Vietnam’s Export Firms Willing but Lack Modern Tools

The designer set down his teacup and examined the collar of a visiting American’s sport shirt, running expert fingers over the stitching.

“Where did you buy it?” he asked. “It’s Taiwan-made,” was the reply. “But I got it at a department store in Fashion Island, near Los Angeles. Thirty-five dollars.”

Nguyen The Phuc looked at the buttons, then checked the sleeve. “We can make it for you for $10,” Phuc said.

His boss, Le Van Hong, director of Hanoi’s state-owned Thang Long Shirt Factory, agreed. “We can do it,” he insisted, urging the visitor to inspect his plant.

The whir of hundreds of sewing machines came from the brightly lighted assembly room across the way. As the factory officers and the visitor stepped to the door, the machines fell silent and the lights went out. The workers groaned.

Brownout. Vietnam’s export industries, spearhead of a government strategy to revive a moribund economy, are eager but not yet ready for prime time.

There are pluses: a large, low-paid pool of skilled or trainable workers and the belated concession by Vietnam’s Communist government that industry must be freed of the shackles of centralized authority.

But the pluses are a molehill against a mountain of minuses: no money to modernize, little experience in international business, woeful power supplies and limited transportation. Research and development? Not in this generation.

Vietnam and its Indochinese allies in Cambodia and Laos watch with envy the booming economies of their non-Communist neighbors. A flight from quiet Hanoi to bustling Bangkok is a leap to the future.

“Vietnam needs to learn from the experiences of others, especially from the NICS (newly industrializing countries like Singapore, Taiwan and South Korea),” conceded Nguyen Quy Nghi, vice director general of the Ministry of Foreign Economic Relations in Hanoi.

“The role of exports has been given great importance in economic development,” Nghi said. “It will become even greater in the 1990s. Thirty years of war has left Vietnam backward and poor. To develop, we need trade relationships with foreign countries.”

In 1986, the latest year for which national figures are available, total exports reached $800 million, but imports topped $1 billion. “We import in order to export,” explained Nghi. “We have to renew our outdated equipment.”

At the Thang Long factory, director Hong illustrated the problem. “Here,” he said, pointing at a sewing machine, “this is East German. Frankly, it’s not so good. The West German machines are better. And in the south they have American equipment left over from before the liberation. It’s old fashioned now, but it’s still better than ours.”

The vast majority of Vietnam’s exports--more than 80%--go to the Soviet Bloc countries. With few exceptions it’s barter business under bilateral trade treaties.

For instance, 50% of Thang Long’s shirts and jeans go to the Soviet Union, and an additional 25% to East Germany. The figure is set under Vietnam’s state plan to meet its treaty requirements. In return, the Soviet Union and its allies provide economic and military aid to the Hanoi government, including some consumer and industrial goods. Thang Long gets some Soviet Bloc machines, but no direct cash payments.

Buys From the West

Thang Long is sending 10% of its products to Sweden, France, West Germany and the Netherlands on assembly contracts. The buyer supplies the cloth, thread and designs, and pays the Hanoi factory in hard currency for its labor.

With the cash, Thang Long can buy West German and Japanese machines. “We need this equipment to raise our quality,” Hong explained, noting that lack of capital is a crushing burden to export expansion. With $5.4 billion in foreign debts, Vietnam is a bad risk.

“We have to export in order to import” is the way Hong sees it.

“There’s a very large market for exports in the socialist countries,” Nghi, the foreign trade official, said, “but that does not mean we ignore the non-socialist states. We are looking, initially, to the trade prospects with ASEAN (the non-Communist Assn. of Southeast Asian Nations), Australia and some African countries.”

Slightly less than two-thirds of Vietnam’s exports are agricultural, including forestry products. The remainder is light industrial goods, primarily clothing. In 1986, export earnings from trade with the capitalist countries totaled $307 million.

“Too bad,” Nghi said. “Vietnam can only export $300 million. It accounts for our backwardness. We should do better.”

Japan is Vietnam’s No. 1 capitalist trading partner, with shrimp the major import.

Nghi broke down the export figure as $112 million in agro-forest products, primarily beans, peanuts and timber; $95 million in seafoods, mostly frozen shrimp; $65 million in light industrial items; $29 million in anthracite coal, $4 million in tea and $2 million in natural rubber.

Expertise Lacking

In the future, oil and minerals are expected to boost exports. “Vietnam has more mineral resources than any other country in Southeast Asia,” said a geologist for Australia’s big Broken Hill Proprietary’s mining combine on a visit to Hanoi.” And last year, the country began exporting oil from its offshore fields in the south.

For the past year, Vietnamese enterprises--state, provincial, communal and private--have been permitted to deal directly with companies in the capitalist world. But translating policy into contracts has not been easy. Business expertise is lacking. “To tell the truth,” said Hong, director of the shirt factory, citing just one difficulty, “we wait for the buyer to come to us instead of going to them.”

In the south, where the Western connection was nurtured under the French and the Americans before Vietnam was unified under Communist rule in 1975, expertise is stronger and businessmen are more aggressive.

“They are living on the edge of self-sufficiency in the north,” declared Tran Dung Tien, vice president of Ho Chi Minh City’s governmental Imexco trading company. “We are more dynamic.”

Until 1982, all Vietnamese exports were handled out of Hanoi. In recent years, particularly since the reformist Communist Party congress of December, 1986, many provinces have formed their own trading organizations, authorized to deal directly with foreign governments and companies.

Imexco handles export and import contracts for state and private producers in Ho Chi Minh City (formerly Saigon) and surrounding areas. In Vietnamese terms, it is a conglomerate. Imexco has its own ships, factories and a fleet of trucks. It forms joint ventures, including a 50-50 $500,000 assembly deal with a Singapore garment maker (Hanoi collects 20% in taxes). In 1987, Tien said, Imexco handled $130 million in exports and $170 million in imports.

Handles Fishery Exports

Another Imexco factory imports and reconditions secondhand machinery and auto parts for domestic sale. “We even do a bit of entrepot trading,” Tien disclosed, importing spares and other items for sale when the market is right. And it develops new exports, some a bit exotic. “The French and West Germans are interested in frozen spring rolls,” he said, “and we’re shipping boneless duck legs to Hong Kong.”

A national trading company, Seaprodex, deals with fishery exports in the south. Like Imexco, it has its own ship and truck fleets and processing factories. Truong Thanh Ha, the deputy director, delivered a Western-style spiel in his board room atop a Ho Chi Minh City high-rise.

“Over the past eight years,” he intoned, “we have untied ourselves from the bureaucracy and the heavy management structure. Trust is the first thing we emphasize. In business, if you lose trust you lose everything.

“For instance,” Ha confided smugly, “we have won a prize for paying our LCs (letters of credit) on time.”

Seaprodex does business with 20 foreign countries, he said. Like most other Vietnamese trading companies, it sends many of its products to Singapore and Hong Kong for reshipment abroad, sometimes under new labels.

At Seaprodex Factory No. 1 on the outskirts of the city, visitors are greeted in a reception room furnished with heavy Chinese-style chairs with red velvet cushions. A stuffed leopard looks on from a glass case nearby. The packing rooms are clean. A staff of 1,300, mostly women making twice the average salary of the south, wash, dry and pack cuttlefish and other export seafoods. Through September, Factory No. 1 had done $13 million worth of business, said assistant manager Do Thi Mai Hue.

Will Export Beer

Saigon Beer, a product familiar to Americans who served in the south during the Vietnam War, is also thinking export. The government-owned brewery, Bia Saigon, turns out 150 million liters (about 157 million quarts) annually under a variety of labels. With machinery imported from Britain and France and cans imported from Singapore, the Saigon Export brand is going to Singapore and Japan.

Hoang Chi Quy, a top official at the brewery, said the familiar Beer 33, which Vietnamese and Asia hands call Bia Ba Ba, will also be sent abroad to markets including Cambodia and Laos.

Besides capital, the highest immediate hurdle facing Vietnam’s exports is the lack of transportation from countryside to city, and from Vietnam to foreign ports. Most Vietnamese ships can reach no farther than Hong Kong or Singapore. Some capitalist flags--usually Liberian--can be seen in the ports of Haiphong and Ho Chi Minh City, but Vietnam is not a regular stop for Western shipping companies.

None of the ministry or trading company officials interviewed in Hanoi and Ho Chi Minh City disclosed any direct trade with the United States, which imposed a trade embargo on Vietnam after its 1978 invasion of Cambodia. But many said contacts were being made through “third parties”--which means traders in Singapore and Hong Kong--by overseas Vietnamese in the United States.

Trade Embargo Hurts

“They’re interested in importing Vietnamese foods and some other products of our culture, like lacquerware and ceramics,” said Ha, the Seaprodex official.

The trade embargo hurts Vietnam. The United States and in some cases Japan are the major markets for most Southeast Asian countries. Hanoi officials expect that the bulk of Vietnam’s exports will go to the Soviet Bloc for the foreseeable future. But with the growth of private trading here, and the desperate need for hard currencies, the balance may tilt if Washington and Hanoi normalize relations.

Nghi, the Hanoi trade official, called the U.S. embargo an “outdated device.” And he clearly saw some benefits in doing business with American firms. “The oil exploration techniques of the U.S. companies are the best in the world,” he said.