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Interview

Vietnam IT leader to fight Asian rivals on quality, not cost: new CEO

FPT aims for 15% annual growth over next three years, plans more R&D spending

Nguyen Van Khoa becomes Vietnamese IT leader FPT's youngest chief executive. (Photo courtesy of FPT)

HO CHI MINH CITY -- The incoming chief executive of FPT, Vietnam's largest information technology company, has affirmed a commitment to double-digit growth and says he will not simply rely on a cheap workforce.

Nguyen Van Khoa, 42, takes the reins on March 29 in a leadership transition from the founding generation to younger hands.

"We aim to keep the company's annual growth rate at 15% or above in the next three years," Khoa told the Nikkei Asian Review in a recent interview here. "We are moving FPT into the Gartner ranking of top 100 global digital service and IT services companies, then into the top 50 in the next 10 years."

FPT held 180th place in the U.S.-based consulting group's 2018 list. The Hanoi-based business provides IT services to multinational companies such as Airbus, Siemens and General Electric.

The Vietnamese group "will compete with other rivals, including Indian and Chinese competitors, on the quality of our services and products and our labor productivity, rather than on labor costs," Khoa said.

To gain an edge, Khoa plans to increase FPT's research and development budget, which stands at 5% of pretax profit.

Giang Nguyen of SSI Research said the transition to a younger leader signals a fresh start at the company and a potential new wind to propel FPT into the next decade.

But Nguyen Tuyet An, an industry observer, said the new CEO could encounter problems if the company fails to adapt quickly to fast-changing technology trends and update its business model.

"The reputation and influence of the first generation of leaders will still weigh on the younger for a while, as FPT has been growing with the first leading generation," she said.

However, An said she thinks the older leaders will give younger management leeway to innovate and grasp opportunities.

Overseas markets likely will remain the primary earnings driver for FPT, which provides services to 650 international companies. Between 2014 and 2018, overseas pretax profit averaged 26.5% growth annually, while foreign revenue gained 27.5% yearly on average. Overseas markets provided 39% of FPT's revenue and profit last year.

A group of friends led by Truong Gia Binh founded FPT in 1988 as state-owned Food Processing Technology. The company was born two years after Vietnam embarked on its Doi Moi economic reforms, which started to open the socialist nation to foreign investment.

The company went on to become Vietnam's first IT group and listed on the Ho Chi Minh City stock exchange in 2006. The Vietnamese government retains a 5.9% stake.

The 63-year-old Binh, who remains chairman, spearheaded the generational transition over the past few years. The first attempt failed seven years ago, leaving the founding generation to spend another five years training senior personnel who were born in the 1970s or 1980s.

More than age separates the old and the new generations. Binh and other established Vietnamese business leaders -- including Vingroup founder Pham Nhat Vuong and Vietjet founder Nguyen Thi Phuong Thao -- studied in the former Soviet Union, and experienced the profound changes brought about by Doi Moi policies. Khoa and his cohorts, by contrast, were largely born after the war, and grew up in an age of rapid economic change and greater engagement with the U.S.

Among the biggest changes in recent years has been the growth of Vietnam's IT industry, which has developed into a major driver of exports and employment. Revenue in the sector jumped 35% in 2017 to $91.6 billion and has averaged roughly 20% growth over 10 years. The industry employs more than 900,000 people.

A turning point came when the U.S. lifted its 30-year trade embargo on Vietnam in 1994. The country started to import computers, and IT companies such as IBM and HP went on to build operations there.

Born into diplomat's family in Hanoi, Khoa joined FPT in 1997. He worked in technical support as a part-time job while still at university, teaching himself computing.

Khoa, who became the youngest chief executive of an FPT subsidiary in 2012 at age 35, said he plans to focus on human resources development in the 28,000-employee group.

"I am a person of action," Khoa said, "and I will do my best to inspire, motivate and persuade different staff levels moving forward and achieve new goals."

(Nikkei)

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