heard how good the service was from a company and that was TS MC.

I consistently heard how good the service was from a company and that was TS MC.

Um that the, the scale of the engineering support that they can provide to their customers. They had of the of the top 12 producers of logic chips they were producing for 10 of them, Intel was vertically integrated and Apple at that point was still being um produced by Samsung. It shifted to TS MC just a couple of years later.

Um that the, the scale of the engineering support that they can provide to their customers. They had of the of the top 12 producers of logic chips they were producing for 10 of them, Intel was vertically integrated and Apple at that point was still being um produced by Samsung. It shifted to TS MC just a couple of years later.

And, and when you looked at at the, the quality of their innovation because they were working with all the top players, it put wide to the view that Intel had that if we're vertically integrated, we can coordinate between design and engineering and come up with better outcomes. Instead

And, and when you looked at at the, the quality of their innovation because they were working with all the top players, it put wide to the view that Intel had that if we're vertically integrated, we can coordinate between design and engineering and come up with better outcomes. Instead

what, what Morris Chang and Ts MC were forced to do is work with all the other players meet all their different demands. Design quite different kinds of chips. Some chips like Qualcomm had radios in them. Some were graphics chips which had some unique architecture, some even had analog bits inside a digital chip.

what, what Morris Chang and Ts MC were forced to do is work with all the other players meet all their different demands. Design quite different kinds of chips. Some chips like Qualcomm had radios in them. Some were graphics chips which had some unique architecture, some even had analog bits inside a digital chip.

So he was, he was producing a much broader array of types working with advanced engineers from broad array of companies and his learning was faster and it was actually at that point predictable that TSNC would move ahead because again, competition and working with diverse parties and demands will often lead to higher innovation.

So he was, he was producing a much broader array of types working with advanced engineers from broad array of companies and his learning was faster and it was actually at that point predictable that TSNC would move ahead because again, competition and working with diverse parties and demands will often lead to higher innovation.

So TS MC has ended up as a leader in, in uh in logic chips. Now, one thing that I think Chris Miller didn't quite catch and I, I've read the book but maybe he had it somewhere is everybody knows about Moore's law, which is the idea that the the the kind of the uh speed of of a chip will double every two years. And a lot of that comes down to some math that

So TS MC has ended up as a leader in, in uh in logic chips. Now, one thing that I think Chris Miller didn't quite catch and I, I've read the book but maybe he had it somewhere is everybody knows about Moore's law, which is the idea that the the the kind of the uh speed of of a chip will double every two years. And a lot of that comes down to some math that

you're about every two years, you're trying to have the the the the kind of nanometer the width of of each of the lines and you can therefore fit four times as many chips on the same area and by having more density, things move faster and, and there's other things that you end up with more, more code on the chip itself.

you're about every two years, you're trying to have the the the the kind of nanometer the width of of each of the lines and you can therefore fit four times as many chips on the same area and by having more density, things move faster and, and there's other things that you end up with more, more code on the chip itself.

What he missed is a corollary to Moore's Law and I can't remember it exactly. But it was something along these lines that every four years the capital cost of a fab double. So when I was working, you know, a fab co uh the, the previous generation of fabs costs about 400 million or the first generation, the second generation 800 million and the current generation was 1.6 billion.

What he missed is a corollary to Moore's Law and I can't remember it exactly. But it was something along these lines that every four years the capital cost of a fab double. So when I was working, you know, a fab co uh the, the previous generation of fabs costs about 400 million or the first generation, the second generation 800 million and the current generation was 1.6 billion.

What I told my client is, are you prepared for the point that Fabs cost $16 billion? And then, and the other thing that occurs is because the width of these chips are getting smaller and more of them fit on a single wafer. And at this point, they were transitioning from 200 millimeter wafers to 300 millimeter, which are a lot bigger is the capacity that comes out of those new plants is like 10 times the capacity from the previous plant

What I told my client is, are you prepared for the point that Fabs cost $16 billion? And then, and the other thing that occurs is because the width of these chips are getting smaller and more of them fit on a single wafer. And at this point, they were transitioning from 200 millimeter wafers to 300 millimeter, which are a lot bigger is the capacity that comes out of those new plants is like 10 times the capacity from the previous plant

because there's just greater density. So you have to find new customers, new applications, you have to work with new people. They they, they scale and so I said there's three kinds of industries, there's a traditional industry where you invest upfront like in a building or a piece of land and then you get rents for the next 30 years. Really easy to model financially. Everybody loves those industries.

because there's just greater density. So you have to find new customers, new applications, you have to work with new people. They they, they scale and so I said there's three kinds of industries, there's a traditional industry where you invest upfront like in a building or a piece of land and then you get rents for the next 30 years. Really easy to model financially. Everybody loves those industries.

Then there's kind of a, an industrial industry where you put in money and every year, effectively, your investment matches your depreciation, you keep investing in the business. So it's not like a building that you, you can minimize the investment at the same time, it's predictable and the revenue, then you have semiconductors and every year the investment requirements go up,

Then there's kind of a, an industrial industry where you put in money and every year, effectively, your investment matches your depreciation, you keep investing in the business. So it's not like a building that you, you can minimize the investment at the same time, it's predictable and the revenue, then you have semiconductors and every year the investment requirements go up,

up and up and up. And so it's a tough industry. So that is the reason that this industry, unlike others has tended to consolidate to fewer and fewer players because of the demands on the investment side. So now we come to, well, who is really a leader in this and it is easy to say TS MC is the leader, but I liken them to a Michelin three star cook. OK.

up and up and up. And so it's a tough industry. So that is the reason that this industry, unlike others has tended to consolidate to fewer and fewer players because of the demands on the investment side. So now we come to, well, who is really a leader in this and it is easy to say TS MC is the leader, but I liken them to a Michelin three star cook. OK.

They're using the same frying pan as me, maybe even the same eggs, maybe even the same butter, maybe they have slightly better ingredients, but still the omelet that they're gonna produce is, is 10 times better than mine. And, and so with the same equipment, TS MC can produce chips

They're using the same frying pan as me, maybe even the same eggs, maybe even the same butter, maybe they have slightly better ingredients, but still the omelet that they're gonna produce is, is 10 times better than mine. And, and so with the same equipment, TS MC can produce chips

that other people can't. And of course, they may have slightly pure ingredients, gasses and things that are required in the production process. But they're using a SML, you know, uh uh eee the, the lithographic equipment as Intel, but they can, they're just better cooks right now than the other players. And they understand how to work with this equipment and how to link it back to the design of the chip. So, but

that other people can't. And of course, they may have slightly pure ingredients, gasses and things that are required in the production process. But they're using a SML, you know, uh uh eee the, the lithographic equipment as Intel, but they can, they're just better cooks right now than the other players. And they understand how to work with this equipment and how to link it back to the design of the chip. So, but

there's a lot, they don't dominate, they don't make the quick key equipment that goes into the fat, they don't have patents on. I was, I had this great quote from Chris Miller's book of just how complex it is to produce

there's a lot, they don't dominate, they don't make the quick key equipment that goes into the fat, they don't have patents on. I was, I had this great quote from Chris Miller's book of just how complex it is to produce

and uh and uh an extreme ultraviolet light for, for advanced lithography. It, it's, it's just crazy how they zap a piece of tin that's moving 200 miles an hour and, and it gets hotter than the sun and then they reflect the beam off of it. And that's what used to. I mean, I can't get my head around anything

and uh and uh an extreme ultraviolet light for, for advanced lithography. It, it's, it's just crazy how they zap a piece of tin that's moving 200 miles an hour and, and it gets hotter than the sun and then they reflect the beam off of it. And that's what used to. I mean, I can't get my head around anything

that that's my like favorite part of the book. I just love that part. Yeah,

that that's my like favorite part of the book. I just love that part. Yeah,

I could. So I

I could. So I

I accept that in semiconductors, no one will be able to dominate.

I accept that in semiconductors, no one will be able to dominate.

And I also believe that the US with capital controls are key technologies and export controls will probably be able to limit China's progress in this area. But what I wouldn't do is extrapolate too much from that capability to other sectors because most of them don't have this dynamic that the capital costs keep going up each year. And the breadth of the products that you need to provide keeps expanding each year,

And I also believe that the US with capital controls are key technologies and export controls will probably be able to limit China's progress in this area. But what I wouldn't do is extrapolate too much from that capability to other sectors because most of them don't have this dynamic that the capital costs keep going up each year. And the breadth of the products that you need to provide keeps expanding each year,

fair enough. But I am going to harp on this matter just a little more Charles if I may, which is if you don't have access to the very advanced chips and you will never be able to get the machinery to make the chips on your own. So you can't buy it, you can't make it. Um I'm just thinking in terms of military applications doesn't mean five years, seven years from now, the Chinese military would be absolutely vulnerable to the US military and the tech gap would be of an existential nature.

fair enough. But I am going to harp on this matter just a little more Charles if I may, which is if you don't have access to the very advanced chips and you will never be able to get the machinery to make the chips on your own. So you can't buy it, you can't make it. Um I'm just thinking in terms of military applications doesn't mean five years, seven years from now, the Chinese military would be absolutely vulnerable to the US military and the tech gap would be of an existential nature.

I don't think so. You know, I I did a quick scan of again, these 44 technologies. I find this, this very, very interesting and, and I looked at how many of these are really going to be dependent on having the most advanced chips. Because remember the Chinese are now they've operated seven nanometers or some question of whether they're, they're, you know, intel struggle to go from 14 to to 7.

I don't think so. You know, I I did a quick scan of again, these 44 technologies. I find this, this very, very interesting and, and I looked at how many of these are really going to be dependent on having the most advanced chips. Because remember the Chinese are now they've operated seven nanometers or some question of whether they're, they're, you know, intel struggle to go from 14 to to 7.

And, and that was really what when they fell behind TS MC. Now TS MC is a two

And, and that was really what when they fell behind TS MC. Now TS MC is a two

look, look every, almost every piece of advanced military equipment right now in the US is not at the leading edge because the way military equipment is designed, it was designed 68, 10 years ago, when was the F-35 designed?

look, look every, almost every piece of advanced military equipment right now in the US is not at the leading edge because the way military equipment is designed, it was designed 68, 10 years ago, when was the F-35 designed?

And so yeah, they'll, they'll do upgrade packages but being at the absolute leading edge is probably required for some things like artificial intelligence and maybe some modeling of, of materials, et cetera. And so there will be some, some things. But again, unless you need a lot of these chips. There's no doubt in my mind, China will get quite a few.

And so yeah, they'll, they'll do upgrade packages but being at the absolute leading edge is probably required for some things like artificial intelligence and maybe some modeling of, of materials, et cetera. And so there will be some, some things. But again, unless you need a lot of these chips. There's no doubt in my mind, China will get quite a few.

Look, Russia has not, has been able to prosecute a war despite all of the restrictions because it will figure out ways and it will just learn, you know, sometimes you can just put in four chips and it will do the work of one and, and it may require more electricity consumption may be slightly less efficient, but it doesn't mean you can't have breakthroughs. And so I'm I'm less convinced that

Look, Russia has not, has been able to prosecute a war despite all of the restrictions because it will figure out ways and it will just learn, you know, sometimes you can just put in four chips and it will do the work of one and, and it may require more electricity consumption may be slightly less efficient, but it doesn't mean you can't have breakthroughs. And so I'm I'm less convinced that

this effort will really hamstrung China in terms of its overall capabilities. Then you have an issue like quantum. Now, what everybody's worried about right now is I I forget how they term it. I think it's a quantum moment but it's the moment that quantum can crack what is right now the encryption standard and what's scary about it is it doesn't mean at that point they can crack all future messages, everything they've stored that's encrypted. They will be able to crack. Everybody's worried about that moment.

this effort will really hamstrung China in terms of its overall capabilities. Then you have an issue like quantum. Now, what everybody's worried about right now is I I forget how they term it. I think it's a quantum moment but it's the moment that quantum can crack what is right now the encryption standard and what's scary about it is it doesn't mean at that point they can crack all future messages, everything they've stored that's encrypted. They will be able to crack. Everybody's worried about that moment.

I think most scientists believe China has the lead on quantum

I think most scientists believe China has the lead on quantum

and, and and quantum computing as well as coding and, and they're obviously putting a lot of effort in. So China and that goes to the basis of the article will seek to leapfrog these capabilities that are embedded in, you know, moving TSM CS chips to an even higher, higher uh capability.

and, and and quantum computing as well as coding and, and they're obviously putting a lot of effort in. So China and that goes to the basis of the article will seek to leapfrog these capabilities that are embedded in, you know, moving TSM CS chips to an even higher, higher uh capability.

If they leap frog then, then some bets are off. So I'm, I'm less convinced it will have a factor, but there are a lot of other things that play. It's very, to, to, to say that somehow China won't be able to keep up with us in terms of military or other forms of innovation across most things that matter.

If they leap frog then, then some bets are off. So I'm, I'm less convinced it will have a factor, but there are a lot of other things that play. It's very, to, to, to say that somehow China won't be able to keep up with us in terms of military or other forms of innovation across most things that matter.

Right. And it's not like there haven't been export controls on military sensitive material for many, many years already. Uh

Right. And it's not like there haven't been export controls on military sensitive material for many, many years already. Uh

OK. Well, China control, by the way, the chips that are used for military often aren't, aren't based on,

OK. Well, China control, by the way, the chips that are used for military often aren't, aren't based on,

you know, your standard silicon chip. They, they need to be more um kind of shielded against uh ways to jam them or disrupt the functioning. My my recollection is that quite a few of these chips are based on gallium arsenide. China has announced expert controls on gallium arsenide and, and, and, and so now will it really keep the US from getting them? They do provide most of gal. So in, in some sense, this is gonna work both ways and China is being very thoughtful about

you know, your standard silicon chip. They, they need to be more um kind of shielded against uh ways to jam them or disrupt the functioning. My my recollection is that quite a few of these chips are based on gallium arsenide. China has announced expert controls on gallium arsenide and, and, and, and so now will it really keep the US from getting them? They do provide most of gal. So in, in some sense, this is gonna work both ways and China is being very thoughtful about

which technologies they themselves will target. I don't think it will keep the US and, and force them to relin relent on their controls, but it may at some point make them think twice about increasing. You know, how, how far do we want this race to spiral?

which technologies they themselves will target. I don't think it will keep the US and, and force them to relin relent on their controls, but it may at some point make them think twice about increasing. You know, how, how far do we want this race to spiral?

It's fascinating, super interesting Charles. OK. Let's uh talk about not China US but China

It's fascinating, super interesting Charles. OK. Let's uh talk about not China US but China

uh I was in Hong Kong last week, you were in Shenzhen last week. Uh During my trip, I spoke with some Chinese business uh owners and you know, heard largely, you know, despondency about the economy. You told me before we started the podcast that restaurants are kind of empty. Um So generally speaking, where do we see bright lights in the Chinese economy?

uh I was in Hong Kong last week, you were in Shenzhen last week. Uh During my trip, I spoke with some Chinese business uh owners and you know, heard largely, you know, despondency about the economy. You told me before we started the podcast that restaurants are kind of empty. Um So generally speaking, where do we see bright lights in the Chinese economy?

Let let me provide a little context and I was one of those people when I started in Singapore. Uh it was clear back in 86 that II I began working in consulting in Singapore. 1993 I I helped set up Beane's office here.

Let let me provide a little context and I was one of those people when I started in Singapore. Uh it was clear back in 86 that II I began working in consulting in Singapore. 1993 I I helped set up Beane's office here.

China wasn't even on the radar. You know, it was a very closed economy. It was just starting to open up dang and visited Shenzhen and mainly Hong Kong people were investing in Shenzhen. And it was, it was kind of curious but it was, it was a long way away and I will hand on heart admit that I consistently underestimated

China wasn't even on the radar. You know, it was a very closed economy. It was just starting to open up dang and visited Shenzhen and mainly Hong Kong people were investing in Shenzhen. And it was, it was kind of curious but it was, it was a long way away and I will hand on heart admit that I consistently underestimated

the power of China's development and, and the strength and how long they were able to sustain it. Because I, I grew up, my father worked for the United Nations. So I grew up living in developing markets that that would have a period of high growth. And then it, it always seemed to peter out. And so it it, it's a, it's hard for me to see a country that sustains such high levels of growth for 30 years and it's truly staggering. So I'm one of those people that initially was a little concerned now about moving the other way, you know, becau because I had underestimated for so long.

the power of China's development and, and the strength and how long they were able to sustain it. Because I, I grew up, my father worked for the United Nations. So I grew up living in developing markets that that would have a period of high growth. And then it, it always seemed to peter out. And so it it, it's a, it's hard for me to see a country that sustains such high levels of growth for 30 years and it's truly staggering. So I'm one of those people that initially was a little concerned now about moving the other way, you know, becau because I had underestimated for so long.

Am I am I, am I at risk if I join the group, that is saying, oh China is starting to hit some headwinds, but if we start to really dig into the headwinds, they're serious. You know, I I've seen estimates of 24% all the way up to 29% on the size of their real estate market. That's both commercial resident, it's building as well as the services. A typical eco economy at China stage of development would be 15. So if you take 25 is the estimate,

Am I am I, am I at risk if I join the group, that is saying, oh China is starting to hit some headwinds, but if we start to really dig into the headwinds, they're serious. You know, I I've seen estimates of 24% all the way up to 29% on the size of their real estate market. That's both commercial resident, it's building as well as the services. A typical eco economy at China stage of development would be 15. So if you take 25 is the estimate,

there's 10 points of the economy that basically have to go away that to move to a sustainable level. And you have to make that up somewhere. In addition, infrastructure spent in China. I've seen estimates of about 20% of the economy.

there's 10 points of the economy that basically have to go away that to move to a sustainable level. And you have to make that up somewhere. In addition, infrastructure spent in China. I've seen estimates of about 20% of the economy.

The norm in Southeast Asia like Singapore is 5 6%. So and and clearly China has built up enough infrastructure, there's always going to be more to build, it shouldn't go to zero. But if it goes from 20 to 5, you have to make up another 15. So there's 25 points of growth that China has to make up. In addition, you're an economist. My my understanding as an economist is that

The norm in Southeast Asia like Singapore is 5 6%. So and and clearly China has built up enough infrastructure, there's always going to be more to build, it shouldn't go to zero. But if it goes from 20 to 5, you have to make up another 15. So there's 25 points of growth that China has to make up. In addition, you're an economist. My my understanding as an economist is that

recessions that are driven by real estate problems tend to be deeper because the, the mass population who have some of their wealth tied up in their homes or in real estate investments feels a wealth loss and that directly impacts their willingness to spend. Well in China, that problem is exacerbated because a lot of people don't have a lot of alternatives to invest in other than real estate. And so they have over just as real estate has been overbuilt, it's also been overinvested in too much of the savings.

recessions that are driven by real estate problems tend to be deeper because the, the mass population who have some of their wealth tied up in their homes or in real estate investments feels a wealth loss and that directly impacts their willingness to spend. Well in China, that problem is exacerbated because a lot of people don't have a lot of alternatives to invest in other than real estate. And so they have over just as real estate has been overbuilt, it's also been overinvested in too much of the savings.

And so when you have a a decline in the real estate market, it it affects people more in China than it would in the rest of the world. I think another is that debt levels in China, there's a huge range of investments. I was looking at this the other day, it's about 300% it's probably tipped over of the GMP that is very high even for a developed economy. I think only Japan would be higher. But for one that is somewhere in the not between developed and developing that's too high.

And so when you have a a decline in the real estate market, it it affects people more in China than it would in the rest of the world. I think another is that debt levels in China, there's a huge range of investments. I was looking at this the other day, it's about 300% it's probably tipped over of the GMP that is very high even for a developed economy. I think only Japan would be higher. But for one that is somewhere in the not between developed and developing that's too high.

And and, and so there's a, there's a real risk that you start to combine a financial crisis with the real estate crisis. Then you have the issue of what I'll call animal spirits. And this is a a John Maynard Keynes quote, but it does affect things, you know, when, when these entrepreneurs that everybody was excited about, everybody wanted to work for Alibaba, it was hard but, you know, that was there and then they were going to start up their own company.

And and, and so there's a, there's a real risk that you start to combine a financial crisis with the real estate crisis. Then you have the issue of what I'll call animal spirits. And this is a a John Maynard Keynes quote, but it does affect things, you know, when, when these entrepreneurs that everybody was excited about, everybody wanted to work for Alibaba, it was hard but, you know, that was there and then they were going to start up their own company.

A lot of that has really been dampened and you feel it and I, I see it in, in the economies and the last one is that there has been some, it, it's become harder to invest and participate in the market. I've read articles that executives are, are not like in the Wall Street Journal or are afraid to travel to China. Um And, and so all of this has led to a dramatic decline in the amount of foreign direct investment in China.

A lot of that has really been dampened and you feel it and I, I see it in, in the economies and the last one is that there has been some, it, it's become harder to invest and participate in the market. I've read articles that executives are, are not like in the Wall Street Journal or are afraid to travel to China. Um And, and so all of this has led to a dramatic decline in the amount of foreign direct investment in China.

So before going into the bright light, I have to, I don't want to just jump to that because you say, oh gosh, this guy has no idea what's going on in China. Things are, are depressed and there's, and there's structural reasons. It's not just a temporary recession that a year from now we'll look back on and say, I wish I had bought at the bottom.

So before going into the bright light, I have to, I don't want to just jump to that because you say, oh gosh, this guy has no idea what's going on in China. Things are, are depressed and there's, and there's structural reasons. It's not just a temporary recession that a year from now we'll look back on and say, I wish I had bought at the bottom.

Now, what are the bright lights? I think we have to remember that China is the top manufacturer in the world for most products. It is the low cost and now they are better at innovations. And we just see that in so many things, what I would illustrate with is all of the key products needed for the energy transition. So if I rattle off seven, you know, electric vehicles, batteries, nuclear power, high voltage transmission, rare earth processing um

Now, what are the bright lights? I think we have to remember that China is the top manufacturer in the world for most products. It is the low cost and now they are better at innovations. And we just see that in so many things, what I would illustrate with is all of the key products needed for the energy transition. So if I rattle off seven, you know, electric vehicles, batteries, nuclear power, high voltage transmission, rare earth processing um

solar panels, wind turbines. China is the leader in all se

solar panels, wind turbines. China is the leader in all se

and so, you know, if the world is gonna start spinning, I've seen estimates that are around four trillion a year on the green transition. Well, at least a quarter of that will be spent in China because that's the size of their economy.

and so, you know, if the world is gonna start spinning, I've seen estimates that are around four trillion a year on the green transition. Well, at least a quarter of that will be spent in China because that's the size of their economy.

And then the other three quarters, China will probably win the largest share because they are the low cost most efficient player. So even though us will develop parallel technologies, maybe Japan will maybe Europe will Korea will try to keep up China will be the leader and and this is an enormous growth engine for them. Then you look at this report and you just see a fast array of

And then the other three quarters, China will probably win the largest share because they are the low cost most efficient player. So even though us will develop parallel technologies, maybe Japan will maybe Europe will Korea will try to keep up China will be the leader and and this is an enormous growth engine for them. Then you look at this report and you just see a fast array of

other technologies which China is now a leader at too many Westerners have a mindset that China is just good at copycatting. That may have been true 20 years ago, but it changed fundamentally, China is an innovation engine and that's a reason to be positive China also has and this is where you get into dangerous points about culture. But I I think it's fair to say China has a very

other technologies which China is now a leader at too many Westerners have a mindset that China is just good at copycatting. That may have been true 20 years ago, but it changed fundamentally, China is an innovation engine and that's a reason to be positive China also has and this is where you get into dangerous points about culture. But I I think it's fair to say China has a very

entrepreneurial culture and a lot of people who are very keen to start successful businesses and get rich and that has been an engine of their economy for for several decades. And I think it will continue to be, there will be areas that are off limits, but you will still see an enormous amount of entrepreneurial activity. Finally, a lot of the growth in the world is going to come in the developing world.

entrepreneurial culture and a lot of people who are very keen to start successful businesses and get rich and that has been an engine of their economy for for several decades. And I think it will continue to be, there will be areas that are off limits, but you will still see an enormous amount of entrepreneurial activity. Finally, a lot of the growth in the world is going to come in the developing world.

China is much better positioned now in those markets than any of the other countries. They they have shown an ability to build infrastructure, maybe they overs spent, maybe the R I was completely not every project will be successful. But if you think about what those countries want, which is good enough, low cost, they want financing

China is much better positioned now in those markets than any of the other countries. They they have shown an ability to build infrastructure, maybe they overs spent, maybe the R I was completely not every project will be successful. But if you think about what those countries want, which is good enough, low cost, they want financing

China is by far in the best position to provide it. So I see a number of growth engines for China. And I think any comparison to see a Japan, which really didn't have a lot of these elements at the point where their real estate bubble popped, would say it's going to be a tough going, it's going to be a period of transition. And we actually believe over the next decade, Southeast Asia is likely to slightly outgrow China for the first time in probably four decades,

China is by far in the best position to provide it. So I see a number of growth engines for China. And I think any comparison to see a Japan, which really didn't have a lot of these elements at the point where their real estate bubble popped, would say it's going to be a tough going, it's going to be a period of transition. And we actually believe over the next decade, Southeast Asia is likely to slightly outgrow China for the first time in probably four decades,

but China will still be a fast growing country and it will transition its economy and be a major player in a lot of the industries in the future.

but China will still be a fast growing country and it will transition its economy and be a major player in a lot of the industries in the future.

No, I I think that uh the last point about the China Japan comparison, uh Charles, I mean, I'm fully on board with you. I mean, Japan had a very overvalued exchange rate because of Plaza Accord coming into its realistic bubble burst. Whereas China has in all measure a very competitive exchange rate, the RMB has been weakening for the last year anyway. Uh So that itself is a big point of departure from the debt deflation risk that Japan had versus the

No, I I think that uh the last point about the China Japan comparison, uh Charles, I mean, I'm fully on board with you. I mean, Japan had a very overvalued exchange rate because of Plaza Accord coming into its realistic bubble burst. Whereas China has in all measure a very competitive exchange rate, the RMB has been weakening for the last year anyway. Uh So that itself is a big point of departure from the debt deflation risk that Japan had versus the

uh risk that China face ie like you also don't want to be seen as somebody who's underplaying risks on China. I think we all recognize the risks but the point that you made about the critical aspects of the global supply chain around green transition and how China as a market leader is, I think very grossly underestimated and under appreciated. Uh So, so no, thanks for pointing that out. But on that issue of climate change, Charles,

uh risk that China face ie like you also don't want to be seen as somebody who's underplaying risks on China. I think we all recognize the risks but the point that you made about the critical aspects of the global supply chain around green transition and how China as a market leader is, I think very grossly underestimated and under appreciated. Uh So, so no, thanks for pointing that out. But on that issue of climate change, Charles,

we see the US sort of lurching from an administration that is sort of pro green transition to one that probably is in denial of green transition. Uh If you have that in the largest economy in the world, how does China rely on the US or should you just go alone in terms of, you know, climate change goals and green transition?

we see the US sort of lurching from an administration that is sort of pro green transition to one that probably is in denial of green transition. Uh If you have that in the largest economy in the world, how does China rely on the US or should you just go alone in terms of, you know, climate change goals and green transition?

I I just can't disagree with you that, you know, in this, it's it's sad the position of the US um that there are climate deniers. However,

I I just can't disagree with you that, you know, in this, it's it's sad the position of the US um that there are climate deniers. However,

when I talk to governments, especially around Southeast Asia about climate change, what I do is say there are three reasons that you would invest heavily in the energy transition. One is because you're worried about climate change and you want to do good

when I talk to governments, especially around Southeast Asia about climate change, what I do is say there are three reasons that you would invest heavily in the energy transition. One is because you're worried about climate change and you want to do good

in my experience, very few people are actually going to raise significant amount of capital invested in their countries when they have so many other priorities on the basis of, of that argument. However, there are two other significant arguments that are very compelling. One is that it's economic,

in my experience, very few people are actually going to raise significant amount of capital invested in their countries when they have so many other priorities on the basis of, of that argument. However, there are two other significant arguments that are very compelling. One is that it's economic,

you know, the, the, the the cost of a of electricity generated by solar farm. As long as you can handle the, the ups and downs

you know, the, the, the the cost of a of electricity generated by solar farm. As long as you can handle the, the ups and downs

is far lower than any other form of transition. I put, I put a bunch of solar panels on top of my house. It's a four year payback. I mean, it's as clear as day that how much money I save every month I now have a negative bill versus what I used to pay and when I paid to install it and, and I'm not a scale player that, that there's no doubt that wind

is far lower than any other form of transition. I put, I put a bunch of solar panels on top of my house. It's a four year payback. I mean, it's as clear as day that how much money I save every month I now have a negative bill versus what I used to pay and when I paid to install it and, and I'm not a scale player that, that there's no doubt that wind

solar can be more economic. Now, a lot of people try to think of this very traditionally that the way it needs to do is then go into the grid and it needs to be always available. But what you'll find is that a lot of, of firms and businesses learn how to adjust their consumption of electricity to match generation.

solar can be more economic. Now, a lot of people try to think of this very traditionally that the way it needs to do is then go into the grid and it needs to be always available. But what you'll find is that a lot of, of firms and businesses learn how to adjust their consumption of electricity to match generation.

So I'll, I'll illustrate with one small example. I was reading about a steel mill mini mill in, in Colorado that put this enormous array of solar uh panels out in the desert of Colorado

So I'll, I'll illustrate with one small example. I was reading about a steel mill mini mill in, in Colorado that put this enormous array of solar uh panels out in the desert of Colorado

and they will only operate the plant when the, when the sun is shining, which is like 330 days of the year, but it only operate during the day. But there are a lot of, of, of manufacturing processes that can be turned off and on. It's hard to do it with cement, but you can do it with a lot of processes. And so they will effectively have electricity that costs about a quarter as much as their competition.

and they will only operate the plant when the, when the sun is shining, which is like 330 days of the year, but it only operate during the day. But there are a lot of, of, of manufacturing processes that can be turned off and on. It's hard to do it with cement, but you can do it with a lot of processes. And so they will effectively have electricity that costs about a quarter as much as their competition.

They don't bother trying to store it in batteries. They'll probably have a few that just to allow for some ups and downs when the cloud goes in front of the panels. But by and large, they will operate using electric art technology during when the sun shines, you'll see more and more of that. Or imagine everyone in Vietnam had two panels. Well, they would just charge up their motorcycle, their their refrigerator, whatever they would then have with the, with the, with its own stand-alone battery when the sun was shining

They don't bother trying to store it in batteries. They'll probably have a few that just to allow for some ups and downs when the cloud goes in front of the panels. But by and large, they will operate using electric art technology during when the sun shines, you'll see more and more of that. Or imagine everyone in Vietnam had two panels. Well, they would just charge up their motorcycle, their their refrigerator, whatever they would then have with the, with the, with its own stand-alone battery when the sun was shining

and they would effectively no longer rely as much on the grid. So both at small scale and large scale, you will start to see people match to production versus say I have to store it so I can run at any time. So I think people underestimate how quickly parts of the economy will move to take advantage of variable but very low cost electricity. So you do it for the economics. The third reason you do it

and they would effectively no longer rely as much on the grid. So both at small scale and large scale, you will start to see people match to production versus say I have to store it so I can run at any time. So I think people underestimate how quickly parts of the economy will move to take advantage of variable but very low cost electricity. So you do it for the economics. The third reason you do it

for the national security benefits the and the, the, the exposure countries have, whether it's China or Thailand or Singapore to buying LNG and oil and gas, often from somewhat unstable countries is enormous and the benefits you get from having a great deal of your electricity generated locally can offset that dependence. So the way I described it in Thailand is I said, look, I'm gonna take some simple numbers.

for the national security benefits the and the, the, the exposure countries have, whether it's China or Thailand or Singapore to buying LNG and oil and gas, often from somewhat unstable countries is enormous and the benefits you get from having a great deal of your electricity generated locally can offset that dependence. So the way I described it in Thailand is I said, look, I'm gonna take some simple numbers.

They say that globally four trillion will be spent every year on, on energy transition, Thailand's population to share of the globe would mean that you should be spending about 30 billion a year. Now, everybody gas, where would we find 30 billion? And then I remind them they spend 60 billion a year on oil gas and, and it already the markets have developed, but that's just a flow, that's just their money going off to another part of the world,

They say that globally four trillion will be spent every year on, on energy transition, Thailand's population to share of the globe would mean that you should be spending about 30 billion a year. Now, everybody gas, where would we find 30 billion? And then I remind them they spend 60 billion a year on oil gas and, and it already the markets have developed, but that's just a flow, that's just their money going off to another part of the world,

Middle East Dubai Qatar, wherever they're sourcing the oil. What good does that do to? They're effectively just burning this money to run there. What if instead at, at the start 10 billion a year was going to build better electricity grid, solar panels and wind turbines that would create jobs locally and over time, they would become less and less dependent on the imported fuels. So when I talk to governments, they get a lot more excited about the 2nd and 3rd possibilities.

Middle East Dubai Qatar, wherever they're sourcing the oil. What good does that do to? They're effectively just burning this money to run there. What if instead at, at the start 10 billion a year was going to build better electricity grid, solar panels and wind turbines that would create jobs locally and over time, they would become less and less dependent on the imported fuels. So when I talk to governments, they get a lot more excited about the 2nd and 3rd possibilities.

The challenge they have is almost every country in Southeast Asia has given the rule of transmission to a large national player that is inefficient and sclerotic and not open to foreign investment and competition. And a good example of that would be Vietnam.

The challenge they have is almost every country in Southeast Asia has given the rule of transmission to a large national player that is inefficient and sclerotic and not open to foreign investment and competition. And a good example of that would be Vietnam.

And as a result, they have a number of big investments, multibillion dollar investments lined up for offshore wind or solar panels that aren't turned on because they can't come to terms with how much will be paid for it and can the grid handle it. So one of the things Southeast Asia is going to have to do to

And as a result, they have a number of big investments, multibillion dollar investments lined up for offshore wind or solar panels that aren't turned on because they can't come to terms with how much will be paid for it and can the grid handle it. So one of the things Southeast Asia is going to have to do to

to kind of take full advantage of the opportunities in the green transition is to think through the competitiveness of their infrastructure and to develop much more sophisticated capital markets that will enable investment in their grid and other other enablers of the transition. So where does the US fit in?

to kind of take full advantage of the opportunities in the green transition is to think through the competitiveness of their infrastructure and to develop much more sophisticated capital markets that will enable investment in their grid and other other enablers of the transition. So where does the US fit in?

It's nice that us right now is investing, it's probably going to accelerate the rate of innovation. It may force the Europeans, the Japanese and others to match some of those subsidies which will again overall force the rate of uh of innovation. I think Southeast Asia is a be

It's nice that us right now is investing, it's probably going to accelerate the rate of innovation. It may force the Europeans, the Japanese and others to match some of those subsidies which will again overall force the rate of uh of innovation. I think Southeast Asia is a be

judiciary as long as they can work with the capital markets and have regulations that allow foreign investment and be open to new technology that will disrupt their existing players, not all those are given, but that's what it takes to take advantage of innovation is to accept disruption,

judiciary as long as they can work with the capital markets and have regulations that allow foreign investment and be open to new technology that will disrupt their existing players, not all those are given, but that's what it takes to take advantage of innovation is to accept disruption,

we accept disruption, that's really, really good. Uh Charles uh since you, you have sort of, you know, pivoted us toward our neighborhood and we just heard you talk a little bit about Vietnam. So I want to talk about Vietnam a bit more. Uh Last year, Ian Council released this report. The title was Southeast Asia's pursuit of the emerging market growth crown.

we accept disruption, that's really, really good. Uh Charles uh since you, you have sort of, you know, pivoted us toward our neighborhood and we just heard you talk a little bit about Vietnam. So I want to talk about Vietnam a bit more. Uh Last year, Ian Council released this report. The title was Southeast Asia's pursuit of the emerging market growth crown.

And the report shows very clearly and very nice illustration that Vietnam is a regional leader in absorbing manufacturing from China and elsewhere and also building world class export capabilities. Now, the thing that I find interesting about Vietnam is that all of that is so impressive, but at the same time, its business environment, its governance environment is not impressive. How how do you reconcile these two opposing dynamic and understand its star performance?

And the report shows very clearly and very nice illustration that Vietnam is a regional leader in absorbing manufacturing from China and elsewhere and also building world class export capabilities. Now, the thing that I find interesting about Vietnam is that all of that is so impressive, but at the same time, its business environment, its governance environment is not impressive. How how do you reconcile these two opposing dynamic and understand its star performance?

It's a great question. I I remember when I first presented the report, I was asked this question and and I simply told the audience,

It's a great question. I I remember when I first presented the report, I was asked this question and and I simply told the audience,

I can't give you the answer right now. It it's a, it's a bit of a dilemma for me to explain because my own experience of working with some investors into Vietnam was that it was very hard going similar to what you just said that that the that there was this tricky interplay between various parts of the government that the National

I can't give you the answer right now. It it's a, it's a bit of a dilemma for me to explain because my own experience of working with some investors into Vietnam was that it was very hard going similar to what you just said that that the that there was this tricky interplay between various parts of the government that the National

Communist Party and the local they have provinces and these provinces relatively. And there was always some tension between them. There are large state owned enterprises that are trying to preserve the status quo or to ensure their participation in, in elements that you're trying to drive into. Um and there's also a private sector community and there used to be a,

Communist Party and the local they have provinces and these provinces relatively. And there was always some tension between them. There are large state owned enterprises that are trying to preserve the status quo or to ensure their participation in, in elements that you're trying to drive into. Um and there's also a private sector community and there used to be a,

so it's no longer true a rule for the military. And so when you, when you did a deal in Vietnam that you had to make, everybody had to get a little piece of, of the benefit of you coming in if you were addressing the domestic market, which in the case of, of one of the large investments I worked on, that was the case we were trying to access the domestic market. And so there were if if they viewed it as a zero some game, there were losers in our participation in the market.

so it's no longer true a rule for the military. And so when you, when you did a deal in Vietnam that you had to make, everybody had to get a little piece of, of the benefit of you coming in if you were addressing the domestic market, which in the case of, of one of the large investments I worked on, that was the case we were trying to access the domestic market. And so there were if if they viewed it as a zero some game, there were losers in our participation in the market.

So I I made two visits to Vietnam and spent quite a bit of time visiting people talking to people trying to get an answer to the question. Here's how I would characterize it. One, there are two Vietnam, there's one Vietnam that is focused on export, manufacturing and it's characterized by these magnificent industrial estates that are scattered all over Vietnam and the different provinces of Vietnam, compete with each other to provide better infrastructure and better terms for multinationals to come in.

So I I made two visits to Vietnam and spent quite a bit of time visiting people talking to people trying to get an answer to the question. Here's how I would characterize it. One, there are two Vietnam, there's one Vietnam that is focused on export, manufacturing and it's characterized by these magnificent industrial estates that are scattered all over Vietnam and the different provinces of Vietnam, compete with each other to provide better infrastructure and better terms for multinationals to come in.

Um In fact, 16 of these are called VS IC Vietnam, Singapore Industrial Parks of P because those are some of the best ones. Um but they also have industrial parks with the Koreans, they with the Japanese they have some with that kind of more aligned with Europeans like the Germans. So it is. And you visit these industrial parks. They're very impressive.

Um In fact, 16 of these are called VS IC Vietnam, Singapore Industrial Parks of P because those are some of the best ones. Um but they also have industrial parks with the Koreans, they with the Japanese they have some with that kind of more aligned with Europeans like the Germans. So it is. And you visit these industrial parks. They're very impressive.

The second thing is I, I talked to a guy one factory, he was very generous with his time and he had three factories, one in south southwest of the US, one in Mexico, one in Vietnam.

The second thing is I, I talked to a guy one factory, he was very generous with his time and he had three factories, one in south southwest of the US, one in Mexico, one in Vietnam.

And I said, just anecdotally, are your workers here really more productive?

And I said, just anecdotally, are your workers here really more productive?

He goes, well, let me, let me answer that with an anecdote

He goes, well, let me, let me answer that with an anecdote

in the US. If I told my employees, they have to do overturn, quite a few would quit

in the US. If I told my employees, they have to do overturn, quite a few would quit

in Mexico. If I told my employees, they have to do overtime,

in Mexico. If I told my employees, they have to do overtime,

they'd agree. But then half would show up and half would

they'd agree. But then half would show up and half would

in Vietnam. If I told them they couldn't have overtime, they quit.

in Vietnam. If I told them they couldn't have overtime, they quit.

And he, and he just said, hands down people here work hard, they want overtime, they want training to get better jobs. He just said time and time again. I'm, I'm amazed by the productivity and commitment of our workers. And so that's an anecdote. It's dangerous. People don't like to write about these things. But when you talk to people in Vietnam, that's what they're all seeing is the quality of the workforce is very high in Vietnam.

And he, and he just said, hands down people here work hard, they want overtime, they want training to get better jobs. He just said time and time again. I'm, I'm amazed by the productivity and commitment of our workers. And so that's an anecdote. It's dangerous. People don't like to write about these things. But when you talk to people in Vietnam, that's what they're all seeing is the quality of the workforce is very high in Vietnam.

Another thing I had an interesting talk with a

Another thing I had an interesting talk with a

former, former senior person at, at the Singapore Economic Development Board

former, former senior person at, at the Singapore Economic Development Board

and we were talking about industrial States and uh he'd read the report.

and we were talking about industrial States and uh he'd read the report.

And I said, tell me your experience in Vietnam. He said, well, let me start with China. You know what happened in China? We built Su Industrial Park before we'd even opened it. There was a new park opened across the street and they were trying to steal our customers, Lee Kuan Yew had to get involved. We still couldn't sort it out. And I think they ended up selling off the park huge disappointment because huge opportunity if it worked

And I said, tell me your experience in Vietnam. He said, well, let me start with China. You know what happened in China? We built Su Industrial Park before we'd even opened it. There was a new park opened across the street and they were trying to steal our customers, Lee Kuan Yew had to get involved. We still couldn't sort it out. And I think they ended up selling off the park huge disappointment because huge opportunity if it worked

and they, they thought they had commitment, but that's what happened to them in China. And by the way, that's the experience of a lot of acies in China that they invest. But then gradually they find that their, their technology is leaking or they have competition that they weren't expecting from their own employees,

and they, they thought they had commitment, but that's what happened to them in China. And by the way, that's the experience of a lot of acies in China that they invest. But then gradually they find that their, their technology is leaking or they have competition that they weren't expecting from their own employees,

Indonesia, they set up a time and Bintan again, very high hopes that this would create this incredible opportunity to help Indonesia grow and help Singapore grow by moving some of the more labor intensive processes to B and Bintan, which are very close to have very frequent transport links and other links. And then, and then the Singapore companies could provide some of the more higher value and, and they would grow together, but it didn't work out. It just turned out that the politics,

Indonesia, they set up a time and Bintan again, very high hopes that this would create this incredible opportunity to help Indonesia grow and help Singapore grow by moving some of the more labor intensive processes to B and Bintan, which are very close to have very frequent transport links and other links. And then, and then the Singapore companies could provide some of the more higher value and, and they would grow together, but it didn't work out. It just turned out that the politics,

the local politics of Batam and Bin Time meant that somebody still wanted a percentage of things that were going in and out of Batam or there were just certain restrictions on investments that weren't agreed to and so it just never met its potential. He said Vietnam is the opposite when we set up our first part before we'd even finished, he said, when are we going to do number two?