Asians Are Prospering in U.S. ‘Business Ghetto’ : Many, However, Would Like to Venture Beyond Retail Trades and Services

It is a sight that has become increasingly common in big cities: a boom of small businesses ranging from restaurants to laundries in neighborhoods of newly settled Asian-Americans. Often in economically blighted areas, they are an apparent sign of budding prosperity.

But Indochinese immigrants, who run many of these businesses, have a different name for it. They call it the business ghetto.

Of 255,000 businesses run by Asian-Americans in 1982, the most recent year for which Census Bureau statistics are available, almost 70% were in services and retail trade. And, of every 20 businesses started by Indochinese refugees each month, 18 will fail during the first year, according to one study.

Le Xuan Khoa says it is time for a change. It is time, he says, for Indochinese to go into businesses such as high technology, heavy manufacturing, banking and transportation.

Khoa, a philosophy professor in Vietnam and now president of the Washington-based Indochina Resource Action Center, said in an interview: “This is the land of opportunity. We have thousands of types of businesses out there. They should not stick to business ghettos.”

But in California’s Orange County, a differing view is put forth. Businessmen of Little Saigon, a mile-long, booming commercial strip on Bolsa Avenue in Westminster and Garden Grove, prefer stability to uncertain new ventures, said Tony Lam, a Westminster business leader who helped found the Vietnamese Chamber of Commerce.

Khoa is “a professor of philosophy,” Lam said. “We are businessmen. He wants us to climb Mt. Everest when we are barely establishing our business community.”

Conduct Workshops

To encourage Southeast Asians to expand their horizons, Khoa and other activists conduct business seminars and workshops in cities across the country--including Los Angeles, Washington, San Antonio and other sites with large Asian populations--on such issues as borrowing big money to making dramatic changes in business philosophy.

Southeast Asian businesses have a long way to go, according to a study in Los Angeles by Khoa’s organization and the city’s Economic and Employment Development Center, which provides technical assistance to Vietnamese businesses.

The study found many problems among the area’s 38,000 Southeast Asian businesses, including poor management, undercapitalization and “ethnocentric orientation.” (The survey noted that 46% of the Indochinese small businesses said their clients are mostly Indochinese refugees.)

The strikingly harsh assessment in the report--titled Economic Development Opportunities for Indochinese Refugees in Los Angeles--and the observations of many experts on Indochinese businesses, portray merchants in Southeast Asian communities as decidedly uninformed about Western commerce, often because of wide cultural differences.

For example, the report found “a clear lack of understanding of the American consumer’s taste, spending habits, needs, culture and traditions” and a “lack of knowledge of the American business environment.”

And, aside from these problems, the Indochinese also must deal with outside competition.

The report asserted that “cutthroat competition and drastic price-undercutting” by “other Asian competitors” in restaurants and grocery stores are running the Southeast Asians out of business. These other Asian groups, it said, “seem to hold the advantage because of their access to abundant external sources of financing from Hong Kong or Taiwan.”

Although the Chinese and Southeast Asians “are in the same geographical areas, doing the same thing,” said Andy Anh, executive director of the Los Angeles Economic and Employment Development Center, “the question is who is better capitalized to sustain a business.”

The answer, he said, is the Chinese. Because they and the Koreans have been in this country longer than the Indochinese, they generally have better adapted to the American marketplace. Moreover, he said, many Indochinese must send money to their homeland to help relatives and friends who have not been able to emigrate, thus siphoning off potential financing from their businesses.

As relative newcomers, Indochinese often find old, establishment institutions unwilling to accept them. In some cases, language is the roadblock.

That is more true for Laotians and Cambodians than for Vietnamese, said Thida Khus, director of employment programs at the nonprofit Khmer Society of San Antonio. She said that, compared to the Vietnamese, Cambodians and Laotians had “very little exposure to Americans” during the Vietnam War, giving them relatively few opportunities to learn about American language and customs.

Language a Barrier

Thomas R. DeGregori, a professor of economics at the University of Houston who specializes in Third World issues, said language is one of the “assimilation characteristics” that are “barriers to entry” to the American business world. Such problems are compounded in Houston, where 6,500 Asian firms are situated, DeGregori said, because the business community “has always been a closed-entry” one run primarily by established residents.

The ultimate barrier--cash shortage--figures prominently in the Indochinese business story. In many cases, inexperience with the workings of financial institutions and the inability to negotiate complicated forms prevent owners of small businesses from graduating to bigger businesses.

In other cases, however, Indochinese business owners simply have an aversion to borrowing, a preference for paying as they go, said Khoa, who contended that many have not learned a fundamental fact about doing business in America: “The more money you owe, the more you can get.”

Tony Lam and Luu TranKiem, former Cal State Los Angeles marketing department chairman and Vietnamese Chamber of Commerce president in Orange County, often hold seminars helping local businessmen apply for Small Business Administration loans.

In some respects, however, Khoa’s findings do not fit Orange County, Indochinese business leaders said. They said that, like the Chinese, they have their own banking institutions, and in spite of the area’s rapid turnover, the commercial growth along Bolsa is still financially healthy.

“We were quite surprised to learn that Orange County, specifically the Westminster-Garden Grove area, was ranked third in the entire nation in terms of Asian-owned businesses,” said Michael Lee, referring to a U.S. Department of Commerce study.

That study, a comparison of firms owned by Asian-Americans in the 10 largest counties, ranked Los Angles first and Honolulu second.

Based on a recent bank survey, Cathay Bank plans to open a branch in Little Saigon this year, said Lee, who is the bank’s vice president of marketing.

“There’s definitely enough businesses and concentrations of Indochinese there to support the bank. No doubt about it,” Lee said.

Already, two primarily Indochinese lenders, Delta Savings & Loan Assn. and United American Bank, are located in Westminster. Two so-called mainstream banks, a Security Pacific National Bank branch and Bank of Westminster, also have many Indochinese customers.

Experts acknowledge that the picture they paint is contrary to the one most people have of Indochinese businesses.

Often, the experts say, when an Indochinese business is in trouble, few people know. “If many Indochinese business failures have gone unnoticed,” the Los Angeles survey said, “it is because many new owners were reluctant to change the establishments’ names for fear of losing loyal customers.”

“Mainstreaming” and “diversification” are the buzzwords among people talking about solving the problems of Indochinese businesses. The message: appeal to the broader society by breaking new ground on the business landscape of America.

Areas of Focus

Seminars and studies urge Indochinese to focus on areas like computer technology, health, law, transportation, communications and financial services.

But Indochinese business leaders in Orange County said it is unlikely that refugees who arrived in the last decade will make the transition into high-tech business areas quickly “with a mom and pop background.”

“It will come eventually, but perhaps with the second generation,” Cathay’s Lee said.

The Los Angeles study said deregulated industries such as regional air transportation, bus charters and freight brokerage are fertile ground for enterprising business people.

The hope for shifting the Indochinese business focus lies partly in the belief that second-generation Indochinese will better adapt to the high-stakes, risk-taking American way of doing things.

“As the younger generation gets more accustomed to the American system, then we can change the attitudes,” Anh said of the development center. “Right now, the number (who have adapted to the system) is still small.”

Among that number is Ted Ngoy, owner of Christy’s Donuts, a chain of 32 stores in California. He came to Orange County in 1975 from Cambodia and started working two jobs simultaneously--as a custodian and gas station attendant--before buying his first doughnut shop a year later.

To open new outlets, Ngoy buys the stores, enters into partnerships with his managers and then shares the profits with them.

Ngoy’s philosophy about his success blends a hard-work ethic with a penchant for caution.

“No. 1 is determination,” he said. “Working hard is important. No. 2 is courage. No. 3 is starting carefully. Don’t just jump into something you don’t know.”

Fishermen’s Cooperative

Chieu Pham, executive director of the Vietnamese Fishermen’s Assn. in Oakland, envisions similar success in his effort to organize a fishermen’s cooperative that would sell directly to consumers in all communities. “We have to do it the American way,” Chieu said. “We have to sell to the mainstream consumer.”

Some critics within the Indochinese communities assert that businesses such as those involving doughnuts and fish have become too common among Indochinese, thus differing little from the type of mom-and-pop grocery stores that economic advisers are trying to discourage.

Taking a longer and more optimistic view, Khus of the Khmer Society called the concern over businesses “a stage all immigrants have to go through. The longer you stay in the country, the better it gets.”

Times staff writer David Reyes contributed to this article.