1 00:00:06,840 --> 00:00:10,020 Speaker 1: Welcome to Kobe Time, a podcast series on Markets and 2 00:00:10,029 --> 00:00:13,170 Speaker 1: Economies from Devious Group Research. I'm Tamir, be chief economist. 3 00:00:13,180 --> 00:00:16,259 Speaker 1: Welcoming you to our 112th episode. 4 00:00:17,170 --> 00:00:20,770 Speaker 1: There is so much negativity in the news these days. 5 00:00:20,780 --> 00:00:24,989 Speaker 1: So you really need, you know, to protect a constructive picture, 6 00:00:25,000 --> 00:00:28,549 Speaker 1: deep experience, deep insights that allows you to sort of 7 00:00:28,559 --> 00:00:31,909 Speaker 1: rise above the short term noise. So today's guest is 8 00:00:31,920 --> 00:00:33,110 Speaker 1: one such person, 9 00:00:33,479 --> 00:00:38,098 Speaker 1: Charles Armon founded ran and grew in Southeast Asia from 10 00:00:38,110 --> 00:00:42,598 Speaker 1: 1993 to 2007. He is presently the chair of the 11 00:00:42,909 --> 00:00:46,110 Speaker 1: Sana Council, a Singapore based think tank backed by venture 12 00:00:46,119 --> 00:00:49,860 Speaker 1: capital for MS Hill Ventures. It is focused on growth 13 00:00:49,869 --> 00:00:52,529 Speaker 1: potential of Southeast Asia. Something that we really want to 14 00:00:52,540 --> 00:00:55,240 Speaker 1: talk about today. Charles. Welcome to Kobe Time. 15 00:00:55,619 --> 00:00:56,619 Speaker 2: Thank you very much, 16 00:00:57,509 --> 00:01:00,020 Speaker 1: great to have you Charles. Um a couple of months 17 00:01:00,029 --> 00:01:01,930 Speaker 1: ago you wrote in Nikkei, 18 00:01:02,500 --> 00:01:05,589 Speaker 1: uh government and business leaders these days frequently speculate on 19 00:01:05,599 --> 00:01:07,959 Speaker 1: which side will win the face of between the US 20 00:01:07,970 --> 00:01:10,839 Speaker 1: and China as if it were a boxing match between 21 00:01:10,860 --> 00:01:13,849 Speaker 1: Ali and Frazier and we end up with one lifting 22 00:01:13,860 --> 00:01:16,809 Speaker 1: his arms. Victoria while the other lies chastened on the mat. 23 00:01:17,180 --> 00:01:19,949 Speaker 1: What these leaders are missing is that in fact, both 24 00:01:19,959 --> 00:01:23,559 Speaker 1: China and the US will be winners from this confrontation. 25 00:01:24,129 --> 00:01:27,720 Speaker 1: Love that intro Charles. I mean that Dr into the piece, 26 00:01:27,730 --> 00:01:29,819 Speaker 1: but I want you to expand on what you were 27 00:01:29,830 --> 00:01:30,919 Speaker 1: meaning in that section. 28 00:01:31,819 --> 00:01:35,839 Speaker 2: Thanks Jer. Um It was an interesting uh piece of 29 00:01:35,849 --> 00:01:38,449 Speaker 2: work we did. It was based on a simple observation 30 00:01:38,459 --> 00:01:38,930 Speaker 2: that 31 00:01:39,819 --> 00:01:43,440 Speaker 2: both the Chinese and US economies 32 00:01:44,110 --> 00:01:47,540 Speaker 2: have emerged as the clear innovation leaders in the world. 33 00:01:48,669 --> 00:01:50,760 Speaker 2: And you know, you ask, why is that? Uh if, 34 00:01:50,769 --> 00:01:53,379 Speaker 2: if you ask what drives innovation, it's one of the 35 00:01:53,389 --> 00:01:58,290 Speaker 2: most complex um questions. But a good way to illustrate 36 00:01:58,300 --> 00:02:03,819 Speaker 2: is to think about the relationship between universities and research houses, 37 00:02:03,959 --> 00:02:07,410 Speaker 2: the business community and the people who provide capital. 38 00:02:08,000 --> 00:02:11,220 Speaker 2: And what's extraordinary is the way that system works in 39 00:02:11,229 --> 00:02:16,228 Speaker 2: China and the US are so dramatically different that in fact, 40 00:02:16,240 --> 00:02:19,139 Speaker 2: it gives them advantages in different ways that make the 41 00:02:19,149 --> 00:02:23,380 Speaker 2: contest more interesting. But in addition, the sheer scale of 42 00:02:23,389 --> 00:02:27,000 Speaker 2: both countries, both in terms of their domestic market and 43 00:02:27,008 --> 00:02:30,660 Speaker 2: their ability to, to raise funding for their priorities 44 00:02:30,949 --> 00:02:35,359 Speaker 2: is well in excess of any other community or maybe 45 00:02:35,369 --> 00:02:38,309 Speaker 2: the Eastern Europe. But that's a much more diverse and, 46 00:02:38,580 --> 00:02:41,940 Speaker 2: and uh probably with, with less consistent policies than the 47 00:02:41,949 --> 00:02:46,169 Speaker 2: US or China. And so you have these two giants 48 00:02:46,589 --> 00:02:50,929 Speaker 2: that are now committed to beating each other on a 49 00:02:50,940 --> 00:02:54,570 Speaker 2: whole range of technology and business ventures. And one of the, 50 00:02:54,679 --> 00:02:57,570 Speaker 2: the articles I cited or research reports I cited in 51 00:02:57,580 --> 00:02:58,800 Speaker 2: the study was by 52 00:02:59,130 --> 00:03:03,130 Speaker 2: the Australian Strategic Policy Institute A ASP I and they 53 00:03:03,139 --> 00:03:07,648 Speaker 2: looked at 44 very important technologies going forward. Now, III 54 00:03:07,660 --> 00:03:09,538 Speaker 2: I did a lot of research on this. Some people 55 00:03:09,550 --> 00:03:11,258 Speaker 2: have a list of 20 some people have a list 56 00:03:11,270 --> 00:03:14,289 Speaker 2: of 75 but it was a well thought out study 57 00:03:14,300 --> 00:03:18,039 Speaker 2: and it looked at which of which of the most 58 00:03:18,050 --> 00:03:20,928 Speaker 2: cited papers are authored by which country. 59 00:03:21,679 --> 00:03:24,190 Speaker 2: So it wasn't all papers, it was the most cited 60 00:03:24,669 --> 00:03:29,139 Speaker 2: and of the 44 technologies, the US and China led 61 00:03:29,149 --> 00:03:31,860 Speaker 2: in 41 generally, China was in the lead 62 00:03:32,880 --> 00:03:36,479 Speaker 2: and in three, the US was not a leader. Uh 63 00:03:36,490 --> 00:03:38,639 Speaker 2: I think one was Korea and two were India. But 64 00:03:38,649 --> 00:03:41,139 Speaker 2: you look at the, the, the the scale of that 65 00:03:41,149 --> 00:03:44,479 Speaker 2: leadership and recognize they really are pointing ahead and, and 66 00:03:44,490 --> 00:03:46,300 Speaker 2: I have the, the report in front of me. It's 67 00:03:46,309 --> 00:03:50,940 Speaker 2: things like, you know, advanced composite materials or mineral extraction 68 00:03:50,949 --> 00:03:55,039 Speaker 2: and processing, uh photo thetas electric batteries. 69 00:03:55,520 --> 00:04:00,210 Speaker 2: It, it's extraordinary to see the foresight with which China 70 00:04:00,220 --> 00:04:04,250 Speaker 2: recognized what were going to be the important priorities and 71 00:04:04,259 --> 00:04:07,039 Speaker 2: was able to direct an enormous amount of capital to 72 00:04:07,050 --> 00:04:09,729 Speaker 2: those priorities. The second thing that I think a lot 73 00:04:09,740 --> 00:04:14,539 Speaker 2: of people miss is they assume that cooper operation and 74 00:04:14,550 --> 00:04:16,909 Speaker 2: planning are the key to winning. 75 00:04:17,908 --> 00:04:20,568 Speaker 2: And, and so they often try to direct a lot 76 00:04:20,579 --> 00:04:24,147 Speaker 2: of the resources to one or two single enterprises. For example, 77 00:04:24,158 --> 00:04:27,278 Speaker 2: in the case of Europe, Ari on space for, for space. 78 00:04:28,010 --> 00:04:31,700 Speaker 2: But actually the China model is very different. Once they 79 00:04:31,709 --> 00:04:36,459 Speaker 2: have identified a priority, the scale and scope of that 80 00:04:36,470 --> 00:04:39,170 Speaker 2: investment vastly exceeds even that of the US. And I 81 00:04:39,178 --> 00:04:41,750 Speaker 2: I did a quick search on, for example, who are 82 00:04:41,760 --> 00:04:44,619 Speaker 2: the major Chinese auto companies. And there are nine 83 00:04:45,010 --> 00:04:47,149 Speaker 2: US has only three of which one is owned by 84 00:04:47,160 --> 00:04:51,450 Speaker 2: a foreigner. What? Um Europe? But nine, now one could 85 00:04:51,459 --> 00:04:54,149 Speaker 2: argue that that's quite wasteful and in some ways it 86 00:04:54,160 --> 00:04:56,380 Speaker 2: might be, you know, the socialist was that we should 87 00:04:56,390 --> 00:04:58,928 Speaker 2: only have one company and direct all the resources at that. 88 00:04:59,160 --> 00:05:03,790 Speaker 2: But instead China has pursued a model of hyper competition. Now, 89 00:05:03,799 --> 00:05:07,609 Speaker 2: the the backers of these competitors are often different cities 90 00:05:07,619 --> 00:05:08,529 Speaker 2: or provinces 91 00:05:08,890 --> 00:05:12,089 Speaker 2: and what they're doing to back a ventures, they're providing capital, 92 00:05:12,230 --> 00:05:16,700 Speaker 2: they're providing subsidized land, they're finding access to research, they're 93 00:05:16,709 --> 00:05:20,600 Speaker 2: facilitating building infrastructure, they're providing training to workers. There's a 94 00:05:20,609 --> 00:05:22,029 Speaker 2: whole host of ways 95 00:05:22,290 --> 00:05:25,130 Speaker 2: that they can help their, who they're backing. But there's 96 00:05:25,140 --> 00:05:28,529 Speaker 2: no guarantee that the, the company they back will win 97 00:05:28,540 --> 00:05:31,709 Speaker 2: and they will definitely be losers. But in the end 98 00:05:31,890 --> 00:05:37,290 Speaker 2: across everything, batteries, electric vehicles, n you see China moving 99 00:05:37,299 --> 00:05:41,100 Speaker 2: ahead in terms of technology, not because they are state directed, 100 00:05:41,350 --> 00:05:44,929 Speaker 2: but because they are state backed with heavy competition between 101 00:05:44,940 --> 00:05:48,078 Speaker 2: firms US has a very different system. One that I 102 00:05:48,089 --> 00:05:49,829 Speaker 2: illustrated in the article which I think 103 00:05:49,924 --> 00:05:54,665 Speaker 2: quite interesting is the space sector where originally NASA was 104 00:05:54,674 --> 00:05:59,355 Speaker 2: allocating its capital to two or three large established defense contractors, 105 00:05:59,545 --> 00:06:02,703 Speaker 2: Boeing and Lockheed were the main ones. And over time, 106 00:06:02,803 --> 00:06:09,075 Speaker 2: they effectively became noncompetitive. Lockheed had three straight failures of rockets, 107 00:06:09,084 --> 00:06:11,894 Speaker 2: one of which was carrying a very expensive spy satellite 108 00:06:12,154 --> 00:06:15,084 Speaker 2: and it, it was almost becoming impossible to ensure a 109 00:06:15,095 --> 00:06:17,464 Speaker 2: US launch. They had, they had failed so fast. 110 00:06:17,829 --> 00:06:21,000 Speaker 2: And so NASA changed strategy and started backing firms like 111 00:06:21,010 --> 00:06:24,760 Speaker 2: Blue Origin, which is backed by Bezos and SpaceX, which 112 00:06:24,769 --> 00:06:28,029 Speaker 2: is passed by Elon Musk. And, and it's extraordinary how 113 00:06:28,040 --> 00:06:31,750 Speaker 2: quickly they leapfrog the capabilities of the existing players and 114 00:06:31,760 --> 00:06:34,279 Speaker 2: now are the leaders both in terms of number of launches, 115 00:06:34,290 --> 00:06:36,799 Speaker 2: the cost of those launch and also a lot of 116 00:06:36,809 --> 00:06:39,510 Speaker 2: the technologies involved in making the launch more successful. 117 00:06:39,839 --> 00:06:44,820 Speaker 2: So these are two different innovation models, one requiring relying 118 00:06:44,829 --> 00:06:47,649 Speaker 2: more on private capital, but with some state involvement and 119 00:06:47,660 --> 00:06:50,609 Speaker 2: the other state backing, but a heavy degree of competition 120 00:06:50,859 --> 00:06:54,160 Speaker 2: and it's hard for Japan and Europe and Southeast Asia, 121 00:06:54,170 --> 00:06:56,700 Speaker 2: let alone the rest of the world to keep up. 122 00:06:56,709 --> 00:06:58,950 Speaker 2: And so that is the basis of the statement that 123 00:06:58,959 --> 00:07:02,269 Speaker 2: the winners will be China and the US and the 124 00:07:02,279 --> 00:07:05,160 Speaker 2: ones who have trouble keeping up is everybody else because 125 00:07:05,170 --> 00:07:06,200 Speaker 2: of this rivalry. 126 00:07:07,160 --> 00:07:10,890 Speaker 1: Uh Fantastic inside Charles, I I think you mentioned this 127 00:07:10,899 --> 00:07:14,299 Speaker 1: in your article in the context of green finance and 128 00:07:14,309 --> 00:07:17,260 Speaker 1: climate change, that if the Indians are not going to 129 00:07:17,269 --> 00:07:21,019 Speaker 1: buy solar cells and wind turbines from the Chinese and 130 00:07:21,029 --> 00:07:23,500 Speaker 1: build on their own or get support from the West. 131 00:07:23,510 --> 00:07:26,730 Speaker 1: So be it, we'll just have the, you know, two 132 00:07:26,739 --> 00:07:29,809 Speaker 1: large economies driving down the cost of energy transition by 133 00:07:29,820 --> 00:07:32,500 Speaker 1: subsidies that and then the rest of the world sort 134 00:07:32,510 --> 00:07:33,420 Speaker 1: of benefits out of it. 135 00:07:33,679 --> 00:07:36,700 Speaker 1: Um But Charles, I want to do like a mild 136 00:07:36,709 --> 00:07:40,820 Speaker 1: pushback on that thesis which I absolutely like. But one 137 00:07:40,829 --> 00:07:45,350 Speaker 1: area which is advanced semiconductors, uh I had Chris Miller 138 00:07:45,359 --> 00:07:49,179 Speaker 1: on my podcast a few episodes ago. And his point 139 00:07:49,190 --> 00:07:53,420 Speaker 1: was that it is impossible for the entire extremely complex 140 00:07:53,429 --> 00:07:56,700 Speaker 1: advanced semiconductor supply chain to be absorbed into one country. 141 00:07:57,089 --> 00:07:59,130 Speaker 1: Uh The US cannot do it, the Taiwanese can't do 142 00:07:59,140 --> 00:08:02,160 Speaker 1: it and the Chinese definitely can't do it. So that area, 143 00:08:02,239 --> 00:08:05,589 Speaker 1: the competition or rivalry between the US and China China 144 00:08:05,600 --> 00:08:08,040 Speaker 1: is sort of destined for failure or am I going 145 00:08:08,049 --> 00:08:08,549 Speaker 1: too far? 146 00:08:09,309 --> 00:08:12,579 Speaker 2: It's, it's funny, I have his book here. It's, it's, it's, it's, 147 00:08:12,589 --> 00:08:15,410 Speaker 2: it's a fascinating book and certainly one of the great 148 00:08:16,089 --> 00:08:20,260 Speaker 2: overviews of how a sector has developed and how competition 149 00:08:20,269 --> 00:08:24,260 Speaker 2: between the different um countries has worked out. The one 150 00:08:24,269 --> 00:08:26,989 Speaker 2: I would definitely add to your list is Korea. Korea 151 00:08:27,000 --> 00:08:30,350 Speaker 2: is the leader in memory chips, which is, is 152 00:08:30,730 --> 00:08:35,549 Speaker 2: just slightly behind TS MC in terms of the um 153 00:08:35,559 --> 00:08:38,239 Speaker 2: the node that it's producing on and the scale of 154 00:08:38,250 --> 00:08:41,840 Speaker 2: their investments are equivalent, if not greater than TS MC. 155 00:08:41,880 --> 00:08:44,059 Speaker 2: It's just that with a little bit more certainty as 156 00:08:44,070 --> 00:08:46,589 Speaker 2: to the demand. So Korea is definitely a big player 157 00:08:46,599 --> 00:08:50,239 Speaker 2: in this game, the semiconductor industry, maybe other industries will 158 00:08:50,250 --> 00:08:52,780 Speaker 2: go this way. But there's a uh 159 00:08:53,609 --> 00:08:56,369 Speaker 2: a staggering level of complexity. I happened to have worked 160 00:08:56,380 --> 00:08:58,929 Speaker 2: in the industry for about eight years. I was working 161 00:08:58,940 --> 00:09:02,630 Speaker 2: for a, a foundry that was competing with TS MC. 162 00:09:03,340 --> 00:09:05,830 Speaker 2: And it was one of the first times when I 163 00:09:05,840 --> 00:09:08,030 Speaker 2: did what a, a consultant does do, which is I 164 00:09:08,039 --> 00:09:11,140 Speaker 2: went and talked to all of the customers of both 165 00:09:11,150 --> 00:09:15,210 Speaker 2: my client as well as TSM CS customers and II, 166 00:09:15,219 --> 00:09:18,669 Speaker 2: I visited a long list of both respective customers. There 167 00:09:18,679 --> 00:09:20,978 Speaker 2: was some overlap between the two and it was one 168 00:09:20,989 --> 00:09:22,710 Speaker 2: of the first times in my life that 169 00:09:23,059 --> 00:09:28,169 Speaker 2: I consistently heard how good the service was from a 170 00:09:28,179 --> 00:09:29,760 Speaker 2: company and that was TS MC. 171 00:09:30,369 --> 00:09:34,390 Speaker 2: Um that the, the scale of the engineering support that 172 00:09:34,400 --> 00:09:37,919 Speaker 2: they can provide to their customers. They had of the 173 00:09:37,929 --> 00:09:41,909 Speaker 2: of the top 12 producers of logic chips they were 174 00:09:41,919 --> 00:09:46,090 Speaker 2: producing for 10 of them, Intel was vertically integrated and 175 00:09:46,099 --> 00:09:50,119 Speaker 2: Apple at that point was still being um produced by Samsung. 176 00:09:50,130 --> 00:09:52,539 Speaker 2: It shifted to TS MC just a couple of years later. 177 00:09:52,919 --> 00:09:55,750 Speaker 2: And, and when you looked at at the, the quality 178 00:09:55,760 --> 00:09:58,020 Speaker 2: of their innovation because they were working with all the 179 00:09:58,030 --> 00:10:00,940 Speaker 2: top players, it put wide to the view that Intel 180 00:10:00,950 --> 00:10:04,020 Speaker 2: had that if we're vertically integrated, we can coordinate between 181 00:10:04,030 --> 00:10:08,580 Speaker 2: design and engineering and come up with better outcomes. Instead 182 00:10:09,229 --> 00:10:11,489 Speaker 2: what, what Morris Chang and Ts MC were forced to 183 00:10:11,500 --> 00:10:14,419 Speaker 2: do is work with all the other players meet all 184 00:10:14,429 --> 00:10:18,489 Speaker 2: their different demands. Design quite different kinds of chips. Some 185 00:10:18,500 --> 00:10:21,559 Speaker 2: chips like Qualcomm had radios in them. Some were graphics 186 00:10:21,570 --> 00:10:24,570 Speaker 2: chips which had some unique architecture, some even had analog 187 00:10:24,580 --> 00:10:26,169 Speaker 2: bits inside a digital chip. 188 00:10:26,450 --> 00:10:30,090 Speaker 2: So he was, he was producing a much broader array 189 00:10:30,099 --> 00:10:32,799 Speaker 2: of types working with advanced engineers from broad array of 190 00:10:32,809 --> 00:10:35,489 Speaker 2: companies and his learning was faster and it was actually 191 00:10:35,500 --> 00:10:40,109 Speaker 2: at that point predictable that TSNC would move ahead because again, 192 00:10:40,119 --> 00:10:45,229 Speaker 2: competition and working with diverse parties and demands will often 193 00:10:45,239 --> 00:10:46,750 Speaker 2: lead to higher innovation. 194 00:10:47,159 --> 00:10:50,789 Speaker 2: So TS MC has ended up as a leader in, 195 00:10:51,119 --> 00:10:54,339 Speaker 2: in uh in logic chips. Now, one thing that I 196 00:10:54,349 --> 00:10:57,030 Speaker 2: think Chris Miller didn't quite catch and I, I've read 197 00:10:57,039 --> 00:10:59,619 Speaker 2: the book but maybe he had it somewhere is everybody 198 00:10:59,630 --> 00:11:02,729 Speaker 2: knows about Moore's law, which is the idea that the 199 00:11:02,739 --> 00:11:05,349 Speaker 2: the the kind of the uh speed of of a 200 00:11:05,359 --> 00:11:08,299 Speaker 2: chip will double every two years. And a lot of 201 00:11:08,309 --> 00:11:10,140 Speaker 2: that comes down to some math that 202 00:11:10,400 --> 00:11:14,978 Speaker 2: you're about every two years, you're trying to have the 203 00:11:14,989 --> 00:11:17,039 Speaker 2: the the the kind of nanometer the width of of 204 00:11:17,049 --> 00:11:19,530 Speaker 2: each of the lines and you can therefore fit four 205 00:11:19,539 --> 00:11:22,039 Speaker 2: times as many chips on the same area and by 206 00:11:22,049 --> 00:11:25,289 Speaker 2: having more density, things move faster and, and there's other 207 00:11:25,299 --> 00:11:27,760 Speaker 2: things that you end up with more, more code on 208 00:11:27,770 --> 00:11:28,539 Speaker 2: the chip itself. 209 00:11:29,280 --> 00:11:32,049 Speaker 2: What he missed is a corollary to Moore's Law and 210 00:11:32,059 --> 00:11:34,419 Speaker 2: I can't remember it exactly. But it was something along 211 00:11:34,429 --> 00:11:38,630 Speaker 2: these lines that every four years the capital cost of 212 00:11:38,640 --> 00:11:42,809 Speaker 2: a fab double. So when I was working, you know, 213 00:11:42,820 --> 00:11:45,969 Speaker 2: a fab co uh the, the previous generation of fabs 214 00:11:45,979 --> 00:11:49,190 Speaker 2: costs about 400 million or the first generation, the second 215 00:11:49,200 --> 00:11:52,580 Speaker 2: generation 800 million and the current generation was 1.6 billion. 216 00:11:53,400 --> 00:11:56,140 Speaker 2: What I told my client is, are you prepared for 217 00:11:56,150 --> 00:11:59,939 Speaker 2: the point that Fabs cost $16 billion? And then, and 218 00:11:59,950 --> 00:12:02,250 Speaker 2: the other thing that occurs is because the width of 219 00:12:02,260 --> 00:12:04,359 Speaker 2: these chips are getting smaller and more of them fit 220 00:12:04,369 --> 00:12:06,419 Speaker 2: on a single wafer. And at this point, they were 221 00:12:06,429 --> 00:12:10,059 Speaker 2: transitioning from 200 millimeter wafers to 300 millimeter, which are 222 00:12:10,070 --> 00:12:13,869 Speaker 2: a lot bigger is the capacity that comes out of 223 00:12:13,880 --> 00:12:17,349 Speaker 2: those new plants is like 10 times the capacity from 224 00:12:17,359 --> 00:12:18,098 Speaker 2: the previous plant 225 00:12:18,570 --> 00:12:21,030 Speaker 2: because there's just greater density. So you have to find 226 00:12:21,039 --> 00:12:24,210 Speaker 2: new customers, new applications, you have to work with new people. 227 00:12:24,270 --> 00:12:27,380 Speaker 2: They they, they scale and so I said there's three 228 00:12:27,390 --> 00:12:31,280 Speaker 2: kinds of industries, there's a traditional industry where you invest 229 00:12:31,289 --> 00:12:33,729 Speaker 2: upfront like in a building or a piece of land 230 00:12:33,739 --> 00:12:36,229 Speaker 2: and then you get rents for the next 30 years. 231 00:12:36,239 --> 00:12:39,630 Speaker 2: Really easy to model financially. Everybody loves those industries. 232 00:12:39,969 --> 00:12:42,848 Speaker 2: Then there's kind of a, an industrial industry where you 233 00:12:42,859 --> 00:12:46,150 Speaker 2: put in money and every year, effectively, your investment matches 234 00:12:46,159 --> 00:12:48,830 Speaker 2: your depreciation, you keep investing in the business. So it's 235 00:12:48,840 --> 00:12:50,960 Speaker 2: not like a building that you, you can minimize the 236 00:12:50,969 --> 00:12:53,679 Speaker 2: investment at the same time, it's predictable and the revenue, 237 00:12:53,690 --> 00:12:58,510 Speaker 2: then you have semiconductors and every year the investment requirements 238 00:12:58,520 --> 00:12:59,109 Speaker 2: go up, 239 00:12:59,479 --> 00:13:02,719 Speaker 2: up and up and up. And so it's a tough industry. 240 00:13:02,729 --> 00:13:06,659 Speaker 2: So that is the reason that this industry, unlike others 241 00:13:06,669 --> 00:13:09,718 Speaker 2: has tended to consolidate to fewer and fewer players because 242 00:13:09,729 --> 00:13:13,679 Speaker 2: of the demands on the investment side. So now we 243 00:13:13,690 --> 00:13:16,099 Speaker 2: come to, well, who is really a leader in this 244 00:13:16,109 --> 00:13:19,059 Speaker 2: and it is easy to say TS MC is the leader, 245 00:13:19,510 --> 00:13:23,140 Speaker 2: but I liken them to a Michelin three star cook. OK. 246 00:13:23,570 --> 00:13:26,570 Speaker 2: They're using the same frying pan as me, maybe even 247 00:13:26,580 --> 00:13:28,699 Speaker 2: the same eggs, maybe even the same butter, maybe they 248 00:13:28,710 --> 00:13:32,419 Speaker 2: have slightly better ingredients, but still the omelet that they're 249 00:13:32,429 --> 00:13:35,849 Speaker 2: gonna produce is, is 10 times better than mine. And, 250 00:13:35,859 --> 00:13:39,510 Speaker 2: and so with the same equipment, TS MC can produce 251 00:13:39,520 --> 00:13:40,189 Speaker 2: chips 252 00:13:40,539 --> 00:13:43,210 Speaker 2: that other people can't. And of course, they may have 253 00:13:43,219 --> 00:13:46,218 Speaker 2: slightly pure ingredients, gasses and things that are required in 254 00:13:46,229 --> 00:13:50,159 Speaker 2: the production process. But they're using a SML, you know, 255 00:13:50,169 --> 00:13:54,619 Speaker 2: uh uh eee the, the lithographic equipment as Intel, but 256 00:13:54,630 --> 00:13:57,489 Speaker 2: they can, they're just better cooks right now than the 257 00:13:57,500 --> 00:14:00,320 Speaker 2: other players. And they understand how to work with this 258 00:14:00,330 --> 00:14:02,330 Speaker 2: equipment and how to link it back to the design 259 00:14:02,340 --> 00:14:04,718 Speaker 2: of the chip. So, but 260 00:14:05,200 --> 00:14:07,679 Speaker 2: there's a lot, they don't dominate, they don't make the 261 00:14:07,690 --> 00:14:10,679 Speaker 2: quick key equipment that goes into the fat, they don't 262 00:14:10,690 --> 00:14:13,940 Speaker 2: have patents on. I was, I had this great quote 263 00:14:13,950 --> 00:14:16,820 Speaker 2: from Chris Miller's book of just how complex it is 264 00:14:16,830 --> 00:14:17,609 Speaker 2: to produce 265 00:14:17,979 --> 00:14:21,799 Speaker 2: and uh and uh an extreme ultraviolet light for, for 266 00:14:21,809 --> 00:14:26,340 Speaker 2: advanced lithography. It, it's, it's just crazy how they zap 267 00:14:26,349 --> 00:14:30,359 Speaker 2: a piece of tin that's moving 200 miles an hour and, 268 00:14:30,369 --> 00:14:32,840 Speaker 2: and it gets hotter than the sun and then they 269 00:14:32,849 --> 00:14:35,809 Speaker 2: reflect the beam off of it. And that's what used to. 270 00:14:35,820 --> 00:14:37,940 Speaker 2: I mean, I can't get my head around anything 271 00:14:37,950 --> 00:14:39,859 Speaker 1: that that's my like favorite part of the book. I 272 00:14:39,869 --> 00:14:41,010 Speaker 1: just love that part. Yeah, 273 00:14:41,039 --> 00:14:42,719 Speaker 2: I could. So I 274 00:14:43,340 --> 00:14:47,400 Speaker 2: I accept that in semiconductors, no one will be able 275 00:14:47,409 --> 00:14:48,119 Speaker 2: to dominate. 276 00:14:48,510 --> 00:14:52,059 Speaker 2: And I also believe that the US with capital controls 277 00:14:52,070 --> 00:14:56,400 Speaker 2: are key technologies and export controls will probably be able 278 00:14:56,409 --> 00:14:59,429 Speaker 2: to limit China's progress in this area. But what I 279 00:14:59,440 --> 00:15:03,700 Speaker 2: wouldn't do is extrapolate too much from that capability to 280 00:15:03,710 --> 00:15:08,559 Speaker 2: other sectors because most of them don't have this dynamic 281 00:15:08,570 --> 00:15:11,919 Speaker 2: that the capital costs keep going up each year. And 282 00:15:11,929 --> 00:15:14,320 Speaker 2: the breadth of the products that you need to provide 283 00:15:14,330 --> 00:15:15,840 Speaker 2: keeps expanding each year, 284 00:15:17,340 --> 00:15:18,969 Speaker 1: fair enough. But I am going to harp on this 285 00:15:18,979 --> 00:15:21,570 Speaker 1: matter just a little more Charles if I may, which 286 00:15:21,580 --> 00:15:26,609 Speaker 1: is if you don't have access to the very advanced 287 00:15:26,619 --> 00:15:28,580 Speaker 1: chips and you will never be able to get the 288 00:15:28,590 --> 00:15:30,210 Speaker 1: machinery to make the chips on your own. So you 289 00:15:30,219 --> 00:15:32,989 Speaker 1: can't buy it, you can't make it. Um I'm just 290 00:15:33,000 --> 00:15:36,669 Speaker 1: thinking in terms of military applications doesn't mean five years, 291 00:15:36,679 --> 00:15:40,380 Speaker 1: seven years from now, the Chinese military would be absolutely 292 00:15:40,390 --> 00:15:42,940 Speaker 1: vulnerable to the US military and the tech gap would 293 00:15:42,950 --> 00:15:44,469 Speaker 1: be of an existential nature. 294 00:15:45,830 --> 00:15:47,510 Speaker 2: I don't think so. You know, I I did a 295 00:15:47,520 --> 00:15:51,020 Speaker 2: quick scan of again, these 44 technologies. I find this, 296 00:15:51,070 --> 00:15:54,900 Speaker 2: this very, very interesting and, and I looked at how 297 00:15:54,909 --> 00:15:58,859 Speaker 2: many of these are really going to be dependent on 298 00:15:59,020 --> 00:16:01,789 Speaker 2: having the most advanced chips. Because remember the Chinese are 299 00:16:01,799 --> 00:16:05,969 Speaker 2: now they've operated seven nanometers or some question of whether they're, they're, 300 00:16:05,979 --> 00:16:09,739 Speaker 2: you know, intel struggle to go from 14 to to 7. 301 00:16:10,210 --> 00:16:12,950 Speaker 2: And, and that was really what when they fell behind 302 00:16:12,960 --> 00:16:15,109 Speaker 2: TS MC. Now TS MC is a two 303 00:16:15,760 --> 00:16:19,909 Speaker 2: look, look every, almost every piece of advanced military equipment 304 00:16:19,919 --> 00:16:21,640 Speaker 2: right now in the US is not at the leading 305 00:16:21,650 --> 00:16:25,739 Speaker 2: edge because the way military equipment is designed, it was 306 00:16:25,750 --> 00:16:28,780 Speaker 2: designed 68, 10 years ago, when was the F-35 designed? 307 00:16:29,119 --> 00:16:32,309 Speaker 2: And so yeah, they'll, they'll do upgrade packages but being 308 00:16:32,320 --> 00:16:35,739 Speaker 2: at the absolute leading edge is probably required for some 309 00:16:35,750 --> 00:16:41,039 Speaker 2: things like artificial intelligence and maybe some modeling of, of materials, 310 00:16:41,049 --> 00:16:43,390 Speaker 2: et cetera. And so there will be some, some things. 311 00:16:43,400 --> 00:16:46,010 Speaker 2: But again, unless you need a lot of these chips. 312 00:16:46,489 --> 00:16:48,349 Speaker 2: There's no doubt in my mind, China will get quite 313 00:16:48,359 --> 00:16:48,729 Speaker 2: a few. 314 00:16:49,010 --> 00:16:51,869 Speaker 2: Look, Russia has not, has been able to prosecute a 315 00:16:51,880 --> 00:16:54,799 Speaker 2: war despite all of the restrictions because it will figure 316 00:16:54,809 --> 00:16:57,309 Speaker 2: out ways and it will just learn, you know, sometimes 317 00:16:57,320 --> 00:16:59,059 Speaker 2: you can just put in four chips and it will 318 00:16:59,070 --> 00:17:02,030 Speaker 2: do the work of one and, and it may require 319 00:17:02,039 --> 00:17:05,119 Speaker 2: more electricity consumption may be slightly less efficient, but it 320 00:17:05,130 --> 00:17:09,030 Speaker 2: doesn't mean you can't have breakthroughs. And so I'm I'm 321 00:17:09,040 --> 00:17:10,550 Speaker 2: less convinced that 322 00:17:10,838 --> 00:17:15,529 Speaker 2: this effort will really hamstrung China in terms of its 323 00:17:15,538 --> 00:17:19,417 Speaker 2: overall capabilities. Then you have an issue like quantum. Now, 324 00:17:19,428 --> 00:17:21,937 Speaker 2: what everybody's worried about right now is I I forget 325 00:17:21,948 --> 00:17:23,658 Speaker 2: how they term it. I think it's a quantum moment 326 00:17:23,667 --> 00:17:26,927 Speaker 2: but it's the moment that quantum can crack what is 327 00:17:26,938 --> 00:17:30,298 Speaker 2: right now the encryption standard and what's scary about it 328 00:17:30,308 --> 00:17:32,379 Speaker 2: is it doesn't mean at that point they can crack 329 00:17:32,388 --> 00:17:36,498 Speaker 2: all future messages, everything they've stored that's encrypted. They will 330 00:17:36,509 --> 00:17:39,379 Speaker 2: be able to crack. Everybody's worried about that moment. 331 00:17:39,829 --> 00:17:42,560 Speaker 2: I think most scientists believe China has the lead on 332 00:17:42,569 --> 00:17:43,040 Speaker 2: quantum 333 00:17:43,670 --> 00:17:46,709 Speaker 2: and, and and quantum computing as well as coding and, 334 00:17:46,719 --> 00:17:48,929 Speaker 2: and they're obviously putting a lot of effort in. So 335 00:17:48,939 --> 00:17:51,208 Speaker 2: China and that goes to the basis of the article 336 00:17:51,219 --> 00:17:55,979 Speaker 2: will seek to leapfrog these capabilities that are embedded in, 337 00:17:55,989 --> 00:17:58,729 Speaker 2: you know, moving TSM CS chips to an even higher, 338 00:17:58,739 --> 00:18:00,250 Speaker 2: higher uh capability. 339 00:18:00,484 --> 00:18:03,375 Speaker 2: If they leap frog then, then some bets are off. 340 00:18:03,564 --> 00:18:07,254 Speaker 2: So I'm, I'm less convinced it will have a factor, 341 00:18:07,354 --> 00:18:09,454 Speaker 2: but there are a lot of other things that play. 342 00:18:09,464 --> 00:18:12,165 Speaker 2: It's very, to, to, to say that somehow China won't 343 00:18:12,175 --> 00:18:13,655 Speaker 2: be able to keep up with us in terms of 344 00:18:13,665 --> 00:18:17,015 Speaker 2: military or other forms of innovation across most things that matter. 345 00:18:17,645 --> 00:18:20,564 Speaker 1: Right. And it's not like there haven't been export controls 346 00:18:20,574 --> 00:18:24,295 Speaker 1: on military sensitive material for many, many years already. Uh 347 00:18:24,305 --> 00:18:26,834 Speaker 2: OK. Well, China control, by the way, the chips that 348 00:18:26,844 --> 00:18:29,974 Speaker 2: are used for military often aren't, aren't based on, 349 00:18:30,280 --> 00:18:33,680 Speaker 2: you know, your standard silicon chip. They, they need to 350 00:18:33,689 --> 00:18:38,579 Speaker 2: be more um kind of shielded against uh ways to 351 00:18:38,589 --> 00:18:42,609 Speaker 2: jam them or disrupt the functioning. My my recollection is 352 00:18:42,619 --> 00:18:44,000 Speaker 2: that quite a few of these chips are based on 353 00:18:44,010 --> 00:18:49,579 Speaker 2: gallium arsenide. China has announced expert controls on gallium arsenide and, and, and, 354 00:18:49,589 --> 00:18:51,739 Speaker 2: and so now will it really keep the US from 355 00:18:51,750 --> 00:18:53,899 Speaker 2: getting them? They do provide most of gal. So in, 356 00:18:53,910 --> 00:18:56,979 Speaker 2: in some sense, this is gonna work both ways and 357 00:18:56,989 --> 00:18:59,170 Speaker 2: China is being very thoughtful about 358 00:18:59,670 --> 00:19:04,589 Speaker 2: which technologies they themselves will target. I don't think it 359 00:19:04,599 --> 00:19:07,660 Speaker 2: will keep the US and, and force them to relin 360 00:19:07,750 --> 00:19:10,869 Speaker 2: relent on their controls, but it may at some point 361 00:19:10,880 --> 00:19:14,849 Speaker 2: make them think twice about increasing. You know, how, how 362 00:19:14,859 --> 00:19:17,010 Speaker 2: far do we want this race to spiral? 363 00:19:18,719 --> 00:19:23,468 Speaker 1: It's fascinating, super interesting Charles. OK. Let's uh talk about 364 00:19:23,479 --> 00:19:25,170 Speaker 1: not China US but China 365 00:19:25,589 --> 00:19:27,319 Speaker 1: uh I was in Hong Kong last week, you were 366 00:19:27,329 --> 00:19:30,650 Speaker 1: in Shenzhen last week. Uh During my trip, I spoke 367 00:19:30,660 --> 00:19:36,359 Speaker 1: with some Chinese business uh owners and you know, heard largely, 368 00:19:36,369 --> 00:19:39,750 Speaker 1: you know, despondency about the economy. You told me before 369 00:19:39,760 --> 00:19:43,060 Speaker 1: we started the podcast that restaurants are kind of empty. 370 00:19:43,229 --> 00:19:48,170 Speaker 1: Um So generally speaking, where do we see bright lights 371 00:19:48,180 --> 00:19:49,250 Speaker 1: in the Chinese economy? 372 00:19:51,430 --> 00:19:54,030 Speaker 2: Let let me provide a little context and I was 373 00:19:54,040 --> 00:19:56,770 Speaker 2: one of those people when I started in Singapore. Uh 374 00:19:56,780 --> 00:19:59,760 Speaker 2: it was clear back in 86 that II I began 375 00:19:59,770 --> 00:20:03,670 Speaker 2: working in consulting in Singapore. 1993 I I helped set 376 00:20:03,680 --> 00:20:04,770 Speaker 2: up Beane's office here. 377 00:20:05,550 --> 00:20:07,900 Speaker 2: China wasn't even on the radar. You know, it was 378 00:20:07,910 --> 00:20:11,930 Speaker 2: a very closed economy. It was just starting to open 379 00:20:11,939 --> 00:20:16,680 Speaker 2: up dang and visited Shenzhen and mainly Hong Kong people 380 00:20:16,689 --> 00:20:19,160 Speaker 2: were investing in Shenzhen. And it was, it was kind 381 00:20:19,170 --> 00:20:21,209 Speaker 2: of curious but it was, it was a long way 382 00:20:21,219 --> 00:20:24,239 Speaker 2: away and I will hand on heart admit that I 383 00:20:24,250 --> 00:20:26,319 Speaker 2: consistently underestimated 384 00:20:26,939 --> 00:20:30,739 Speaker 2: the power of China's development and, and the strength and 385 00:20:30,750 --> 00:20:32,739 Speaker 2: how long they were able to sustain it. Because I, 386 00:20:32,750 --> 00:20:34,719 Speaker 2: I grew up, my father worked for the United Nations. 387 00:20:34,729 --> 00:20:37,660 Speaker 2: So I grew up living in developing markets that that 388 00:20:37,670 --> 00:20:39,639 Speaker 2: would have a period of high growth. And then it, 389 00:20:39,650 --> 00:20:42,369 Speaker 2: it always seemed to peter out. And so it it, 390 00:20:42,380 --> 00:20:44,409 Speaker 2: it's a, it's hard for me to see a country 391 00:20:44,420 --> 00:20:47,159 Speaker 2: that sustains such high levels of growth for 30 years 392 00:20:47,170 --> 00:20:49,920 Speaker 2: and it's truly staggering. So I'm one of those people 393 00:20:49,930 --> 00:20:52,948 Speaker 2: that initially was a little concerned now about moving the 394 00:20:52,959 --> 00:20:55,630 Speaker 2: other way, you know, becau because I had underestimated for 395 00:20:55,640 --> 00:20:56,400 Speaker 2: so long. 396 00:20:57,099 --> 00:20:59,698 Speaker 2: Am I am I, am I at risk if I 397 00:20:59,709 --> 00:21:02,500 Speaker 2: join the group, that is saying, oh China is starting 398 00:21:02,510 --> 00:21:04,800 Speaker 2: to hit some headwinds, but if we start to really 399 00:21:04,810 --> 00:21:08,079 Speaker 2: dig into the headwinds, they're serious. You know, I I've 400 00:21:08,089 --> 00:21:11,829 Speaker 2: seen estimates of 24% all the way up to 29% 401 00:21:12,040 --> 00:21:14,968 Speaker 2: on the size of their real estate market. That's both 402 00:21:14,979 --> 00:21:18,020 Speaker 2: commercial resident, it's building as well as the services. A 403 00:21:18,130 --> 00:21:22,728 Speaker 2: typical eco economy at China stage of development would be 15. 404 00:21:22,989 --> 00:21:25,369 Speaker 2: So if you take 25 is the estimate, 405 00:21:25,650 --> 00:21:28,699 Speaker 2: there's 10 points of the economy that basically have to 406 00:21:28,709 --> 00:21:31,949 Speaker 2: go away that to move to a sustainable level. And 407 00:21:31,959 --> 00:21:35,189 Speaker 2: you have to make that up somewhere. In addition, infrastructure 408 00:21:35,199 --> 00:21:37,909 Speaker 2: spent in China. I've seen estimates of about 20% of 409 00:21:37,920 --> 00:21:38,709 Speaker 2: the economy. 410 00:21:39,349 --> 00:21:43,729 Speaker 2: The norm in Southeast Asia like Singapore is 5 6%. 411 00:21:43,969 --> 00:21:47,619 Speaker 2: So and and clearly China has built up enough infrastructure, 412 00:21:47,630 --> 00:21:49,189 Speaker 2: there's always going to be more to build, it shouldn't 413 00:21:49,199 --> 00:21:53,209 Speaker 2: go to zero. But if it goes from 20 to 5, 414 00:21:53,589 --> 00:21:56,770 Speaker 2: you have to make up another 15. So there's 25 415 00:21:56,780 --> 00:22:00,410 Speaker 2: points of growth that China has to make up. In addition, 416 00:22:00,420 --> 00:22:04,709 Speaker 2: you're an economist. My my understanding as an economist is 417 00:22:04,719 --> 00:22:05,089 Speaker 2: that 418 00:22:06,199 --> 00:22:08,879 Speaker 2: recessions that are driven by real estate problems tend to 419 00:22:08,890 --> 00:22:13,670 Speaker 2: be deeper because the, the mass population who have some 420 00:22:13,680 --> 00:22:16,060 Speaker 2: of their wealth tied up in their homes or in 421 00:22:16,069 --> 00:22:19,969 Speaker 2: real estate investments feels a wealth loss and that directly 422 00:22:19,979 --> 00:22:22,979 Speaker 2: impacts their willingness to spend. Well in China, that problem 423 00:22:22,989 --> 00:22:25,150 Speaker 2: is exacerbated because a lot of people don't have a 424 00:22:25,160 --> 00:22:28,930 Speaker 2: lot of alternatives to invest in other than real estate. 425 00:22:28,939 --> 00:22:31,500 Speaker 2: And so they have over just as real estate has 426 00:22:31,510 --> 00:22:34,139 Speaker 2: been overbuilt, it's also been overinvested in too much of 427 00:22:34,150 --> 00:22:34,819 Speaker 2: the savings. 428 00:22:35,099 --> 00:22:37,389 Speaker 2: And so when you have a a decline in the 429 00:22:37,400 --> 00:22:40,859 Speaker 2: real estate market, it it affects people more in China 430 00:22:40,869 --> 00:22:42,839 Speaker 2: than it would in the rest of the world. I 431 00:22:42,849 --> 00:22:45,609 Speaker 2: think another is that debt levels in China, there's a 432 00:22:45,619 --> 00:22:48,069 Speaker 2: huge range of investments. I was looking at this the 433 00:22:48,079 --> 00:22:51,959 Speaker 2: other day, it's about 300% it's probably tipped over of 434 00:22:51,969 --> 00:22:55,000 Speaker 2: the GMP that is very high even for a developed economy. 435 00:22:55,010 --> 00:22:57,489 Speaker 2: I think only Japan would be higher. But for one 436 00:22:57,500 --> 00:23:01,079 Speaker 2: that is somewhere in the not between developed and developing 437 00:23:01,089 --> 00:23:01,879 Speaker 2: that's too high. 438 00:23:02,250 --> 00:23:05,699 Speaker 2: And and, and so there's a, there's a real risk 439 00:23:05,800 --> 00:23:08,929 Speaker 2: that you start to combine a financial crisis with the 440 00:23:08,939 --> 00:23:11,939 Speaker 2: real estate crisis. Then you have the issue of what 441 00:23:11,949 --> 00:23:14,689 Speaker 2: I'll call animal spirits. And this is a a John 442 00:23:14,699 --> 00:23:18,119 Speaker 2: Maynard Keynes quote, but it does affect things, you know, when, 443 00:23:18,130 --> 00:23:22,260 Speaker 2: when these entrepreneurs that everybody was excited about, everybody wanted 444 00:23:22,270 --> 00:23:25,000 Speaker 2: to work for Alibaba, it was hard but, you know, 445 00:23:25,010 --> 00:23:26,439 Speaker 2: that was there and then they were going to start 446 00:23:26,449 --> 00:23:27,500 Speaker 2: up their own company. 447 00:23:27,890 --> 00:23:29,979 Speaker 2: A lot of that has really been dampened and you 448 00:23:29,989 --> 00:23:32,109 Speaker 2: feel it and I, I see it in, in the 449 00:23:32,119 --> 00:23:35,790 Speaker 2: economies and the last one is that there has been some, it, 450 00:23:35,800 --> 00:23:39,069 Speaker 2: it's become harder to invest and participate in the market. 451 00:23:39,079 --> 00:23:42,270 Speaker 2: I've read articles that executives are, are not like in 452 00:23:42,280 --> 00:23:44,948 Speaker 2: the Wall Street Journal or are afraid to travel to China. 453 00:23:45,180 --> 00:23:48,010 Speaker 2: Um And, and so all of this has led to 454 00:23:48,020 --> 00:23:50,819 Speaker 2: a dramatic decline in the amount of foreign direct investment 455 00:23:50,829 --> 00:23:51,290 Speaker 2: in China. 456 00:23:51,569 --> 00:23:53,949 Speaker 2: So before going into the bright light, I have to, 457 00:23:53,959 --> 00:23:56,030 Speaker 2: I don't want to just jump to that because you say, 458 00:23:56,040 --> 00:23:58,119 Speaker 2: oh gosh, this guy has no idea what's going on 459 00:23:58,130 --> 00:24:01,099 Speaker 2: in China. Things are, are depressed and there's, and there's 460 00:24:01,109 --> 00:24:04,449 Speaker 2: structural reasons. It's not just a temporary recession that a 461 00:24:04,459 --> 00:24:05,959 Speaker 2: year from now we'll look back on and say, I 462 00:24:05,969 --> 00:24:07,430 Speaker 2: wish I had bought at the bottom. 463 00:24:07,920 --> 00:24:09,599 Speaker 2: Now, what are the bright lights? I think we have 464 00:24:09,609 --> 00:24:12,579 Speaker 2: to remember that China is the top manufacturer in the 465 00:24:12,589 --> 00:24:15,959 Speaker 2: world for most products. It is the low cost and 466 00:24:15,969 --> 00:24:18,310 Speaker 2: now they are better at innovations. And we just see 467 00:24:18,319 --> 00:24:20,579 Speaker 2: that in so many things, what I would illustrate with 468 00:24:20,650 --> 00:24:24,060 Speaker 2: is all of the key products needed for the energy transition. 469 00:24:24,400 --> 00:24:28,500 Speaker 2: So if I rattle off seven, you know, electric vehicles, batteries, 470 00:24:28,599 --> 00:24:34,219 Speaker 2: nuclear power, high voltage transmission, rare earth processing um 471 00:24:35,239 --> 00:24:39,380 Speaker 2: solar panels, wind turbines. China is the leader in all 472 00:24:39,420 --> 00:24:39,579 Speaker 2: se 473 00:24:41,089 --> 00:24:44,319 Speaker 2: and so, you know, if the world is gonna start spinning, 474 00:24:44,329 --> 00:24:47,849 Speaker 2: I've seen estimates that are around four trillion a year 475 00:24:47,859 --> 00:24:50,680 Speaker 2: on the green transition. Well, at least a quarter of 476 00:24:50,689 --> 00:24:52,569 Speaker 2: that will be spent in China because that's the size 477 00:24:52,579 --> 00:24:53,430 Speaker 2: of their economy. 478 00:24:53,689 --> 00:24:56,189 Speaker 2: And then the other three quarters, China will probably win 479 00:24:56,199 --> 00:24:58,829 Speaker 2: the largest share because they are the low cost most 480 00:24:58,839 --> 00:25:03,829 Speaker 2: efficient player. So even though us will develop parallel technologies, 481 00:25:03,839 --> 00:25:06,969 Speaker 2: maybe Japan will maybe Europe will Korea will try to 482 00:25:06,979 --> 00:25:10,630 Speaker 2: keep up China will be the leader and and this 483 00:25:10,640 --> 00:25:13,949 Speaker 2: is an enormous growth engine for them. Then you look 484 00:25:13,959 --> 00:25:16,250 Speaker 2: at this report and you just see a fast array 485 00:25:16,260 --> 00:25:16,619 Speaker 2: of 486 00:25:16,734 --> 00:25:19,785 Speaker 2: other technologies which China is now a leader at too 487 00:25:19,796 --> 00:25:22,336 Speaker 2: many Westerners have a mindset that China is just good 488 00:25:22,345 --> 00:25:25,336 Speaker 2: at copycatting. That may have been true 20 years ago, 489 00:25:25,345 --> 00:25:30,005 Speaker 2: but it changed fundamentally, China is an innovation engine and 490 00:25:30,015 --> 00:25:33,355 Speaker 2: that's a reason to be positive China also has and 491 00:25:33,365 --> 00:25:36,754 Speaker 2: this is where you get into dangerous points about culture. 492 00:25:36,765 --> 00:25:39,265 Speaker 2: But I I think it's fair to say China has 493 00:25:39,276 --> 00:25:39,676 Speaker 2: a very 494 00:25:39,781 --> 00:25:43,401 Speaker 2: entrepreneurial culture and a lot of people who are very 495 00:25:43,411 --> 00:25:46,561 Speaker 2: keen to start successful businesses and get rich and that 496 00:25:46,571 --> 00:25:50,561 Speaker 2: has been an engine of their economy for for several decades. 497 00:25:50,571 --> 00:25:52,192 Speaker 2: And I think it will continue to be, there will 498 00:25:52,202 --> 00:25:54,630 Speaker 2: be areas that are off limits, but you will still 499 00:25:54,641 --> 00:25:59,302 Speaker 2: see an enormous amount of entrepreneurial activity. Finally, a lot 500 00:25:59,311 --> 00:26:01,631 Speaker 2: of the growth in the world is going to come 501 00:26:01,641 --> 00:26:02,722 Speaker 2: in the developing world. 502 00:26:03,410 --> 00:26:06,939 Speaker 2: China is much better positioned now in those markets than 503 00:26:06,949 --> 00:26:09,698 Speaker 2: any of the other countries. They they have shown an 504 00:26:09,709 --> 00:26:12,530 Speaker 2: ability to build infrastructure, maybe they overs spent, maybe the 505 00:26:12,540 --> 00:26:16,179 Speaker 2: R I was completely not every project will be successful. 506 00:26:16,189 --> 00:26:19,099 Speaker 2: But if you think about what those countries want, which 507 00:26:19,109 --> 00:26:23,020 Speaker 2: is good enough, low cost, they want financing 508 00:26:23,959 --> 00:26:27,140 Speaker 2: China is by far in the best position to provide it. 509 00:26:27,150 --> 00:26:30,099 Speaker 2: So I see a number of growth engines for China. 510 00:26:30,229 --> 00:26:32,939 Speaker 2: And I think any comparison to see a Japan, which 511 00:26:32,949 --> 00:26:35,149 Speaker 2: really didn't have a lot of these elements at the 512 00:26:35,160 --> 00:26:38,389 Speaker 2: point where their real estate bubble popped, would say it's 513 00:26:38,400 --> 00:26:40,319 Speaker 2: going to be a tough going, it's going to be 514 00:26:40,329 --> 00:26:43,329 Speaker 2: a period of transition. And we actually believe over the 515 00:26:43,339 --> 00:26:47,699 Speaker 2: next decade, Southeast Asia is likely to slightly outgrow China 516 00:26:47,709 --> 00:26:50,129 Speaker 2: for the first time in probably four decades, 517 00:26:50,550 --> 00:26:53,739 Speaker 2: but China will still be a fast growing country and 518 00:26:53,750 --> 00:26:56,589 Speaker 2: it will transition its economy and be a major player 519 00:26:56,599 --> 00:26:58,099 Speaker 2: in a lot of the industries in the future. 520 00:26:59,150 --> 00:27:01,650 Speaker 1: No, I I think that uh the last point about 521 00:27:01,660 --> 00:27:04,689 Speaker 1: the China Japan comparison, uh Charles, I mean, I'm fully 522 00:27:04,699 --> 00:27:07,010 Speaker 1: on board with you. I mean, Japan had a very 523 00:27:07,020 --> 00:27:10,260 Speaker 1: overvalued exchange rate because of Plaza Accord coming into its 524 00:27:10,380 --> 00:27:14,069 Speaker 1: realistic bubble burst. Whereas China has in all measure a 525 00:27:14,079 --> 00:27:16,599 Speaker 1: very competitive exchange rate, the RMB has been weakening for 526 00:27:16,609 --> 00:27:19,770 Speaker 1: the last year anyway. Uh So that itself is a 527 00:27:19,780 --> 00:27:22,530 Speaker 1: big point of departure from the debt deflation risk that 528 00:27:22,540 --> 00:27:23,810 Speaker 1: Japan had versus the 529 00:27:24,119 --> 00:27:26,839 Speaker 1: uh risk that China face ie like you also don't 530 00:27:26,849 --> 00:27:29,750 Speaker 1: want to be seen as somebody who's underplaying risks on China. 531 00:27:29,760 --> 00:27:32,619 Speaker 1: I think we all recognize the risks but the point 532 00:27:32,630 --> 00:27:35,729 Speaker 1: that you made about the critical aspects of the global 533 00:27:35,739 --> 00:27:38,060 Speaker 1: supply chain around green transition and how China as a 534 00:27:38,069 --> 00:27:42,198 Speaker 1: market leader is, I think very grossly underestimated and under appreciated. 535 00:27:42,390 --> 00:27:45,869 Speaker 1: Uh So, so no, thanks for pointing that out. But 536 00:27:45,880 --> 00:27:48,479 Speaker 1: on that issue of climate change, Charles, 537 00:27:48,880 --> 00:27:52,930 Speaker 1: we see the US sort of lurching from an administration 538 00:27:52,939 --> 00:27:56,619 Speaker 1: that is sort of pro green transition to one that 539 00:27:56,630 --> 00:28:00,369 Speaker 1: probably is in denial of green transition. Uh If you 540 00:28:00,380 --> 00:28:03,189 Speaker 1: have that in the largest economy in the world, how 541 00:28:03,199 --> 00:28:06,369 Speaker 1: does China rely on the US or should you just 542 00:28:06,380 --> 00:28:08,839 Speaker 1: go alone in terms of, you know, climate change goals 543 00:28:08,849 --> 00:28:09,619 Speaker 1: and green transition? 544 00:28:10,729 --> 00:28:13,380 Speaker 2: I I just can't disagree with you that, you know, 545 00:28:13,390 --> 00:28:16,869 Speaker 2: in this, it's it's sad the position of the US 546 00:28:17,339 --> 00:28:20,500 Speaker 2: um that there are climate deniers. However, 547 00:28:21,170 --> 00:28:24,150 Speaker 2: when I talk to governments, especially around Southeast Asia about 548 00:28:24,160 --> 00:28:27,329 Speaker 2: climate change, what I do is say there are three 549 00:28:27,339 --> 00:28:30,119 Speaker 2: reasons that you would invest heavily in the energy transition. 550 00:28:30,300 --> 00:28:33,149 Speaker 2: One is because you're worried about climate change and you 551 00:28:33,160 --> 00:28:34,030 Speaker 2: want to do good 552 00:28:35,229 --> 00:28:38,630 Speaker 2: in my experience, very few people are actually going to 553 00:28:38,709 --> 00:28:41,750 Speaker 2: raise significant amount of capital invested in their countries when 554 00:28:41,760 --> 00:28:43,839 Speaker 2: they have so many other priorities on the basis of, 555 00:28:43,849 --> 00:28:47,839 Speaker 2: of that argument. However, there are two other significant arguments 556 00:28:47,849 --> 00:28:51,180 Speaker 2: that are very compelling. One is that it's economic, 557 00:28:51,910 --> 00:28:56,040 Speaker 2: you know, the, the, the the cost of a of 558 00:28:56,050 --> 00:28:59,689 Speaker 2: electricity generated by solar farm. As long as you can 559 00:28:59,699 --> 00:29:02,000 Speaker 2: handle the, the ups and downs 560 00:29:02,640 --> 00:29:06,589 Speaker 2: is far lower than any other form of transition. I put, 561 00:29:06,599 --> 00:29:08,400 Speaker 2: I put a bunch of solar panels on top of 562 00:29:08,410 --> 00:29:11,560 Speaker 2: my house. It's a four year payback. I mean, it's 563 00:29:11,569 --> 00:29:13,900 Speaker 2: as clear as day that how much money I save 564 00:29:13,910 --> 00:29:17,020 Speaker 2: every month I now have a negative bill versus what 565 00:29:17,030 --> 00:29:19,020 Speaker 2: I used to pay and when I paid to install 566 00:29:19,030 --> 00:29:21,780 Speaker 2: it and, and I'm not a scale player that, that 567 00:29:21,790 --> 00:29:24,020 Speaker 2: there's no doubt that wind 568 00:29:25,229 --> 00:29:29,930 Speaker 2: solar can be more economic. Now, a lot of people 569 00:29:29,939 --> 00:29:32,449 Speaker 2: try to think of this very traditionally that the way 570 00:29:32,459 --> 00:29:34,390 Speaker 2: it needs to do is then go into the grid 571 00:29:34,400 --> 00:29:37,319 Speaker 2: and it needs to be always available. But what you'll 572 00:29:37,329 --> 00:29:41,170 Speaker 2: find is that a lot of, of firms and businesses 573 00:29:41,180 --> 00:29:47,930 Speaker 2: learn how to adjust their consumption of electricity to match generation. 574 00:29:48,260 --> 00:29:50,949 Speaker 2: So I'll, I'll illustrate with one small example. I was 575 00:29:50,959 --> 00:29:54,060 Speaker 2: reading about a steel mill mini mill in, in Colorado 576 00:29:54,270 --> 00:29:57,560 Speaker 2: that put this enormous array of solar uh panels out 577 00:29:57,569 --> 00:29:58,800 Speaker 2: in the desert of Colorado 578 00:29:59,510 --> 00:30:01,609 Speaker 2: and they will only operate the plant when the, when 579 00:30:01,619 --> 00:30:04,130 Speaker 2: the sun is shining, which is like 330 days of 580 00:30:04,140 --> 00:30:06,569 Speaker 2: the year, but it only operate during the day. But 581 00:30:06,579 --> 00:30:09,479 Speaker 2: there are a lot of, of, of manufacturing processes that 582 00:30:09,489 --> 00:30:11,420 Speaker 2: can be turned off and on. It's hard to do 583 00:30:11,430 --> 00:30:13,069 Speaker 2: it with cement, but you can do it with a 584 00:30:13,079 --> 00:30:16,369 Speaker 2: lot of processes. And so they will effectively have electricity 585 00:30:16,380 --> 00:30:19,130 Speaker 2: that costs about a quarter as much as their competition. 586 00:30:19,930 --> 00:30:22,079 Speaker 2: They don't bother trying to store it in batteries. They'll 587 00:30:22,089 --> 00:30:24,290 Speaker 2: probably have a few that just to allow for some 588 00:30:24,300 --> 00:30:25,880 Speaker 2: ups and downs when the cloud goes in front of 589 00:30:25,890 --> 00:30:28,790 Speaker 2: the panels. But by and large, they will operate using 590 00:30:28,800 --> 00:30:32,849 Speaker 2: electric art technology during when the sun shines, you'll see 591 00:30:32,859 --> 00:30:36,109 Speaker 2: more and more of that. Or imagine everyone in Vietnam 592 00:30:36,119 --> 00:30:40,790 Speaker 2: had two panels. Well, they would just charge up their motorcycle, 593 00:30:40,800 --> 00:30:44,260 Speaker 2: their their refrigerator, whatever they would then have with the, 594 00:30:44,270 --> 00:30:47,420 Speaker 2: with the, with its own stand-alone battery when the sun 595 00:30:47,430 --> 00:30:47,939 Speaker 2: was shining 596 00:30:48,239 --> 00:30:50,959 Speaker 2: and they would effectively no longer rely as much on 597 00:30:50,969 --> 00:30:54,069 Speaker 2: the grid. So both at small scale and large scale, 598 00:30:54,239 --> 00:30:57,910 Speaker 2: you will start to see people match to production versus 599 00:30:57,920 --> 00:31:00,250 Speaker 2: say I have to store it so I can run 600 00:31:00,260 --> 00:31:03,449 Speaker 2: at any time. So I think people underestimate how quickly 601 00:31:03,459 --> 00:31:06,530 Speaker 2: parts of the economy will move to take advantage of 602 00:31:06,540 --> 00:31:09,969 Speaker 2: variable but very low cost electricity. So you do it 603 00:31:09,979 --> 00:31:12,060 Speaker 2: for the economics. The third reason you do it 604 00:31:12,849 --> 00:31:16,579 Speaker 2: for the national security benefits the and the, the, the 605 00:31:16,589 --> 00:31:21,469 Speaker 2: exposure countries have, whether it's China or Thailand or Singapore 606 00:31:21,540 --> 00:31:25,979 Speaker 2: to buying LNG and oil and gas, often from somewhat 607 00:31:25,989 --> 00:31:31,579 Speaker 2: unstable countries is enormous and the benefits you get from 608 00:31:31,589 --> 00:31:36,250 Speaker 2: having a great deal of your electricity generated locally can 609 00:31:36,260 --> 00:31:39,199 Speaker 2: offset that dependence. So the way I described it in 610 00:31:39,209 --> 00:31:41,900 Speaker 2: Thailand is I said, look, I'm gonna take some simple numbers. 611 00:31:42,260 --> 00:31:45,410 Speaker 2: They say that globally four trillion will be spent every 612 00:31:45,420 --> 00:31:49,640 Speaker 2: year on, on energy transition, Thailand's population to share of 613 00:31:49,650 --> 00:31:52,040 Speaker 2: the globe would mean that you should be spending about 614 00:31:52,050 --> 00:31:55,819 Speaker 2: 30 billion a year. Now, everybody gas, where would we 615 00:31:55,829 --> 00:31:58,959 Speaker 2: find 30 billion? And then I remind them they spend 616 00:31:58,969 --> 00:32:01,640 Speaker 2: 60 billion a year on oil gas and, and it 617 00:32:01,650 --> 00:32:04,949 Speaker 2: already the markets have developed, but that's just a flow, 618 00:32:04,959 --> 00:32:08,079 Speaker 2: that's just their money going off to another part of 619 00:32:08,089 --> 00:32:08,479 Speaker 2: the world, 620 00:32:08,989 --> 00:32:12,099 Speaker 2: Middle East Dubai Qatar, wherever they're sourcing the oil. What 621 00:32:12,109 --> 00:32:14,969 Speaker 2: good does that do to? They're effectively just burning this 622 00:32:14,979 --> 00:32:18,569 Speaker 2: money to run there. What if instead at, at the 623 00:32:18,579 --> 00:32:22,250 Speaker 2: start 10 billion a year was going to build better 624 00:32:22,260 --> 00:32:26,040 Speaker 2: electricity grid, solar panels and wind turbines that would create 625 00:32:26,050 --> 00:32:29,530 Speaker 2: jobs locally and over time, they would become less and 626 00:32:29,540 --> 00:32:33,290 Speaker 2: less dependent on the imported fuels. So when I talk 627 00:32:33,300 --> 00:32:35,890 Speaker 2: to governments, they get a lot more excited about the 628 00:32:35,900 --> 00:32:37,890 Speaker 2: 2nd and 3rd possibilities. 629 00:32:38,239 --> 00:32:41,530 Speaker 2: The challenge they have is almost every country in Southeast 630 00:32:41,540 --> 00:32:46,020 Speaker 2: Asia has given the rule of transmission to a large 631 00:32:46,030 --> 00:32:50,699 Speaker 2: national player that is inefficient and sclerotic and not open 632 00:32:50,709 --> 00:32:54,010 Speaker 2: to foreign investment and competition. And a good example of 633 00:32:54,020 --> 00:32:55,000 Speaker 2: that would be Vietnam. 634 00:32:55,380 --> 00:32:58,180 Speaker 2: And as a result, they have a number of big investments, 635 00:32:58,189 --> 00:33:02,359 Speaker 2: multibillion dollar investments lined up for offshore wind or solar 636 00:33:02,369 --> 00:33:05,469 Speaker 2: panels that aren't turned on because they can't come to 637 00:33:05,479 --> 00:33:08,400 Speaker 2: terms with how much will be paid for it and 638 00:33:08,410 --> 00:33:11,199 Speaker 2: can the grid handle it. So one of the things 639 00:33:11,209 --> 00:33:14,209 Speaker 2: Southeast Asia is going to have to do to 640 00:33:14,354 --> 00:33:17,614 Speaker 2: to kind of take full advantage of the opportunities in 641 00:33:17,625 --> 00:33:21,194 Speaker 2: the green transition is to think through the competitiveness of 642 00:33:21,204 --> 00:33:25,935 Speaker 2: their infrastructure and to develop much more sophisticated capital markets 643 00:33:26,194 --> 00:33:29,645 Speaker 2: that will enable investment in their grid and other other 644 00:33:29,655 --> 00:33:33,214 Speaker 2: enablers of the transition. So where does the US fit in? 645 00:33:33,660 --> 00:33:36,520 Speaker 2: It's nice that us right now is investing, it's probably 646 00:33:36,530 --> 00:33:39,969 Speaker 2: going to accelerate the rate of innovation. It may force 647 00:33:39,979 --> 00:33:42,410 Speaker 2: the Europeans, the Japanese and others to match some of 648 00:33:42,420 --> 00:33:46,000 Speaker 2: those subsidies which will again overall force the rate of 649 00:33:46,010 --> 00:33:49,250 Speaker 2: uh of innovation. I think Southeast Asia is a be 650 00:33:49,574 --> 00:33:52,694 Speaker 2: judiciary as long as they can work with the capital 651 00:33:52,704 --> 00:33:56,125 Speaker 2: markets and have regulations that allow foreign investment and be 652 00:33:56,135 --> 00:33:59,505 Speaker 2: open to new technology that will disrupt their existing players, 653 00:33:59,625 --> 00:34:02,314 Speaker 2: not all those are given, but that's what it takes 654 00:34:02,324 --> 00:34:05,395 Speaker 2: to take advantage of innovation is to accept disruption, 655 00:34:06,619 --> 00:34:09,580 Speaker 1: we accept disruption, that's really, really good. Uh Charles uh 656 00:34:09,639 --> 00:34:11,899 Speaker 1: since you, you have sort of, you know, pivoted us 657 00:34:11,909 --> 00:34:14,750 Speaker 1: toward our neighborhood and we just heard you talk a 658 00:34:14,760 --> 00:34:16,459 Speaker 1: little bit about Vietnam. So I want to talk about 659 00:34:16,469 --> 00:34:19,879 Speaker 1: Vietnam a bit more. Uh Last year, Ian Council released 660 00:34:19,889 --> 00:34:22,799 Speaker 1: this report. The title was Southeast Asia's pursuit of the 661 00:34:22,810 --> 00:34:24,449 Speaker 1: emerging market growth crown. 662 00:34:24,860 --> 00:34:28,580 Speaker 1: And the report shows very clearly and very nice illustration 663 00:34:28,590 --> 00:34:31,919 Speaker 1: that Vietnam is a regional leader in absorbing manufacturing from 664 00:34:31,929 --> 00:34:36,969 Speaker 1: China and elsewhere and also building world class export capabilities. Now, 665 00:34:36,979 --> 00:34:40,540 Speaker 1: the thing that I find interesting about Vietnam is that 666 00:34:40,899 --> 00:34:44,370 Speaker 1: all of that is so impressive, but at the same time, 667 00:34:44,379 --> 00:34:49,049 Speaker 1: its business environment, its governance environment is not impressive. How 668 00:34:49,060 --> 00:34:52,629 Speaker 1: how do you reconcile these two opposing dynamic and understand 669 00:34:52,639 --> 00:34:53,810 Speaker 1: its star performance? 670 00:34:54,658 --> 00:34:56,718 Speaker 2: It's a great question. I I remember when I first 671 00:34:56,729 --> 00:35:00,968 Speaker 2: presented the report, I was asked this question and and 672 00:35:00,979 --> 00:35:02,279 Speaker 2: I simply told the audience, 673 00:35:03,000 --> 00:35:05,070 Speaker 2: I can't give you the answer right now. It it's a, 674 00:35:05,080 --> 00:35:07,820 Speaker 2: it's a bit of a dilemma for me to explain 675 00:35:08,110 --> 00:35:11,389 Speaker 2: because my own experience of working with some investors into 676 00:35:11,399 --> 00:35:13,820 Speaker 2: Vietnam was that it was very hard going similar to 677 00:35:13,830 --> 00:35:16,439 Speaker 2: what you just said that that the that there was 678 00:35:16,449 --> 00:35:20,520 Speaker 2: this tricky interplay between various parts of the government that 679 00:35:20,530 --> 00:35:21,659 Speaker 2: the National 680 00:35:22,179 --> 00:35:25,439 Speaker 2: Communist Party and the local they have provinces and these 681 00:35:25,449 --> 00:35:29,360 Speaker 2: provinces relatively. And there was always some tension between them. 682 00:35:29,510 --> 00:35:31,750 Speaker 2: There are large state owned enterprises that are trying to 683 00:35:31,760 --> 00:35:35,520 Speaker 2: preserve the status quo or to ensure their participation in, 684 00:35:35,530 --> 00:35:38,810 Speaker 2: in elements that you're trying to drive into. Um and 685 00:35:38,820 --> 00:35:41,139 Speaker 2: there's also a private sector community and there used to 686 00:35:41,149 --> 00:35:41,389 Speaker 2: be a, 687 00:35:41,469 --> 00:35:44,659 Speaker 2: so it's no longer true a rule for the military. 688 00:35:44,739 --> 00:35:46,850 Speaker 2: And so when you, when you did a deal in 689 00:35:46,860 --> 00:35:49,699 Speaker 2: Vietnam that you had to make, everybody had to get 690 00:35:49,709 --> 00:35:52,409 Speaker 2: a little piece of, of the benefit of you coming 691 00:35:52,419 --> 00:35:55,350 Speaker 2: in if you were addressing the domestic market, which in 692 00:35:55,360 --> 00:35:57,409 Speaker 2: the case of, of one of the large investments I 693 00:35:57,419 --> 00:35:59,250 Speaker 2: worked on, that was the case we were trying to 694 00:35:59,260 --> 00:36:02,270 Speaker 2: access the domestic market. And so there were if if 695 00:36:02,280 --> 00:36:04,129 Speaker 2: they viewed it as a zero some game, there were 696 00:36:04,139 --> 00:36:06,279 Speaker 2: losers in our participation in the market. 697 00:36:06,850 --> 00:36:09,239 Speaker 2: So I I made two visits to Vietnam and spent 698 00:36:09,250 --> 00:36:11,409 Speaker 2: quite a bit of time visiting people talking to people 699 00:36:11,419 --> 00:36:13,459 Speaker 2: trying to get an answer to the question. Here's how 700 00:36:13,469 --> 00:36:16,489 Speaker 2: I would characterize it. One, there are two Vietnam, there's 701 00:36:16,500 --> 00:36:21,370 Speaker 2: one Vietnam that is focused on export, manufacturing and it's 702 00:36:21,379 --> 00:36:26,149 Speaker 2: characterized by these magnificent industrial estates that are scattered all 703 00:36:26,159 --> 00:36:29,739 Speaker 2: over Vietnam and the different provinces of Vietnam, compete with 704 00:36:29,750 --> 00:36:33,629 Speaker 2: each other to provide better infrastructure and better terms for 705 00:36:33,639 --> 00:36:34,870 Speaker 2: multinationals to come in. 706 00:36:35,590 --> 00:36:40,879 Speaker 2: Um In fact, 16 of these are called VS IC Vietnam, 707 00:36:40,889 --> 00:36:43,830 Speaker 2: Singapore Industrial Parks of P because those are some of 708 00:36:43,840 --> 00:36:47,879 Speaker 2: the best ones. Um but they also have industrial parks 709 00:36:47,889 --> 00:36:49,870 Speaker 2: with the Koreans, they with the Japanese they have some 710 00:36:49,879 --> 00:36:53,270 Speaker 2: with that kind of more aligned with Europeans like the Germans. 711 00:36:53,399 --> 00:36:56,800 Speaker 2: So it is. And you visit these industrial parks. They're 712 00:36:56,810 --> 00:36:57,638 Speaker 2: very impressive. 713 00:36:58,530 --> 00:37:00,989 Speaker 2: The second thing is I, I talked to a guy 714 00:37:01,000 --> 00:37:03,229 Speaker 2: one factory, he was very generous with his time and 715 00:37:03,239 --> 00:37:06,040 Speaker 2: he had three factories, one in south southwest of the US, 716 00:37:06,050 --> 00:37:07,389 Speaker 2: one in Mexico, one in Vietnam. 717 00:37:08,070 --> 00:37:11,310 Speaker 2: And I said, just anecdotally, are your workers here really 718 00:37:11,320 --> 00:37:12,090 Speaker 2: more productive? 719 00:37:12,919 --> 00:37:15,270 Speaker 2: He goes, well, let me, let me answer that with 720 00:37:15,280 --> 00:37:15,979 Speaker 2: an anecdote 721 00:37:16,820 --> 00:37:19,379 Speaker 2: in the US. If I told my employees, they have 722 00:37:19,389 --> 00:37:21,330 Speaker 2: to do overturn, quite a few would quit 723 00:37:23,040 --> 00:37:25,750 Speaker 2: in Mexico. If I told my employees, they have to 724 00:37:25,760 --> 00:37:26,570 Speaker 2: do overtime, 725 00:37:27,419 --> 00:37:29,399 Speaker 2: they'd agree. But then half would show up and half 726 00:37:29,409 --> 00:37:29,679 Speaker 2: would 727 00:37:31,300 --> 00:37:34,739 Speaker 2: in Vietnam. If I told them they couldn't have overtime, 728 00:37:34,770 --> 00:37:35,350 Speaker 2: they quit. 729 00:37:36,739 --> 00:37:39,850 Speaker 2: And he, and he just said, hands down people here 730 00:37:39,860 --> 00:37:44,129 Speaker 2: work hard, they want overtime, they want training to get 731 00:37:44,139 --> 00:37:47,449 Speaker 2: better jobs. He just said time and time again. I'm, 732 00:37:47,459 --> 00:37:51,449 Speaker 2: I'm amazed by the productivity and commitment of our workers. 733 00:37:51,459 --> 00:37:54,590 Speaker 2: And so that's an anecdote. It's dangerous. People don't like 734 00:37:54,600 --> 00:37:56,500 Speaker 2: to write about these things. But when you talk to 735 00:37:56,510 --> 00:37:59,009 Speaker 2: people in Vietnam, that's what they're all seeing is the 736 00:37:59,020 --> 00:38:02,370 Speaker 2: quality of the workforce is very high in Vietnam. 737 00:38:03,120 --> 00:38:05,979 Speaker 2: Another thing I had an interesting talk with a 738 00:38:07,159 --> 00:38:11,310 Speaker 2: former, former senior person at, at the Singapore Economic Development 739 00:38:11,320 --> 00:38:11,570 Speaker 2: Board 740 00:38:12,290 --> 00:38:15,479 Speaker 2: and we were talking about industrial States and uh he'd 741 00:38:15,489 --> 00:38:16,199 Speaker 2: read the report. 742 00:38:16,840 --> 00:38:19,360 Speaker 2: And I said, tell me your experience in Vietnam. He said, well, 743 00:38:19,370 --> 00:38:21,569 Speaker 2: let me start with China. You know what happened in China? 744 00:38:21,580 --> 00:38:25,178 Speaker 2: We built Su Industrial Park before we'd even opened it. 745 00:38:25,340 --> 00:38:27,580 Speaker 2: There was a new park opened across the street and 746 00:38:27,590 --> 00:38:30,169 Speaker 2: they were trying to steal our customers, Lee Kuan Yew 747 00:38:30,179 --> 00:38:33,189 Speaker 2: had to get involved. We still couldn't sort it out. 748 00:38:33,199 --> 00:38:35,050 Speaker 2: And I think they ended up selling off the park 749 00:38:35,139 --> 00:38:38,179 Speaker 2: huge disappointment because huge opportunity if it worked 750 00:38:38,610 --> 00:38:41,239 Speaker 2: and they, they thought they had commitment, but that's what 751 00:38:41,250 --> 00:38:43,310 Speaker 2: happened to them in China. And by the way, that's 752 00:38:43,320 --> 00:38:45,110 Speaker 2: the experience of a lot of acies in China that 753 00:38:45,120 --> 00:38:48,669 Speaker 2: they invest. But then gradually they find that their, their 754 00:38:48,679 --> 00:38:51,530 Speaker 2: technology is leaking or they have competition that they weren't 755 00:38:51,540 --> 00:38:52,969 Speaker 2: expecting from their own employees, 756 00:38:54,030 --> 00:38:56,959 Speaker 2: Indonesia, they set up a time and Bintan again, very 757 00:38:56,969 --> 00:39:00,850 Speaker 2: high hopes that this would create this incredible opportunity to 758 00:39:00,860 --> 00:39:04,179 Speaker 2: help Indonesia grow and help Singapore grow by moving some 759 00:39:04,189 --> 00:39:06,780 Speaker 2: of the more labor intensive processes to B and Bintan, 760 00:39:06,860 --> 00:39:09,810 Speaker 2: which are very close to have very frequent transport links 761 00:39:09,820 --> 00:39:12,790 Speaker 2: and other links. And then, and then the Singapore companies 762 00:39:12,800 --> 00:39:14,739 Speaker 2: could provide some of the more higher value and, and 763 00:39:14,750 --> 00:39:17,159 Speaker 2: they would grow together, but it didn't work out. It 764 00:39:17,169 --> 00:39:19,370 Speaker 2: just turned out that the politics, 765 00:39:19,719 --> 00:39:22,459 Speaker 2: the local politics of Batam and Bin Time meant that 766 00:39:22,469 --> 00:39:26,139 Speaker 2: somebody still wanted a percentage of things that were going 767 00:39:26,149 --> 00:39:28,219 Speaker 2: in and out of Batam or there were just certain 768 00:39:28,229 --> 00:39:31,169 Speaker 2: restrictions on investments that weren't agreed to and so it 769 00:39:31,179 --> 00:39:34,040 Speaker 2: just never met its potential. He said Vietnam is the 770 00:39:34,050 --> 00:39:36,459 Speaker 2: opposite when we set up our first part before we'd 771 00:39:36,469 --> 00:39:37,959 Speaker 2: even finished, he said, when are we going to do 772 00:39:37,969 --> 00:39:38,600 Speaker 2: number two? 773 00:39:39,000 --> 00:39:40,729 Speaker 2: And he said, they keep coming back and say, how 774 00:39:40,739 --> 00:39:43,340 Speaker 2: about you also build a vocational training school? You know, 775 00:39:43,350 --> 00:39:46,550 Speaker 2: why aren't your universities here? You know, when are you gonna, 776 00:39:46,560 --> 00:39:49,350 Speaker 2: why don't we share more companies where they do some things? 777 00:39:49,360 --> 00:39:51,948 Speaker 2: And he said it's our dream and that's why they're on, 778 00:39:51,959 --> 00:39:57,709 Speaker 2: they've announced five more because Singapore companies benefit Vietnam benefits. 779 00:39:57,719 --> 00:40:00,799 Speaker 2: But what he said is more than his experience has been, 780 00:40:00,810 --> 00:40:02,949 Speaker 2: they stick to their agreements and look for further ways 781 00:40:02,959 --> 00:40:03,469 Speaker 2: to grow. 782 00:40:03,800 --> 00:40:08,780 Speaker 2: So one Vietnam is the industrial states that are exporting now, 783 00:40:08,810 --> 00:40:14,479 Speaker 2: they are temporarily depressed because the entire world's export sector 784 00:40:14,489 --> 00:40:16,429 Speaker 2: is depressed and a lot of their products go to 785 00:40:16,439 --> 00:40:18,959 Speaker 2: China and, and there's nothing you can do, but it 786 00:40:18,969 --> 00:40:22,939 Speaker 2: is a very efficient and protected from a lot of 787 00:40:22,949 --> 00:40:25,679 Speaker 2: the dynamics. Then there's the other Vietnam which is domestic 788 00:40:25,689 --> 00:40:29,050 Speaker 2: Vietnam and it's messy. It's not China. A lot of 789 00:40:29,060 --> 00:40:31,790 Speaker 2: people think Vietnam is China and and of course, there 790 00:40:31,800 --> 00:40:32,779 Speaker 2: are similar enough similar 791 00:40:33,169 --> 00:40:35,459 Speaker 2: that you can be confused but then dig under the 792 00:40:35,469 --> 00:40:38,000 Speaker 2: surface and you see they don't build infrastructure nearly as 793 00:40:38,010 --> 00:40:41,500 Speaker 2: well as China. You know, everything's delayed, the airports delayed, 794 00:40:41,510 --> 00:40:45,219 Speaker 2: you know, the the certain expressways are delayed. The it 795 00:40:45,229 --> 00:40:48,459 Speaker 2: it just takes time to build, it's not as efficient. 796 00:40:48,820 --> 00:40:52,779 Speaker 2: Um They have a, a clampdown on corruption is probably necessary. 797 00:40:52,790 --> 00:40:56,419 Speaker 2: They overbuilt real estate in the wrong sectors. So they're 798 00:40:56,429 --> 00:40:59,169 Speaker 2: just not as good as China and, and I think 799 00:40:59,179 --> 00:41:01,158 Speaker 2: people who go in thinking, oh, it's just another China, 800 00:41:01,169 --> 00:41:02,299 Speaker 2: another province of China 801 00:41:02,649 --> 00:41:05,530 Speaker 2: will find that the, if they're trying to accept the 802 00:41:05,540 --> 00:41:08,859 Speaker 2: the domestic market, there are more roadblocks, there are more 803 00:41:08,870 --> 00:41:11,929 Speaker 2: licenses that don't get renewed or it's harder to bring 804 00:41:11,939 --> 00:41:16,870 Speaker 2: in expatriates to support your business, et cetera. It's tougher going. 805 00:41:16,879 --> 00:41:20,330 Speaker 2: It's more like say a Thailand or, or a a 806 00:41:20,340 --> 00:41:22,069 Speaker 2: Malaysia in that sense, 807 00:41:22,614 --> 00:41:26,074 Speaker 2: it is a China for the domestic market and that's 808 00:41:26,084 --> 00:41:28,734 Speaker 2: the part of the economy that's really hurting. That's where 809 00:41:28,745 --> 00:41:30,614 Speaker 2: you have a real real estate crisis. You have the 810 00:41:30,625 --> 00:41:33,925 Speaker 2: corruption back down, you have a financial process prices, you 811 00:41:33,935 --> 00:41:37,145 Speaker 2: have undeveloped capital markets which are important for that part 812 00:41:37,155 --> 00:41:40,504 Speaker 2: of the market. So what we expect is the export 813 00:41:40,514 --> 00:41:44,395 Speaker 2: oriented will recover fast but over time, so will the 814 00:41:44,405 --> 00:41:46,905 Speaker 2: domestic but it will take more time and it will 815 00:41:46,915 --> 00:41:49,975 Speaker 2: be rockier going than I think people who had been 816 00:41:49,985 --> 00:41:51,475 Speaker 2: so successful in China. 817 00:41:52,870 --> 00:41:55,020 Speaker 1: Totally I Chelsea, I also think that, you know, a 818 00:41:55,030 --> 00:41:59,340 Speaker 1: nation like Vietnam which over the last 6070 years has 819 00:41:59,350 --> 00:42:04,489 Speaker 1: gone through tumultuous changes from, you know, debilitating wars to 820 00:42:04,669 --> 00:42:07,780 Speaker 1: anti colonial movements. And then of course, you know, regional conflict, 821 00:42:07,979 --> 00:42:12,459 Speaker 1: um its performance super impressive, but I'm sure its governance 822 00:42:12,469 --> 00:42:15,530 Speaker 1: as ethos have some degree of scarring from all these 823 00:42:15,540 --> 00:42:17,610 Speaker 1: conflicts and it sort of informs the way this country 824 00:42:17,620 --> 00:42:18,449 Speaker 1: also navigates. 825 00:42:18,840 --> 00:42:20,550 Speaker 1: Um So, uh 826 00:42:20,560 --> 00:42:23,509 Speaker 2: let me comment on that because when, when, when I have, 827 00:42:23,520 --> 00:42:26,219 Speaker 2: you're absolutely right, but you have to put dates to 828 00:42:26,229 --> 00:42:28,520 Speaker 2: some of these key things and recognize some of them 829 00:42:28,530 --> 00:42:31,739 Speaker 2: are in more distant past. So, you know, the, the 830 00:42:31,750 --> 00:42:35,149 Speaker 2: the conflict with, with France and ended what in about 831 00:42:35,159 --> 00:42:40,590 Speaker 2: 5960 with the US ended in 7273. Um The, I 832 00:42:40,600 --> 00:42:43,229 Speaker 2: think the war with China was 79 833 00:42:43,949 --> 00:42:47,389 Speaker 2: um that was 43 years ago. So let's say you 834 00:42:47,399 --> 00:42:51,580 Speaker 2: were just a AAA infantry in the China War, you 835 00:42:51,590 --> 00:42:55,790 Speaker 2: would already be in your mid sixties, right? Um And 836 00:42:55,800 --> 00:43:00,250 Speaker 2: so when I talked to people, especially Vietnamese were optimistic 837 00:43:00,260 --> 00:43:03,350 Speaker 2: going forward, what they talk about is that they have 838 00:43:03,360 --> 00:43:05,979 Speaker 2: a different way than Singapore defining leadership. And 839 00:43:06,330 --> 00:43:08,790 Speaker 2: right now it's based on the year they were born. 840 00:43:09,100 --> 00:43:10,810 Speaker 2: And I think right now, if I, if I recall, 841 00:43:10,820 --> 00:43:13,989 Speaker 2: they're transitioning from six G to seven G, which meant 842 00:43:14,000 --> 00:43:15,459 Speaker 2: they were born in the seventies. 843 00:43:16,100 --> 00:43:19,799 Speaker 2: And what they said is wait till eg because you're 844 00:43:19,810 --> 00:43:21,639 Speaker 2: going from people who were, 845 00:43:22,530 --> 00:43:23,790 Speaker 2: went through the war. 846 00:43:24,750 --> 00:43:27,659 Speaker 2: That's those are now retired. Now, you have a group 847 00:43:27,669 --> 00:43:31,080 Speaker 2: that were educated in the Soviet Union because immediately after 848 00:43:31,090 --> 00:43:34,429 Speaker 2: the war it was the eastern bloc that educated Vietnamese. 849 00:43:34,870 --> 00:43:39,290 Speaker 2: The current generation is usually a hybrid. Their undergraduate was 850 00:43:39,300 --> 00:43:44,589 Speaker 2: in Kiev or Moscow or, or Eastern Eastern Germany, but 851 00:43:44,600 --> 00:43:47,669 Speaker 2: their graduate was at Harvard or Stanford or Chicago or 852 00:43:47,679 --> 00:43:51,810 Speaker 2: somewhere else. The next generation were largely educated in the West. 853 00:43:52,219 --> 00:43:55,080 Speaker 2: And because the, the Soviet Union was no longer AAA 854 00:43:55,090 --> 00:43:59,600 Speaker 2: as accessible or as desirable. And so they are very 855 00:43:59,610 --> 00:44:03,719 Speaker 2: confident that with each change in a generation, you have 856 00:44:03,729 --> 00:44:08,500 Speaker 2: people who are more confident of Vietnam's future and want 857 00:44:08,510 --> 00:44:11,239 Speaker 2: to integrate with the world economy. One other thing that 858 00:44:11,250 --> 00:44:14,879 Speaker 2: makes Vietnam different than say, a Philippines or Thailand or 859 00:44:14,889 --> 00:44:18,770 Speaker 2: Indonesia is they've signed up for almost every trade agreement 860 00:44:18,780 --> 00:44:19,520 Speaker 2: that they can 861 00:44:19,830 --> 00:44:23,929 Speaker 2: and that binds them to be a relatively open economy 862 00:44:24,129 --> 00:44:27,290 Speaker 2: and it gives confidence to foreign investors that the terms 863 00:44:27,300 --> 00:44:31,429 Speaker 2: under which they operate, particularly for export oriented manufacturing won't change. 864 00:44:31,439 --> 00:44:34,209 Speaker 2: And that's a big deal if you're thinking of making 865 00:44:34,219 --> 00:44:36,280 Speaker 2: an investment in anything other than a two or three 866 00:44:36,360 --> 00:44:37,449 Speaker 2: year payback facility. 867 00:44:39,110 --> 00:44:42,679 Speaker 1: Oh, this is this really, really good. Uh That's fantastic. 868 00:44:42,689 --> 00:44:46,469 Speaker 1: Uh Charles, I love the seven ghg uh point. Uh OK, 869 00:44:46,479 --> 00:44:49,888 Speaker 1: you mentioned briefly Philippines as a counterpoint to Vietnam. And yes, 870 00:44:49,899 --> 00:44:51,589 Speaker 1: I want to talk a little bit about the Philippines. 871 00:44:52,219 --> 00:44:57,340 Speaker 1: This country has very favorable demographics, large industrial English speaking 872 00:44:57,350 --> 00:45:01,719 Speaker 1: population and still it underperforms decade after decade. Why? 873 00:45:03,290 --> 00:45:06,219 Speaker 2: Oh, you know, that's that it's a trillion dollar question. 874 00:45:06,229 --> 00:45:08,379 Speaker 2: And again, I've made a couple of trips to the 875 00:45:08,389 --> 00:45:13,610 Speaker 2: Philippines to try to better answer that question. The the we, 876 00:45:13,620 --> 00:45:15,779 Speaker 2: you know, we being has offices in all these markets, 877 00:45:15,790 --> 00:45:19,729 Speaker 2: we have clients, we have uh established advisor groups. These 878 00:45:19,739 --> 00:45:22,340 Speaker 2: are the kind of people that I interact with. Um 879 00:45:23,590 --> 00:45:24,489 Speaker 2: sadly, 880 00:45:25,659 --> 00:45:28,000 Speaker 2: demographics is not destiny. 881 00:45:29,040 --> 00:45:32,020 Speaker 2: Yeah, I I remember seeing one report. It, it, it 882 00:45:32,030 --> 00:45:34,060 Speaker 2: had to have been by one of the most naive 883 00:45:34,070 --> 00:45:36,449 Speaker 2: analysts that has ever walked on earth. But he was 884 00:45:36,459 --> 00:45:39,129 Speaker 2: writing for one of the top investment banks in the US. 885 00:45:39,139 --> 00:45:41,350 Speaker 2: And he was saying you should invest in the Middle 886 00:45:41,360 --> 00:45:42,250 Speaker 2: East and Africa 887 00:45:43,010 --> 00:45:46,729 Speaker 2: because because that's where the population growth is and, and 888 00:45:46,739 --> 00:45:48,780 Speaker 2: having grown up, you, you, you just like are, are 889 00:45:48,790 --> 00:45:52,310 Speaker 2: you out of your mind? Do you not realize what, 890 00:45:52,320 --> 00:45:55,280 Speaker 2: what it takes for an economy to create returns for 891 00:45:55,290 --> 00:45:59,260 Speaker 2: an investor? Um because they're, they're or even to have growth, 892 00:45:59,270 --> 00:46:02,840 Speaker 2: let alone returns for investor and, and uh it, it's 893 00:46:02,850 --> 00:46:05,388 Speaker 2: gonna be a long time before those countries put in place. 894 00:46:05,399 --> 00:46:08,928 Speaker 2: All the factors that are required for high growth. It's 895 00:46:08,939 --> 00:46:12,279 Speaker 2: actually an exception to have high growth. We're spoiled in 896 00:46:12,290 --> 00:46:12,739 Speaker 2: Asia 897 00:46:13,010 --> 00:46:15,790 Speaker 2: because so many of the countries have have broken out 898 00:46:15,800 --> 00:46:18,840 Speaker 2: and are now middle income class countries with high degree 899 00:46:18,850 --> 00:46:22,270 Speaker 2: of domestic stability. It's rare. So we have to start 900 00:46:22,280 --> 00:46:25,659 Speaker 2: with that. Philippines. It's not an outlier, it's an outlier 901 00:46:25,669 --> 00:46:28,229 Speaker 2: in Asia, but it's not an outlier in the world 902 00:46:28,239 --> 00:46:30,120 Speaker 2: that it is hard to get the factors to grow. 903 00:46:30,729 --> 00:46:33,179 Speaker 2: I looked at the, we we had what we called 904 00:46:33,189 --> 00:46:35,509 Speaker 2: seven traditional factors 905 00:46:35,899 --> 00:46:40,290 Speaker 2: which characterized high growth versus low growth countries. And, and 906 00:46:40,300 --> 00:46:42,279 Speaker 2: these all everybody can have a different list but they 907 00:46:42,290 --> 00:46:45,639 Speaker 2: will have familiar elements, things like ease of doing business, 908 00:46:45,649 --> 00:46:51,620 Speaker 2: government effectiveness in reducing corruption. Um The ability to attract investment, 909 00:46:51,629 --> 00:46:55,239 Speaker 2: the ability to build infrastructure, the the the quality of 910 00:46:55,250 --> 00:46:58,080 Speaker 2: education levels in the country. Um 911 00:46:58,729 --> 00:47:03,310 Speaker 2: And what's really sad is Philippines was last on six 912 00:47:03,320 --> 00:47:07,739 Speaker 2: of the seven and these aren't, these aren't being databases. 913 00:47:07,750 --> 00:47:09,810 Speaker 2: So the the degree of competition was the one that 914 00:47:09,820 --> 00:47:13,229 Speaker 2: we couldn't get data. But anecdotally someday we'll figure out 915 00:47:13,239 --> 00:47:15,739 Speaker 2: how to do it. But anecdotally, that's my experience that 916 00:47:15,750 --> 00:47:18,620 Speaker 2: there's a number of sectors that like retail, foreigners just 917 00:47:18,629 --> 00:47:20,989 Speaker 2: aren't allowed in and you basically have a monopoly by 918 00:47:21,000 --> 00:47:25,110 Speaker 2: a few large families in, in, in the Philippines. So, 919 00:47:26,169 --> 00:47:29,790 Speaker 2: you know, take education, the lowest piece of scores in, in, 920 00:47:29,800 --> 00:47:34,428 Speaker 2: in Southeast Asia among the big six ease of doing business, 921 00:47:34,439 --> 00:47:38,409 Speaker 2: the lowest, you know, Vietnam passed it several years ago. And, 922 00:47:38,419 --> 00:47:43,909 Speaker 2: and so it's those elements that are holding Philippines back 923 00:47:43,919 --> 00:47:47,280 Speaker 2: and if I had one word or one phrase to 924 00:47:47,290 --> 00:47:50,189 Speaker 2: describe it is that government matters a lot. 925 00:47:50,510 --> 00:47:55,010 Speaker 2: Hm. And the Philippines has never been effectively governed to 926 00:47:55,020 --> 00:47:59,020 Speaker 2: drive growth. A second is a phrase that I read. 927 00:47:59,030 --> 00:48:00,530 Speaker 2: I now will paraphrase 928 00:48:01,159 --> 00:48:03,209 Speaker 2: but it really hit home to me. And it's what 929 00:48:03,219 --> 00:48:07,320 Speaker 2: I have told people in Thailand, Philippines, Indonesia when they're 930 00:48:07,330 --> 00:48:08,979 Speaker 2: dissatisfied with their growth rate. 931 00:48:09,760 --> 00:48:10,459 Speaker 2: I said 932 00:48:11,429 --> 00:48:13,250 Speaker 2: when the elites in the country, 933 00:48:13,969 --> 00:48:19,510 Speaker 2: including government and business decide that they prefer high growth 934 00:48:19,520 --> 00:48:21,389 Speaker 2: to preserving the status quo, 935 00:48:22,159 --> 00:48:23,419 Speaker 2: then good things can happen. 936 00:48:24,419 --> 00:48:27,409 Speaker 2: And in countries like the Philippines, the elites have decided 937 00:48:27,419 --> 00:48:31,459 Speaker 2: they prefer the status quo, whether, whether it's land reform 938 00:48:31,469 --> 00:48:35,479 Speaker 2: or banking reform or, or allowing foreign participation in a 939 00:48:35,489 --> 00:48:40,199 Speaker 2: broad set of sectors or even fomenting entrepreneurial activity, they 940 00:48:40,209 --> 00:48:43,939 Speaker 2: lag their neighbors in Southeast Asia. And as a result, 941 00:48:44,010 --> 00:48:47,750 Speaker 2: they have never attracted anywhere near the levels of investment 942 00:48:47,949 --> 00:48:52,479 Speaker 2: or MNC participation, others in their economy that they deserve. 943 00:48:52,760 --> 00:48:56,139 Speaker 2: I hope it changes. There are a lot of nice 944 00:48:56,149 --> 00:49:00,580 Speaker 2: signs that the current administration is going to make good progress. 945 00:49:00,590 --> 00:49:03,750 Speaker 2: So like they, they're now allowing 100% foreign participation in 946 00:49:03,760 --> 00:49:06,259 Speaker 2: the utility sector, for example. But 947 00:49:06,989 --> 00:49:10,469 Speaker 2: um history says that it's going to be hard and 948 00:49:10,479 --> 00:49:12,429 Speaker 2: they look a lot more like the countries I used 949 00:49:12,439 --> 00:49:15,810 Speaker 2: to live in Latin America than they do your typical 950 00:49:15,820 --> 00:49:18,770 Speaker 2: Southeast Asian country in terms of their ability to keep 951 00:49:18,780 --> 00:49:21,290 Speaker 2: moving forward versus two steps forward, one step back. 952 00:49:21,770 --> 00:49:25,590 Speaker 1: Uh Charles, that is my overriding impression from my trips 953 00:49:25,600 --> 00:49:27,649 Speaker 1: to the Philippines. I feel that, you know, I'm in 954 00:49:27,659 --> 00:49:30,770 Speaker 1: Latin America and not in Asia for so many different ways. 955 00:49:30,780 --> 00:49:32,259 Speaker 1: Even there, all the words that are used in their 956 00:49:32,270 --> 00:49:35,860 Speaker 1: ver Acular to the the day to day. Uh Way 957 00:49:35,870 --> 00:49:39,859 Speaker 1: one leads. Uh Absolutely. Um Charles, we have to have 958 00:49:39,870 --> 00:49:41,229 Speaker 1: you back another day because I want to 959 00:49:41,899 --> 00:49:44,830 Speaker 1: go deep on Indonesia and Thailand, Malaysia with you one day, 960 00:49:44,840 --> 00:49:47,070 Speaker 1: but today is not that day. Uh I'm going to 961 00:49:47,080 --> 00:49:50,340 Speaker 1: ask you one final question for today's podcast. Your prognosis 962 00:49:50,350 --> 00:49:51,560 Speaker 1: on Singapore, 963 00:49:52,840 --> 00:49:55,560 Speaker 2: same is difficult. I mean, it, it's, it's a city 964 00:49:55,570 --> 00:49:58,219 Speaker 2: state so you, you, you really can't compare it to 965 00:49:58,229 --> 00:50:00,989 Speaker 2: other countries in the same way. I'm gonna say I'm 966 00:50:01,000 --> 00:50:02,620 Speaker 2: gonna put myself out on the limb. 967 00:50:03,280 --> 00:50:03,810 Speaker 2: Um 968 00:50:04,689 --> 00:50:06,610 Speaker 2: I believe Singapore is the best run country in the 969 00:50:06,620 --> 00:50:06,870 Speaker 2: world 970 00:50:08,419 --> 00:50:11,020 Speaker 2: and, and that's not caveat, it's not perfect. 971 00:50:11,989 --> 00:50:14,350 Speaker 2: Um And, and the reason I say that is when, 972 00:50:14,360 --> 00:50:17,389 Speaker 2: when I think about development, I, I think about a 973 00:50:17,399 --> 00:50:20,889 Speaker 2: tight rope and on the left side is corruption and 974 00:50:20,899 --> 00:50:24,389 Speaker 2: rent seeking. What, what economists call rent seeking, which is when, 975 00:50:24,399 --> 00:50:29,600 Speaker 2: when businesses and the people who have power are exploiting the, 976 00:50:29,610 --> 00:50:32,080 Speaker 2: the resources of the country, the capability, the assets of 977 00:50:32,090 --> 00:50:34,610 Speaker 2: the country, including the people for their own benefit 978 00:50:34,810 --> 00:50:37,698 Speaker 2: versus for the broader good. And, and too many countries 979 00:50:37,709 --> 00:50:40,060 Speaker 2: that I've lived in or worked in over the years 980 00:50:40,070 --> 00:50:42,310 Speaker 2: have too much on the left. And if there's ever 981 00:50:42,320 --> 00:50:47,299 Speaker 2: a country that is vigilant and successful at controlling corruption 982 00:50:47,310 --> 00:50:51,030 Speaker 2: and rent sinking, it's Singapore, it's not perfect, but it's, 983 00:50:51,040 --> 00:50:53,120 Speaker 2: it's really one of the best in the world. And 984 00:50:53,129 --> 00:50:55,189 Speaker 2: there are a lot of of measures that would, would 985 00:50:55,199 --> 00:50:57,750 Speaker 2: validate that, uh, or who've looked at it in greater 986 00:50:57,760 --> 00:51:00,469 Speaker 2: depth than me on the right side is what I'll 987 00:51:00,479 --> 00:51:01,388 Speaker 2: call populism. 988 00:51:01,959 --> 00:51:05,540 Speaker 2: Now again, that's, it's a bit trickier. This is when 989 00:51:05,550 --> 00:51:08,959 Speaker 2: you're using the resources of the country not to invest 990 00:51:08,969 --> 00:51:11,979 Speaker 2: in the assets or the future of the country, but 991 00:51:11,989 --> 00:51:14,459 Speaker 2: to allay current misery, 992 00:51:15,320 --> 00:51:19,389 Speaker 2: it's things like subsidies on fuel and food. It's giving 993 00:51:19,399 --> 00:51:24,739 Speaker 2: welfare or unemployment benefits. It, it's, but in, in many ways, it's, 994 00:51:24,750 --> 00:51:26,939 Speaker 2: it's rational is to buy votes 995 00:51:27,540 --> 00:51:30,199 Speaker 2: not to really develop the country 996 00:51:30,870 --> 00:51:34,570 Speaker 2: and all governments should do some of this just because 997 00:51:34,580 --> 00:51:36,129 Speaker 2: it's the right thing to do. But I liken it 998 00:51:36,139 --> 00:51:39,370 Speaker 2: to an individual which is if an individual never spends 999 00:51:39,379 --> 00:51:42,580 Speaker 2: on themselves, but only invest in the future, they're going 1000 00:51:42,590 --> 00:51:45,449 Speaker 2: to grow more wealth than somebody who is not, is not, 1001 00:51:45,459 --> 00:51:46,850 Speaker 2: you know, delaying gratification. 1002 00:51:47,340 --> 00:51:50,860 Speaker 2: Singapore is in the middle. Most of its investments over 1003 00:51:50,870 --> 00:51:54,639 Speaker 2: the years have been in things that will raise the assets, 1004 00:51:54,649 --> 00:51:57,370 Speaker 2: the balance sheet of Singapore, whether it's the education of 1005 00:51:57,379 --> 00:52:01,179 Speaker 2: their people, it's the infrastructure they build, providing a safe 1006 00:52:01,189 --> 00:52:04,750 Speaker 2: and stable environment, the investment in courts, I mean, it's 1007 00:52:04,760 --> 00:52:06,520 Speaker 2: soft as well as hard infrastructure. 1008 00:52:06,750 --> 00:52:11,089 Speaker 2: But Singapore keeps investing and as a result, it just 1009 00:52:11,100 --> 00:52:15,250 Speaker 2: has one of the most stable well planned economies that 1010 00:52:15,260 --> 00:52:19,209 Speaker 2: I know a second is they're very good at identifying 1011 00:52:19,219 --> 00:52:24,780 Speaker 2: future sectors which will provide jobs and meaningful employment to Singaporeans. 1012 00:52:24,989 --> 00:52:27,840 Speaker 2: And you know, for example, a 20 year bet on, on, 1013 00:52:27,850 --> 00:52:29,050 Speaker 2: on Bo and 1014 00:52:29,149 --> 00:52:32,040 Speaker 2: Pharma, which is paid off largely or it appears to 1015 00:52:32,050 --> 00:52:34,040 Speaker 2: be paying off. But people had skeptics for 10 or 1016 00:52:34,050 --> 00:52:36,250 Speaker 2: 15 years because it wasn't paid off for what they've 1017 00:52:36,260 --> 00:52:38,389 Speaker 2: done in the chemical sector or what they've done in 1018 00:52:38,399 --> 00:52:42,370 Speaker 2: the tourist sector with casinos, a series of even decisions 1019 00:52:42,379 --> 00:52:46,360 Speaker 2: to change policy because of the way the world is changing. 1020 00:52:46,439 --> 00:52:50,600 Speaker 2: So in the long term, structurally, I'm a very bullish 1021 00:52:50,610 --> 00:52:51,439 Speaker 2: on Singapore. 1022 00:52:51,750 --> 00:52:55,310 Speaker 2: That being said it's a city state. It's the domestic 1023 00:52:55,320 --> 00:52:59,530 Speaker 2: market can never save it from the the the waves 1024 00:52:59,540 --> 00:53:01,889 Speaker 2: of change and turbulence in the world. And so they're 1025 00:53:01,899 --> 00:53:04,429 Speaker 2: very exposed when there's, when there's problems in the Middle 1026 00:53:04,439 --> 00:53:08,520 Speaker 2: East or problems in Europe where oil prices escalate or 1027 00:53:08,899 --> 00:53:11,948 Speaker 2: you know, Chinese cut off capital flows, it affects Singapore. 1028 00:53:11,959 --> 00:53:16,159 Speaker 2: And so, but if you ask yourself which countries or 1029 00:53:16,169 --> 00:53:17,770 Speaker 2: even companies, countries 1030 00:53:18,409 --> 00:53:21,320 Speaker 2: prosper in the long term, it's those that can adapt 1031 00:53:21,330 --> 00:53:24,600 Speaker 2: to change versus ones that made the right bet. And 1032 00:53:24,610 --> 00:53:27,339 Speaker 2: so I think Singapore does look over the horizon, but 1033 00:53:27,350 --> 00:53:30,340 Speaker 2: if they see something changing, they will adapt. One of 1034 00:53:30,350 --> 00:53:32,620 Speaker 2: my favorite speeches which I'll close on was by Lee 1035 00:53:32,629 --> 00:53:35,959 Speaker 2: Kuan Yew when he was describing why he approved having 1036 00:53:35,969 --> 00:53:37,439 Speaker 2: the casinos in Singapore. 1037 00:53:37,860 --> 00:53:39,830 Speaker 2: And he just said, if we want to be one 1038 00:53:39,840 --> 00:53:42,100 Speaker 2: of the top 10 or 20 cities in the world, 1039 00:53:42,110 --> 00:53:44,679 Speaker 2: we have to have a strong tourism sector and what 1040 00:53:44,689 --> 00:53:47,350 Speaker 2: we've determined is this is something that could draw people 1041 00:53:47,360 --> 00:53:51,279 Speaker 2: to Singapore. I don't like gambling. I don't want Singaporeans 1042 00:53:51,290 --> 00:53:54,080 Speaker 2: to go there, but we need it for the growth 1043 00:53:54,090 --> 00:53:56,959 Speaker 2: of this sector in Singapore. And therefore I'm putting my 1044 00:53:56,969 --> 00:54:00,040 Speaker 2: support behind it and it was just a very eloquent, 1045 00:54:00,350 --> 00:54:03,370 Speaker 2: I am willing to change my mind. And I think 1046 00:54:03,379 --> 00:54:07,689 Speaker 2: it's an extraordinary statement for how Singapore can navigate and 1047 00:54:07,699 --> 00:54:10,100 Speaker 2: adjust to turbulence in the world. And that's why I'm 1048 00:54:10,110 --> 00:54:11,050 Speaker 2: bullish on the country. 1049 00:54:11,709 --> 00:54:14,929 Speaker 1: Uh Charles Chester, on the time when you saw that interview, 1050 00:54:14,939 --> 00:54:18,810 Speaker 1: this must have been 2006, 2007 because by 2007, the 1051 00:54:18,820 --> 00:54:21,759 Speaker 1: work had begun. Uh I remember Lee Kuan Yew giving 1052 00:54:21,770 --> 00:54:23,709 Speaker 1: one of his last interviews. He was kind of ailing 1053 00:54:23,860 --> 00:54:25,820 Speaker 1: and he said that I'm not going to be around 1054 00:54:25,830 --> 00:54:28,969 Speaker 1: to see Myrna Bay when all the structures are done. 1055 00:54:29,389 --> 00:54:31,549 Speaker 1: But I've seen the plan, it's going to be beautiful. 1056 00:54:31,750 --> 00:54:33,310 Speaker 1: And now when we look around and we see the 1057 00:54:33,320 --> 00:54:34,330 Speaker 1: fruition of that vision. 1058 00:54:34,649 --> 00:54:37,899 Speaker 1: Um And my final point on your uh sort of 1059 00:54:37,909 --> 00:54:40,279 Speaker 1: prognosis in Singapore is that the indicator that I sort 1060 00:54:40,290 --> 00:54:41,429 Speaker 1: of look at at the end of the day, a 1061 00:54:41,439 --> 00:54:44,750 Speaker 1: society is successful if its population are healthy, have good 1062 00:54:44,760 --> 00:54:48,319 Speaker 1: nutrition and live long. And the gains in life expectancy 1063 00:54:48,330 --> 00:54:50,529 Speaker 1: and infant mortality. Singapore has seen in the last 40 1064 00:54:50,540 --> 00:54:52,649 Speaker 1: years is just a world record. We have not seen 1065 00:54:52,659 --> 00:54:53,610 Speaker 1: anywhere else? Anything 1066 00:54:53,620 --> 00:54:56,560 Speaker 2: like that? Can I add to that, that at a 1067 00:54:56,570 --> 00:54:58,989 Speaker 2: cost level? That's probably a quarter of the US. 1068 00:55:00,010 --> 00:55:02,770 Speaker 1: Oh, yeah. Oh, yes. Yes. But that cost is rising 1069 00:55:02,780 --> 00:55:06,678 Speaker 1: even in Singapore. It is. Yes. Yes. Charles. I think 1070 00:55:06,689 --> 00:55:08,520 Speaker 1: we should do a part two of this conversation, but 1071 00:55:08,530 --> 00:55:10,750 Speaker 1: for today. Thank you so much for your time and 1072 00:55:10,760 --> 00:55:11,080 Speaker 1: thank 1073 00:55:11,139 --> 00:55:11,989 Speaker 2: you. I really enjoyed 1074 00:55:12,000 --> 00:55:15,600 Speaker 1: it. It was fantastic. Uh, Kobe Time is for information 1075 00:55:15,610 --> 00:55:16,859 Speaker 1: only and does not represent 1076 00:55:16,979 --> 00:55:20,909 Speaker 1: and any trade ideas or recommendations. All 112 episodes of 1077 00:55:20,919 --> 00:55:24,029 Speaker 1: the podcast are available on youtube and on Apple Google 1078 00:55:24,040 --> 00:55:27,820 Speaker 1: at Spotify. As for our research publications, webinars and live streams, 1079 00:55:27,929 --> 00:55:30,919 Speaker 1: you can find them all by Googling DVS research library. 1080 00:55:30,929 --> 00:55:32,149 Speaker 1: Have a great day.