Vietnam Won't Become the World's Factory, But It May Be the Last Confucian Emerging Market
Vietnam's GDP per capita is only $3,700, equivalent to China in 2003. Its opportunity isn't to replicate China's full industrial chain, but to pick a few industries and reach developed-country levels, the way the Four Asian Tigers did.
The video won't play here. Listen to the audio instead:
The argument · tap a timestamp to hear it
Vietnam is the last untapped Confucian market
The core logic behind Yang Fan's judgment on Vietnam's opportunity: most markets shaped by Confucian culture — Japan, the Four Asian Tigers, mainland China — are already well developed, and Vietnam is the last emerging market that hasn't yet developed. He sums up this cultural sphere as ‘eating with chopsticks’, underpinned by Confucianism, Buddhism and Daoism. The key to this judgment isn't the culture itself, but the behavioral traits the culture produces: a hardworking and pragmatic people, emphasis on education, and a pursuit of worldly success. These traits are not common in other Southeast Asian countries — Indonesia, for instance, is the largest Muslim country, and Thailand is Theravada Buddhist, where the pursuit is more about religious fulfillment.
— Yang Fan FrancisVietnam will not become the world's factory
Yang Fan states plainly that Vietnam will not become the world's factory, because its size decides it. Vietnam's total population is just over 98 million, more than Germany, more than South Korea, with an area about the same as Japan. China could develop a full industrial chain because of its land area, population size and earlier accumulation — Vietnam doesn't have these conditions. He thinks Vietnam is more likely to develop in the direction of the Four Asian Tigers, picking a few industries the way South Korea did — Samsung's electronics, Hyundai Motors, shipbuilding, high-precision chemicals — and if it can develop several of them well, it could become a developed country. But he also stresses this requires the right timing, advantages and people, a kind of historical accident.
— Yang Fan FrancisPeople matter more than timing or geography
Yang Fan breaks Vietnam's development over the past decade into timing, geography and people, and argues people matter most — meaning Confucian culture. He gives several concrete supports: Vietnam ranks in the top 12 globally for engineering graduates; Vietnam is the world's second-largest IT outsourcing hub after India; Vietnam's female employment rate is 10 points higher than China's; the median age is just over 30, very young. On the high female employment rate, he speculates it may be related to war — male mortality during wartime was very high, women had to do everything in the villages, and became the backbone of economic development.
— Yang Fan FrancisMen do big things, and fighting a war is a big thing
There's a Vietnamese proverb: men do big things. Yang Fan explains: what is a big thing? Fighting a war is a big thing. This has led to Vietnamese men today being somewhat more languid, while women, besides working, also take care of the family, and are extremely hardworking. He also mentions another feature of Vietnamese culture: it only extends to China's Ming dynasty, and never experienced the Qing dynasty's suppression of Han culture, so there were no restrictions on women's social status like foot binding. At the same time he stresses that Vietnamese men are very resilient — the only people in the world who beat the US military are the Han Chinese and Vietnam's ethnic Kinh majority.
— Yang Fan FrancisVietnam has four slims, and land is permanent-use rights
Yang Fan says Vietnam has four slims: a slim country, slim pho, slim women in ao dai, slim houses. Houses are slim because the tax system is like the Netherlands', taxing by the width of the house's facade, so people like to build narrow and deep, and build upward. The key difference is that land is permanent-use rights — when a new family member arrives you can build another floor on top, and the ground floor can be rented to a shop. So for locals life is quite easy, and there's no need to buy another house. Foreigners have been able to buy since July 2015, but only apartments, not land — and what appreciates fastest in Vietnam is land.
— Yang Fan FrancisVietnam is safe, but low-level officials will skim benefits
Yang Fan says Vietnam is a very safe country, tied to its Confucian cultural foundation. He gives the example of Hanoi: if someone on the street dares to do wrong to anyone, a bunch of Hanoi's ‘Chaoyang grandmas’ rush over to beat that person up — the moral demands are very high. Ho Chi Minh City has motorcycle phone-snatching, but Hanoi doesn't. On the business environment, Vietnam is very similar to China: the government welcomes foreign investment, but low-level officials hold approval power and want to skim benefits from companies. Compared with the West, Vietnam is not so rule-of-law, it's still officialdom-centered, and also a society of personal connections — to do business well you have to cultivate relationships with all kinds of people.
— Yang Fan FrancisThe China model hits a size ceiling in Vietnam
Yang Fan gives a concrete example: a Chinese luxury brand contacted his friend in Vietnam, planning to open 500 stores in Vietnam in five years, and asked if it was possible. His friend thought about it and said, 500 — you'd be doing well to open two. Vietnam is one north, one south — one Hanoi, one Ho Chi Minh City. Because China is so large, any vertical can be done at great scale, but Vietnam's size is much smaller. He also mentions that southern Vietnam is more Southeast Asian — people won't work overtime, and the pace of getting things done is unexpectedly slow. This is the pit Chinese companies most easily fall into when they go to Vietnam with Chinese habitual thinking.
— Yang Fan FrancisDon't only go to Ho Chi Minh City — you have to pay respects in Hanoi
Yang Fan's advice for Chinese companies: manufacturing firms need to find a good industrial park — Vietnam has roughly 500 industrial parks from north to south, but only about half may be operating, and quality varies. For other companies, including fairly large Chinese internet firms, the mistake is that they all only come to Ho Chi Minh City, because Ho Chi Minh is the economic center, was formerly called Saigon, and is more famous — but they neglect Hanoi. Hanoi is the capital, equivalent to China's Beijing, and many matters of paying respects have to be done in Hanoi. He also warns that many people come over, take one look and feel it's very much like China, but in actual operations you must absolutely not be kidnapped by this ‘very much alike’ — there are many subtle places that are very different.
— Yang Fan FrancisIn their own words · checked verbatim
I think Vietnam won't become the world's factory. As for the world's factory — worldwide, would you say Japan is the world's factory? Japan isn't either. Is South Korea? South Korea isn't either. It's decided by their size.
我觉得越南不会成为世界工厂 因为世界工厂来说 全世界 你说日本是世界工厂吗 日本也不是啊 韩国是不是 韩国也不是 就他的体量决定了嘛
Yang Fan Francis18:31
Vietnam has a very interesting proverb: men do big things. So what is a big thing? Fighting a war is a big thing. So this has led to Vietnamese men today being somewhat more languid.
越南 有一句很有意思的一句谚语 就是说男人是做大事情的 那什么是大事情呢 打仗才是大事情 所以就导致 现在的越南的男性 比较慵懒一点
Yang Fan Francis25:25
My friend thought about it and said, 500 stores — you'd be doing well to open two. Vietnam is one north, one south — one Hanoi, one Ho Chi Minh City. Then how do you open them? The size is just much smaller.
我朋友想了想说 五百家 你开两家就差不多了 就越南一北一南 一个河内一个胡志明 然后你怎么开 就这个体量就小很多
Yang Fan Francis43:45
Some Grab drivers, sometimes you'll see them lying on their motorbikes, sunbathing, quite happy. They don't want to take that many jobs. When they get off work, they'll go to the river with a little line and catch a very big fish — a fish this big — and go home.
开Grab的一些driver 有时候你会看到 他就躺在他的摩托车上 在那晒太阳 就蛮开心的 他也不是想接那么多活的 他下班的时候 会在那个河里面 拿一根小线 然后钓一条很大的鱼 这么大的一条鱼 就回家了
Yang Fan Francis44:47
Many people come over, take one look and feel it's very much like China — it really is very much alike. But in actual operations, you must absolutely not be kidnapped by these feelings of being very much alike.
很多人过来一看会觉得很像中国 确实很像 但是在实际的操作中 其实千万也不要被这些感觉很像所绑架
Yang Fan Francis50:51
If there's no traffic jam, sitting on the back of a motorbike, whether it's the wind blowing in the daytime sun or the evening breeze at night, that feeling is very, very good — a very happy moment. You don't feel that kind of moment in Hong Kong.
如果不堵车的情况下 你坐在摩托车的后面 不管是这个 这个阳天下风一吹 或者是晚上晚风一吹 那个感觉是非常非常好的 是非常开心的一个瞬间 这种瞬间你在香港是没有感受到的
Yang Fan Francis1:22:05
I once made an inappropriate analogy: I said that in the night breeze of Saigon, you can smell the scent of hormones. It's really there, it's really there.
我做过一个不恰当的一个比喻 我是说 在西贡的夜晚的这个晚风中 就能够闻到这个荷尔蒙的味道 确实是有 确实是有
Yang Fan Francis1:32:13
Figures
| Vietnam GDP per capita | $3,700 | 13:13 |
| Vietnam GDP growth rate | around 7% to 8% | 11:35 |
| Vietnam inflation target | 3% | 11:35 |
| Ho Chi Minh City housing price | about 20,000 RMB per square meter | 12:13 |
| Vietnam female employment rate relative to China | 10 points higher | 24:19 |
| Vietnam median age | just over 30 | 27:29 |
| Vietnam coastline length | 3,600 km | 29:32 |
| Number of free trade agreements Vietnam has signed | 15 with 58 countries | 30:32 |
| Number of industrial parks in Vietnam | about 500, maybe half operating | 49:51 |
Glossary
- Confucian society
- East and Southeast Asian societies influenced by Confucian culture, marked by the chopstick-eating sphere.
- Four Asian Tigers
- Hong Kong, Taiwan, Singapore and South Korea, which achieved economic takeoff in succession after World War II.
- Ao dai
- Traditional Vietnamese women's garment, similar to the qipao, with side slits worn over trousers.
- Chaoyang grandmas
- Middle-aged and older women in Beijing's Chaoyang district who eagerly watch over community order; here a metaphor for Hanoi's busybody citizens.
How to listen
Founders and investors watching Southeast Asia expansion, manufacturing relocation and emerging-market investment, plus anyone considering living or working in Vietnam.
The opening Vietnamese greeting and the north-south accent comparison can be skipped, roughly the first 5 minutes.