The Economist - UK (2022-04-02)

62 Business TheEconomistApril2nd 2022

proximity matters. At the very least, it

meansbeinginthesametimezoneasyour

client. Infosys and tcs now operate in

morethan 40 countries.Infosyshasmore

than 30 outpostsacrossAmerica andis

buildinga new$245mcampusinIndiana­

polis.Thefirmplanstoadd10,000Ameri­

canworkersinthenextfewyears,bringing

thetotalto35,000.“Weneededcapacity

closertothecustomers,”explainsRaviKu­

mar,whooverseesInfosys’sglobalservices

business.MrKumar’sownjobhasrelocat­

edfromBengalurutoNewYork.

Still,Indiaaccountsforthebulkofitsit

firms’workforce.Althoughthecompanies

arecageyaboutwheretheiremployeesare

based, securities filings by Infosys and

Cognizantshowthat,giveortake,three­

quartersofstaffarebasedinIndia.IfIn­

dia’sentireitindustrygrewatthesame

rateastcs, moreorlessdoublingitswork­

forcethisdecade,thatcouldmeannearly

5mnewIndianwhite­collarjobs—andpo­

tentially5mfewerintheWest.

Thispointstoa finalhurdle.Amidsup­

ply­chaindisruptionsfromthepandemic,

nowcompoundedbyRussia’swarinUk­

raine,anda geostrategiccontestwithChi­

na,theWestisina protectionistmood(see

Schumpeter).Fewpoliticianswouldrelish

millionsofwell­paidpositionsmovingto

India ontheir watch. Criticalvisas that

onceallowedtheIndianfirmstosendstar

employeesabroadto work directlywith

clientshavealreadygrownhardertocome

by,forcingthesepositionstobefilledlo­

cally.Althoughdatacanintheorybestored

andanalysedanywhere,governmentsare

increasinglykeentolimitcross­borderin­

formationflows,ofteninvokingnational

security.Bybuildinga fewmorecampuses

inWesterncountriesIndia’sittitansmay

alleviatesomeofthoseconcerns.Theyare

unlikelytomakethemdisappear.n

Asianconglomerates

Born to Vin

I

ntheheydayofVietnam’scommunist

economy,  comrades  could  expect  their

health care, education, housing and enter­

tainment  to  be  provided  by  the  govern­

ment. In the freeish­market Vietnam of to­

day, those necessities are still purveyed by

one  dominant  entity,  albeit  a  capitalist

one.  Vingroup,  the  country’s  biggest  con­

glomerate,  and  its  two  listed  subsidiaries,

Vinhomes (a property developer) and Vin­

com  Retail  (which  offers  other  real­estate

services), jointly make up 28% of free­float

shares  in  Vietnam’s  stockmarket  index

(see  chart).  Their  revenues  are  equivalent

to nearly 2% of Vietnamese gdp. 

Having made Vingroup into a dominant

force  at  home,  its  founder  and  chairman,

Pham  Nhat  Vuong,  now  wants  to  turn  it

into a household name abroad. In Decem­

ber the group announced plans to list Vin­

Fast,  its  electric­car  division,  in  America

this  year,  to  open  showrooms  across  the

West,  and  to  sell  42,000  electric  vehicles

(evs) globally in 2022, up from a previous

goal of 15,000. On March 29th, in the most

audacious move yet, VinFast said it would

invest $2bn in its first foreign factory, to be

built  in  North  Carolina  with  capacity  to

make 150,000 evs a year. 

That is quite a ride for a firm that began

life in 1993 making instant noodles in Uk­

raine, where Mr Vuong found himself after

studying geological engineering in the So­

viet Union. He subsequently expanded op­

erationstohishomecountryandin 2010

soldtheUkrainianbusinesstoNestlé,a

Swissfoodgiant,fora reported$150m.The

VietnamesearmbecameVingroup.Ithas

beenaccruingbusinesslines eversince,

turningMrVuong,whoretainsa majority

stake intheparent company, intoViet­

nam’srichestman.

Between 2011 and 2021 Vingroup’srev­

enues exploded nearly 50­fold,to more

than$5bn.Grossoperatingprofithasbal­

looned ten­fold in the past decade, to

around$800m.Vingroup’ssharepriceis

also 50 timeswhatitwasatitsinitialpub­

licofferingin2007.ItspunoffVincomRe­

tailin 2017 andVinhomesa yearlater,re­

tainingmajoritystakesinboth.Theselu­

crativepropertybusinessesgeneratemost

oftheparentcompany’sprofits.

Now Vingroup wants more to come

fromtechiersectors,saysLeThiThuThuy,

MrVuong’sdeputyatVingroupandceoof

VinFast.Inparticular,thecompanyiseye­

ingevs.Tothatend,thegroupisrejigging

itsindustrialdivisions.Lastyearitwound

down VinSmart, an unlisted subsidiary

thathadgrabbedjustover10%ofthedo­

mesticsmartphonemarketwithitsown

models,andlaunchedtwonewev­focused

high­techventures:Vines, a battery­mak­

ing subsidiary, and Vinai, a machine­

learningarmwhichisledbya formerre­

searcheratDeepMind,Google’sartificial­

intelligenceunit,andwhosetaskistode­

velopself­driving technology.Aspartof

the electric shift VinFast will also stop

makingpetrol­drivenvehiclesbytheend

ofthisyear.

The planisto conquertheglobalev

marketwithsnazzy newmodels—anda

craftynewbusinessmodel.VinFastwill

sell cars while leasing their batteries,

whichaccountfora largechunkofanev’s

cost.Thatlowersthestickerprice,aswell

as alleviating concerns aboutlong­term

declineinrangeasbatteriesdegrade(the

companywillreplacethosewhichnolon­

gerrechargeadequately).VinFast’s$41,000

vf 8 isone ofthecheapest electricsuvs

around,evenafteryoufactorinthe$100or

somonthlybatterypayments.

Vietnam’s president, Nguyen Xuan

Phuc,whomMrVuongtookfora spinina

vf8 atVinFast’sfactoryinHaiphongearlier

this year, certainly looked impressed.

AfterwardsMr Phuc reiteratedjust how

Vingroup’s business objectives dovetail

with the government’s economic goals.

Theseincludethecreationoflarge,inter­

nationallycompetitive conglomeratesin

themouldofSouthKoreanchaebolsuchas

Samsung.NoVietnamesecompanyfitsthe

billbetterthanVingroup.

Ambitiondoesnot,though,guarantee

success.Vingroup’sindustrialbusinesses,

ofwhichcarmakingisbyfarthebiggest,

recordeda netlossofabout$1bnlastyear.

ChrisRobinsonofLuxResearch,ananaly­

sisfirm,isscepticalaboutVinFast’sability

to compete with established carmakers

likeVolkswagen,whichisploughingbil­

lionsintoaffordableevs,orTesla,thein­

dustrysuperstar.HereckonsVinFastwill

struggletowina bigmarketshareoutside

South­EastAsia.WallStreet’senthusiasm

forupstartevfirmshaschilledoflatein

America, which could dash VinFast’s

hopesfora blockbusterNewYorklisting.

Theworld’smotoristsandinvestorsmay

provehardertoimpressthanMrPhuc.n

S INGAPORE

Vietnam’s Vingroup is making a bold leapintoglobalmarkets.Toobold?

In the vinguard

Top companies in MSCI Vietnam index

Market capitalisation, Mar 31st 2022, $bn

Sources:Bloomberg;MSCI *Basedonfree float

0 5 10 15 20

4.5

4.7

3.4

7.7

8.6

9.7

15.6

11

1

.7

6

% of index*

Thaiholdings

Vincom Retail

Vietjet Aviation

No Va Land Investment Group

Vietnam Dairy Products

Masan Group

Hoa Phat Group

Vingroup

Vinhomes

Vietcombank